How to Move from a Concept to a Business (4 minute read)
By Alissa Bryden, CPA, CA
As I write this it is small business week, and I want to celebrate both small business owners and the work it takes to get the doors open. Not all ideas or concepts can or will turn into a healthy business. You must first determine if you have an idea worth pursuing. Some do this on the fly, but planning and forethought will save you both money and stress.
Preliminary research can give you a better idea on how to move from a business concept to a business. This research will form your “business plan” if it you decide to go ahead. Your research should at a minimum cover these five areas. Write it all down as you go then add to parts later and tweak your strategy as you learn more.
1) SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats): Capitalize on the opportunities using your strengths, minimize weaknesses and mitigate threats.
- Strengths – These are internal to the business and are things that will help you succeed. They can include skill sets or education you have or have access to.
- Weaknesses – These are internal to the business as well and consist of areas where you are lacking. Weaknesses are within your control to fix. Ie. if you are lacking in a specific technical skill related to your business you could take a course or hire someone to fill this gap.
- Opportunities – Are external to the business (part of the environment). They may be certain market conditions or an economic climate that makes the potential prosperity of your business favourable.
- Threats – A threat is also external to the business and is anything that could have a negative affect on your business. You do not have direct control over threats. With threats the goal is to reduce the likelihood of it occurring and/or have a plan if it does occur. An opportunity can change to a threat and vice versa. The best you can do is be aware so that you are prepared.
2) Human Resources: When considering what employees you may need you must consider both pre start-up and post start-up. Determine what employees you need for the product/service development (if any) and then who would be needed to take the product/service to market. You may also decide to outsource specific functions such as manufacturing.
3) Technical: Consider whether or not the business or idea will technically work. In the case of the development of Uber, there had to be the app development with the consideration of how it interacted with both drivers and those looking for a ride. Many ideas never make it past the technical stage. A teleporter is a great idea but until someone can make it technically work it is only an idea.
4) Marketing: First consider what the market is (who you will sell to), how big it is and how you will sell to this market. I remember reading an article about the great people at Hubdoc and how they created a product, a cloud software that fetches documents like bills into one location; for example your Telus and Fortis bills (even your credit card statements). The software was initially intended for people to use to at home but they realized that although most home consumers thought the idea was great they weren’t willing to pay for the convenience or at least enough to make it a feasible venture. So Hubdoc repositioned the product to attract businesses who could save time with easier document management and thus were willing to pay the price. Statistics Canada and Industry Canada can be a great source of information for market research.
5) Finances: It is all about cash flow at this stage. What are the realistic projections for costs and revenues? Consider the pre start-up costs as well as costs and revenues for the first year up to at least 3 years. I have met many would be entrepreneurs who had an idea but when they broke it down they realized they made more at their current occupation and thus (to them) wasn’t worth pursuit. A hot dog stand may make money, but if the market is saturated and growth is limited, maybe the profit just isn’t worth the pursuit. There are other reasons to become an entrepreneur other than finances (life style, flexibility etc.) but you should understand the trade off of each venture.
This provides a very general format to your research. If you are looking into starting your own business, there are many resources available through organization like Community Futures and Columbia Basin Trust (if you are within its boundaries). The BDC (www.bdc.ca) also has an extensive number of links and information available.
Need more advice? You can also contact Virtual Heights Accounting and we can do our best to help or point you in the right direction. We love small business. Good luck.
If you would like more great insights or tips on everything small business, tax and accounting or to just connect. You can also follow us on twitter at @vhaccounting.ca, on Facebook at www.facebook.com/vhaccounting.ca, or follow me Alissa Bryden, CPA on LinkedIn (https://www.linkedin.com/in/alissabryden). Lot’s of way’s to connect!