Page 32 - Business Plans that Work A Guide for Small Business

Entrepreneurs Create the Future • 23

Business planning helps you tie together the three spheres of the
Timmons Model. The planning process helps you shape the opportunity
and understand its full potential. Then the lead entrepreneur has a sense
of what other team members are needed to fill out the venture’s skill set
and also the resources that will be needed to fully execute the opportunity.
Examine your idea. Does it have the makings of a strong opportunity?

Scale of the Opportunity

Opportunities come in different shapes and sizes. Some opportunities
are massive and may lead to entrepreneurial companies that change an
industry, if not the world. For instance, through years of study, we have
found that the largest opportunities occur in emerging or fragmented
industries. Technology, such as the Internet, telecom, biotechnology, Web
2.0, and so forth, often creates new emerging industries. Within these
spaces, demand exceeds supply, and multiple new entrants are racing to
develop the dominant platform or structure. For example, the early days
of the desktop computer saw hundreds of companies competing with their
product offerings. The DOS-based PCs became the dominant platform,
with Apple’s operating system a distant second. All other PC platforms
disappeared as well as the companies that promoted them. We have seen
similar races in the Internet, telecom, and other technology arenas. These
races are often about market share (and, it is hoped, foreseeable profit).
Emerging industries often have attractive gross profit margins, allowing
the companies to grow and adapt their business models (even though
operating margins can be low or negative in early years). As the domi-
nant platforms develop, the industry transforms to a mature state, and
the gross margins decrease. Competition becomes more intense, and it is
more difficult for new ventures to enter successfully. Therefore, some of
the best opportunities for new ventures are in emerging industries.
Fragmented industries also provide strong opportunities. A frag-
mented industry is characterized by many small mom-and-pop competi-
tors, each with a narrow geographic focus. Consider Home Depot. Before
their entrance into hardware, many small, local hardware stores could
be found. In one of the author’s hometowns just outside of Boston, there
were three hardware stores for a town with 12,000 residents. Today, only
one remains, and it has affiliated with Ace Hardware. These large box
stores, such as Home Depot, Wal-Mart, and Staples, have revolutionized
retail by rolling up industries. Moving large volumes of product allows