Entrepreneurial Itch. David Trahair

A summary of the start-up costs

      • A projection of sales and expenses for at least the first few years

      • An analysis of your own strengths and weaknesses — will you need help with some aspects of the business?

      • An analysis of the industry — is it steady, declining, or growing?

      • A marketing strategy — how do you plan to find customers or clients?

      If you are planning to establish a large entity that will require external financing from banks or possibly investors, your business plan will need to be formal and detailed. You will probably require the assistance of a lawyer, an accountant, and possibly a business adviser. It will be difficult to obtain financing if you have not researched and documented all the details of how the business will work. (Keep in mind that no matter how well-written a business plan may be, you may still be turned down by the bank. See Chapter 5 for more information about financing your business.)

      It’s easy to find sample business plans on the Internet. I just Googled “business plan templates” and got over 42 million hits. Look for examples of award-winning plans. There are many available, and some may even deal with your specific product or service.

       Elements of a business plan

      A good business plan is concise and written in plain language. It contains charts, illustrations, and graphs placed appropriately. It uses realistic assumptions about future income and expenses and provides detailed information in appendixes.

      It should include the following basic components:

      • Cover page. Include the company name, address, telephone and fax numbers, website URL, and email address, as well as the names of key company contacts.

      • Table of contents. Summarize the major sections of the plan.

      • Executive summary. Write a brief (one- or two-page) summary of the major points in the plan.

      • Company summary. Include the company’s goals and its objectives as well as the amount of financing required.

      • Management. Summarize the experience and qualifications of all key people who will be involved.

      • Marketing strategy. Outline your market research, the strategy for attracting customers or clients, and the pricing strategy (i.e., will your products/services be inexpensive or premium priced?).

      • Financial projections. Set out what start-up costs you will incur, and include five-year income-and-expense projections and a loan repayment plan.

      • Advisers. Include the contact information of your lawyer, accountant, and other advisers.

      • Conclusion. Summarize your goals and objectives, the required financing, and the reasons why this is a good investment.

      • Appendixes. Include detailed management résumés, any product illustrations or literature, any financial statements, detailed cash-flow forecasts, and any major customers or clients you may have.

      Research Should Never End

      Once you’ve started your business, don’t stop thinking about what changes you’ll need to make to keep it viable. A product or service that is in hot demand today may be collecting dust on store shelves tomorrow. Think of film processing. Ever since I bought my digital camera, I haven’t touched my 35 mm film camera. Those companies in the film production and processing industries that did not anticipate this change are no longer around.

      Even in a service business, it’s crucial that you keep thinking about the specific services you offer now and what you will be offering in the future. This is known as identifying your niche.

      Niche Today, Gone Tomorrow?

      Dictionary.com offers one definition of niche as “a situation or activity specially suited to a person’s interests, abilities, or nature,” and another as “a special area of demand for a product or service.” If you wish to build a satisfying business, it is well worth taking the time to identify what your niche is going to be. But be careful. Relying on one niche could spell the end for your business.

      This was made clear for me during the dot-com boom of the late 1990s. At the time, it seemed that things were going a little crazy. People with no business experience were starting Web-based businesses and becoming millionaires within months. That sounded cool, and I wanted a piece of it. I spent a lot of time developing accounting systems and solutions solely for dot-com start-ups, and I knew several other accountants who were doing the same thing.

      What would have happened if I had neglected my existing clients and put all my eggs in the dot-com basket? I would have lost my client base and replaced it with clients who, in most cases, soon ceased to exist. In a matter of months, good clients with investors pouring money into their businesses would have become bad clients unable to pay their bills.

      Having one niche is beneficial, but risky. If you happen to choose an area that suffers a severe downturn, you may be in trouble. That is why it may be best to work on developing at least two niches.

      What is good about a niche?

      One of the main advantages of developing a niche for your business is that word-of-mouth naturally occurs if what you do is specific and unique, and that is what people are more apt to remember. Because you have defined exactly what products or services you offer, it’s more likely that you will come to mind when these people happen to talk to other people who could use what you offer. That may be reason enough to establish your own specialty, but there are other advantages:

      • The learning curve is faster. It takes you less time to investigate issues relating to new clients because you will already be familiar with many of the problems that they may have. If you take the time to document policies and procedures for dealing with clients in a manual, new employees can refer to it instead of having you continually investigating and explaining things to them. This could save you and your employees significant amounts of time.

      • You decide what type of work you do. Because you have spelled out your niche, you will attract work of your choosing rather than simply accepting what comes your way. Take my case, for example. I have been an accountant for over 20 years and have wrestled with the issue of identifying my niche for much of that time. Accountants do many things, but I have found that people often assume we are all tax specialists interested in doing personal tax returns. Over the years I have tried to dispel this notion because it is not an area I want to be involved with.

      • It is easier to keep current. Trying to keep up to date on many different types of businesses at once is time-consuming. If you specialize in one area, it is much easier to keep current.

      Always be thinking about your next niche

      It is also important to remember that establishing a niche should not be a static process. You should constantly be thinking about changing your current niche and perhaps adding new ones so that you don’t get caught flat-footed as client demands change.

      Over the years I have always been on the lookout for new niches and considering what my next niche should be. Here’s just a partial list:

      • Doctors

      • Women entrepreneurs

      • Engineers

      • Incorporated businesses

      • Dot-com start-ups

      • QuickBooks accounting set-ups

      • Training in software

      • Tax minimization

      • Nonprofit audits

      • Notice-to-reader accounting engagements