As Barney (2010) notes, the business planning should be founded on a solid framework in order to ensure that the entrepreneur remains objective in their decision making processes. The most critical part of the entire process is the market research. The entrepreneur needs to understand the market in order to know how best to counter the prevailing market forces and develop a formidable business strategy (Barney, 2010). The business plan provides the right framework for ensuring that the business planning process remains objective and comprehensive. The elements of the business plan shall therefore be used as a guide to explain the business planning process with the importance of each of these elements explained properly. A well though out business plan enables the entrepreneur to run their businesses smoothly without unnecessary hitches and it can be a significant determinant for whether or not a business succeeds (Coulthard, 1996).
Various crucial elements must be taken into consideration for a business planning process to be reliable and produce the desired results. These elements include the vision of the organisation, the mission and the objectives of the business (Zacharakis, 2011). These elements indicate to the entrepreneur what the business should be about. The rest of the elements which include marketing strategy, environmental analysis, and the financial plan are supporting elements whose goal is to ensure the success of the first three elements (Zacharakis, 2011). The latter three require thorough research in order to play their role in the creation of a successful venture. These elements have been discussed in detail in the following sections:
The vision is basically the basal idea that expresses what the entrepreneur intends to present to the market (McDaniel, 2002). Where more than one owner is involved, it takes the form of a shared ideology that binds them to an enterprise. It describes the organisation’s long term goal and it mainly tells of where the organisation would like to be in the long run (Barney, 2010). For instance, a new business would have the vision of becoming the leader in the provision of certain services in the economy. It gives a business the reason for its existence and the basis on which all other strategies must stem from. Vision statements are normally short statements which must be clear enough to express the desires of the owners of a business.
The mission explains how a business intends to achieve the vision specified (Karlson, Johansson and Stough, 2006). In most cases, it will describe the organisational values to be embraced and the philosophies that are to be adhered to while conducting the business. Good mission statements must address three main issues: the elements of the products or services to be offered to the consumers; the internal organisational values to guide their operations; and the financial goals of the organisation (Barney, 2010). The mission helps in painting a picture of what a business is all about and how they intend to go about their daily operations.
The vision and the mission are broad ideas that need to be broken down into actionable steps that the organisation can embark on fulfilling. Objectives do just that: they simplify the vision and mission in a manner that allows for the monitoring of the amount of progress made (Rod and Jim, 2009). There are several characteristics that objectives should have. For instance, objectives must be time bound. Unlike the vision and the mission which are open ended, an objective is something that must be achieved within a specific time (Rod and Jim, 2009). They must also be specific. The avoidance of ambiguity is important to any business. Objectives must also be achievable, measurable and realistic (Rod and Jim, 2009). The inclusion objectives into a business plan helps in putting the plan in motion. It provides a sense of urgency and a motivation to begin the real action within the specified timelines.
It is very critical that the entrepreneur conducts a thorough research on the industry in which they intend to operate. A thorough analysis of prospective competitors must be done in order to ascertain their strengths, weaknesses and their strategies. It is only the knowledge of these competitor characteristics that can enable the entrepreneur to can come up with a formidable strategy (Rod and Jim, 2009). One can either to out-compete other market players by exploiting an identified weakness or tapping into arising opportunities that the current market players may either be aware of or deliberately ignoring. This is where the importance of market research comes in. The entrepreneur must avoid making assumptions based on their limited knowledge. Most people tend to think that they know more than they actually do and this is a reality that the entrepreneurs must take cognisance of (Galindo and Miguel, 2008).
Apart from the competitor analysis, other industry factors such as suppliers and buyers must be taken into consideration. It is important to establish how easy or difficult the acquisition of raw materials would be and how suppliers behave in the market (Galindo and Miguel, 2008). Their pricing must also be taken note of in order to accurately estimate the cost of production. The knowledge of the target customers is also very important. They are the principal objects of any business and their perceptions, attitudes and habits must be taken into consideration. A good market analysis demonstrates that the consumers have been thoroughly scrutinised and this determines how reliable a business plan is (McGarty, 1989). The porter’s five forces model is an ideal tool for analysing the micro environment.
This section takes note of the developments in the entire economy and how they may impact the business about to be started (King, 2000). The political, economic, socio-cultural, technological, legal and environmental factors are noted and their likely impact analysed. Opportunities and threats arising from the environment are detected through such analyses hence their importance.
After analysing the environment, focus must be turned to the proposed business and its core competencies determined. Core competencies are the internal capabilities that the business could use to take advantage of the opportunities identified in the environment (Barney, 2010). The entrepreneur must be clear in their minds as to what strategic capabilities they intend to build in their businesses that would help them have a competitive advantage in the market. These core competencies help in giving meaning to the business plan by making a reflection on its potential (King, 2000).
The business plan should be clear as to who are the target customers and provide a rationale for this choice by elaborating on their characteristics that make them a viable target. The business plan should also contain a comprehensive marketing plan which provides insights on what the business wishes to offer as well as how they intend to bring them to the customers (Williams, 1983). A marketing strategy contains the product or service description. It describes the product characteristics and how such products are different from the ones in the market and the benefits that the product is intended to provide are also highlighted (King, 2000). The strategy should also explain how the business intends to ensure that the products reach the targeted clients. The general approach to distribution should be provided (King, 2000). The general approach to pricing for the products must also be provided and explained clearly. Market characteristics that support such an approach should be highlighted as well. The promotional strategy is also an integral part of the marketing strategy and it describes the approach to be taken in getting the target market aware of the product. The approaches of advertising, personal selling, marketing campaigns and others should be elaborated clearly in the business plan (Rod and Jim, 2009). The entrepreneur could also choose to mention their estimated budget for the first year in this section.
The swot analysis wraps up the business strategy section by providing a pictorial presentation of the firm’s strategic positioning. It is an important part of the business plan.
The operation plan provides a breakdown of activities to be undertaken before the commencement of the business (King, 2000). It is an important guide for helping entrepreneurs to stick to the agreed timelines and launch operations on time.
The financial plan is perhaps the most important part of the business plan. It provides the figures which provide the basis for the decision on whether or not to invest in the business. This section, like all others must be completed after a thorough research to ensure accuracy (Zacharakis, 2011). It details the amount of capital to be used in starting the business as well as the expenses to be incurred. It also provides a projection of sales revenues as well as the profit projections hence forming the basis for investment in a plan. Entrepreneurs go into a business to create wealth and they tend to be more interested in establishing the worth of the business before studying the specific provisions of business strategy hence the importance of this section (Zacharakis, 2011).
Even though entrepreneurs can have varying characteristics and succeed, research shows that certain traits are extremely important in guaranteeing the success of an entrepreneur (Audretsch, Litan and Strom, 2009). These traits are as discussed below:
The process of planning for a business is one that requires that utmost care be taken when coming up with the necessary estimations. When judging the viability of a business, details such as the prices of raw materials, statutory fees, rent rates, and other relevant expenses must be taken into consideration (Audretsch, Litan and Strom, 2009). The entrepreneur must conduct a thorough market research in order to ensure that their estimations remain realistic at all times. Being attentive to details is a trait that also helps in analysing market characteristics. An entrepreneur needs to understand the consumption habits of the target market and the reason why they behave as they do (Audretsch, Litan and Strom, 2009). Paying attention to detail when researching and putting down a plan ensures that there is a reliable basis drawing appropriate conclusions (Meyer, 2011). This attention to detail must however not be mistaken for obsession with perfection. Perfectionists are in many cases known to waste valuable time in pursuit of details whose significance may not be justifiable. The entrepreneur must remain attentive to detail while bearing in mind the acceptable variability in decision making.
In order to run a business, one must be disciplined enough to see it through. Entrepreneurs must have the discipline to do whatever is needed in a timely manner (Meyer, 2011). As opposed to other occupations where people are supervised or provided with targets which they must meet, the entrepreneurs sets the yardsticks on their own with no one to ensure that such yardsticks are adhered to (Meyer, 2011). The ability to work without supervision and in consistency with the plans established is the essence of discipline. It also entails the recognition of certain tasks that may appear to be unimportant and ensuring that they are carried out. For instance, routines such as bookkeeping may appear boring and less important than activities like meeting potential clients and others. However, it is a routine whose significance may determine how successful the business may become by providing the information needed to accurately assess the performance of the business.
Being objective means that one should always have the whole picture in mind before making a decision (Galindo and Miguel, 2008). Variables in business tend to change from time to time with some appearing to be more important than others. The temptation on the part of business people is the reaction to such factors without taking time to analyse the importance of such factors in relation to other relevant variables in the environment. For instance, where they may be natural disasters, the reaction of most investors is to keep off the markets until the conditions stabilise. An objective investor would however be able to assess the market fundamentals and make their investment decisions based on the overall picture. Objectivity is also important at the business formation stages where the investor is required to weigh all relevant factors before making a decision on what strategies to embrace in the pursuit of their goals (Galindo and Miguel, 2008). An entrepreneur should have the ability to weight specific factors in their order of importance before relying on them to make their decisions.
Calmness is a trait that many entrepreneurs lack. Most entrepreneurs are known to be inpatient and hot tempered and this perhaps contributes a little to the high level of failure among start up businesses (Casson, 1995). Markets are often volatile with sporadic changes happening quite frequently where factors that could adversely affect a business appear and disappear without notice (Galindo and Miguel, 2008). An entrepreneur must be aware that such undesired eventualities are bound to happen and remain prepared. Seasoned business managers tend to hold the view that there is always a perfect solution for every situation (Meyer, 2011). Most arising threats can be turned into opportunities if the right strategies are embraced. The important thing is to remain calm and evaluate the strategic options at the disposal of the organisation. Calmness provides the entrepreneur with the opportunity to remain creative even at the height of all crises. Decisions made in panic are often detrimental to the business and it may potentially lead to its demise (Galindo and Miguel, 2008). However, calmness must not be mistaken for slowness or complacency. Many occurrences in the business world require entrepreneurs to make quick decisions in order to realise the potential benefits. Calmness denotes the absence of panic and hasty decision making. However, entrepreneurs should be able to tell where there is need for a swift decision and where they can take more time to evaluate their options.
A certain level of flexibility is necessary for the success of the entrepreneur: they must be able to monitor the goings on in the environment and make quick adjustments where need be (Casson, 1995). This flexibility must be balanced with the need to standardise procedures as well as ensuring operational discipline. However, the core functions of the organisations should remain the principal focus and all other procedures realigned to them. Rigidity in business in most cases relates to the procedure of service and payment as well as the approach to core functions such as promotion. The market environment is constantly changing and businesses must keep adopting the changing preferences in order to remain relevant (Entrepreneur, 2011). For instance, marketing messages are only effective at a given time and the moment market perceptions change; the messages must follow suit. Failure to do so would render them largely ineffective.
The character of being autonomous means that one can function to the optimum without supervision (Nair, 2006). Entrepreneurs are their own bosses and they are the ones who set the rules which they then enforce on their own. They must be able to hold themselves accountable and follow their own rules without fail in order to succeed.
Organisational management requires a clear focus with the end in mind. Everything an entrepreneur undertakes to do should in one way or another be aimed at achieving the set goals (Meyer, 2011). Being goal oriented enables them to avoid wasting time and resources on activities that may be deemed as unnecessary. This clarity of vision is easily transmitted to other members of the organisation hence leading to the growth of a desired organisational culture.
Everything in business bears some levels of risk. The business environment can be very volatile and this means that no plan in business can be full proof (Meyer, 2006). An entrepreneur must have some level of tolerance to risk for them to be able to commence any business operations.
My personal assessment on the level to which the 8 characteristics named above are possessed can best be done using a matrix with scores from 1 to 5 with 5 being the highest. This is as illustrated below:
My strongest attributes are personal discipline, goal orientation and my preference for independence. These attributes are complimentary in the sense that high discipline levels are necessary for the enhancement of results under autonomy. I am also quite attentive to detail even though this is not my strength. My level of objectivity is also reasonably high. I am generally calm in most situations and I exude a significant level of flexibility. This may be useful in business as some level of strictness must be tampered with flexibility to avoid losing focus. My weakest point is the tolerance to risk. However, I consider the level of trait possessed as adequate for engaging in business while avoiding recklessness by ensuring proper market research before embarking on any venture. In my own assessment, I can make a very successful entrepreneur.
A business plan is the blue print that details what an entrepreneur intends to do with their new venture. It must therefore be well researched and written with elements such as vision, mission, strategic positioning and approach to strategy clearly spelt out. Accurate estimates of financial estimates should also be provided to ensure that the profitability prospects of the business are well reflected. In order to successfully implement the business plan, an entrepreneur must bear some characteristics. These traits include personal discipline, attention to detail, flexibility and objectivity among others. The personality of the entrepreneur is central to the success of a business venture and entrepreneurs should be keen to invest in themselves and acquire the required traits in order to increase their chances of success.
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