The terms 'entrepreneur' and 'entrepreneurship' are most commonly linked directly to small business management.

University Degree Business and Administrative studies

The terms ‘entrepreneur’ and ‘entrepreneurship’ are most commonly linked directly to small business management. The definitions of these terms have changed and extended since they were first introduced in the Middle Ages. The definition most applicable to today’s entrepreneurs could be that of Hisrich (n.d, citied in Stokes 1998)

‘Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks, and receiving the resultant rewards of monetary and personal satisfaction.’

Today’s entrepreneurs are equipped with a list of characteristics and skills, providing the building blocks for successful entrepreneurship. Stokes (1998) categorises these skills and characteristics into three headings:

Technical skills, encompassing product or service knowledge and an understanding of the marketplace.
Management competencies, encompassing the areas of marketing, finance and human relations.
Personal attributes, such as having an innovative and determined nature, being equipped with an external focus and being a team leader.

The possession by the entrepreneur of these skills and characteristics can aid him when turning his vision into strategy. With small companies and new ventures at high risk of failure, adopting a strategic approach will improve its chances of survival. A successful strategy should provide the direction necessary to allocate the resources of the enterprise in a unique and viable way, taking into account internal strengths and weaknesses and also external opportunities and threats. (Stokes, 1998)

In the context of entrepreneurship this strategy should emerge as a pattern or plan, and be formally constructed written and presented. Most commonly such an activity is known as a business plan. The process of putting together a business plan forces the entrepreneur and his team to take a critical look at the entire business project. ‘The business plan is an operating tool, which if properly used will help manage the business and work effectively towards its success.’()

By looking objectively at their venture, the entrepreneur may be able to spot any weaknesses as well as any strengths within the business. It can also help to pinpoint any less obvious needs of the venture and give more insight into how best to achieve their business goals.

As well as equipping the entrepreneur to perform a critical analysis of the internal factors of the company and its venture, it also provides vital information required by external sources to evaluate the enterprise venture. This is especially significant when depending upon outside financing. ‘A business plan can quickly become a complete financial proposal, that will satisfy the requirements of most lenders.’() Adding the appropriate financial data will give weight to an entrepreneurs business plan.

In exchange for the time, commitment, discipline and dedication required to complete a comprehensive business plan, the entrepreneur and their team mates are rewarded ten-fold by the advantages gained. Effective planning provides a guiding analysis of the company, its structure and goals and also that of the venture. A properly segmented business plan should contain the following headings:

Business description
Marketing plan
Financial plan
Management plan

()

By segmenting and categorising the information into various sections it allows those composing the plan to critically analyse and assess each section and how it is doing in relation ...

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Business description
Marketing plan
Financial plan
Management plan

()

By segmenting and categorising the information into various sections it allows those composing the plan to critically analyse and assess each section and how it is doing in relation to its goals. Such analyse can lead to the stimulation of new ideas or approaches and possibly the prediction of, or solutions to, any arising problems. The process of segmenting and integrating information into the business plan works best if, ‘the information is digestible and discrete’ (Timmons J., 1999, ch.11).

The documenting and analysing of a new venture can provide the entrepreneur and their managers with new insights. Examples of this can include the identification of possible problems, hold-ups or even the introduction of new technologies and new markets. A change in any of these factors would depict a change in the plan and in the strategy of the company and its new venture. By actually recording their plans, entrepreneurs can also gain new insights into the benefits, requirements, risks and rewards of their venture. They can also achieve an insight into a better or the best way to achieve their goal as the plan progresses.

There are two primary purposes to a business plan, an inside one and an outside one. The inside one being a guide as to how the organisation can best meet its goals. The outside purpose is to obtain funding. When devising a business plan the entrepreneur should remain constantly aware of how the plan communicates the potential of the venture and the company behind it to interested parties. A good business plan can be the cornerstone of successful financing. ()

In order for the venture to appear attractive to outside lenders and investors, the entrepreneur must ensure their plan is well prepared, well structured, professional in tone, but not too complicated. It is vital the plan is persuasive of the company’s potential. The plan should be informative, relevant and logical, showing the company and its venture to be a good investment. More importantly the business plan should be specifically directed to the funding source. An entrepreneur should write a plan differently for presentation to a banker than to a private investor. This is the concerns of funding bodies vary, with the banker being more concerned with how good the security was, whilst the private investor is more concerned with the risks involved. ()

In order to communicate the venture successfully to interested parties, the entrepreneur must ensure the business plan will captivate, interest and impress the lenders. Although a time-consuming process the entrepreneur must remember that their business plan is an essential selling tool and if they want investors money they must give good reasons for them to buy in. This said, the entrepreneur should not try to lie or fake any information in order to dress up the business plan.

Outsiders want to know that the entrepreneur and his team have carefully thought out the plan. In order to achieve this the entrepreneur must put together a package containing all the ‘hows’ and ‘needs’ of the particular venture. The entrepreneur must be able to show outside investors that all the human and physical resources effectively interrelate with the marketing, operational, and financial strategies of the company. ()

By doing this the entrepreneur and his team have a better chance of convincing outsiders that they possess all the skills and expertise needed to actively manage the company, and are well prepared to solve any problems arising, or to seize any fresh opportunities.

When preparing a business plan for the perusal of outsiders, there are guidelines, which can be followed to make the overall plan look more attractive. Firstly, capture the readers’ attention with the introductory statement, making it easy to read and understand. Private investors are primarily interested in the reaction of the market to the proposed venture, so it is important for the entrepreneur to show that he and his team have thoroughly researched their market, having gathered information on predicted customer reaction to the venture and the state of their competitors. The entrepreneurial team must ensure they have planned all aspects of the venture including how they will market and distribute the product or service, how they will emphasis the products uniqueness and display their own management strengths. (Stokes, 1998)

Including attractive yet accurate projections will further reassure outside investors. Finally the team should ensure that their closing statement assures the investors that they will get their money back, and assure the lenders of adequate security, and drive home the point that a good deal is on offer. ()

Some entrepreneurs often think it wise to delegate the task of preparing a business plan to outside professionals, believing that it will allow the management to commit its time trying to obtain finance and begin business operations. However, this may not be such a good idea, as the planning and writing of a business plan is a good way for the entrepreneur and his management team to examine the consequences of various strategies before its too late. A good example of this is the case of an entrepreneur and his partner who, whilst preparing their business plan discovered that the target market for their biomedical products was not emergency room as first thought but indeed nursing homes. This discovery changed the focus of their marketing strategy. Had the entrepreneur delegated the task of writing the business plan to an outside professional, this may never have been discovered. (Timmons J., 1999, ch.11).

Another reason for not involving outside professional in the drafting of business plans could be that outside investors and lenders place a great deal of importance to the quality of the management team and want reassurances that the tea fully understand and are committed to the venture in question. Their intention is to invest in a team and its leader, not in an outside consultant.

There are many benefits to managers when they are involved in the preparation of a business plan, mostly it aids management planning and is advantageous in setting future goals and realistic targets. It allows managers to take a strategic look at their marketing, sales, operations and manufacturing strategies. ()

By involving themselves in the preparation of the plan, managers can critically assess financial and budgetary matters. Carrying out and being involved in the reviewing and up-dating of a business plan at set intervals also allows managers to re-evaluate their achievements, and gives them early warning with regards to any budget or time losses. Managers also become equipped with the ability to think ahead about the impact of their decisions, and can anticipate the resources needed and chart the best course of action to take, thus promoting management action. ()

Business plans can also aide the responsiveness and flexibility of a venture. Having the opportunity to critically analyse all sections of the company and its new venture allows the entrepreneurial team to spot in advance problems or opportunities, they can then respond accordingly. In order to do this effectively the entrepreneurial team need to track results, analyse the difference between plan and actual results. They must be capable and prepared to change those things which need changing and compare plan to reality. They must be prepared to fix anything, which went wrong and take advantage of what went right. The entrepreneurial team should evaluate the plan every month or quarter.

The entrepreneur and their team managers should always view their plan as ‘work-in-progress’, keeping an open mind and clear focus on the venture. Undoubtedly,

unexpected changes will occur along the way and in order to minimise risk and maximise opportunities, the entrepreneur and his team must be prepared to continually adjust.

Although the preparation and presentation of a business plan is thought to be one of the best ways to define all the needs, requirements and expectations of a new venture, it is important that the entrepreneur does not adopt the approach that a fat and enticing plan will automatically make the business a success. Some of the most impressive business plans fail to become great businesses and some of the weakest plans can lead to extraordinary success. (Timmons J., 1999, ch.11). The conclusion being, that although the development and presentation of a business plan by the entrepreneur can swing the odds in their favour, unless the opportunity, resources and team mangers are present, the venture may not be an automatic success.

Word count: 1,902

References

Stokes, D., 1998, Small Business Management, Continuum, London, 2nd Ed.

Strategic Business Planning Co., 2002, Business Plan, [online], Available: (

Timmons J., 1999, New venture Creation, Mc Graw Hill, London

University of Missouri, 2002, Business Plans, [online], Available: , (2002, July)

Venture associates, 2002, Business plans and Planning, [online] Available: (2002, Aug, 20th)

BIBLIOGRAPHY

Stokes, D., 1998, Small Business Management, Continuum, London, 2nd Ed.

Strategic Business Planning Co., 2002, Business Plan, [online], Available: (

Timmons J., 1999, New venture Creation, Mc Graw Hill, London, 1ST Ed.

University of Missouri, 2002, Business Plans, [online], Available: , (2002, July)

Venture associates, 2002, Business plans and Planning, [online] Available: (2002, Aug, 20th)

Carter, S. &Jones-Evans, D., 2000, Enterprise and Small Business, Prentice Hall.

ASSIGNMENT COVER SHEET

MODULE TITLE: Entrepreneurship and Innovation

MODULE CODE: BMG558M1

MODULE CO-ORDINATOR: Mr Daniel Mulvenna

STUDENT NAME: Carrie Williamson

STUDENT NUMBER: 40009200

COURSE: BA Hons Business Studies (spec.)

ASSIGNMENT TITLE:

A business plan is a tool essential for entrepreneurs. Like many other managers, entrepreneurs are often called upon to prepare written, formal business plans. Consider the way a business plan can help a venture by guiding analysis, creating a synthesis of new insights, communicating the potential of the venture to interested parties, promoting management action and increasing the responsiveness and flexibility of the venture.