As most everyone knows, e-business is the act of conducting business on the Internet.
Not only is there a steady stream of new businesses that exist completely in cyberspace, but most traditional brick-and-mortar businesses are branching out, or already have branched out, to add an online component to their existing business.
Accountants with clients who intend to start a new e-business or expand an existing business to the Internet may find themselves participating in the development of an e-business plan or serving in an advisory role in the plan preparation. In addition, once a plan is completed and an e-business is underway, accountants can participate in periodic re-examinations and revisions of the plan.
"Accountants need to encourage their clients to delve further into the quantitative part of their business plans," said Linda Pinson, author of several books, including Anatomy of a Business Plan, and developer of the software program, Automate Your Business Plan. Pinson also wrote the business planning guide, "How to Write a Business Plan," for the U.S. Small Business Administration.
The key to a good business plan, and the place where accountants can step in as advisors, according to Pinson, is in the financial area of the plan. "This is the most ignored, the most needed, and the most beneficial in the long run."
At the same time, "this is the part that's very, very weak in a number of business plans that are created by the end users of software or people following books," she said. "They don't understand the different financials and their relationship to everything."
"There's a misconception out there that you can just pop in some numbers and guess at them and pop out some graphs and charts and it looks good, but it may not have any validity to it," Pinson explained.
In addition to the questions that the SBA suggests every business plan creator should ask, there are some facets of business planning that are unique to the e-business. Consider these e-business issues that a traditional business might not incorporate into its plan:
* What service or product does your business provide and what needs does it fill?
* Who are the potential customers and why will they purchase it from you?
* How will you reach your potential customers?
* Where will you get the financial resources to start your business?
Technology obviously needs to play a large part in the e-business plan. "An e-commerce-based business is much more of a matrixed organization," according to Brian Walsh, an independent IT consultant based in Lake Oswego, Ore. "You're bringing in parts from day one to do everything that is not your core competency."
Depending on the type of business, examples can include site hosting, security, redundant network and redundant power supplies, site design, programming, and response services to answer telephone calls and e-mail messages.
Walsh notes that one of the greatest challenges of creating an e-business plan is to have a realistic take on business costs. "Do more than due diligence on what the costs are," he said, and warned against preparing a plan with an overly idealistic or optimistic forecast.
Walsh suggests that the accountant advisor on an e-business plan needs to "concentrate on the cold, hard cash - what is the cash flow of the site going to be in the month-in, month-out planning for the first two to three years? That's what I'm looking for accountants to provide."
Michael A. Ross, CPA and president of American Business Plans, in Carrollton, Texas, comments that, in many ways, there's not a lot of difference between a plan for an e-business and a plan for a traditional business.
"You've got to look at the funding of the business, the strategies, and you go through that exercise in much the same way in both business types. The one thing I would say is probably more difficult is that many of the e-businesses are unknown entities," said Ross. "It may be difficult to put together projected financial statements. You have to be particularly careful with e-business - the barriers to entry are lower. To start a business on the Internet is really not that hard."
