Business Plan is an important document for entrepreneurs. It is basically an evaluation of their business model. In this document, entrepreneurs basically assess the likelihood of failure and failure of their business ideas and business models as it comprehensively discusses all the important aspects pertaining to a business. The process of business plan starts from idea generation and discusses other important aspects such as financial data, cash flow and industrial analyses. Both factual data and predictions are used for assessing a new business model.
Idea Generation
Idea Generation is also known as ideation. It is the process of developing and communicating new and unique ideas that do not exist in the market. It is the basic of any business plan and the rest of the business plan revolves around ideation. In this part, new ideas are jotted down and they are further evaluated to make sure that they are pragmatic and can be implemented in the real world business situations. Since, it is the most important step in business planning it requires maximum effort and it is the most time consuming aspect of developing a good and pragmatic business plan. Many entrepreneurs try to devote maximum time to idea generation because they know that if their ideas are good their business will do well and there are more chances of success if good ideas are developed. However, in this stage on blue prints of business ideas are developed and jotted down on a piece of paper or a white board. It requires a lot of critical thinking and counter checking before deciding on which ideas to adopt and which to drop. (Harford 2006)
There have been a lot of debates regarding the role of idea generation in the overall entrepreneurial environment. Many people correlate good ideas with the success of a business. However, if we look at this aspect realistically we will see that there may or they may not be any correlation between the business success and idea generation. Since this process is a blue print of a business plan, we cannot say with complete confidence that a good idea will be successful in real world. When the things get practical, most of the theory becomes useless. Since, idea generation is adopted from theories and past experiences, things might turn out to be very different once the entrepreneur steps into the real practical worlds, and hence once can say that the role of idea generation has overly emphasis and there is much less to idea generation than what entrepreneurs think.
Strategic Objectives
Whenever a business is established, it contains certain strategic and monetary objective in its manifesto. If a business lacks such manifesto or does not have any objectives then it lacks sense of direction. It can go astray and fail without making any significant effect on the market in which it operates in. Many entrepreneurs consider a business without objectives as confused as “rat in a maze”. The business cannot function well without explicitly defined and codified objectives. Many entrepreneurs therefore explicitly state their strategic objectives as a vision or mission statement of the business.
Strategic Objectives do give sense of direction to the business, but they place a limit on the extent to which business can grow or could otherwise achieve. It is basically a cap on the productive potential or a development of the business. The reason why it is said is because, saying that a business intends to grow by a certain percentage means that entrepreneurs are not looking beyond that certain percentage of growth. They are inhibiting the business growth. In other words, it is limiting the growth of business and reducing its potential by placing a cap on its competencies. (Ashton 2007)
Market Analysis and Research
In the past, various methods were used to carry out a research. However, there was a big question mark on the validity of these researches as the methods used in these researches were hardly accurate and whole research used to be flawed due to biases of the researcher or the respondent. In the recent years many techniques have been developed to eliminate these biases and to ensure the validity of the research. But first thing first, let’s describe the term validity in the context of research. Valid research methods are those methods which help the research to draw correct inferences from the information that is been gather or those which provide the correct information to enable the researcher to make close inferences.
There are two basic types of research techniques, Observational and experimental. In observational research no proper planning for the research is done, but the question is asked in spur of the moment and then the respondent is observed as to how he answers the question. In this type of research, no only what he has said or written down is observed, but, his body language and gesture are also observed. This helps the researcher into finding out whether the respondent is asking in certain way because he does not want to create offence or is he answering honestly. Observational research therefore reduces biasness of the respondent from the research. This type of research techniques requires good skills and observation skills and can only prove to be successful, if the researcher has these qualities. (Branson 2010)
The second type of research is one-off project research. This type of research includes both the observational and experimental research into account. It encourages the researcher to plan out his research thoroughly. It also leads to a lot of field work and other skills that are required for a good research like data collection and collation skills. In this type of research, several questions are asked and they have to be answered over a period of time. A particular hypothesis is created for the research and it is solved over a period of time. This type of research is very useful in getting to a point but it is not extensive enough to guarantee its concreteness. It also ignores that changes in trend are going to make their research obsolete, after which a new research will be needed. Although, it is better than lone observational research as it takes into account the past literature that has been collected, but it is not as substantial as extended research.
The role of research is again over emphasized. It is the quality of the product or services and Customer relationship management that has maximum impact on the business success and failure. Many businesses fail to deliver well not because they lack proper research, but because they are unable to provide proper quality and customer service to its clients. (Deakins 2005)
Understanding the competiton
Understanding your competitors is of utmost importance. Many businesses fail because they operate without taking into account the actions of their competitors and trying to operate independently of their competiton that exists in the market. Hence, a good entrepreneur is one who takes into account the actions of its competitors before deciding on its own policies.
However, in the recent years this has been proved wrong as we have seen emergence of many businesses having survived and succeeded despite having different policies than its competitors. The locus has been shifted from understand the competitors to the emergence of differentiation. Customers in almost all market are appreciating product differentiation and hence understanding the competition is fading away.
Cash Flow and Profit and Loss Projection
It is an established truth that many businesses fail through poor management of cash flow despite the fact that their published accounts show a profit on their trading activities. This is mainly due to the fact that they do not keep a close check on their cash flow and that the cash outflow from the business is more than the cash inflow into the business.
Increased cash outflow over the cash inflow is mainly due to many reasons which require a close look into the affairs of the business. Most of the businesses come to know about the poor cash flow problem at the time when this situation really gets worse and the business has no money to pay for its debts and credits. However, if managed properly many businesses can survive through the same revenue and profit. (Gibson 2008)
Balance Sheet Project
As the name suggests, these are projection or predictions. These are prediction regarding the future financial health of a company. It talks about the changes that a business can expect over a period of time. Since, all the businesses want to make profits, this document is imperative for all financial evaluations of a business.
However, one cannot totally rely on this document before making financial decisions. Since, the bases of this document are prediction which can also turn out to be wrong. Hence, entrepreneurs need to consider other important elements such as industrial analyses and SWOT analyses to make a comprehensive decision regarding all their future investments.
However, this is only an estimate and things in reality could turn out to be a lot different than estimates. Hence, a business cannot completely rely on these estimated figures, but instead it should try to deal with the reality by dealing with things as they happen rather than predicting them and then facing a set back if they do not go the business’s way. (Handy 1995)
Scenario Planning
Scenario planning is an approach of forecasting or evaluating the future concerns or problems and go about solving them before hand. Scenario planning nowadays is widely used by manager as a part of contingency planning or to devise backup plans if business plan or plan of actions does not go according to predetermined plans. For example, suppose that a business demand is booming, so it doubles it production but later it finds out that advent of new competitors would mean that most of the increased production will have to be go to warehouses as company’s market share falls. In this case, strategic managers should plan in advance and foresee future problems and counter them. For example, in this case, a business might introduce various promotions and selling activities to make sure its market share remains high. (Kevinlane Keller and Kotler, 2000)
However, scenario planning is a complex field. It again is based on prediction and hence things in reality could turn out to be a lot different than the reality and hence good entrepreneurs cannot rely on it completely or else they crumble behind the entrepreneurs and businesses which are closer to reality. (Jones-Evans & Carter 2006)
The Essence of Entrepreneurship
Entrepreneur is someone who is willing and able to coordinate the resources into one place and someone who is willing to take risks and accept responsibility for them if these risks do not pay off. There are a lot of skills and personality traits that make an entrepreneur’s jobs easier. Some of these skills and traits are inborn while others are learnt as the time elapses. In the literature several personality types were discussed. Among them we discussed extraversion, openness to experience, self-efficacy and conscientiousness. All of these traits make a good entrepreneur, but it is highly unlikely that we find all of these qualities in one person. Sometime these personality traits conflict with each other and hence it is very difficult for a person to possess all these qualities or traits in him. There are thousands of different personalities that we see and meet in our daily lives. We like some personalities and hate others. However, hardly any importance is given to the background of these personalities or why is the person carry with him good or bad personalities. If people had choice and control over their personalities then all of us would have chose the best possible personalities. This is not possible because there are several forces working in the determination of one’s personality.
As an entrepreneur you need to have good knowledge of your customers and employees. You need to handle them effectively if you want to achieve success. Failure to handle them well can lead of loss of customers and loss of valuable employees. As an entrepreneur there are a lot of activities and competencies that need to be demonstrated in order to build trust among the team member. You can build trust in your customers and your team members by displaying your expertise in the job. This will ensure that people know that you know how to do things and your team members will know they can count on you and that you are not a free-rider. Similarly, if your customers know that you are an expert in what you do they will seek your advice and will know that they are buying from someone who can give them honest opinion.
Similarly, another good way is to establish boundaries among yourself and others. This does not mean to become a total introvert, but instead you should not cross certain boundaries especially where you do not know about feelings and culture of other people. This will elevate your position in the group and people will start trusting you. Similarly, it is very good to practice tough love and appreciate people the way they are. This will establish a relationship of mutual trust among you and other people. Another good way to build trust is give opinion and respect other people’s opinion. You should avoid being a close minded person; instead you should not only give your opinions about different things, but also respect what other people have to say about different things. This will help to build your image and other people will come forward to seek your help more often knowing that you are happy to help them and give them honest opinions and you are very much willing to listen to them and understand them. (Kotler & Kotler 2006)
The two major disciplines that he talked about were judgmental function and perspective functions. He stated that thinking and feeling fall into the category of judgmental functions, whereas feeling and sensing fall into the category of perspective functions. These were the ways how Carl Jung gave the psychological approach of determining the personalities of different people.
Jung established 8 different types of categories of personalities in which a person can fall. He believed that a person falls into each of these categories depending upon how he takes information and uses this information to make decisions. These decisions are taken and supported by a dominant function, which is further supported by an auxiliary function. He further stated that even auxiliary functions have to be supported by tertiary or inferior functions. He believed that all individuals have either introverted dominant function or an extroverted dominant function. (Southon 2009)
I would classify my personality type as social and agreeable. I think this personality type is good for entrepreneurs to have. As an entrepreneur you need to meet a lot of people. The list of people that an entrepreneur has to meet is quite extensive. An entrepreneurs needs to meet clients, employees, government officials, tax officers, prospective customers, prospective employees, suppliers, debtors and creditors. Therefore, I believe it is quite necessary for an entrepreneur to have extraverted personality. I am also an extrovert. This can help me maintain cordial relationships which are very useful for an entrepreneur. I can deal with my customers and clients cordially in order to make good impact on them and to create long-lasting positive-sum business relationships.
Similarly, I also happen to have an agreeable and conscientious personality. I am agreeable and willing to listen what others have to say. If I find that the other person is giving me a good suggestion I tend to do things his way. This is really good personality trait for an entrepreneur to have. People not only value democratic leadership, but this can lead the business towards success as lots of ideas gets pooled out which the best ones get selected. However, I find that if an entrepreneur is too agreeable then there are some drawbacks for having this type of personality as well. If an entrepreneur is too agreeable then he is inflicting heavy damage to his rapport as a good leader. Many people might mistake me as a person who cannot make good decision or someone who is indecisive. This way I may lose people’s trust and they won’t count on me to make a decision in case some dilemma arises. This discussion shows that a person needs to find the right balance between being agreeable and being somewhat autocratic. The ideal mix is to use intermittent personality shifts from being autocratic to being agreeable. This will not harm the rapport of an entrepreneur and at the same time people will find him understanding and someone who listens to them and helps them in business problems and inter-personal situations. I acknowledge that I need to mould my personality and need to find right balance between being agreeable and being autocratic. (Wickham 2006)
People who meet me form an opinion that I am also a conscientious person. I try to achieve targets by working hard. I try to achieve them even if they are impossible or even if I need to put double effort to achieve them. There are a lot of advantages for an entrepreneur for having a personality like this. This triggers in other people sense of hard work and when they see their leader is putting his 100 percent, they also try to do their best and try to achieve their objectives. This phenomenon is known as leading by example and all the good leaders and entrepreneurs use this to translate their hard work into their employees. It is also a good thing when customers and prospective clients see that a person in authority is working hard for the firm’s clients. This builds trust and attracts a lot of potential customer. However, possessing a conscientious personality has some drawbacks too. Many a times it leads to stress. When a person tries to work too hard or works beyond what his mind and body allow, it leads to stress. Stress can result in decreased overall performance in the long run. In the short-run, goals can be achieved, but in the long-run it may have more negatives than positive. (Jones-Evans & Carter 2006)
In the light of above discussion, we can safely conclude that an entrepreneur is a leader. He needs to show qualities of good leader if he wants to be a successful entrepreneur and wants to lead his business towards success. In order to achieve success, an entrepreneurs needs to have a balance in his personality. He should not have an extreme personality, but he should be somewhere between the two extremes. For example, a good entrepreneur is nether neither too agreeable nor too autocratic. He is somewhere between these two extremes. Sometimes he becomes autocratic, whereas on the other times he is democratic and agreeable. Similarly, a successful entrepreneur changes his personality intermittently to make sure that his employees or people working under him do not become too complacent. He also makes sure that people working under him face too much stress. By changing his personality intermittently, a successful entrepreneur tries to strike the right balance and to make sure he leads his business towards success and enjoy the position of market leader in the market. Similarly, a good leader or an entrepreneur also tries to be nice and friendly. He is candid and extroverted and wears a friendly and extraverted personality. (Timmons & Spinelli 2008)
Reference List
Ashton, R 2007, The Entrepreneur’s Book of Checklists, New York:Prentice Hall.
Branson, R 2010, Screw it, Let’s do it, New York: Virgin Books
Deakins, D 2005, Entrepreneurship and Small Firms, New York:McGraw-Hills.
Gibson, D 2008, The Streetwise Guide to Being Enterprising, New York:Oak Tree Press.
Handy, C 1995, The Empty Raincoat,London:Random House.
Harford, T 2006, The Undercover Economist,New York:Abascus.
Jones-Evans, D & Carter, S 2006, Enterprise and Small Business: Principles, Policy and Practice, New York:Financial Times, Prentice Hall.
Kay, J 2010, Obliquity, New York:Profile Books.
Kotler, K & Kotler, P 2006, Marketing Management, New York:Prentice Hall.
Southon, M 2009, The Beermat Entrepreneur, Pearson, New York:Prentice Hall.
Timmons, J & Spinelli, S 2008, New Venture Creation: Entrepreneurship for the 21st Century, New York:McGraw Hills.
Wickham, A 2006, Strategic Entrepreneurship, New York:Pearson.