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.
For more theory and case studies on: http://expertresearchers.blogspot.com/
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For more theory and case studies on: http://expertresearchers.blogspot.com/
For premium papers/articles: juchrisma@gmail.com
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