Introduction
It is paramount for entrepreneurs to develop an effective business plan prior to venturing into any project. According to Zacharakis, Spenelli, and Timmons (2011, p.4), business planning safeguards entrepreneurs from incurring losses that might be associated with a particular project. This arises from the fact that the business plan enables entrepreneurs to anticipate the obstacles that he or she might face upon launching the business.
A business plan articulates how a business idea will be exploited. This means that it serves as a roadmap that outlines how the entrepreneur intends to accomplish a particular business idea within a specific timeframe (Zacharakis, Spenelli & Timmons, 2011, p.4). The business plan is composed of various elements, such as evaluation of the feasibility of the business idea. A well-developed business plan can enable an entrepreneur to source funds externally, such as loans from financial institutions. In developing the business plan, entrepreneurs should focus on the long term rather than in the short term.
Idea generation
During the business planning process, idea generation forms the first step. According to Weiss and Legrand (2011, p.125), idea generation entails a thorough process which may involve combining unconnected or existing facts so as to develop a solution to a particular problem or to exploit an opportunity. For entrepreneurs to be effective in generating business ideas, it is paramount that they adopt an innovative thinking process. An example of an innovative thinking process that entrepreneurs can adopt is illustrated below.
An idea may be generated from the external business environment. This may entail the identification of a need within a market or a gap that has not been exploited by other firms in the market. This means that the entrepreneur is required to conduct a thorough environmental scan (Kuratko, 2008, p. 128). Alternatively, the entrepreneur may generate a business idea through brainstorming. Weiss and Legrand (2011, p.126) assert that idea generation is a group activity. Generating ideas through brainstorming in a group is very effective. This arises from the fact that brainstorming encourages lateral thinking. Additionally, the group members have diverse knowledge and experience compared to an individual (Weiss & Legrand, 2011, p. 125). An entrepreneur can also generate ideas individually based on his or her skills and experience. To achieve this, the entrepreneur must be very creative. The diagram below illustrates a creative problem-solving process.
After successful generation of ideas, entrepreneurs should screen them so as to determine their feasibility. The most feasible idea should be selected. The idea screening process should entail the evaluation of whether the idea selected will add value to the consumers’ and the firm and hence its commercial viability.
Strategic objectives
A well-developed business plan should outline the firm’s strategic objectives. Strategic objectives include the various milestones or targets that a firm intends to achieve in the course of its operation. These objectives may either be medium or long term based. In the process of developing their business plans, entrepreneurs should ensure that their strategic objectives are reflected by the firm’s values, vision, and mission statements (Planaware, 2011, para. 8). Additionally, entrepreneurs should ensure that the strategic objectives are SMART. This means that the strategic objectives should be specific, measurable, attainable, relevant, and time-bound (Beam, 2008, p.84). By being ‘specific’ means that the objectives should outline a specific outcome. Measurable means that it should be possible to track the progress of the objective. Attainable means that the objective should be achievable using the resources and capabilities that the firm has. If a firm does not have the necessary resources, the entrepreneur should evaluate what needs to be done in order to access the resources. On the other hand, relevant means that the objective should be beneficial to the firm while time bound means that the objective should be accomplished within a specific time frame (Beam, 2008, p. 85).
The strategic objectives should be focused on ensuring that the firm attains future success. One of the ways through which entrepreneurs can attain this is by ensuring that the strategic objectives are broad. For example, the strategic objectives should take into account the various needs and wants that should be addressed both in the medium term and the long term. Therefore, the strategic objectives should integrate both financial and non financial objectives. The financial objectives outline various issues, such as the profit margin that the firm intends to achieve within a particular timeframe. On the other hand, the non-financial objectives may outline the relationship that the firm intends to have with its customers and the society within which it operates.
Market analysis and research
Business plan should reflect the entrepreneurs understanding of the market (Zimmerer, Scarborough & Wilson, 2008, p. 139). Entrepreneurs can achieve this by conducting a market audit through the incorporation of market analysis and research. There are numerous benefits that are associated with conducting market research and analysis. For example, understanding the market enhances the effectiveness with which entrepreneurs formulate their business strategies (Fyall & Garrod, 2005, p.67).
To be effective in conducting market analysis and research, entrepreneurs should evaluate both the macro environment and the microenvironment (). This arises from the fact that both internal and external business environment influences business operations (Haberberg & Rieple, 2008, p.105). There are various models that entrepreneurs can integrate to ensure effective conduction of market analysis and research. One of the models that entrepreneurs can use in evaluating the macro environment is the PESTLE analysis. The PESTEL model enables entrepreneurs to evaluate the various factors within the external environment which the firm does not have control over. These include political, economic, social, technological, and legal factors.
Additionally, entrepreneurs should conduct a market audit on the micro-environment. Conducting an analysis of the micro-environment contributes towards an effective understanding of the industry within which a firm operates (Fyall & Garrod, 2005, p.68).
Entrepreneurs can conduct effective micro-environment analysis through the integration of the Five Forces Model. The five forces model enables entrepreneurs to understand the attractive nature of the industry. Using the five forces model gives entrepreneurs an idea regarding the intensity of competition and the industry structure (Fyall & Garrod, 2005, p. 68). Other issues that the five forces model enables entrepreneurs to understand include market threats such as the threat of new entrants, the threat of substitutes, and the degree of rivalry amongst the competitors. Entrepreneurs are also able to understand the bargaining power amongst the suppliers and buyers (Cheverton, 2004, p.72).
Another model that entrepreneurs can consider integrating is the SWOT model (Cheverton, 2004, p.72). This will enable the entrepreneurs to understand market strengths, weaknesses, opportunities, and threats. In the process of conducting market research, entrepreneurs should focus on two main market variables, which include the consumers and the competitors. Incorporating these models improves the effectiveness with which entrepreneurs formulate business strategies such as positioning, market targeting and segmentation (Cheverton, 2004, p.72).
Understanding competition
In order to formulate effective business strategies, entrepreneurs should understand their competition (Fleisher & Blenkhorn, 2000, p.7). Entrepreneurs can achieve this by conducting a competitive analysis. Competitive analysis enables entrepreneurs to gain knowledge regarding what the competitors are doing with regard to business and marketing issues (Corporation, p. 109). Understanding competition is only possible if the entrepreneur takes into consideration his or her direct and indirect competitors (Balanko-Dickson, 2006, p.40). The resultant effect is that the firm is able to determine the degree of sustainability within the market.
Competitive strategy and scenario analysis
In the process of conducting competitive analysis, entrepreneurs should take into consideration the competitive strategies adopted by their competitors. For example, they should analyze their competitors marketing strategies. This can be achieved by integrating the 7P’s which include product, promotion, process, people, place, process and physical evidence (Craig, 2000, p. 59). Understanding the competitive strategies enhances the effectiveness with which entrepreneurs formulate strategies to counter the competition.
Entrepreneurs should also conduct a scenario analysis so as to understand its position within the market compared to its competitors (McAfee, 2005, p.255). As a result, entrepreneurs are able to formulate effective competitive strategies. Scenario analysis should entail evaluation of the strategies adopted by the entrepreneurs. A rating scale should be adopted so as to understand the degree of competitiveness amongst the entrepreneurs (McAfee, 2005, p.255).
Financial Planning
The core objective of every business is to maximize profit. In order to achieve this, entrepreneurs should adopt financial planning. Financial planning refers to the process through which entrepreneurs forecast their present and future financial requirements. Nissenbaum, Raasch, Young & Ratner (2004, p.401) assert that a business plan is a financial tool. This arises from the fact that an entrepreneur can use it to obtain the necessary funds. To be effective in the financial planning process, a number of financial planning tools should be incorporated. These tools include projections of their firms’ profit and loss, cash flow statements and balance sheet. The financial projections should relate to a number of years (Nissenbaum, Raasch, Young & Ratner, 2004, p.406).
Additionally, the financial projections should also take into consideration the costs that will be incurred in the process of establishing the venture. Therefore, a budget should be developed. To be effective in estimating costs, entrepreneurs should adopt the concept of breakeven analysis (Richards, 2011, p.1). This will enable the entrepreneur to understand the variable and fixed costs. Additionally, the firm will be able to understand the point at which their businesses will breakeven (Nissenbaum, Raasch Young & Ratner, 2004, p.406).
Entrepreneurial characteristics
Entrepreneurship is considered to be the driving force for economic and industrial growth. These growths arise from the ingenuity of business managers, leaders and administrators. Additionally, entrepreneurship is regarded to be a way of thinking that is motivated by existence of a particular opportunity. The objective of entrepreneurship is to create value (Haran & Kumar, 2006, p.2). Entrepreneurship has resulted into significant transformation of the society. There are numerous attributes that make a successful entrepreneur. Some of these attributes are discussed below.
Self confident
Business environment is very dynamic and challenging. As a result, it is characterized by a high degree of uncertainties. For example, an entrepreneur may establish a business venture but be faced with challenges that may limit its success. However, entrepreneurs do not back off from challenges. Instead, their optimism enables them to tackle challenges head-on (Boone & Kurtz, 2010, p. 195).
According to Sun (2007, p.63), succeeding is such an environment requires one to be persevering and be self-confident. As a result, self-confidence enhances aggressiveness amongst the consumers. Additionally, self-confidence attributes enables entrepreneurs to be risk takers (Organization of Economic Cooperation and Development, 2010, p. 165). For example, entrepreneurs can risk their time and financial resources in order to exploit a certain opportunity presented by the market or to follow their passion. This means that they are able to take advantage of the opportunities that are presented by the business environment. As a result of their self-confident characteristics, entrepreneurs are good leaders who are able to motivate others (Sun, 2007, p.63).
Ambitious
Entrepreneurs have a strong desire to succeed in their activities. Therefore, they are regarded as being ambitious. As a result of their ambitions, entrepreneurs are able to focus on long term goals without deviating (Solita & Cristina, n.d, p. 9). One of the factors that enable them to attain their objectives is that they are very calculating. Additionally, the ambitious nature of entrepreneurs is also evidenced by their hard driving and relentless in an effort to achieve their mission.
Commitment
Entrepreneurs are also are very committed towards their goals. This is evidenced by the sacrifices that they make in an effort to achieve their objectives.
According to Price (2004, p.5), entrepreneurs are characterized by a high level of diligence and determination. As a result, they are able to deal with uncertainties that emerge from the market. Additionally, entrepreneurs are ready to incur numerous opportunity cost in their quest to achieve their desires. For example, if an entrepreneur establishes a particular business venture, he or she will be very persistent towards ensuring that the idea succeeds. As a result, entrepreneurs make a lot of sacrifices (Price, 2004, p.5).
Hard working
Considering the fact that entrepreneurs are motivated by a strong desire to excel they are very hard working (Kiyimba, 2011, para. 9). Entrepreneurs are always ready to do anything necessary that will contribute towards success of their business venture. As a result of the value that they attach to hard work, entrepreneurs are able to develop a high degree of independence. The hard working characteristic of entrepreneurs is evidenced when establishing a business. For example, entrepreneurs undertake most of the business operations by themselves. This is due to the fact that the entrepreneur may not have enough resources to hire the necessary help. As a result, they can work for long hours. Additionally, the hardworking characteristic of entrepreneurs is motivated by the need to satisfy the customers and to attain business growth. Boone & Kurt (2010, p.196) further assert that their hard working nature makes them to enjoy challenges that might arise in their effort to attain their objectives. The resultant effect is that they are able to achieve their goals.
Strong ego
Entrepreneurs are also characterized by a strong ego that enables them to deal with obstacles (Fieger, 2011, para. 15). Businesses face ups and downs in their operation. Such a trend may emanate from the strategies being adopted by the competitors. However, their strong ego enables them to sail through such uncertain trends. The resultant effect is that they are able to maintain their business perspective. For an entrepreneur to have a strong ego, he or she must possess a strong sense of self-assurance, self-image and identity. By possessing a high sense of self-assurance, an entrepreneur is able to face various issues due to his or her self-belief. Entrepreneurs’ belief that they can accomplish tasks better compared to anyone else (Tassiopoulos, 2008, p. 326). Strong ego also enhances the entrepreneurs’ passion towards their business goals. Additionally, the strong ego enables entrepreneurs to seek challenges that can contribute towards improvement in their competitive advantage (Bolton & Thompson, 2004, p.114).
Autonomous
In their operation, businesses are required to make different decisions. To be effective in making decisions, entrepreneurs have to source information from different sources. Sourcing information from different sources increases the effectiveness of the decision making process. Despite seeking information and opinion from different sources, entrepreneurs are independent in their decision making. Their autonomous characteristic enables them to take responsibility of everything that might arise as a result of their decisions (Ruef, 2007, p.11).
A reflection on the extent of entrepreneurial skills required
In order to be a successful entrepreneur, it is important for an individual to evaluate whether he or she possess the necessary skills. This arises from the fact that the entrepreneur will be faced by numerous uncertainties that needs to be addressed (Baumol & Blinder, 2008, p.32). Most of the skills that the entrepreneur should have are inborn while others are developed over time. One of the most important skills that entrepreneurs should posses relate to self-confidence. Self-confidence increases the effectiveness with which entrepreneurs exploit opportunities presented by the market, this arises from the fact that they are able to take risk and exploit the opportunities (Ward, 2011, para. 2). Additionally, entrepreneurs should be motivated to execute their duties. This is only possible if the entrepreneur has a high level of courage, perseverance and courage.
Additionally, the entrepreneurs should have a strong ego in order to deal with obstacles that arise in the process of business operations. By possessing a strong ego, entrepreneurs are able to stand their ground and assert their position. Additionally, a strong ego enables entrepreneurs to have a high level of self-assurance. The resultant effect is that they are able to risk. To achieve their desires, entrepreneurs should be hard working. This is only possible if the entrepreneurs are motivated to achieve their goals.
Other skills that entrepreneurs should posses relate to administrative skills, financial skills and management skills. The administrative skills enhance the effectiveness with which the entrepreneurs create an environment that is conductive for working. For example, by possessing effective administrative skills an entrepreneur is able to implement the concept of teamwork within an organization. Teamwork can play a significant role in improving the operational efficiency of a firm. However, this can only be achieved if the entrepreneur possesses good leadership skills.
It is also important for entrepreneurs to have good problem solving skills. This arises from the fact that there is a high probability of the enterprise experiencing problems from time to time in its operation. These problems may either arise from within the enterprise or from without. The success of the business enterprise is dependent on the effectiveness with the firm solves its problems.
Entrepreneurs should also be good communicators. Communication is an important element in the success of a firm. This arises from the fact that it contributes towards creation of an environment conducive for working. By being good communicators, entrepreneurs will be able to enhance employee relationship. Additionally, they will also be able to solve problems that may arise between employees through incorporation of an effective mediation process.
In their operation, business enterprises are required to make diverse financial decisions. Some of these decisions relate to expenditures that the firms have to incur in their operation. Other decisions may relate to allocation of resources and investment decisions. To be effective in making these decisions, entrepreneurs should have the necessary financial skills (Abrams & Kleiner, 2003, p. 34). Entrepreneurs should also possess managerial skills such as planning, controlling, organizing, and staffing. These skills contribute towards the firm’s operational efficiency. If an entrepreneur possesses the above skills, there is a high probability of his or her venture succeeding.
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