Business Plan for an IT Research and Advisory Services Firm

Introduction and Value Proposition

The continued growth of research and advisory services in the information technologies (IT) industry continues to accelerate, given the highly disruptive nature of cloud computing, increased adoption of analytics, and the continued acceptance of Software-as-a-Service (SaaS)-based enterprise software applications. The intent of this business plan is to define the proposed research and advisory firm and the benefits it will provide to clients. Also included is a thorough analysis of the form this business will take, the chart of accounts, applicable Generally Accepted Accounting Principles (GAAP), pro forma balance sheets, valuation of assets, and recommendations for implementing internal controls. As the proposed firm is private, Sarbanes-Oxley (SOX) reporting compliance requirements do not apply (Schneider, Valenti, 2010). Paradoxically, however, SOX is a potential source of revenue for the firm, as publicly held enterprises are often challenged to ensure their information systems and financial reporting processes are in compliance with the SOX standard. SOX will therefore be evaluated from the context of a potential revenue stream for the research and advisory firm.

The fundamental value proposition for the advisory firm is guiding enterprises to make more insightful decisions about how and where they invest in IT systems to better accomplish their goals. This includes the overall development of Enterprise Resource Planning (ERP) integration strategies and the development of large-scale Customer Relationship Management (CRM) implementation plans. This advisory firm will also provide guidance on how to implement SaaS-based Sales Force Automation (SFA) applications throughout sales teams to ensure they are as effective as possible in selling products and services.

The general staffing plan for the proposed research and advisory services firm will be based on three initial practice areas: Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and System Integration. A Practice Partner will lead each of these three areas, with each practice area also having senior consultants who will work with enterprise accounts to determine the best combination of software to meet their specific needs. The staffing plan will include two senior consultants in each practice area, in addition to ten implementation engineers across the entire company. The plan will also include two full-time positions in the finance and accounting department, a total of seven positions in enterprise sales, three full-time sales operations positions, two positions managing the internal IT staff, and four full-time positions in executive management. The total staff of the proposed research and advisory firm will initially number 37.

Form and Structure of the Business

The proposed IT research and advisory firm will be structured as a private corporation to ensure the confidentiality of financial data, including investor shares and return on shareholder equity. The designation as a private corporation will also allow the advisory firm to be considered a separate and unique legal entity, apart from the shareholders who collectively own it. The shareholders will elect a board of directors who will oversee investments in each of the three strategic practice areas of CRM, ERP, and System Integration.

This form and structure of business is the best possible choice for the research and advisory firm, as it also provides a stable foundation for generating funds for growth through stock issuance, in addition to protecting officers and employees from legal proceedings that are specifically directed at the corporation as its own entity. These many benefits are well aligned with the knowledge management and trusted advisor roles the proposed research and advisory services firm will provide.

Chart of Accounts and Accounting Standards

As the proposed IT research and advisory services firm is based in the United States and initially serves only domestic customers, accounting systems and revenue recognition will be defined using GAAP financial reporting methods. As the Securities and Exchange Commission and international accounting organizations work to create a more unified financial reporting standard that incorporates both GAAP and IFRS, the two most significant factors are the classification of deferred tax assets and liabilities on the balance sheet and the classification of expenses on the income statement (Henry, Lin, & Yang, 2009).

With respect to the classification of deferred tax assets and liabilities, for purposes of IFRS compliance, all amounts are classified as non-current on the balance sheet (Henry, Lin, & Yang, 2009). Regarding the income statement classification of expenses, IFRS rulings currently permit entities to present expenses based on either function or nature, which is more expansive than the SEC's requirement to report on function alone. The IFRS standard also requires that the nature of expenses be described in the notes to financial statements (Henry, Lin, & Yang, 2009).

IFRS and GAAP convergence share an accrual-based accounting foundation and produce the same financial statements; however, IFRS is more restrictive and treats each reporting period not as part of the annual results of a firm but as a discrete 90-day performance window (Henry, Lin, & Yang, 2009). For a new firm such as the proposed research and advisory company, a GAAP-based financial reporting system is the best possible approach, as it gives the company greater flexibility to grow without being required to itemize every transaction and cost within a given period.