Developing a business Plan

As an entrepreneur you should be familiar with the business plan, this is a document describing in detail the nature and objective of the business venture. It is vital to know how to draft a proper business plan for various reasons. Today we will only look at the importance of drafting one.

1. Sell the business to yourself
You need to be able to sell your idea to yourself since you are the most important stakeholder in the venture. As an entrepreneur you need to convince yourself that starting the venture is the right thing on both a personal and investment point of view.

2. Obtain investment funds
There are a number of private investors available that you could obtain funding from, whether its venture capital or informal capital.

3. Secure bank finance
Banks require you to have a written business plan when seeking a business loan. In order for you to stand a fighting chance at obtaining the business loan you need to construct a convincing plan. Banks have become wary to lending start-ups that are categorized as high risk, which is why a business plan has become an essential component.

4. Secure big contracts
As a small company seeking ongoing orders or contracts from large corporations, they are often met with “who are you? Everyone knows who we are so why should we do business with you”. In order for you to answer this question properly, you need to have a business plan.

5. Keep focused and motivated
As a small business venture grows and becomes more complex, a business plan can help keep everyone focused and motivated on the same targets and goals.

6. Attract key employees
Convincing the best employees can somewhat present itself as a challenge for small businesses. As a growing company you will need to present a convincing business plan to some employees in order for them to believe that the company is going to thrive in the coming years.

There are other plausible reasons for drafting a business plan; it can help you evaluate the chances of the ventures survival rate, or help you identify key components that can determine the success or failure of the venture. You may also use a business plan as an instrument to compare actual results against targets and goals.

Why is planning important for my business?

Planning has been defined as the first step in the management process. It gives a business the direction needed to achieve its goals. I have compiled a small list of reasons why we should incorporate planning in the overall management of small businesses.

1.       Gives direction

This is the most important function of planning, it allows you to see where you business is heading. By stating your goals in your plan you have essentially stated what you want to achieve, how you will achieve it, and by when you will achieve it, giving your business direction.

2.       Facilitates control

Control allows you to measure the actual performance of the business against set goals and plans, wherein you can take corrective action if necessary. Without planning it becomes difficult for you to take control in the business.

3.       Promotes co-ordination

By setting out goals, the activities in your business become focused in one direction. Members of your organization become aware of those goals and they easily co-ordinate their activities and work as a team.

4.       Reduces the impact of change

This could be described as reducing business related risk also. Formulating a plan and setting goals allows the business to anticipate change that may affect them in the future. This in return reduces uncertainty, risks, and guesswork caused by change.

5.       Assists in organizing

Organization in a business is plays an important role because without it the successful implementation of a plan is not possible. By making a plan you can easily see the different parts of the business that are reconcilable with each other as well as the primary targets of the business as a whole.

Characteristics of an entrepreneur

Exactly what is an entrepreneur you say, well the most basic description would be: “An entrepreneur is someone who starts a business with the intention of making a profit and assumes the risk of losing all of his/her resources if the business fails. In simple words, the entrepreneurs reward for taking the risk is profit, and his/her punishment for making the wrong decisions is financial loss.

In order to become successful an entrepreneur should have the following traits.

 Be able to take and manage risk

In the business world, most conditions and variables are not in the entrepreneurs control (new laws, interest rates, currency fluctuations and so on) a successful entrepreneur will find a way to minimize risk and only make calculated risks. Calculated risk is the only difference between a successful entrepreneur and an unsuccessful one, the unsuccessful one makes expensive, impulsive decisions that are not thought out.

Stays motivated

Entrepreneurs could be described as individuals with a higher need to achieve than people who are not entrepreneurs. Their desire to succeed could be seen through their prolonged, intense and repeated efforts to accomplish something that is difficult. An individual who is constantly motivated works single-mindedly towards his/her goals and is driven by the desire to win or succeed.

Has a strong need to be in charge of his/her own destiny

This could also be referred to as a strong internal locus, a persons need to be in charge of their own destiny as opposed to an external locus of control, where a person regards luck and fortune rather than personal ability and hard work. An Individual with a strong need to be in charge of his/her destiny believes that an outcome of an event is determined by his/her own actions and behavior. 

 Is creative and innovative

Entrepreneurs are always looking to identify opportunities and find ways to take advantage of them. Although not all entrepreneurs who have established their businesses create new products or service, they are responsible for ensuring that the venture continues to exist and add value.

There are other traits like confidence, optimism, high levels of energy and commitment. You do not necessarily have to fit the bill perfectly for you to achieve success in the business industry; the main ingredient is for you to have the desire to succeed.

Using information Systems to gain a competitive advantage

We are fortunate to be living in a time where technology is advanced; we are surrounded by laptops, smart phones, Internet, and many other interesting forms of communication. What we usually do not realize is how computers and information technology could help us perform more effectively and productively. We could use our understanding of information to generate business intelligence. With business intelligence we obtain historical, current and predictive views of how the business is operating which equips us with an advantage in the marketplace.

Here are some tips to give your business an advantage in the marketplace.

1. Make it difficult for your customers and suppliers to leave you

Depending on your budget and creative juices, you can offer benefits, discounts, and bargains to your customers and suppliers, making it hard for them to easily switch from you. You could also develop your information systems to offer reduced transaction costs, increased customer support, or fast deliveries, allow your creative side to take over and implement something new.

2. Make it hard for someone to duplicate your product or service.

You can focus your strategies on ensuring that the threat of new entries remains low. This is easier achieved when your product or service is difficult to copy. For example developing a search engine that could compete successfully with Google would be difficult.

3. Cutting costs of products or services

You can use information systems to assist you in lowering your internal or external costs. This will allow you to offer products and services at a lower price than your competitor hence gaining the upper hand. A simple example is how airlines could use information systems strategically to lower costs so that they may offer cheaper rates than their competitors.

4. Create a reliable database

A good database can be used to improve your marketing for your business. With the information collected in the database you can easily spot details such as purchases made by customers, suppliers patterns, price changes e.t.c this information can be used to target a market, assign sales resources, or attract new customers.

Information systems have the power to change your business when utilized, you can affectively save time, cut costs, grow your profit margin and add value to your business. Many businesses operating without a web presence or engage in e commerce will probably find themselves being ousted by their competitors. If you do not implement technology strategies into your business structure you might find yourself losing a lot of money. In this age you need to have a networked presence.

Becoming a succesful entrepreneur

We will start with the most important question; what is an entrepreneur? There are a lot of definitions but one that stuck with me was: “An entrepreneur is the individual who starts a business with an intention of making a profit and takes over the risks of losing all of their resources if the venture fails.”

So I asked myself, how do I become a successful entrepreneur? How do I ensure that my venture does not fail? There is no obvious answer but there are a few things we can look at that will get you on the way to achieving success.

1. Be driven
Find your motivator; it might be in the form of achieving a high profit margin, personal satisfaction, stability or just for the love of it, it doesn't matter. Your motivator should pull you up in tough times.

2. Follow your plan
When you started your business you drew up a business plan, one of the reasons for that was for you to outline where you want to take your business. Planning should be an ongoing process and when done right will serve as a guide to keep you on the right track.

3. Control your cash flow
By now you understand that the livelihood of a business is its cash flow, as long as money is going out, more money has to come in. You need to become wise when handling the income vs expenses list, this is a crucial aspect that will either make or break your business.

4. Value your customers
If we go back to our high school teachings, we will remember that a market exists when there is a buyer and a seller, as an entrepreneur your business cannot exist without the customer. Incorporate your customers in your business dealings, operating hours, payment options, advertising, warranties e.t.c .Have all the relevant knowledge about your target customers.

5. Invest in advertising
The reason I said invest is because the amount of time and money spent in advertising should be paid for by the leads you will receive, the trick is finding what works best for your business. Remember that the main reason for advertising is to get the word out that you have something exciting to offer, a properly run campaign should generate new customers.

6. Educate yourself
There is no such thing as too much education, everyday offers us the opportunity of learning something new. A successful and driven entrepreneur adds new skills to their resume, they read business books & articles, they join business clubs and network, and they attend business seminars and workshops. Choose what you feel comfortable with and arm yourself with knowledge.

Things to do before starting a Small business

South Africa is a beautiful rich country, where opportunities are knocking at every corner. If you have been experiencing certain discomfort at the end of each month, sweaty palms, increased heart rate or the horrible realization that you have spent all your income before payday arrived, then you definitely need a second income!

Today we will look at some of the things you need to do before you start your business.

1.       The first step is to decide that you want to do this! Commit yourself to the idea! Where there is a will, there is a way! You will not succeed until your mind is set right, you cannot entertain negative thoughts, self doubts or listen to the negative voice in your head.

2.       What are you good at? What skills do you have that someone would pay for? Decide on the type of business you want to start. Take your time because doing what you love will make it easier to get motivated during tough times.

3.       After deciding on a business, you need to do extensive research on it, is there a market for your product or service? There is nothing more disappointing than offering something that no one wants to buy or pay for, avoid the pain by doing your homework.

4.       Draft a business plan; this should help you answer questions like: How much capital will I need? Will I need to hire any employees?  Will I need a partner? When will I break even? E.t.c

5.       Think about the finances, how will you pay yourself? How will you fund your business? Are you ready to risk losing your money? It might take time to actually raise the funds you need or pay off the debts you have, either way it’s your decision.

There are many other things to consider before starting, these are just the basics to get you started. Starting a business is not easy, but it can give you a lot of satisfaction and financial freedom when you succeed, the question is: how bad do you want that success. Good luck!