Introduction
Pre-start-up business planning has been considered one of the most important activities that an entrepreneur should engage in before implementing any business project. Entrepreneurs planning to start business project need to have a road map that would guide their activities in the market. They need a plan of how to handle dynamic environmental factors in a way that would yield success. According to Günther (2012), pre-start-up business plans are always unique from other forms of business planning. This is so because an entrepreneur will be developing a plan for a business that is not in existence. It is a business that has no established structures, and with no clientele that may offer it a strong competitive market. It is a plan of how to start something that is completely new. Another unique factor in such plans is that it involves planning on how to carry out numerous activities with limited sources of finance. Starting up a business unit needs proper finance to help in purchasing equipment. Many start-up entrepreneurs struggle to find extra sources of capital that can help start their operations. However, most of them fail to attract potential investors because of their poor pre-start-up plans. Before an investor can be convinced to commit his or her resources to a given project, they need to see detailed pre-start-up plans on how a business unit plans to address various issues that would enable it achieve the desired success. They must be presented by a plan that clearly defines the anticipated challenges, and how the business unit plans to address them in order to realize its objective. Excellent business pre-start-up plan would easily draw more investors because they will be assured of success when the project finally commences. This research focuses on the relevance of pre-start-up business plans for entrepreneurs, and how such plans can help them attract extra funding from investors.
Pre-Start-Up Business Planning for Entrepreneurs
Important of pre-start-up business planning for novice entrepreneurs
A detailed pre-start-up business plans is one of the most important factors that would define success of a firm in the market. Many entrepreneurs have failed in their business projects because of failure to develop pre-start-up business plans. Pre-start-up business planning is very important for novice entrepreneurs who are not only keen on attracting more investments, but also determined not to lose their investments. Most of these novice entrepreneurs struggle to save enough money in order starts a project. They have limited resources, and for this reason, they are concerned of ways of protecting the little they already have. The only way of achieving this is by having a clearly defined plan on the project that is to be undertaken. The plan should define the business that is to be undertaken, its stakeholders, and the target market. The plan should identify how to reach the market, and some of the challenges that are expected in the project. Strategies of addressing these challenges should be defined in a clear and conscious manner. The plan should also set smart objectives that would define what the firm seeks to achieve in the market.
According to Kraten (2010), having such a clear plan gives an entrepreneur an edge in the market. The plan will help give the firm the market environment and how to address issues that may it in one way of the other. It helps novice entrepreneurs avoid pitfalls that may affect their success in the market. They will be able to know the financial needs of their projects, making it easy to plan for the scarce resources. Such plans can also win the trust of the investors who may be interested in financing the project, expanding sources of capital that is available for the project. A business plan is like a map that shows the direction that should be taken. If the map were drawn with the utmost keenness, with all the indicators and landmarks clearly labeled, then it would easily offer novice entrepreneurs a path towards successful projects (Allen, 2012). On the other hand, if the map lacks clear direction and with no clear landmark, it may be a recipe for failure. Similarly, lack of a plan would put a novice entrepreneur into a scenario where he or she is forced to make guesses. It means that victory in such projects would be unpredictable as the outcome of the guesses. For this reason, it is necessary for novice entrepreneurs to develop comprehensive plans prior to starting up business projects. Such business plans will be their weapon and shield in a business environment that is becoming increasingly competitive. They will be able to operate as small units alongside other giant firms in their industries but still remain successful.
According to Hisrich, Peters and Shepherd (2013), pre-start-up business plans help in forecasting the future of the market. The market is increasingly becoming competitive, and firms are forced to be very smart in order to achieve the desired success. One of the ways of being smart in the market is to be able to predict the future of the market despite the challenge of uncertainties. The ability to predict the future market environment enables a firm to plan for the expected market changes. It not only gives it the ability to overcome some of the new challenges that may be brought in a new business environment, but also puts it ahead of the competition. It is through proper planning that this can be achieved. Pre-start-up plans give novice entrepreneurs a rare opportunity to understand the industry they are getting into, and some of the changes that they may experience from time to time. This knowledge gives new business start-ups strength to compete with established corporations that have been in the market for years. It is one of the ways that a firm will be sure that it will not be forced to close-up soon after starting operations.
Novice entrepreneurs need to identify special niches that they can offer superior value to instead of targeting the entire market. Having a detailed business plan helps an entrepreneur determine strengths as weaknesses of the new start-up, the gap in the market that is yet to be filled by the current players, and how they can come up with a superior way of meeting the needs of people in this niche. This makes them move away from market competition. It enables them to have a market where they are the only players (Lasher, 2013). It means that they shall have succeeded in eliminating competitive threats that could have derailed their success. With the market niche, the entrepreneur can develop ways of gaining maximum benefits before of other players can flood the niche.
A pre-start-up business plan defines the future growth pattern of a business unit by defining its mission, vision, and objectives in the market. For a business unit to achieve success there is a need to have a vision that would inspire employees and other stakeholders to work towards its achievement. The vision offers the stakeholders a rare opportunity to see where a business unit needs to be at after years of working hard (Günther, 2012). It gives them the direction and a sense that their efforts would lead to a certain desirable position. At this early stage of business, such visions may inspire massive success in business operations as employees and the owner will have a clear vision of what they intend to achieve. Business plans are, therefore, very strong weapons that should be put in place by novice entrepreneur before getting into the market if they expect to achieve success.
Developing pre-start-up business plan for novice entrepreneurs
It is clear from the discussion above that novice entrepreneur needs pre-start-up business pans in order to achieve success in his or her post-start-up business operations. However, most of the novice entrepreneurs lack knowledge of how to develop a smart business plan that can be easily used in a practical business context. According to Granger and Sterling (2012), a plan can only be useful if it is practical and addresses pertinent issues that a project may face in the market. It is important to understand steps that the novice entrepreneurs should take when developing business plans.
The first step in developing a pre-start-up business plan is to conduct a self-assessment evaluation. In such evaluation, the focus will be to determine special skills and talents that would make the entrepreneur have unique capabilities in the market. At this stage, it would be crucial to confirm that personal interests match skills and talents that an individual has (Allen, 2012). This way, it becomes easy to combine the two important factors when the time for investment comes. The self-assessment would help the entrepreneur know the industry that he or she would best be suited to work.
After defining the industry of interest from the self-assessment program, the next stage would be to conduct extensive and intensive research on that industry. When conducting the market research, the first step that the entrepreneur should focus on is how the skills, talents, and interests identified earlier can be put into practice in this industry. When this is determined, the entrepreneur should determine the requirements that are necessary to succeed in the industry. Emphasis should be laid on how to come up with workable projects that would be able to meet the needs of customers. The strengths and weaknesses of the major players should be identified, and how this may pose threats or offer opportunities to the business unit. A comprehensive environmental scan should be conducted to identify all important factors that may promote or inhibit the success of the firm in the market. The political, economic, social, technological, ecological, and legal environment within that particular industry should be analyzed comprehensively using some of the modern market scanning tools. It is at this stage that the entrepreneur should determine what to expect in the market. This stage will also help predict future changes that may affect the industry in various aspects. By analyzing the history of the industry, and comparing it with the present, it becomes easier to predict its future. This would enable the entrepreneur know how to deal with the future environment. The final stage at this level of planning would be to determine if there is a window of opportunity that can be exploited using personal skills, knowledge, and interests. The gap in the market should be defined clearly, and approaches of exploiting it stated. It may be necessary to determine if it is possible make the gap a special niche where the current players cannot easily access.
The third stage would once again involve self-reevaluation. The reevaluation would involve analyzing skills, talents, and interests of the entrepreneurs, and the reality of the market, to determine how to develop strategies that would be used to exploit the opportunities. The strategies should be realistic enough to enable the entrepreneur exploit the opportunities using the skills and talents. This stage would also involve evaluating the financial capacity of the entrepreneur. After determining financial needs through market research, it would be necessary to determine the financial strength of the entrepreneur. The financial strength should match or exceed financial needs. Sometimes it is common to underestimate costs of production because of the hidden charges that researchers may not be able to identify unless they get into operations. For this reason, it may be necessary to have contingency funds that may be useful in cases where a firm is forced to spend more than it had planned for in its budget. In cases where the entrepreneur lacks the capacity to generate all the funds needed, it would be necessary to identify reliable sources that can help generate the deficit. At this stage, it would also be necessary to identify other sources of funds that would be necessary for future growth. According to Cummings and Worley (2014), the best way of attracting investors is to involve them in a business plan at earliest possible stage. This helps in reaffirming to them that they are part of the foundation of the business, not a secondary partner who has been brought in unexpectedly to help address the unfortunate financial position of a firm.
The final stage of a pre-start-up business plan would be to develop a comprehensively written plan that reflects on the activities conducted in the stages mentioned above, the findings after the analysis, and the resolutions made. The written plan should capture all the issues identified and the planned activities in a clear and concise manner in order to avoid the possibility of confusion when there is a need to make references in future.
Implementation of pre-start-up bbusiness plans
Implementation of the business plans is as good as developing the plans. Good plans that are not executed properly may not give the expected results. It is, therefore, necessary to be careful during the implementation stage because it will define success of the new project. In order to achieve this, it would be necessary to ensure that the implementation is headed by the vision holder. The entrepreneur should avoid the temptation to delegate duties to other parties involved in executing the project when the project finally starts (Cumming, 2012). All the important tasks should be closely coordinated and supervised by the team that took part in the planning for the project from its early stages. It will be important to ensure that activities done in the field are in line with the planned activities. It would be necessary to fight temptation to sway from the original plans because that will be a recipe for chaos. In the implementation process, of concern should be a need to ensure that expenditure is within the budget outlines. This would avoid cases where such a project runs out of finances soon after starting operations. Although it is necessary to be flexible during the implementation process, care should be taken to ensure that the implementation process is close enough to the planned strategies. It may be necessary to involve experts in cases where abrupt changes that may threaten the implementation of the initial plans take place in the market. This is so because it may be necessary to develop a contingency plan that would ensure that the initial objectives are met with the available resources but under a different environment from what was defined before.
Conclusion
Pre-start-up business planning is always very important to novice entrepreneurs who intend to enter new markets. The plans should focus on identifying the skills, knowledge, and interests of the entrepreneurs, and comparing them closely with market factors in the industry of interest. This would involve determining how the current capacities of an entrepreneur can be exploited in a given industry to start a successful business unit. The pre-start-up plans would help identify what to expect in the market and how internal strengths can be used to overcome weaknesses and external threats while exploiting market opportunities. Novice entrepreneurs need to attract investors to help finance their projects. Properly defined plans have the potential of attracting investors. It means that the development of such plans does not only offer opportunity for smooth operations in the market, but also opens more avenues to the capital market.
References
Allen, K. R. (2012). Launching new ventures: An entrepreneurial approach. Mason, OH: South-Western, Cengage Learning.
Cumming, D. (2012). The Oxford handbook of entrepreneurial finance. New York: Oxford University Press.
Cummings, T., & Worley, C. (2014). Organization development and change. Stamford, CT: Cengage Learning.
Granger, M., & Sterling, T. (2012). Fashion entrepreneurship: Retail business planning. New York: Fairchild Publications.
Günther, A. B. (2012). Entrepreneurial strategies of professional service firms: An analysis of commercial law firm spin-offs in Germany. Köln: Kölner Wissenschaftsverlag.
Hisrich, R.D., Peters, M.P. & Shepherd, D.A. (2013). Entrepreneurship. Boston: McGraw-Hill Irwin.
Kraten, M. (2010). Business planning and entrepreneurship: An accounting approach. New York: Business Expert Press.
Lasher, W. R. (2013). Practical financial management. Stamford, CT: Cengage Learning.