Very Small Businesses

Business Plans for Entrepreneurs

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Few areas of business attract as much attention as entrepreneurship, and few aspects of entrepreneurship attract as much attention as a business plan. Increasingly, business plan competitions are springing up across the world, partly helped by the marketing gimmicks of business schools. Indeed, judging by all the hooplas surrounding business plans, you might want to ask yourself what happen to all those eventual winners, many of those MBA graduates would no doubt went on to work in investment banks, drawing huge bonuses managing venture capital and private equity funds rather than taking the uncertain path of entrepreneurship.

Nothing could be further from the truth, in my experiences with the hundreds of entrepreneurial startups, business planning persistently ranked as one of the least important aspects of entrepreneurship. In fact, most wasted too much time and effort on numbers rather than actual implementation and the more elaborately crafted the documents, the more likely the venture would flop. Don’t misunderstood me, business plans are necessary for the eventual entrepreneur to soul search and clarify to himself his actual thought process, address unforeseen issues and to analyze likely market competitions and potential structural changes.

There are plenty of existing business plans templates you can google on the Internet. On will provide an automatic formula for winning. Rather, business plans are meant to be temporary and subject to changes all the time. There is no need to follow the execution plan step-by-step. Rather, the general strategy should comprise of the following three core of interdependent factors critical to new ventures:

a) People – The people starting and running the startups. Without the right people, nothing else really matters. “I invest in people, not ideas.”, is the famous saying of Arthur Rock, a legendary venture capitalist associated with the likes of Apple and Intel. The men and women involved should also include third parties providing key support and resources to the venture.

b) Business Profile – The profile of the business itself. Selling the right thing is a battle half-won. These include questions like who will be the expected buyers, how fast can the business grow and what factors stand in the way. The business owners need to be specific on where the source of income is going to come from.

c) The Big Picture – Social and technological evolution that are beyond the control of any entrepreneurs. Imaging trying to sell pagers 10 years ago. For this particular factor, would entrepreneurs must prepare to eventually cut their loss and stopped their businesses or switched to another products and services should situations changed. Many successful ventures adapted to new market environment and were in very different lines when they first started. This is also where a shift in market environment can turn an unattractive idea into a highly profitable ones.

Good business planning is like a video show into the future, and discuss people, business profile and the big picture as a moving target. Be prepared to tear up the original plan and go back to re-write it as you move on.

SMART Goals

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S = Specific
M = Measurable
A = Attainable
R = Realistic
T = Timely

So what is a SMART goal? You might find it helpful to apply the following questions while in the process of exploring your business ideas:

1. Specific – What will I be attempting to accomplish specifically in my business?

2. Measurable – How will I measure my success? How will I know I have succeeded in my goal?

3. Attainable – Have I set an attainable goal? What commitment will be required to attain that goal? Am I willing to make that commitment?

4. Realistic – Is this goal within my reach or beyond my reach?

5. Timely – Is this a good time in my career and my life to start this business? Is it a good time to hit the market with this business idea?

Setting goals for your business is a necessary and invigorating process. Write your goals down and continue to review and revise them as often as necessary. Seeing your plans “in writing” gives a sense of reality to your entrepreneurial goal.

Your Turn: Write down your goals for your business and apply the SMART process to each one. After the exercise, what did you find out? Did you revise some of your goals after applying the SMART process to them?

Getting Started

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The first step should be to make a business case for your entrepreneurial opportunity. Details and information on preparing a business plan are provided in Guide #3 but for now, put your thoughts in writing to help you determine what additional information and resources you will need. Consider such areas as the following.

 Do you have a solid idea for a business? What resources will you need to move it from abstract to concrete application?

 What role will you play in the business?

 What role will others play in your business? Will you need others?

For many, it may be as simple as defining your goals and turning them into SMART goals. The key in this strategic exercise is to be sure of your goals. It’s important to have a clear vision and plan of what you want to accomplish in your venture. Simply saying that “I want to own a successful business within twelve months” does not constitute a workable plan. Consider the following focused objectives and goals:

 I will manage my own sports equipment business in twelve months with a personal net salary of $100,000 and a staff of twenty.

 I will increase my business sales by 17% compared to last year by implementing seasonal sales on a quarterly basic in both local and regional media venues.

Industry Research

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Be sure to take the necessary time to become immersed in content about starting a new business, as well as content specifically related to the industry that you want to enter. Just as you have had your entrepreneurial dream for a long time, turning that dream into reality will take time.

The following are good places to start in terms of increasing your knowledge about the field you may want to get into.

 Consider professionals at your local financial institutions that are available to provide financial advice tailored to your business needs, as well as financing for your business.

 Consider government agencies such as the Small Business Administration (SBA) that provide financial assistance for individuals to expand their business. The agency sponsors workshops, seminars, publications, and newsletters on the various aspects of operating a small business. Check out http://www.sba.org for their range of services, as well as the SBDC (Small Business Development Center) at http://www.sba.org/sbdc.

 Consider opportunities provided by the local chamber of commerce. These might include mentorship, newsletters, online advice, etc.

 Consider the availability of organizations such as SCORE (Service Corps of Retired Executives). This is a non-profit association “dedicated to encouraging the formation, growth, and success of small business nationwide through counseling and mentor programs.” Check out http://www.score.org for available services.

 Consider your local library. Locate the entrepreneurial/small business section and take advantage of the many publications offered.

An Entrepreneur’s Personality

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Now it’s time to assess whether you have what it takes to move from dreams to reality: an entrepreneur’s personal traits, commitment, and skill. Complete the questionnaires on the following pages and then make a plan for addressing those areas that you need to strengthen.

PERSONALITY: DO I HAVE WHAT IT TAKES?

Not Yet Sometimes Most Times Always

I am passionate about my goals.

I have a spirit of adventure.

I have a strong need to achieve.

I am self-confident.

I am a self-starter. (I stay focused on my plan.)

I am goal-oriented.

I am innovative, creative, and versatile.

I am persistent; I don’t give up easily.

I am hardworking and energetic.

I am a positive thinker.

I am willing to take initiative.

I am able and willing to commit myself.

How did you measure up? Where are your strong points? For those areas that you can’t answer “Always,” do you have a plan or strategy to work on achieving the needed skill set(s)?

Entrepreneurial Landscape

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The U.S. entrepreneurial landscape exhibits some very strong positive characteristics:

- The culture of the United States is one of seeking opportunities and taking risks.

- The age group most active in entrepreneurial activity in the United States includes people between 5 and 4 years of age with a broad variety of ethnic backgrounds. The U.S. diversity contributes positively and significantly to continuing and expanding the country’s entrepreneurial tradition. ( 2003 Global Entrepreneurial Monitor Report)

- One out of every nine people (about 11% of the U.S. population) is involved in entrepreneurship - either currently involved in the start-up of such an enterprise or has been within the preceding 47 months. ( 2003 Global Entrepreneurial Monitor Report)

The U.S. Small Business Administration looks at “small business as the engine of economic growth.” Consider these recent statistics.

- There are approximately 5 million small businesses in the country. More than 10.5 million Americans are self-employed.

- Small businesses currently employ more than half of the country’s workforce and account for more than half of the private sector economic output.

- Small businesses provide approximately 75 percent of the new jobs added to the economy.

Nevertheless, small businesses are not guaranteed to survive. We will help you do the “homework” that is essential to increase the odds that your business will survive — and thrive!

We will walk you through many questions and many ways to assess whether or not entrepreneurship is right for you. You will be encouraged to weigh your motives, your talents, and your skills.

Meaning of Entrepreneurship

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Entrepreneurship is the process of organizing, managing, and assuming the risks and rewards of a business or enterprise. Most people see entrepreneurship as the opportunity to pursue the dream of working for themselves. For many, it’s not always about the money, but rather, about the passion and the challenge. Do you have that drive? Consider the following quotes about business success. What are these mentors trying to tell us?

“The only place where success comes before work is in the dictionary.” - Vidal Sassoon

“The only things that evolve by themselves in an organization are disorder, friction, and malperformance.” – Peter Drucker

“I promoted myself. I had to make my own opportunity! But I made it!

Don’t sit down and wait for the opportunities to come.” – Sarah Breedlove Walker

“Business is never so healthy as when, like a chicken, it must do a certain amount of scratching for what it gets.” – Henry Ford

“Let all your things have their places; let each part of your business have its time.” – Benjamin Franklin

Concept of Entrepreneurship

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The concept of entrepreneurship is “big” and involves many detailed concepts. Let’s look closer at the concept of entrepreneurship to be sure we understand its scale. Consider the following characteristics of entrepreneurship.

Entrepreneurship:

√ Is action-oriented. The key word in this characteristic is “action”; something is always moving. Owning a start-up most likely means managing it as well, at least at the beginning. The management concept means many things: making sure your business runs smoothly and efficiently; finding a market for your product; meeting the changing demands of your product in the marketplace; having in place the necessary operations to allow your business to operate successfully; and maintaining a productive and efficient workforce.

√ Involves calculated risks. The key word in this characteristic is “calculated”. There is risk involved in every business. You can do preparation to make sure you minimize risk as much as possible but sometimes, you get surprises, both positive and negative. However, someone must take responsibility for the decisions. That person is you. The more planning you do, the more you can minimize risk and increase the likelihood of success.

One of the challenges in starting a business is financing. It takes money to start and maintain a business, whether it is a one-person operation or a larger operation. It is not easy to have an accurate financial estimate in the beginning. That’s why it is important to plan for the unexpected; consider the calculated financial risks during the start-up time. This step is even more important if you have a family and dependents.

Your Turn: What are some of the other risks in starting your own business? List some of the other risks involved with starting a business and some ways to minimize those risks. Which of these risks would apply to your personal situation if you were to start a business?

Potential Risk Way to Minimize Risk

√ Involves much planning. The key word in this characteristic is “planning.” Operating a successful business involves knowing how to do many things and having many skills and talents. A good piece of advice for any entrepreneur is to “do your homework” and educate yourself in every aspect of the business opportunity you want to pursue.

Having the power to set your own policies (such as working hours) and having the power to keep all the profits provides a wonderful sense of independence. While the prospect of independence is exciting, it also brings responsibilities and challenges. In the long run, if your business does poorly, you are still responsible for your business debts. It is critical to understand and accept the financial responsibilities and legal ramifications of establishing a business before you make that final decision.

√ Starts small and grows. The key word in this characteristic is “grows.” It takes time for a business to grow. Success does not happen overnight. Hopefully, this growth will be positive. What can you expect from the experience?

Your Turn: Starting your own business presents many challenges as well as the potential for many rewards. Make a list of the challenges and rewards that you see for yourself if you were to start your own business.

Motives For Entrepreneurship

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Some of the most important questions to ask about entrepreneurship are the kind that make you take a close look at yourself—your personality, your skills, and your willingness to commit to something that could demand your constant attention for many years.

First, ask yourself why you want to become an entrepreneur. Clear, honest answers to this question will help you determine whether your personal traits, skills, and commitment match your goals.

Entrepreneurs often cite reasons like the following:

1. I had an innovative idea for a new product or service.

2. I had an innovative idea for improving an existing product or service.

3. I saw a great opportunity and I grabbed it!

A classic innovator is Jeff Bezos, founder of Amazon, the online bookstore. Booksellers have been around forever, but selling books online? Now, that’s an innovative delivery system! Amazon.com has grown well beyond the book business and now sells a wide array of consumer goods.

One of the most famous opportunity spotters was Ray Kroc. In 1954, Ray Kroc became the exclusive distributor of a five-spindled milk shake maker called the Multimixer. Hearing about the McDonald’s hamburger stand in California running eight Multimixers at a time, he packed up his car and headed West. He soon began to franchise McDonald’s. He was 52 years old.

Innovative ideas and opportunities are only two reasons that lead people to entrepreneurship. There are many others. Many people are determined to become their own boss. Others want the satisfaction of using their skills to improve a product; make the world a safer place; improve the human condition; or, provide a better future for their families and communities. Some start new businesses due to a lack of alternative job opportunities, sometimes referred to as “Necessity-Based Entrepreneurship.”

Consider these thoughts:

1. Debbie Fields, founder of Mrs. Fields Cookies (Opportunity-Based Entrepreneurship) “The important thing is not be afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.”

2. Madam C. J. Walker, creator of African-American hair care products “I had to make my own living and my own opportunity! But I made it! Don’t sit down and wait for the opportunities to come. Get up and make them!”

Your Action: Make your own list of reasons for becoming an entrepreneur.