A business plan is a document that forms a road map on which a chosen business idea is build. The document defines the idea and explains how it can be converted into a valuable business venture. This paper will examine the various elements that make up a business plan document and explain how important each element is to a business plan.
Idea generation refers to the process of developing a sellable business concept. Only competitive business ideas survive the test of time in highly competitive market environment. There are various methods that entrepreneurs use to generate competitive business ideas. Most common of them is group brainstorming; this is a collaborative process that provokes imagination in a group setting. The process widens the scope of idea generation by providing a forum in which different ideas are collected, discussed and the best among them chosen for implementation (McKeever, 2010). Other idea generation methods include; mind mapping, SWOT analysis and the six thinking hats.
Mind mapping as a tool of idea generation can also help in problem solving and decision making. The process begins by identifying an idea which is expanded through individual reflection to develop an offshoot of ideas. The process can be carried out manually or by use of computer software such as freeMind. SWOT analysis is where an idea is examined in terms of their strength, weakness opportunities and threats that accompany it.
It is important that the idea generation process is structured on a well laid down process in order to come up with a functional business concept. Competitive markets call for continuous innovation to bring new ideas in a business venture, and make it relevant to the current times (McKeever, 2010).
Successful business ventures are build on sound strategic plans that provide a framework for decision making, setting benchmarks and stimulating change. A strategic plan in a business plan comprises of; the vision, mission, values and objectives a business venture. A vision draws the picture of the desires of the business venture in terms of; activities and magnitude within a given period of time (Stutely, 2002).
The mission defines the nature of the business activities as well as its purpose to the society. A mission statement should therefore be focused, justifiable and clearly state what the business is all about. Ochtel (2009) observes that the strategic element of a business plan should also address the business values of the venture. Values in this case state the principles set out to govern the enterprise operations as well as how the business relates with the society.
Enterprise objectives are also stated under the strategic plan. Business objectives are classified either as long term or short term. The objectives define the path to be followed to attain the desired success. They further communicate the desires and needs of the investors as well as employees of the enterprise (Ochtel, 2009). The main business aspects addressed in the objectives section include; growth strategies, profitability, market entry, what the business has to offer and the type of technology to be employed in the business.
The strategic plan also explains the strategies the enterprise will utilize to realize the objectives, values mission and vision. Major strategies covered under this element according to Stutely (2002) include; issues of diversification, acquisitions and growth. Strauss (2008) adds that an enterprise should also focus on directing the enterprises’ internal cash flow into future expansions, introducing new products and outsourcing as a means to reduce operations expenses. Most of these strategies should be implemented through a SWOT analysis.
The business program also forms part of a strategic. Strauss (2008) points out that a program sets out an implementation road map that shows a schedule of the implementation milestones. The program covers the resource mobilization process, a budget both for time and resources and performance targets.
Market analysis and research
Every business enterprise strives to create a market niche for its products or services. In order to create the niche, it is necessary to gather information about the market through research. Market research focuses on finding “relevant information on factors that influence the peoples buying behavior” (Calvin, 2002). This type of information can be gathered through a personal initiative that involves own contact with customers to find out their views on a product or service. This type of research method is referred to as primary research. Secondary research method involves search of information from publications, internet and trade associations (Calvin, 2002).
Understanding the competition
It is important to understand your business competitors in order to develop strategies to have an edge on them. This can be done by investigating their business lines to identify their weaknesses and strength. The investigation starts by identifying the competitors and analyzing their offers in the target market, their market segments, and why they are preferred by customers.
Such information can be hard to obtain directly from the business operators. However, one can smartly put together pieces of information gathered from the business website to generate useful information about a competitor.
Such information would include; their pricing strategies, promotions and other benefits they offer the customers. Employees, customers and suppliers can also provide vital information about competitors though must device a good language of approach to get such information from them. Trade shows and exhibitions can provide a good ground for gathering information about competitors (Calvin, 2002). By visiting a competitors’ stand in a trade show, you can be able to gather as much information about the business as possible without being suspected.
Once you have gathered information about your competitors, the next question is how you would intent to fight with them for business within the market segment. The first step to beat the competitors in the market according to Strauss (2008) is to identify a market niche, find out what the competitor is not offering well and device methods to fill in the gap. The main aim of the analysis is to discover the competitive advantage that an enterprise can have and focus on how to expand the competitive advantage.
In the analysis section of the business plan, one should therefore identify who are the competitors, the size of the market they control and how they have been able to perpetuate themselves in the market. The section should also point out the weakness of the competitor and explain how the new business will capitalize on the weaknesses of the existing business to fight for a niche in the market. This section must persuasive in the sense that it assures a reader that the new business is ready for the competition.
Understanding the Financial numbers and projections
The financial section is an indication of whether the business idea is feasible or not. A non-feasible business idea cannot attract funding as potential investors only put their money in plans that are profitable. The section explores the details of “the income statement, the cash flow projection and the balance sheet” (Reading, 2005). When preparing the financial section, one should gather information about the business expenses so as to be able to make their projections. The business expenses include; rent utilities, legal fees, operation costs and inventory.
The income statement indicates the revenues, expenses incurred and the profit realized within a particular period of time. This can either be on quarterly or annual basis depending on the business enterprise. For start up businesses, an income statement needs to be generated more often to study the developing trend. The balance sheet on the other hand explains the “assets, liabilities and equity” in terms of magnitude, availability and how they will be used (Reading, 2005).
Competitive strategy and Scenario Analysis
Launching a new business idea into the market is like blanching in darkness, the process is often surrounded with a lot of uncertainties that create fear. Scenario analysis helps in demystifying the fear by providing rational frameworks on which to examine the challenges of the new venture. Scenario analysis helps creates a picture of the future of the business and how particular decisions can affect the business.
A scenario is a tale of how business events may turn in the event that certain forces are in place or when they are missing. Scenario analysis starts with problem definition, giving yourself timelines and investigating to find out what the future holds on a given business idea. One should identify particular factors that may hinder the business from attaining the set goals in the future and learn how to avoid them in the event that they may occur. Before developing scenarios, you need to identify the uncertainties and certainties of the business enterprise (Reading, 2005). Both certainties and uncertainties should be arranged in an ascending order starting with the most severe to the least severe.
A business plan is a vital document in any serious business enterprise. The various elements that form the plan provide a dependable guideline on how to implement the business idea. The financial section of the plan provides detailed information about the income, balance sheet and cash projection statements. This information can be used to gauge whether the business venture will be viable or not. From this point of view, a business plan can be used for purposes of securing funding from investors.
Behavior and Skills of Entrepreneurs
The first and most important behavior of a typical entrepreneur is the ability to influence. So as to be able to get investors, customers and employees follow an idea, you need to convince and influence them in the direction of your idea. Strauss (2008) indicates that most entrepreneurs use their own experience to create solutions to problems they have encountered in their course of life. An entrepreneur is usually quick to act, as it is often called, “strike the iron when it’s still hot”. Strauss (2008) contends that entrepreneurship is a hustle that requires a non-relenting fighters’ spirit.
The most outstanding behavior and skills of an entrepreneur is the ability to take risks. An investment can either yield profits or make loses. The time to rejoice is when profits are realized. An enterprise can make losses as a result of wrong business moves, natural disasters or manmade problem. An entrepreneur must take calculated risks on investment in order to make a profit and grow the business (Reading, 2005)
Several theories have been advanced to define the behaviour and skills of an entrepreneur. Strauss (2008) alludes that there is no particular theory that is consistent to cover the whole spectrum of the behavior and skills of entrepreneurs. The first theory is the “goal, objectives and expectations” theory (Strauss, 2008).
A business venture is run to attain certain objectives and goals. A business can for example be run with expectations of generating income, improving living standards or creating employment. Other entrepreneurs begin an enterprise with an expectation to realize growth in a particular market segment. This theory contends that entrepreneurs driven to begin business venture with an expectation either to grow the enterprise in the market and technology or to solve a problem in society.
The psychological need for achievement theory also describes the main drives that push entrepreneurs to starting a new business ventures (Scheiner, 2009). McLelland theory describes personality attributes and points out that entrepreneurs have a strong need for success. The locus of control theory also portrays entrepreneurs as having a sturdy “internal locus of control” (Scheiner, 2009).
With this attributes, an entrepreneur is very confident with his or her decisions regarding the business and all actions are driven by the need to succeed in the venture. Creation of new business enterprises stem out on success as a motivation as suggested by Scheiner (2009) entrepreneurs generally have a competitive mind with a high need to achieve success as well as the ability to learn from situations.
The sociological theory describes an entrepreneur as one who scouts for ideas and strives to turn ideas into a money making ventures. This dimension is based on the environment as the field in which the entrepreneur looks for business idea. The environment in this case refers to the social context in which one exists. Another vital theory in the description of entrepreneur skills and behavior is the anthropological theory. This theory describes one’s ability to recognize opportunities. The social context in entrepreneurship comprises of the ethnic group, population and the social network (Down, 2010)
The Theory of Self-Efficacy and Effectuation
Effectuation is a set of internal and systematic ideas that form a platform on which decisions are made. Successful entrepreneurs as Down (2010) concludes, apply an effectual logic in decision making, this involves taking a confident stance in a particular market segment and mastering how to manipulate the market and other actors. In this sense, entrepreneurship is looked at as “an artificial science” in which the entrepreneur takes the world as a blank and the market plus the market players are the artifacts. An entrepreneur uses the artifacts to grow his or her enterprise in the “blank world” (Down, 2010).
To realize self-efficacy, one needs to perceive a possibility in every opportunity rather than failure. They should be able to recognize and control opportunities in order to grow a business enterprise to desired success. Business markets are never found, they are created. The creation is not a simple process; it requires research, insight and a perception above the competition. An effectuator will strive to attain success bearing in mind that failure is an integral part of the venture (Strauss, 2008). This means that the entrepreneur does not fight to escape failure instead they force their way out to success.
A Personal Reflection on the Characteristics
I adopt a stance that no one personality or trait theory is sufficient to describe all entrepreneurs. The different views as advanced in the traits theories summed up can offer a concrete description of the entrepreneur behavior and skills. An entrepreneur must be committed and work hard in order to attain success. As Carsrud and Brännback (2009) suggest, a successful venture must be built on a framework of current information based on empirical research on the targeted market segment.
I agree with McLelland’s personality theory that an entrepreneur is driven by a greater need to achieve success. The need drives the entrepreneur to strive much harder to achieve success. As Carsrud and Brännback (2009) point out, entrepreneurs must have “a strong internal locus of control”, the locus of control determines how one makes decisions about business and success. The rate of action should be equally so as to present the idea to the market in time. The manner in which a business idea packaged determines whether it can succeed or not.
Each enterprise must be based on particular expectations, goals and objectives. The expectations that one has about the venture provide the drive to work for them. It is important to remain focused to the goal and fight to the end. Ability to influence both investors and customers is important to ensure the idea survives the competition. It also important to carry out research and use the information gathered to develop a competitive advantage for the business.
The Importance of the Seminars
Through the seminars, I have been able to learn so much that relates to entrepreneurship. The seminars provided a forum for networking with people of like minds and sharing business ideas and experience. Networking is an important element of entrepreneurship; it provides a platform for learning about new business technologies, new markets and other new business concepts.
The seminars also brought to light the roles of entrepreneurship in society. Entrepreneurs play an important role in availing innovative ideas that eventually become instrumental economic growth and creation of employment opportunities. Good business ideas should aim at creating job opportunities and contribute to the growth of the national revenue. The seminars have positively changed my perception about entrepreneurship and improved my knowledge on how to generate business ideas, develop business strategies and getting information about the competitors. The seminars have also been instrumental to providing information on how to package a business idea as well as how and where to get funding for the business idea (Carsrud and Brännback, 2009).
Knowledge is power and more so in the current dynamic world. Continuous learning helps one keep updated with current ideas and technologies. Seminars provide a good forum for sharing current ideas on the topic of discussion. The seminar forum also provides information on new business management skills that are relevant in managing business enterprises in the modern world.
Calvin, R., 2002, Entrepreneurial Management, McGraw-Hill Inc, New York.
Carsrud, M., and Brännback, M., 2009, Understanding the entrepreneurial mind: opening the black box, Springer Dordrecht Heidelberg, New York.
Down, S., 2010, Enterprise, Entrepreneurship and Small Business, Sage Publications Ltd, London.
McKeever, M., 2010, How to Write a Business Plan, NOLO, California.
Ochtel, R., 2009, Business Planning, Business Plans and Venture Funding: A Definitive Reference Guide for Startup Companies, The Carlsbad Technology Inc, California.
Reading, C., 2005, Strategic Business Planning: A Dynamic System for Improving Performance and Competitive Advantage, Kogan Page Ltd, London.
Scheiner, W., 2009, Determinants of Entrepreneurial Behaviour, Duestche Nationalbibliothek, Leipzig.
Strauss, S., 2008, The Small Business Bible: Everything you need to know to succeed in your Small Business, John Wiley & Sons, New Jersey.
Stutely, R., 2002, The definitive business plan: the fast-track to intelligent business planning for Executives and Entrepreneurs, Pearson Education Ltd, London.