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For Accidental Entrepreneurs – 12 + 12 Factors to Consider in Starting a Business

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A while ago a new term entered the lexicon of popular culture; that term was “Accidental Entrepreneur”.  This came to denote a person who got laid off or otherwise lost their job and started their own business.  What could be better than being your own boss?  Well plenty, if you don’t know anything about business.  One would do well to remember the E-Myth:

… refers to the idea that most businesses fail because the founders are technicians that were inspired to start a business without knowledge of how successful businesses run.  The mythic and often disastrous assumption is that people who are experts regarding technical details of a product or service will also be expert at running that sort of business. Many small business owners eventually realize that just as they had to learn their technical skills, they have to learn business growth and management skills…. (read more)

Many Accidential Entrpreneurs don’t have a written Business Plan.  The point is not to have a business plan to have a business plan per se but to have a written business plan to demonstrate that you have thought it through and you have covered the predictable pitfalls that cause businesses to fail.

On the front end, make sure that what you have is something someone else wants to buy. Rather than finding ways to sell what you already have (product) or something you can do (service).  This difference makes all the difference in the world.   Just because you love making something or love doing something – or if this is your hobby, and wouldn’t it be fun to do your hobby and get paid for it –  does not mean that there is a market for it, and even if there is a market for it, it does not mean that you can be competitive in that market against entrenched incumbents.

Here are 12 external factors and 12 internal factors that can get Accidential Entrpreneurs who want to start a business thinking about whether to enter a particular market as a business.  The simple lists below are not a substitute for a formal business plan.

(This is based on the GE/McKinsey model for portfolio analysis used by businesses to make investment and divestment decisions with regard to strategic business units or divisions)

Market/Industry Attractiveness (External)

  1. Market size
  2. Market growth rate
  3. Market profitability
  4. Pricing trends
  5. Competitive intensity / rivalry
  6. Overall risk of returns in the industry
  7. Entry barriers
  8. Opportunity to differentiate products and services
  9. Demand variability
  10. Segmentation
  11. Distribution structure
  12. Technology development

(Your) Competitive Strength (Internal)

  1. Strength of assets and competencies
  2. Relative brand strength (marketing)
  3. Market share
  4. Market share growth
  5. Customer loyalty
  6. Relative cost position (cost structure compared with competitors)
  7. Relative profit margins (compared to competitors)
  8. Distribution strength and production capacity
  9. Record of technological or other innovation
  10. Quality
  11. Access to financial and other investment resources
  12. Management strength

If you can’t write a couple of paragraphs on each of these 24 topics then you are missing an opportunity to identify a set of common business failures that occur over and over again due to lack of planning,  market analysis, analysis of internal competency, competitor analysis, and  industry analysis for a particular product or service in a particular market.  Do the work up front and you just might mitigate the risk of losing your money, the family money, your parents money, your retirement savings, and your kids college fund.

Read a short article on on the Boston Consulting Group (BCG) and the GE/McKinsey models for portfolio analysis –
https://frrl.files.wordpress.com/2010/04/bcgandgemckinseyportfoliomodels.pdf
Check out Porter’s Five Forces Model – http://en.wikipedia.org/wiki/Porter_five_forces_analysis
And PESTL Analysis for the macro environment – https://frrl.files.wordpress.com/2010/04/pestlanalysis.pdf

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Written by frrl

April 24, 2010 at 4:16 pm

2 Responses

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  1. The need to learn about business field is should be done before putting up a business. It is vital to know what the industry, products and services are to offered. One should know the risk of being a businessman. Do local library research, talk to small business organizations and search online and then put together a full market research report to be able to evaluate the opportunity for the business. It is your strategy on how your business will become successful.

  2. Very nice article.. worth reading it. Thank you for posting such a very nice

    y3y3n.s

    May 5, 2010 at 5:22 am


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