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 strategic management 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 strategic management, 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). It provides the overall guidance for all strategic management
planning and implementation processes. 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). It
edges more towards the operational aspects of the strategic management process.
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). They break down the strategic management goals set
into actionable and measurable goals that can be gauged for success or failure.
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.
External environment scoping is a very
important part of the strategic management process. 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. Entrepreneurs are advised to make use of strategic management
models such as the PESTEL model to ensure that their external analysis is
comprehensive. 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). Strategic management plans should revolve around the existing core
competencies or the need to develop new ones. 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 is a
component of the organisations strategic management blue print that contains
the product or service description and how it is to be communicated to the
target customers. 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. Indeed, the effectiveness of any strategic
management plan lies on its financial viability. 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. This is
an important strategic management trait. 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:
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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.
Audretsch, D.B., Litan, R.E.,
Strom, R.J., 2009. Entrepreneurship and
openness: theory and evidence. Cheltenham, UK: Northamton, MA
Barney, J.B., 2010. Strategic Management and
Competitive Advantage. 3rd Ed. Boston: Prentice Hall
Casson, M., 1995. Entrepreneurship
and business culture. Hants, England: Brookfield
Coulthard, M., 1996. Business
planning: the key to success. South Melbourne: Macmillan Education
Australia
Entrepreneur, 2011. 25 Common characteristics of Successful Entrepreneurs. (Online)
Available at: http://www.entrepreneur.com/article/200730 (Accessed 18 November
2011)
Galindo, M., Miguel, A., 2008. Entrepreneurship and Business: a regional perspective. Heidelberg:
Springer Berlin Heidelberg
Karlson, C., Johansson, B., Stough, R.R., 2006. Entrepreneurship in the knowledge economy. New
York: Routledge
King, J.B., 2000. Business
plans to game plans: a practical system for turning strategies into action. Los
Angeles, Calif: Silver Lake Publishers
McDaniel, B.A., 2002. Entrepreneurship
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McGarty, T.P., 1989. Business
plans that win venture capital. New York, Toronto: Wiley
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start-ups and corporate ventures. Los Angeles: SAGE
Nair, K.R.G., 2006. Characteristics of
Entrepreneurs: an empirical study. Journal
of Entrepreneurship, 15 (1), pp. 47-61
Rod, B.M., Jim, B., 2009. Entrepreneurship and globalisation. London: SAGE
Williams, E.E., 1983. Business
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York: Van Nostrand Reinhold
Zacharakis, A., 2011. Business
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McGraw-Hill
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