Generally, it helps to know about the business sector before starting writing a business plan. However, I will start to discuss writing the beginning of a business plan without having not one ounce of knowledge of the business. This process is more challenging.
A friend was interested in investing in a crematorium. He knew nothing about the business, and his expertise focused on home repairs. There was some experience he had which he could transfer to his establishment of a crematorium. But not having any clue, he asked me to look into it.
First, look at the overall market by looking at what the business entails, both in terms of equipment and licensing. The Internet is the best tool to research ever made. Within the County of Northern Virginia, the focus of the study, the crematorium business required some licensing on a county by county basis and EPA requirements. The study focused on one county.
Second, what is needed. The equipment can be purchased,costing a couple of hundred thousand of dollars. All operated using methane gas. Given that methane gas prices were going down, the margins should increase over time when one cremates a body. Also, crematoriums charge by body weight — the greater the weight, the more gas is required. Even with the obesity trend, the crematorium does not lose money.
We have identified that there is a market. There are two certainties in life, death and taxes, and crematoriums fell into the former.
Third, identify the growth of the business by analyzing the macro-economic trends. Is it a growing market? This final analysis found the wrinkle in this market sector. A study in the local demographics unquestionably showed that the mortality rates were dropping. And given the competitive environment, there was an obvious concern that the business of a crematorium would be highly profitable. There was no hockey stick growth.
Was there another way to approach a fast growth in this business? So, when faced with a business that is stagnant or facing flat line growth, one studies different angles. There is the a macabre musical, Sweeney Todd, The Demon Barber of Fleet Street, where one could produce profitable meat pies from artificially induced death. Then one attempts to explore other approaches to create market growth. The only solution I could consider is the creation of nationwide franchises in this industry, but already there were competitors following this same route.
My quick study of this industry revealed that the business had considerable hurdles. There was no attractive business in this space right now, unless a better, cheaper technology develops.
This exercise, nonetheless, indicated the basic approaches of developing a business plan — first, identify the product or the industry; secondly, quantify that market; and thirdly, analyze the macro-trends. It is said that a journey of a thousand miles begins with the first step. These approaches show the first step to that journey to begin drafting the first few pages of a business plan.