Many people wish to become entrepreneurs at one time of their live. Running a business or being self employed is viewed at part of individual’s successes. Entrepreneurship has a very important role in the society. A part from giving an entrepreneur a source of income, it create more opportunities for employment, help in utilization of resources, provide important products and services to people, provide revenue to government and many other benefits.
Various benefits of entrepreneurship have been the main source of attraction to entrepreneurship. Many governments have been promoting the idea of entrepreneurship. At the same time, individual investors are attracted to entrepreneurship. It has been a common phenomenon to see an individual leave employment to establish business. Being an entrepreneur is not an easy task. Although many individuals attempt, not all become successful in their ventures. Having good business plan is a must for an entrepreneur to be successful.
Growth interest in entrepreneurship
There has been growth in interest in entrepreneurship in the country and other parts of the world. Many individuals are attracted by various benefits accrued from entrepreneurship. Many individuals have realized entrepreneurship is possible after observing successful entrepreneurs in the world (Burnett 46). Changes in economical systems have attracted ambitious individuals who try to take advantage of the very many opportunities for business. Increase in entrepreneurship is reflected by many product and services in the market. Entrepreneurs have been able to identify many human needs that are not addressed and come up with products and services to address the needs.
Entrepreneurship has been widely studied. Many scholars have been interested in understanding what motivate some individuals to be attracted to entrepreneurship or be successful at the same. Entrepreneurship spirit is viewed as the spirit that makes some individuals to engage in entrepreneurship (Zacharakis and Minniti, 83). Entrepreneurship spirit has been observed to vary in one individual to the other or event from one country to the other.
Various definitions of entrepreneurship suggest the conception that people have on entrepreneurs. In most of the definitions, an entrepreneur is viewed as an individual who is able to observe need or opportunity, come up with a solution and be courageous enough to risk their resources. An entrepreneur has been crowned with various characteristics such as self starters, innovative, self motivated, creative and optimistic. They are viewed as individuals that are able to take risk and have ability to endure failures.
Becoming an Entrepreneur
Entrepreneurship is not new in the world. The concept has been there for a long time and has led to great contribution to the world. The spirit of entrepreneurship, however, increased in late1980’s and early 1990’s. During this period there emergence of successful entrepreneurs who established successful companies that exist even today (Burnett 68). Some successful organizations such as Ford and Coca cola are a result of entrepreneurship.
In the recent past we have witnessed emergence of successful organization, especially in information technology as a result of entrepreneurship. Organizations such as Microsoft Corporation, Google, and Facebook are of the successful organizations that have resulted from entrepreneurship. A part from the major organizations, the spirit of entrepreneurship has led to growth of many successful small enterprises.
There are many theories that try to explain how people become entrepreneurs. Psychological theories assert that entrepreneurs have unique character and personality that make them engage in self employment. They are said to be curious, ambitious and risk taking. These and other favourable characters make them engage and be successful in business. Risk taking theories explain that entrepreneurs are individuals that are able to take risk. After they observe an opportunity, entrepreneurs are able to overcome fear of failure take initiative to utilize the opportunity (Dupuis, And De Bruin, 103). Entrepreneurs are also innovative.
They are able to come up with innovative ways of solving other people’s problem. They not only observe people’s needs but also create needs and come up with solutions. Observation on successful entrepreneurs has shown similarities. Most of successful entrepreneurs have high IQ level, able to take risk, innovative and have good personality. The entrepreneurs are able to organize and cooperate with other people. They are able to observe and bring together skills to be used in business ventures. They are also able to enter into business relation with other individuals and engage in win-win cooperation.
People become entrepreneurs in many different ways. Some individuals become entrepreneurs by observing other people close to them become successful in business. For example, an individual can observe a friend or another person close to them become successful in business. They can observe a business opportunity through other individuals and be attracted to invest. Some individuals become entrepreneurs through family lineage. An individual who has been brought up in an entrepreneurial family is more likely to become an entrepreneur. The individual can learn business management skills in the family.
An individual brought up in an entrepreneurial family is able to observe many business opportunities and get to know other individual with who he or she can cooperate in business. An individual can become an entrepreneur after gaining experience in a certain area. For example, an individual can decide to set up his or her own business after working in an organization for a long period. This way of becoming an entrepreneur is common with service providers (Burnett 76).
The experience gives an individual confidence that he or she can be able to offer satisfactory services. It also enables an individual to establish initial clients or customers who play a significant role in their success. Some individual become entrepreneurs by chance. Some individual just come across and idea in their live and, making use of the idea, become successful entrepreneurs. Majority of people become entrepreneurs rationalizing the idea. Most people make a rational decision to become entrepreneurs, plan for it and establish business. Although many people attempt to establish businesses, not all the business ideas become successful.
Risk of Entrepreneurial Businesses
Every entrepreneur goes into entrepreneurship with hope of success. This however does not always become as about half of start-up businesses close up within four years of their establishment. There many reasons as to why some business fail. The cause of failure is poor planning and management problem. Some individuals are not able to plan for their business leading to cardinal business mistakes.
An individual may be in a hurry to establish a business that he or she is not able to evaluate important factors to the business (Zacharakis and Minniti, 58). For example, in hurry to establish a business an individual can establish a business at any available premise without evaluating the suitability of the business location. Some individuals are not able to plan a business finances properly. Inability to lay down how a business would be financed may lead to major financial blunders that can sink the business.
Managing a business is usually a challenge to most starting entrepreneurs. Management problems usually lead to failures of most new businesses. Some entrepreneurs are not to manage resources and operations in their businesses. For example, a new entrepreneur may not be able to manage cost in his business making his business less competitive to other businesses. A new entrepreneur may not be able to observe changing trends in the market may not be able to respond appropriately to the trends. Some entrepreneurs engage in high risk that they end up closing up their business when their ventures fail to bear fruits. For example, a new entrepreneur may not be able to balance his or her investment leading to major losses.
Some businesses fail right from the time when they are established. An entrepreneur may have observed a business opportunity that was never was. An entrepreneur can observe a certain phenomenon and misinterpret it for business opportunity. In trying to utilize the perceived opportunity, an entrepreneur may end up losing his or her investment and be heart broken. An entrepreneur attitude towards a business venture can contribute highly to success or failure of a business. An entrepreneur must be having the right attitude towards a business for him or her to be able to take advantage of available opportunities. Being unprepared for business can make an entrepreneur not to be able to take advantage of ample opportunities that may be available.
No business can run without finances. An entrepreneur need adequate finances to finance operations of his her business. Poor financing is one of the causes of failure in most new businesses. Some entrepreneurs are not able to raise enough capital to establish their business or initial operations of their businesses. New entrepreneurs find it difficult to secure credit from financial institutions. Most financial institutions want to know whether a borrower would be able to repay the credit offered. Since most new entrepreneurs do not have a history of borrowing and repaying huge amount of money, some financial institution may not be willing to finance their business.
Financial institutions need to be sure that the financed projects would be successful. If they are not confident that a certain business would be successful, then they may be unwilling to finance. Other alternative financing such as through suppliers may not possible since there is no established relation.
As mentioned above, most new businesses fail because of lack of proper planning. Some entrepreneurs do not see the need for prior planning before going into business. Most of the entrepreneurs are in a hurry to establish their business that they fail to take time in planning. A business concept is not well evaluated before it is put into practice (McKeever 57). Although some businesses become successful with such establishment, the practice is a major cause of difficulties or even failure in business. A business plan is defined as a formal statement that outlines goals of a business, justification for the goals and set across a plan intended to be used in order to meet the goals.
For a business, the goals may include growth target, financial goals and target market share. It is advocated that preparing a business plan should be the first step when starting a business. The process, rather than final product, is of more benefits to an entrepreneur.
Planning is an important aspect of life. For one to be successful he or she must be able to have a vision of what one want and be able to plan on how to achieve the vision. Planning is an activity that helps an individual think about the future and be able to establish what to do in order to achieve the desired goals. Planning is a process that appreciates that one does not have full knowledge of the future. There are many uncertainties that can lead to failure.
Planning connect the present and the future and enable an individual to move into the future with confidence. Planning is required when establishing a business. An entrepreneur needs to think through his business idea and come up with ways of bring the idea into reality. Business plan is a document that constitutes the plans a businessperson has with his or her business. A business plan is used to summarize and analyze a business opportunity and establish how the opportunity can be utilized. A business plan is not just required when starting a business but remains an important document that guides business decisions in the future.
Importance of Business
Thinking through a Business Venture
The process of creating a business plan is of great benefit to an entrepreneur. Most business ideas are not clear when they develop. An entrepreneur may come up with a business idea he carry out with normal activities. These ideas may not be well developed and entrepreneur may not be clear on how to utilize the idea. Writing a business plan enables an individual to think over the idea and develop an in-depth understanding of how to utilize the opportunity (Abrams 76-7).
Many new businesses fail because the individuals who established them did not have a clear understanding of the business opportunity and how to utilize them. Without clear understanding of a business idea, entrepreneurs establish businesses that are technically bound to fail. Business plan enables entrepreneurs to assess their business opportunities. They are able to go through every important aspect of the opportunity before investing their resources. The process can enable an entrepreneur to identify success or failure factors. A business plan provides check and balance when establishing a business. An entrepreneur is aware of the opportunities as well as risks and is able to make business decisions with confidence. For example, through this process an entrepreneur is able to make decision over the best location to establish his or her business.
Developing a business mission and vision
Mission and vision are very important to a business. A business ought to have clear mission and vision in order for it to grow. Business plan enable an entrepreneur to establish clear mission and vision. He or she is able to develop a picture of he or she want their business to be in the future. An entrepreneur is also able to establish how to attain the vision. This process helps an entrepreneur to differentiate his or her business from other businesses and be able to establish the values that will lead the business. Mission and vision help an entrepreneur to have a long term expectation of his business and be able to overcome short term challenges.
Plan for Managing a business
The most important benefit of a business plan is that it outlines the guideline of how to manage a business. It has been established that may new businesses fail because of poor management. This result when an entrepreneur does not have a well thought framework for managing her business. A business plan sets the goals of a business and how the goal would be achieved. The plan should be used in managerial decisions.
Acquire financial resource
Business plan is an important tool for securing financial resources. Financing a business venture is one of the major challenges for new businesses. To get financing, lenders and investors need to understand financial implication of a venture. Writing a business plan enables an entrepreneur to make financial projection and can know the amount to borrow from a financial institution (Vaseghi and Schwetje, 89). A good business plan shows that an entrepreneurs understands his business and is, thus, more likely to be successful.
Components of a business plan
- Executive summary: This is the first component of a business plan. In this section an entrepreneur writes a summary of all what is covered in the business plan. The section should summarize all the fundamental things covered in the plan. Any person reading the executive summary should be able to have an idea of what is covered in the business plan (Stewart par 2).
- Business Description: In this section the business is describe. The business name, mission statement, vision statement, goals and objectives are stated. An entrepreneur should write about the activities that the business will be involved and how it plans to fulfil customers’ needs. The business strength, industry involved and legal ownership are described in this section.
- Products and services: In this section, the products and services that a business plans to offer are described. Diagrams, photographs and other vision method can be used where possible. The quality of the products and services and how they would be competitive is described.
- Marketing Plan: This section contains a depth description of how marketing would be carried out. It gives details of how the business intends to gain market, handle competitive and grow.
- Operations Plan: This section expounds of on a daily basis operations of the business. It describes the location of the business, people involved, equipments, processes and even the surrounding environment. It describes the productions operations that would be involved, suitability of location, legal environment and other important factors (Stewart par 5).
- Management and Organization: This section describes how the business would be managed on a daily basis. For example the people to be involved and their responsibilities would be described.
- Capitalization: This section describes how the business venture would be financed. An entrepreneur should describe how he intends to get capital to start his business.
- Financial plan: The section consists mainly of a one year profit and loss projection, cash flow projection, break even estimation, and a projection of the balance sheet. It is in this section that performance and profitability of the business is highlighted.
Business Plan for Banks
As noted, business plan is an important instrument for securing financing. To convince banks to finance to finance a business venture, a business plan should be well written. The banks want to see a clear vision that creates a clear picture of the business in the future. They want to see how an entrepreneur is committed to a venture. They are also interested in the potential of the business. The business should potential enough to allow an entrepreneur to repay the loan time. An entrepreneur should show that he or she understand the market where he or she intend to sell products. Financial planning should show the banks that an entrepreneur has analyzed financial implication of their business (Lister, par 2-7).
Becoming self employed is a wish for many people. Entrepreneurship does not only benefit an entrepreneur but create employment opportunities and provide goods and services to many other people. Becoming a successful entrepreneur does not come by chance. One must have entrepreneurial spirit and be committed. Having a business plan is one way to increase chances being successful. Writing a business plan enables an entrepreneur to analyze all aspects of a business. Through the process an entrepreneur can be to avoid mistakes or even be able to discover other more opportunities. Besides, a good business is an important instrument for securing financing from financial institutions.
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McKeever, Mike. How to write a business plan. New York: Nolo, 2008.
Stewart, Cavyl. Crucial Components of a Business Plan. 2004. Web.
Vaseghi, Sam. And Schwetje, Gerald. The Business Plan: How to win Your Investor’s confidence. New York: Springer, 2007.
Zacharakis, Andrew. And Minniti, Maria. Entrepreneurship: The Engine of Growth. Westport: Greenwood Publishing Group, 2007.