Starting a New Business and Preparing a Business Plan - Research Paper Example

Writing a business plan for a new venture Introduction Starting a new business is a daunting task and requires proper planning for the entrepreneur to achieve success. When starting a business, an entrepreneur should carry out thorough market research regarding the business he or she wants to venture. This is because, there are numerous market niches, and an entrepreneur has to select a niche that suits his or her business skills and experience. After, an entrepreneur decides on the ideal business to invest, preparing a business plan is necessary because it provides a step by step direction for the entrepreneur to follow. Starting a new business involve various processes that require writing down a plan on how such processes will be carried out. Most entrepreneurs have failed to succeed in their new ventures due to poor planning (Lamb, 2006). In essence, a proper business plan enables the entrepreneur to understand where he or she is headed. In addition, proper planning allows an entrepreneur to identify opportunities and risks in the business he or she decides to venture. The competition in the business environment is stiff and entrepreneurs need to take time to prepare adequately for their new venture. This is only possible through developing a business plan that provides a strategy on how to deal with the challenges in a competitive market environment (Lamb, 2006). This paper examines why it is necessary to write a business plan when starting a new venture. Why it is important to write a business plan For entrepreneurs with the intention to start a new business, the question that they should ask themselves is how they can plan for their new venture. At the moment an entrepreneur decides to venture into a new business, many details that are required emerge at the same time and without a proper plan to analyse such details, an entrepreneur is likely to fail in the initial stages of starting a new business venture (Delmar & Shane, 2003). As such, writing a business plan ensures that an entrepreneur venturing into business overcomes the challenges experienced in the initial stage of a new venture. A business plan is essential because, it provides the entrepreneur with direction in terms of discussing how to set up the identified business venture. Further, writing a business plan also provides the entrepreneur with a structure that ensures everything regarding the intended business venture is covered. Writing a business plan also prompts the entrepreneur to contemplate the future, for example, a business plan provides the entrepreneur with an idea of what to do next when the new business becomes stable (Delmar & Shane, 2003). Having a written business plan will enable the entrepreneur to generate ideas regarding how to deal with competition in an entrepreneur’s market niche. A written business plan also helps the entrepreneur to communication his or her ideas, for instance, to financiers, suppliers and customers. On the same note, a well written plan will help the entrepreneur generate feedback from his or her business contemporaries and other interested parties. The insight provided in this sense, can help an entrepreneur to establish a successful business venture. Writing a business plan provides the entrepreneur with impetus to participate in its implementation (Delmar & Shane, 2003). In addition, an entrepreneur can avoid unnecessary costs incurred in hiring a consultant to assist in writing the new business plan. As such, it is important for an entrepreneur to be involved in developing his or her business plan for purposes of enhancing accountability during the decision-making process based on the written plan. While an entrepreneur may need the services of an expert, the entrepreneur is still the originator of the new business. This is because; the business is an extension of an entrepreneur’s desires or abilities and as such, direct involvement makes the business plan more effective (Bruce & Ireland, 2010). How the business plan is written Writing a business plan depends largely on the target audience, for instance, financiers or prospective investors. As such, in case the business plan is targeting potential investors, the business plan needs to be comprehensive and contains all the necessary details regarding the new venture. This is because, in order for an entrepreneur to convince the prospective investors about the opportunities presented by the new venture, there is a need for more details. In addition, what the written plan says is also critical because, a plan can be long, but contains little information. On the other hand, a plan can be short, but precise in terms of providing the information required by the prospective investors. Overall, a thoughtful and comprehensive consideration of every aspect of the proposed business venture is important when writing a business plan that targets a particular audience (Bruce & Ireland, 2010). A business plan acts as a road map for the entrepreneur and writing down the steps involved in starting a new business is necessary. All the processes and stages that an entrepreneur expects to go through should be written down to ensure he or she does not miss any step in developing the ideal business plan. A business plan should contain all the necessary elements required to establish a new business entity. As such, the entrepreneur knows where to start the planning process for the implementation stage. Most entrepreneurs confuse themselves when it comes to writing down a business plan. To write a proper business plan, the prospective entrepreneur should conduct a thorough market research to understand the dynamics of a particular business. Conducting market research ensures that the prospective entrepreneur selects the business that suits his or her abilities (Burns, 2011). After selecting the ideal business that can generate profits depending on the information from the market survey, the process of writing a plan on how to achieve the desired goals can begin. As such, the written plan should follow a systematic process regarding how each objective of the new business will be achieved. In this way, the entrepreneur can save the time wasted in consulting other persons on how to set up a new venture. However, while ideas from other people can help in making a wise choice, it is important when writing a business plan to integrate other ideas with personal knowledge in a business plan. In essence, the elements necessary for the entrepreneur to write down in developing a business plan include the description of the new business, market analysis, competitor assessment, marketing plan, operating plan and a financial plan (Lange et al. 2007). The elements to write a business plan Business description As an entrepreneur, when writing a business plan, the first element to consider in such a document is the description of the intended business venture. The information in this part should include what the entrepreneur intends to do in the new business plan. In addition, this part of the business plan also needs to contain details regarding the reasons for starting the new business venture. The first part of the business plan provides an insight regarding the new venture and the intended objectives. The intended audience of the business plan is interested to know why the new business is a worthwhile decision. As such, it is important for the entrepreneur to write down a mission statement that can convince the audience regarding why the new venture is necessary. As an entrepreneur, clarifying the mission statement is critical in communicating the intended purpose of the new venture (Fernandez-Guerrero, Revuelto-Taboada, & Simon-Mova, 2012). The mission statement is important in terms of highlighting the intentions and motivations of the new venture. The necessary factors that should be considered in writing a mission statement include what the entrepreneur value. For instance, an entrepreneur can decide to communication the key principles of his or her new venture. Accuracy is necessary for writing a mission statement because, the audience want to know what can be accomplished by implementing the new business plan. The explanations of the entrepreneur’s intentions in the first part of the business plan needs to be written in a simple manner that is understandable to the targeted audience. Further, in the first part of the business plan, the questions that require brainstorming by the entrepreneur include how to identify opportunities for the new venture. In addition, the entrepreneur also needs to look at how to address the needs of the new business and what principles and beliefs are needed to guide the new business venture. The mission statement acts as the foundation of the new business venture, and the actions that may follow are geared at accomplishing the mission of the business venture (Fernandez-Guerrero, Revuelto-Taboada, & Simon-Mova, 2012). When working on the first part of the business plan, it is important for the entrepreneur to note that communication is critical. On the same note, communication enhances clarity of information, and it is necessary for the entrepreneur to specify the goals, actions and how to accomplish the business’s mission in the market. In writing the plan, it is also necessary to mention the business’s current state. For instance, an entrepreneur may want to set a partnership business, a corporation or a sole proprietorship venture. Other details to include, providing the information of the owner or owners depending on the nature of the new business venture (Fernandez-Guerrero, Revuelto-Taboada, & Simon-Mova, 2012). It is also important to define the nature of operations the new business wants to start. For example, it is necessary to define whether the new business will be for manufacturing, retailing or a wholesale. Additional information should also include whether the business has existed before and the new venture is an expansion or starting from scratch (Lange et al. 2007). Market analysis As an element that is needed in the development of a business plan, the entrepreneur is required to provide information regarding the intended customers and their expected needs. In this part of the business plan, it is necessary for the entrepreneur to write about how he or she is going to approach the identified market. As such, the entrepreneur needs to provide information related to the identified market’s characteristics, the profile of the targeted consumers and the competition. This will allow the entrepreneur to assess how he or she will gain an advantage in terms of developing a successful venture. Regarding the describing market characteristics, the details that an entrepreneur needs to provide includes information about the industry of choice (Hopp, 2012). Details in this sense should also involve mentioning the size of the industry, its location, background information, its competitiveness and profitability. Further, the entrepreneur should also mention the identified opportunities and threats in the industry selected for the new venture. Such information helps to convince the intended audience that there is a market for the new product or service. In this part also, the content written should focus on how the entrepreneur can forecast for sales. This in turn, will determine how the entrepreneur will operate, for example, small scale or large scale. The sales forecasts also help the entrepreneur to determine the amount of capital needed to set up the new business venture. This part should also discuss the forces that influence the intended market. For instance, supplier power, new competition, substitute goods, consumer power, industry rivalry and government regulations (Hopp, 2012). Assessing competition At this point, the entrepreneur must have known his or her competition in the market. As such, this information is needed in the business plan to enable the entrepreneur to assess what competitors provide in the market. Assessing the competition helps the entrepreneur to identify their strengths and weaknesses (Bruce & Ireland, 2010). This provides the entrepreneur and the intended audience with a clue of how to develop a strategy that can overcome the stiff competition in the market. Assessing the competition also allows the entrepreneur when writing a business plan to come up with a pricing strategy that will appeal to the targeted customers. In this part, it is important for the entrepreneur also to write down how his or her products will be distributed and sold in the market (Hopp, 2012). Marketing plan While writing a business plan, the entrepreneur needs to explain to the intended audience how he or she will access customers. On the same note, the entrepreneur needs to explain to the intended audience the uniqueness of his or her products and how they can attract the attention of customers. In addition, it is important for the entrepreneur to explain how he or she intends to offer his or her services to the targeted customers. For instance, the entrepreneur may decide to use promotion as a way of attracting customers to his or her services. When writing such information, it should be convincing enough to the intended audience (Hopp, 2012). Operating plan This phase of the business plan involves the entrepreneur writing down how he or she intends to implement the ideas for the new venture. Further, this section requires the entrepreneur the write down the organisational structure of his or her venture. The entrepreneur should also explain how he or she intends to operate in the new venture (Fernandez-Guerrero, Revuelto-Taboada, & Simon-Mova, 2012). Financial plan This is the most critical part of writing a business plan because; the venture cannot start without adequate funding. As a result, the entrepreneur needs to explain to the intended audience the budgeted costs for starting the venture and where he or she will get the required funds (Bruce & Ireland, 2010). Conclusion Starting a new business venture is challenging and requires a proper plan that follows a systematic step prior to implementation. Essentially, writing down a business plan provides the entrepreneur with a roadmap of how to achieve the intended objectives of each phase of the business plan. In addition, preparing a business plan ensures that the ideas written are well thought to ensure the success of a new business venture. Writing a business plan also help entrepreneurs to understand the various changes taking place in the market. As such, they are able to implement these changes in their business plan to avoid failing in implementing a new venture. References Bruce, R.B. & Ireland, R.D., 2010. Entrepreneurship, Successfully Launching a New Venture, Pearson, New Jersey. Burns, P., 2011. Entrepreneurship and Small Business, Palgrave, London. Delmar, F. & Shane, S., 2003. ‘Does business planning facilitate the development of new ventures? Strategic Management Journal, no. 24, pp. 1165-1185. Fernandez-Guerrero, R., Revuelto-Taboada,L. & Simon-Mova, V 2012, ‘The business plan as a project: an evaluation of its predictive capability for business success’, Service Industries Journal, Vol. 32, no. 15, pp. 2399-2420. Hopp, C., 2012. ‘The acquisition and utilisation of market information in new venture development and the contigent nature of venture organising activities’, Journal of Strategic Marketing, Vol. 20, no. 6, pp. 553-567. Lamb, S.E., 2006. ‘How to write it: Business plans and reports’, Business & Economic Review, Vol. 53, no. 1, pp. 17-24. Lange, J., Mollov, A., Pearlmutter, M., Singh, S. & Bygrave, D., 2007. ‘Pre startup formal business plans and post startup performance: A study of 116 new ventures’, Venture Capital: An International Journal of Entrepreneurial Finance, Vol. 9, no. 4, pp. 237-256. Read More