Why Is Strategic Planning Important to a Small Company - Essay Example

Certain personality characteristics can also be very helpful in starting a new business. A study conducted by Southern Methodist University’s Cox School of Business lists several shared characteristics of more than 200 successful entrepreneurs (those who have been in business for more than 5 years and have gross revenues of at least $1 million), including good health, an ability to control, strong self-confidence, high energy and sense of urgency, comprehensive awareness of a situation, a realistic outlook, conceptual ability, a low need for societal status, an objective approach, emotional stability, an attraction to challenges and an ability to describe situations with numbers (Glick-Smith, 1999).

Why is strategic planning important to a small company?

Strategic planning is important to any small company that wishes to grow or expand product lines or services. Different from a business plan in which something is started, strategic planning maps out the various practices a company will use to obtain a desired goal, such as increased sales, employee growth, or adjusting to new competition (Kautz, 2005). Like running a race, if you don’t know where the course is, you have little chance of arriving at the finish line before the competition. A strategic plan should include a business purpose that makes the mission and philosophy of the company clear to employees and others in a concise statement, organizational goals that define the endpoints toward which the plan is striving, mapped out strategies for meeting each of these goals, action plans to implement the various strategies and the implementation of a monitoring plan to ensure the company is on the right path toward meeting these goals (Kautz, 2005). The plan should remain flexible to meet the growing needs of the company as well as the changes within the marketplace.

What factors should an entrepreneur consider before choosing a form of ownership?

According to Alex Goumakos, 5 major factors should be considered when deciding on the format of ownership: liability protection, taxes, management, ownership transition, and capitalization (2001). Sole proprietorships and general partnerships offer no liability protection, which means that any personal property can be seized to cover any business debts incurred. The best liability protections are offered under limited partnerships, LLC, LLP, and S or C corporations. Depending on what form is selected, there are significant tax issues to consider including self-employment tax, payroll, and estate taxes. Management structure limits available forms based on the number of individuals to share ownership. Anticipating eventual transfer of ownership and setting down contingent capitalization policies can also help to determine which legal entity will be the best format for your business.

Noting the growing trend among collegiate entrepreneurs launching businesses while still in school, one educator says “A student whose main activity on campus is running a business is missing the basic reason for being here, which is to get an education.” Do you agree or disagree? Explain.

I disagree with the assumption that college students starting their businesses while still in school are missing the basic reason for being there. On the contrary, I think they have grasped the point even more than the instructor in this case. Most college students who enter business while in school do so as a means of obtaining much-needed funds or helping fellow students with common issues (Seymour, 2001). Nicole Seymour cites studies that indicated most of these students do not plan to continue operating their businesses following graduation and several don’t even expect to earn a profit. However, their association with classmates who are also entrepreneurs as well as the availability of business professors to whom they can turn for advice means they are effectively expanding their education to include laboratory experience in business management with the possibility of profitability as well as future expansion.