Starting a business: The Swot Analysis

Deloitte's Growth Solutions division is a large team of consultants which advises small businesses on strategies to increase their wealth.

One of the methods Deloitte uses to evaluate a business proposal is a SWOT analysis: a breakdown of the proposal's strengths, weaknesses, opportunities and threats.

A SWOT analysis of Nectarmin by Deloitte has been included below.

STRENGTHS:

The owner is employed and able to contribute income during start-up phase.

Access to scientific/medical research and development capacity.

Ability to patent product.

WEAKNESSES:

Owner's lack of real business experience.

Lack of credibility/reputation in the marketplace (need to develop brand).

Limited capital to invest.

Lack of initial cashflow from business.

Need to identify manufacturing options.

Need to determine pricing model.

Lacks knowledge of the market opportunities and competitor products.

In the case of Nectarmin, this could include where the product would compete against other health supplements and what its point of difference would be.

OPPORTUNITIES:

Growing market for natural health supplements here, as the population ages, and overseas.

Clean, green image of New Zealand product produced from sustainable resource.

Government grants to assist business start-up and export market development.

Option to licence product to major player (common in industry).

THREATS:

Small number of dominant players with ability to impact prices.

Regulation of food and drug and health product market here and overseas.

New competitors - ease of entry to market.

* * *

From the SWOT analysis, Deloitte's Greg Anderson decided the idea had merit.

However, several things had to be considered before the start-up tried entering the market.

These included:

* Market research on the present size and and expected growth in the supplement market here and overseas. Who are the major players? What are they doing?

* Does Nectarmin compete with or complement competitor's products?

* Explore options for manufacturing.

* Start thinking about pricing and costing to determine whether the business is financially viable.

* Capital requirements and ability to borrow to fund the set-up phase.

More research is also needed on the regulations applying to the food and drug industry here and overseas.

Nectarmin also needs to explore cultural issues regarding the use of "native" plant extract.

Anderson points to Statistics NZ, NZ Trade and Enterprise, NZ Food Safety Authority and competitor websites for research starting points.

BUSINESS STRUCTURE

Deloitte recommends Nectarmin forms a company to operate, as opposed to a sole trader, partnership or a trust.

Because Nectarmin is likely to operate at a loss initially, Deloitte advises registering as a Loss Attributing Qualifying Company.

This will allow it to attribute the initial losses to the shareholders to offset this against their other income, thereby reducing effective tax burden in the initial period of operation.

Without this arrangement, any losses incurred by the company will be carried forward to be offset against future profits and the owner will pay tax on all their other income at normal tax rates.

FORMING A COMPANY

Several steps need to be followed:

* Selecting and reserving a name with the Companies Office, after checking for any duplicate and/or similar names.

* Appointing company directors: these also need to be registered with the Companies Office. Owner can elect to be sole director if so wished.

* Adopting a company constitution:

This document provides a legal right to carry on in business.

Simple forms of a constitution are available from the Companies Office website for a small fee.