The Foundation of a Successful Business and the Major Problem of Businesses - Research Paper Example

Relevance of A Business Plan A business plan is “the planned activities and aims of any entity, individual group or organization where effort is being converted into results”. The planning process is based cause effect using common sense and logic. It does not require sophisticated techniques or skills (http://www.businessballs.com ). A business plan is not just a report. It involves critical thinking. A business plan is needed because of the following reasons: 1. A Business plan helps an entrepreneur “plot a course” for his/her business. It makes the entrepreneur think ahead beyond the immediate and give him/her a broader view of how to not just to start the business but to stay in it (OCRI and Entrepreneurship Centre 2002). 2. A business plan helps the entrepreneur develop his/her idea keeping in mind the viability and profitability of the business as well as the barriers to the success of his/her business. These issues address the question of “feasibility” of the business (OCRI and Entrepreneurship Centre 2002). 3. A business plan also help the entrepreneur make “better and informed decisions”. By developing a good business plan the entrepreneur will have god knowledge of the business environment (sector and industry) he/she plans to invest and sharpen his/her investigative skills. He/she can therefore more readily read the future anticipate problems and challenges (OCRI and Entrepreneurship Centre 2002). 4. With good knowledge of the business environment and the power to anticipate problems, the business plan helps the entrepreneur “inspire solutions” to anticipated problems. He/she will prepare self to face these problems in reality. Where he/she is weak he/she will get assistance (OCRI and Entrepreneurship Centre 2002). 5. The most important reason for developing a business, especially in this case, is “sell” the business to potential investors, lenders, partners, strategic allies and other stakeholders. The business plan speaks about the preparedness of the entrepreneur to translate the plan into reality (OCRI and Entrepreneurship Centre 2002). 6. The process of developing a business plan provides the entrepreneur an avenue to structure his/her analysis and thinking by considering all options and angles that challenge his/her assumptions and pre-conception. As such, it will help the entrepreneur uncover omissions or weakness in the planning process and get supportive ideas and opinions on how to strengthen the process (http://www.swan.ac.uk/knowledge/Entre-businessplan.html and http://www.myownbusiness.org/s2/ ). 7. The business plan is the roadmap to success of the business. The actions and activities outlined in the plan will help the entrepreneur stay focus as he/she implements the plan (OCRI and Entrepreneurship Centre 2002). What to Consider in The Planning Process Having known the importance of a business plan, what then are those that an entrepreneur should consider in the planning process? First, the entrepreneur must be able to establish a strong ethical philosophy at beginning of the process. A strong ethical philosophy is “a vital reference for decision-making and strategy from the start”. It helps in communicating entrepreneur’s values to investors, lenders, partners and other stakeholders (customers, suppliers, employees, etc). The next important factor is the business concept. The entrepreneur must be able to outline his/her business concept, which help him/her set objectives and develop strategies of achieving these objectives. A sound business concept makes business goals and objectives realistic and realizable. Thirdly, the entrepreneur must have good knowledge of his/her target market including the sector or industry he/she plans to invest. Another factor that determines the success of business is the entrepreneur’s mindset. An entrepreneur with a mindset that anticipates change is always proactive and dynamics (Having known the importance of a business plan, what then are those that an entrepreneur should consider in the planning process? First, the entrepreneur must be able to establish a strong ethical philosophy at beginning of the process. A strong ethical philosophy is “a vital reference for decision-making and strategy from the start”. It helps in communicating entrepreneur’s values to investors, lenders, partners and other stakeholders (customers, suppliers, employees, etc). The next important factor is the business concept. The entrepreneur must be able to outline his/her business concept, which help him/her set objectives and develop strategies of achieving these objectives. A sound business concept makes business goals and objectives realistic and realizable. Thirdly, the entrepreneur must have good knowledge of his/her target market including the sector or industry he/she plans to invest. Another factor that determines the success of business is the entrepreneur’s mindset. An entrepreneur with a mindset that anticipates change is always proactive and dynamics. This will having the disposition to seek and use advice from other experts (www.myownbusiness.org/s2/ ). Outline of A business Plan There is no universal format of a business plan. Entrepreneurs develop their business plans that suit their businesses, operating environments and business strategies. The size of the business planned influences the content and size of the business plan. It does not however affect the structure. Generally, a business plan has the following structure. 1. Title Page The cover page on the business plan should contain the following: Business Title, Location Contact Information 2. Table of Content Precise page of major sections and subsection of the plan 3. Executive Summary A summary of the plan describing the major sections of the plan 4. Company profile The profile of the company should provide a description of the business planed. It should contain information on: Vision and mission statement Goals and Objectives Opportunities Business location and Setting Product or service to be offered Business legal and ownership structure Permits and licenses 5. Marketing plan Industry Trends Product/Service Target Market Competitive Analysis Marketing Mix Pricing Strategy Distribution Plan Advertising and Promotion 6. Operational Plan Organization Structure Operations Suppliers Manufacturing Plans Operating Requirements Human Resources Technology 7. Risk Factor Challenges Opportunities Risk profile 8. Financial Plan Start up Costs Cash Flow Statement Income Statement Balance Sheet 8. Schedule Major activities Timeline 9. Appendix Relevant reference documents Supporting tables, charts and graphs (OCRI and Entrepreneurship Centre 2002; http://www.businessballs.com; http://www.swan.ac.uk/knowledge/Entre-businessplan.html and http://www.myownbusiness.org/s2/) What Bankers Look For in Business Plans Every part of the business plan is important so also is every information contained in the document. But there are some aspects of the plan that attracts the bankers. These are aspects that make the plan saleable and a good risk for bank to invest or lend. These aspects include, in no particular order: 1. A sound business concept. This is the foundation of a successful business. It converts ideas and thoughts to implementable package. 2. Understanding of market. The entrepreneur must demonstrate knowledge of the market he/she will target. Does the product or service meets the market demand and resonates with the market? The plan must help the bank to answer this question. 3. Capable management. The bank assesses the competence and capacity of the management team in actualizing the plan. Experience and qualification as well as ethical values of management team members will be assessed. 4. Able financial control. How will the business fund be managed? Can the management team be able to handle risks? The bank looks into these issues before giving out a penny (http://www.myownbusiness.org/s2/ ). 5. A consistent business focus. The plan must be able to clearly bring out the areas of business specialization by indicating how the plan will explore areas of comparative and competitive advantages. This also involves how business managers set out practicalities such as potential customers and unique selling point. 6. Good marketing plan. The essence of business is to sell products and services in order to make profits. This can be achieved in competitive world with good marketing strategies. Banks searching eyes look into this aspect of the business plan. (http://www.womanowned.com/growing/businessplan/ImpressingInvestors.aspx ). 7. Flexibility. The ability of business to adjust itself in case of unanticipated changes shows how well the plan was developed. The way business risks are profiled will tell how prepared the management team is to proactively avert or contain risks when the bank lends or invests it money in the business. 8. Entrancing figure. The plan must explicitly show how viable the business is and the interest the bank expects from the business will be paid. The bottom line in the relationship between the bank and the business is if profit will be made sustainably to pay back interest and expand. The use of instruments such as tables, charts and graphs helps in presenting the figures in a more concise manner. 9. A convincing executive summary. There is no part of the business plan is not important. As it is with personalities, first impression is very important. The impression you create determines about your suitability for accessing the bank’s fund. Good impression can be created with a good executive summary. The executive summary must not just be comprehensive but well articulated. The way it is organized reflects how the points in the main document are organized and by extension how the business will be organized. Make the executive summary attractive by including brief facts and arguments that will capture the interest of the bank (http://entrepreneurs.suite101.com/article.cfm/creating-a-winning-business-plan ) 10. . Advice on How to Succeed The entrepreneur in this case has a good start. His/her business clearly indicates potential growth. His problem, he believes, insufficient capital. So his/her ultimately goal is to get money to invest in the business. The business plan, if carefully developed, can help solve this problem. Good. The question is, is lack of money the major problem of businesses? No. The entrepreneur may lack the knowledge and experience to manage the fund he/she is expecting to get form the bank. Therefore, his/her capacity must be built to face the challenges of managing bigger fund. Therefore he will need to undergo training or hire the services of managers of start-ups to help him/her sail across the turbulent water of managing a start up. Related to this, is the issue of presenting or defending plan when called upon to do so. First impression always matters. The entrepreneur may have a brilliant business idea developed into a workable plan that attracts the attention of the bank. If he/she cannot defend the proposal in person then, he/she should get the assistance of an expert or rehearse to improve his/her communication efficiency. In addition, the bank is a corporate entity that has code. To boost the personality of the entrepreneur, he/she should dress in a businessman-like manner. As he/she plans to expand the business more employees will be recruited. Care must be taken in the selection of employees. Character of applicants must be scrutinized before they are finally employed. This will guarantee adherence to ethics in doing business. Another area the entrepreneur must pay attention to is the issues of ethics. He/she must stick to those practices that ethical. Honesty, transparency and trust must be his guiding principles in order to have good reputation and create and maintain integrity. References “Creating a Wining Business Plan”. Web. May 7, 2010. http://entrepreneurs.suite101.com/article.cfm/creating-a-winning-business-plan Entrepreneurship Business plan. http://www.swan.ac.uk/knowledge/Entre-businessplan.html “How to write a business plan”. Web. May 7, 2010. http://business.timesonline.co.uk/tol/business/career_and_jobs/graduate_management/article2537485.ece “How to Write a Business Plan”. Web. www.hsbcsme.reedbusiness.co.uk/welcome/foundations/write-a-business-plan "Impressing the Bank or Investors”. Web. May 7, 2010. http://www.womanowned.com/growing/businessplan/ImpressingInvestors.aspx OCRI and Entrepreneurship Centre (2002). Writing an Effective Business Plan. Web. May 8, 2010. http://www.entrepreneurship.com/tools/pdf/businessPlanWorkbook.pdf “Writing a Business and Strategic Plan”. Web. May 7, 2010. http://www.businessballs.com/freebusinessplansandmarketingtemplates.htm Read More