Overview
The director of the Emerging Business Consulting group describes the strategy to creating an effective business plan.
Large Interest in Small Companies
A recent speech given by George Gendron the editor-in-chief of Inc. Magazine proclaimed that entrepreneurship is now being regarded as a legitimate vocation in the professional world. No longer are entrepreneurs being regarded as loners, non-conformists and radical risk takers who have a vision that they can build an empire from their garage workshops. The efforts of identifying a market need, conceiving a product or service concept to meet that customer need, and assembling the resources to present the offering to the market represent fundamental skills that are viewed as valuable in both emerging business ventures and established corporate organizations.
As a corporate entrepreneur, or “intrapreneur”, people with these emerging business skills are looked upon to bring new life to stagnant product lines, or to expand existing product offerings into new and untapped markets to grow sales. While the environment of an established company presents situations different from a new start-up such as ready access to resources and financing, the fundamental needs of conceiving the entire product plan and marketing strategy is identical to the needs that are present in a small start-up company trying to launch its first product. But the focus of innovation in emerging business has been placed on the new organizations that are small and are struggling against the odds to revolutionize the particular market segment or industry they participate in. The public is more likely to be hearing about companies such as Netscape Communications and its rocket ship ride to the top of the internet software market than the fact that Gillette has added a new razor blade configuration to its disposable razor lines.
It is not only the media that has focused its attention on the growing wave of start-up organizations and new businesses that are being created in record numbers. Large companies and service providers that have a historical client list of large and established companies have turned their attention onto these new businesses as well. New attitudes in our country’s economy about where the prosperity will be and what type of organizations will drive the most significant growth has made the small and emerging business segment very interesting. Large corporate providers of business services are beginning to search for potential clients among the many new business start ups that are dotting the landscape. Arthur Anderson, a Big Six professional service organization, has established an Emerging Business Consulting Group that focuses on small and new business ventures as clients. The objective of such a practice is to offer accounting, tax and audit, and management consulting services that are focused on the needs of emerging businesses. The benefit to Arthur Andersen is based on the anticipation of that client someday growing to be successful and prosperous so that a full-fledged service relationship can be established for the traditional services Arthur Andersen provides.
Arthur Andersen – Emerging Business Consulting Group
The Boston office of Arthur Andersen has established a unique service in its Emerging Business Consulting Group. The practice offers new business planning and strategic guidance to entrepreneurs to assist them during their very early stages of growth and operation. In particular, the practice offers guidance in assisting entrepreneurs compose and improve their business plans and strategies, as well as introduce them to various resources in the investor community to ultimately reach the financing and funding needs of their start-up.
Ron Guerriero is the director of the Emerging Business Consulting Group and spoke with the EM about his experiences in working with entrepreneurs, and the services he provides to clients. Ron has worked for twenty years offering advice to new business developers and entrepreneurs in strategic planning and investment funding. Most recently Ron has been published in the Boston Business Journal giving advice for “Cash-poor Entrepreneurs” in achieving seed capital. The discussion with Ron covered many aspects of entrepreneurship but focused on the often important element of the emerging business planning process – the business plan. He discussed the use of a business plan by a new company in attempting to muster funding, the investing audience that receives the business plan and what they are looking for in a plan, and the critical elements of a business plan that often go underdeveloped by an entrepreneur when composing a plan.
The type of client that Ron typically deals with is what he would classify as a “garage” entrepreneur. The entrepreneur has established a product or service concept, the funding for the business venture has come from informal sources such as friends and family, and the concept is in the early stages of development towards the final version. The client’s need for a more structured business strategy and greater funding are driven by the potential sales leads with customers that are interested in the concept, or because of customers that have even gone to the extent of inking a contract for the product or service when commercialized. More advanced product development is needed to convince pending sales that the concept is viable, and to begin a larger marketing effort to introduce the concept to a wider marketspace. Typically the client is in need of hundreds of thousands and even millions of dollars to grow their company to the next iteration of operations.
The Business Plan
A definition for a business plan can be a document that outlines and specifies the details behind the product or service concept of a new business. The plan ties together the market the product is aimed at, the strategy that will be used for producing and distributing the product to market, the anticipated financial performance of the new business based on its plan, and the people that will be involved in executing the work.
The purpose for the creation of the business plan is twofold. The first is to create an outline of how a new business intends to proceed in its operation for all the critical aspects such as target market, market opportunity, resources to be utilized and pro forma financial planning and estimates. This organization of thoughts can facilitate the efforts of the entrepreneurs so they have a plan to assist them in moving along. By no means is a business plan ever static or ever in a final version. It is a dynamic document that needs to be flexible in how it can address changing market or customer needs, as well as adjust to the influences the entrepreneur experiences as they proceed along their business growth. The second and main use for the business plan is to introduce a new business venture to the investor population to present the new company and business concept, and to outline the new business opportunity to acquire funding for the business to proceed. As Ron describes this use of the plan, “It is not a solicitation to buy anything. It’s not a capital offer. The capital need for the venture is stated in the plan, and the intended applications for the funds that are being sought.”
There are many products on the market today that readily outline the structure and contents of a business plan for even the most inexperienced beginner to understand. Software applications and numerous text exist from many industry experts that itemize all of the important elements of the plan and offer an approach to constructing one. But as the discussion with Ron proceeded, it became evident that there are many more important aspects in composing an effective business plan than simply understanding the typical outline and structure of the plan.