Elements of a business plan - Essay Example

?Introduction Starting a business enterprise is a process that requires concerted efforts in order for the initiative to be a success. As such, this report seeks to critically evaluate the reasons why it is important for a new start up business to create a comprehensive business plan. Basically, a business plan is an outline of a business idea which seeks to justify the reason behind starting that particular business (Timons, 2000). Internally, the business plan helps to shape direction upon which the organisation will operate and externally, it helps in linking with the stakeholders. Thus, important elements of a business plan will be discussed in the first part of the essay and these include the following: idea generation, strategic objectives, market analysis and research, understanding the competition, cash flow, profit and loss forecasts, balance sheet projections, competitive strategy and scenario analysis. The second part of the essay focuses on discussion of the following five personality factors: extraversion, openness to experience, agreeableness, conscientiousness and emotional stability. The discussion will reflect on the extent to which these characteristics are to be found within my own personal skills set as well as the extent to which they influence my approach towards different situations. Part 1 Elements of a business plan 1. Idea generation In order to establish the significance of a comprehensive business plan in a start up business, it is imperative to begin by explaining the meaning of planning which is regarded as the key term in this discussion in order to gain a full understanding of the whole concept. “Planning includes defining goals, establishing strategy and developing plans to coordinate activities” (Robbins, 1993). In the same vein, Bates et al (2006) concur with this idea when they state that planning which is concerned with generation of ideas is regarded as the starting point of establishing a business as well as managing it. In actual fact, before starting a business, one needs to determine in advance the goals to be achieved as well as to visualise likely result of the objectives for the business enterprise. Therefore, it can be safely said that planning is a process whereby objectives are decided upon and developing the plans to reach them as well as to coordinate other activities. Planning can be said to be very important in a business venture because it gives people in a particular organisation an idea of the direction in which business will be going. 2. Strategic objectives A comprehensive business plan is very important in every business given that it outlines the objectives of that particular business venture. Essentially, every business is in existence because of a purpose. In most cases, the major aim of business is to generate profits through revenue that is generated from its operations (Armstrong & Kotler, 2004). Basically, the objectives of the business venture are clearly stated in its mission statement and are emphasised in the vision of the organisation. The mission of the organisation clearly outlines the purpose of a particular business and this is where objectives are also stated. The vision of any business enterprise is to detail the plans as well as the measures that can be taken in order to achieve the set goals. This may not be possible without a comprehensive business plan which details the measures as well as the steps that can be taken towards attainment of the set goals. 3. Market analysis Planning is very important because it gives the people in the organisation an idea of the direction in which the business is going (Bates, 2006). However, there are likely problems to be encountered during the operations of the business enterprise given that it operates in an environment that is characterised by various factors. As such, a comprehensive business plans details a critical analysis of the environment in which the organisation is operating. In this case, a SWOT analysis is very important since constitutes the comprehensive plan of the business. Basically, A SWOT analysis defines the relationship between the internal and external environmental factors which can affect the operations of a given business (Robinson, 1997). SWOT is an acronym for strengths, weaknesses which represent the internal environment of the firm while opportunities and threats are external environmental factors. This is used as a strategic tool to analyse key factors in the environment particularly the fundamental strengths and opportunities of the enterprise on how they can be harnessed in order to improve the performance of the organisation. Threats and weaknesses are also taken into consideration which enables the organisation to operate effectively. 4. Understanding competition A comprehensive business plan is essential because it is based on a realistic appraisal of business’s resources as well as its level of competitiveness. Thus, the essence of a business plan is to use the strategic pointers in order to utilise existing strengths in business to exploit new opportunities while counteracting threats that may exist as well as repairing the weaknesses (Robinson, 1997). An analysis of the environment is very important because it enables the entrepreneur to gauge the degree of competitiveness of the business enterprise on the basis of the available resource such as finance as well as human capital. Through the use of a proper business plan, an entrepreneur is in a better position to operate his or her enterprise within the capacity of the resources available. In other words, a business plan is a realistic measure of the resources available which play a pivotal role in determining the strategy that can be adopted by the enterprise in order to counter threats likely to be encountered such as competition. According to Timons (2000), venturing into a new business is mainly concerned with identifying opportunities that exist in the market. However, there are risks that are likely to be encountered in pursuit of this business venture hence there is need for preparedness to utilise the opportunities available to take calculated risks in order to effectively deal with the threatening situation (Nieman, 2003). This is the other reason why it is important to have a proper business plan in place when starting a business. There are various measures that have to be taken into consideration by the entrepreneurs in order to be successful in their business ventures and these include the need to take calculated risks with regards to problem solving rather than relying on chances alone. Failure to plan often results in failure of the business initiative given that their business enterprises may be overwhelmed by the magnitude of risk that can be encountered in their operations. A proper plan often outlines the steps that can be taken in the event that a similar situation to the one mentioned above has been encountered in the operations of the new business venture. 5. Cash flow Another important element about planning in business is that it improves cash flow projections whereby clear direction is detailed in the plan and this can be easily followed since it is designed on the basis of the available resources which guide as a framework for the operations of the business venture. It may be difficult for the managers to organise people as well as financial resources when there is no clearly defined plan or course of action that can be taken in the operations of the business venture. Business that is conducted in a haphazard manner is likely to fail since there will be no objectives that are properly outlined. 6. Financial forecasts It has also been observed that business enterprises operate in a dynamic environment that is subject to changes (Schultz, 2003). As such, they are not immune to inevitable changes that may take place in the environment in which they operate hence the need for up to date information about issues obtaining in the environment. Such changes are mainly cause by economic factors hence there is need to have realistic financial forecasts. These often involve the following aspects: Profit and Loss forecasts Cash flow forecasts Balance sheet forecasts These ought to be realistic in order to ensure the viability of the business venture. Through the use of a proper business plan, the entrepreneur is in a better position to deal with changes that may take place in the environment given that there would be contingent plans already in place to counter such negative impacts likely to be encountered. If there is a proper plan in place, financial resources can be adequately allocated in order to decisively deal with unprecedented changes that may affect the operations of the organisation. Situation analysis Another important reason why it is important to have a comprehensive business plan is that it becomes easier for the entrepreneurs to allocate resources as well as to attract investors who form part of the day to day operations of the enterprise. Resource allocation is also enhanced through proper planning of the business initiative which can entail its success in the long run. Businesses which fail to anticipate the factors that may affect their operations are bound to fail as it may fail to cope with the unprecedented forces that often characterise the market in which they will be operating. Failure of a new business venture is often attributed to lack of planning in most cases. Summary and conclusion Over and above, from the discussion carried above, it can be seen that planning plays a very important role in determining the success or failure of a new business venture. Basically, planning is the foundation upon which organisational goals and objectives are formulated and these give direction upon which the enterprise will follow in its operations. In order to achieve the set goals and objectives, it will be prudent for the business enterprise to follow a particular course of action that has been designed to provide the guiding principles in the operations of the newly established business venture. Part 2 This section of the paper is concerned with discussion of the following five personality factors which include: extraversion, openness to experience, agreeableness, conscientiousness and emotional stability. The discussion will also reflect on the extent to which these characteristics are to be found in my personal skills set. After a brief definition of the personality trait, I will reflect on the applicability of the personality trait to my own set of skills. The first personality trait to be discussed is extraversion. According to The Free Dictionary [online, 2012], extraversion is a personality trait that is characterised by a disposition towards outward things particularly a strong orientation towards others. Such personality is often found in people who like to be on top of the situation every time and in most cases, these people are mainly attracted by external things and they like to dominate various events. People with such a personality are commonly referred to as extroverts and they talk too much. The other characteristic of extroverts is that they like the company of the other people to a larger extent as they feel more confident when they are around others. Their action and behaviour is mostly influenced by people around them in most cases. The extroverts often act according to the situation obtaining on the ground. In as much as the above mentioned personality trait is concerned, I can say that I possess little of the characteristics of this kind of personality trait. Indeed, I am stimulated by outward things to a certain extent but these are not the sole basis of my decision making. I also appreciate that the decisions I make are somehow influenced by external factors but I am not totally disposed to external factors. To a greater extent, I can say that I am a reserved person and I do not talk too much. I mainly engage other people in situations I may need to solve or to gain ideas from others about the appropriate course of action that can be taken. Indeed, it is good to interact with others as there are high chances of sharing knowledge which is the basic tenet of learning. I like to learn from others but I can safely say that I am not a go getter to every situation that may obtain in the environment. I first scan and analyse the situation before taking action in order to make informed decisions about the course of action that I will take. The second personality trait is openness to experience. Sarasvathy (2003) posits to the effect that openness to experience is much more about construction of new realities especially by committed stakeholders from the expertise and experience about a particular situation they have. Such personality trait is often concerned with beginning with the given means gained from experience towards creation of new means and this process does not use predictive strategies. In other words, people with such personality trait are concerned with generating a new board of knowledge from the experience they have from a particular situation. An experienced entrepreneur often starts from what he knows through experience gained and the knowledge available is used as a stepping stone towards starting a new business venture. Expert entrepreneurs also focus on what they can do and it can be noted that their expert knowledge is given priority. I am very curious when it comes to discovering new things which can lead to creation of new knowledge. I am interested in discovering new things based on the experience I have gained in various subject areas that are related to entrepreneurship. I am not afraid of challenging situations since I am particularly interested in gaining knowledge in different areas. I am also curious when it comes to sharing knowledge which can be transformed to positively change our lives. I believe that it is important to have experience in different subject areas since this can be easily transformed into new knowledge when faced with a challenging situation. I am a good learner and I am capable of grasping new things in a short period. I can brainstorm any particular type of situation in order to generate new knowledge that can be used to construct something new especially in a business setting. The third personality trait is agreeableness. Sarasvathy (2003) suggests that this personality trait is mainly concerned with showing concern for other people. Agreeable people are sociable and they are cooperative when they are dealing with other people in different matters. Such people also display affection to other people whereby they show that they are keen to listen to their views and ideas. Another important aspect about people with this personality trait is that they have a positive approach towards different situations they may encounter particularly business cases. Some situations may be challenging but agreeable people have a tendency of approaching such a situation with hope of obtaining positive results. In view of the explanation given about agreeable people, I can safely say that I posses qualities that resemble the characteristics described above. In every situation I encounter, I am hopeful of achieving a positive result. I always make it a policy to approach every situation with a positive attitude in order to be in a position to obtain the desired result. I am also good in listening to other people’s concerns as well as ideas since I greatly believe that knowledge is generated through learning. I go along well with people who often give me ideas about a situation obtaining in a particular environment in the event that I am intending to start a new business initiative. I believe in engaging other people in order to gain the much needed information about a given subject. I take my time to get to the bottom of the matter since I have realised that this approach will enable me to make objective decisions when dealing with different scenarios. The fourth personality trait is conscientiousness which mainly borrows from one’s conscience with regards to personal conduct when carrying out a particular course of action. Generally speaking, a conscious person acts in a dignified manner and is determined to achieve a positive outcome in whatever task he may be doing. Basically, this trait is characterised by self determination by the individual to attain the set goals and objectives of a particular action. A conscious person always attempts to do things in the correct way and is also concerned about taking note of details of every step that is taken. Another important aspect about conscious people is that they act according to schedule and they are prepared to execute any task that may need to be solved. In as far as my character is concerned, I am strongly convinced that I am conscious when it comes to dealing with different issues. I always try to treat the ideas I gain from other people as important and I usually trust my instincts when dealing with different situations. I am driven by the need to achieve the set goals. The fifth personality trait is called emotional stability. As the name suggests, the state of a person’s emotions has a bearing on the way that person acts or behaves. Timons (2000) suggests that when it comes to pursuit of certain actions, a person’s emotions are likely to influence the result that can be achieved at the end of the day. People who show anger and anxiety towards a particular scenario are bound to fail in their initiatives due to negative attitude as depicted by their approach to that particular situation. Such personality traits are likely to impact negatively on one’s endeavour to achieve a particular result from a certain action. However, I do not possess any feature that can resemble this personality trait since I do not deal with emotions when I am approaching a given scenario. Over and above, it can be seen that the big five personality traits discussed above affect people’s actions in various ways and they have a bearing on the outcome of any given action that is directed towards something. When it comes to business, these traits also have a bearing on the results likely to be achieved from a particular course of action. From a close analysis of these personality traits discussed above, I have realised that I have characteristics which resemble three of the traits namely openness to experience, agreeableness and conscientiousness. I have also noticed that these traits have a bearing on the way we behave towards a certain situation. Bibliography Bates, B et al 2005, Business Management, fresh perspectives, Pearson Ltd, CT. Cant, MC 2000, Marketing Management, 4th Edition Juta and Co Ltd, CT. Ducker, P, 1985, Innovation and Entrepreneurship. Heinemann Ltd, London. Kotler, P & Armstrong G 2004, Principles of Marketing, Pearson Education, Upper Saddle River: NJ. Nieman, G. 2003, Entrepreneurship, Van Schaick Publishers, Pretoria. Robbins, SP 1993, Organisational behaviour: Concepts, controversies and Applications, 6th Edition, Prentice Hall, NJ. Robinson, W 1997, Strategic Management and Information Systems, 2nd Edition, Prentice Hall, London. Sarasvathy, SD (2003, Effectuation: Elements of entrepreneurial expertise, University of Virginia. Schultz, S et al 2005, Organisational behaviour, VanSchaik Publishers, Pretoria. Timons, JA 2000, New venture creation: entrepreneurship for the 21st century, 5th Edition, Burr Ridge, Irwin, NY. The free dictionary (2012), viewed 23 March, 2012, . Wickham, PA, 2001, Strategic Entrepreneurship: A Decision Making Approach to New Venture Creation and Management, FT Prentice Hall, NY. Read More