Entrepreneurship in the 21st Century-the Business Plan


Published: June 17, 2020

Researchers and scholars equate the business plan as a road map for entrepreneurs to follow. Without the business plan, there is a slim to none chance of the entrepreneur obtaining success and reaching their goals. Nevertheless, most entrepreneurs do not make a business plan, and these same researchers and scholars associate this with the failure of most ventures and the cause of them going out of business. A well-written business plan will increase the chances of a firm’s survival and have a competitive advantage over one’s competitors in the marketplace. This well thought out plan will demonstrate the well thought out plan and the competitive advantage of the entrepreneur of knowing who their competitors are.

The information in a business plan is vital to keep one from going up again a Goliath in a head-to-head competition, which would be dire for the new entrepreneur. The proper strategy for the entrepreneur is to develop a niche that is to small for the Goliath but large enough for the entrepreneurs to be profitable. So when one is contemplating going into business, a well thought out business plan is essential to ensure the entrepreneur there is a market for the product or service that one brings to the marketplace. If the entrepreneur does not do these two practices, found that they will see themselves doing nothing more than burning money, and to their demise, failure.

Thus the reduction of the failure rate of new startups would increase the economy and the stability of jobs, which feeds back into the communities with additional that lend to other businesses being viable and profitable and to their sustainability.

Background of the Problem

Anett Haag 2013 argues that some 600,000 new businesses are started each year in the United States, and some 200,000 businesses will make it five years into the future, that is only one third, so why is there a two-third failure rate? Annett Haag suggests that the answer to this question is due to the lack of a business plan by entrepreneurs. So, knowing this, why do so many entrepreneurs still not develop a business plan? Haag in 2013 argues that the business plan is a written manuscript that is generated by the entrepreneur that will describe some relevant internal and external events that could happen in the not too distant future of this venture. This document is referring to overtime and assistance to keep the entrepreneur on track and have metrics of measurables that the entrepreneur can view and revamp when the planned business plan goes astray.

This plan will deal with not only short-term but long-term projects as well. Thus, this roadmap will let the entrepreneur know where they are now and where they are going and show the best route to get there. So, if one does not know where they are going, how they will know when they get there?   

Problem Statement

Researchers have found the two main problems areas in new ventures are marketing and finance that entrepreneurs encounter. These two elements are so intertwined and essential that the inclusion of these two elements would increase the success of business achievements from the start of a new venture past the 5-year point. The problem with finance includes that of obtaining startup capital, financial growth, cash flow management, and economic control. Whereas, marketing problems, although separate, are related to that of the financial issues of the organization. The lack of planning is relating to commercial or marketing aspects that bring about a quicker failure rate.

This lack of planning can be defined as laziness by the entrepreneur. Or the lack of knowledge on how to develop a business plan. Why else would one not put down a formal plan knowing in advance that the failure rate is astronomical when such programs formally put in print? Then there is the concept that entrepreneurs’ perception of marketing is limited and little understanding of what marketing is or does for the organization. Researchers argue that sound fiscal management of the small business is essential for survival. Studies have shown that the lack of financial management is one of the prime causes of the high failure rate of small companies. Careless financial management of the small business is due to the lack of financial planning and accounting, examining accounts payable, and the concentration of cash flow.

Academics have shown that one of the significant problems of small business failure is the lack of financial planning and management. Thus, this finding has prompted scholars and writers to stress this cause and begin to promote more educational awareness. Since small businesses are not as formal as their more prominent corporate colleagues, it comes down to documentation and that of recordation of the business processes. If this process changes, does the failure rate also decrease? Thus, with the knowledge of the lack of financial and marketing management that could extend the life of small businesses, entrepreneurs should be more cognizant of how to survive the startup, operational, and growth stages of entrepreneurship. Thus, so, the question is, how can entrepreneurs be motivated to change their ways? For the better and the survival of their organizations?

The answer lies with more financial and marketing training to entrepreneurs from governmental, academic, and other non-government organizations (NGOs) that focus on these two elements in the preparation of the business plan and the execution of the operational process in the venture. The results of the organizations above working to supply these two elements to the business plan cannot only extend the life of entrepreneurs but can add to the knowledge of entrepreneurship. The more scholars and others can learn about why new business ventures fail, the more resources and education applied to this area of expertise.

Entrepreneurial Financing

As a small business consultant, it is my objective to help reduce the failure rate of entrepreneurs. When Annett Haag did her work on how to write a successful business plan and stated the number of failures in one year, I was taken aback.  In short, two-thirds of the 600,000 new businesses would not make it, that is 400,000 new businesses would fail due to not preparing a business plan. Now that is something we can focus on. As a reason why and work on to reduce in time the number of entrepreneurs that fail.

As mentioned above, under the problem statement, the two main problems area in new ventures are marketing and finance. In this segment, we will deal with entrepreneurial financing in how this affects the well-being and growth of the new venture. The four areas of financial concern with new undertakings are (1) startup capital, (2) financial growth (3) cash flow management, and (4) financial control.

Startup Capital

Startup capital is the money that entrepreneurs need to get their new business started. Thus, money, used for office space, permits, licenses, and marketing that is required to get the company up and running. Startup capital is also denoted as seed capital. The business plan lays out the financing to the venture; for the most part, this startup capital should come from the entrepreneur(s). Consequently, this financing comes from savings and other financial resources the entrepreneur has at their disposal, such as any pensions and additional funds from employers.

Entrepreneurship should be a planned process, not something that one day one wakes up too to start that day. Furthermore, entrepreneurship is a risky undertaking, and the entrepreneur could lose all their money. Thus, without a business plan, that is the likelihood of what will happen. With that said, why would a stranger or anyone else want to invest in an enterprise the entrepreneur does not have enough faith in the venture to finance their own business?

Now let us look at the other side of the scenario. You, the entrepreneur have saved, you have a business plan (unlikely to get funding without one) and need more capital than you have or could possibly save, then what? Traditionally banks are the customary place where entrepreneurs go to get funding for their enterprise. Moreover, this process requires a downpayment from the entrepreneur. And, depending on the loan program, collateral may be needed for the backing of the loan that it will be paid back.

Venture Capitalist is another source of funding for entrepreneurs; this can be one individual or a group of investors. Generally, the entrepreneur hands over a share of the company for financing. Thus, an agreement is drawn up to outline various situations, such as Initial Public Offerings (IPO) or being bought out by a larger organization, which defines how the investment group will reap its rewards from the funding process.

Then you have Angel Investors who are venture capitalists, but they have a more hands-on approach, due to they are successful entrepreneurs and putting up their profits in the form of funding for the enterprise.

The Marketing Plan          

The other part of the due process of the business plan is the marketing plan. A marketing plan is a document that illustrates how the entrepreneur plans to advertise and attract prospects to its business and close as customers. For any business to stay solvent, they need sales. Sales are the revenue-producing factor that pays the bills, and without it, the company will soon go out of business.

Marketing Research should be done to support the sales price of said product or service and other new market entries. Targeted marketing into demographic and geographic areas is warranted. The marketing is based on the companies overall strategy and shows how it intends to do what it plans to do in the marketplace. There must be some frame of the platform showing how the entrepreneur will use either traditional or digital promotional campaigns.

Thus, in the last twenty years, since the incursion of the Millenium mainstream (the year 2000), the marketing phenomenon has moved away from traditional to digital marketing concepts, such as inbound marketing. Nevertheless, this researcher has discovered some 163 forms of marketing processes used today. However, the entrepreneur must find what better works for them and their enterprise, due to no two enterprise work the same marketing methodologies and come out with the same results.

Lastly, there must be some form of metrics showing how the marketing process is going, is it accomplishing the goals of the entrepreneur, or not. If not, there should be some shift in the marketing plan to correct the misalignment and get back on track for the marketing strategy proposed. Constant monitoring of the marketing plan and making changes is not a one-time solution but is an ongoing process.    

Conclusion

Entrepreneurship in the 21st century is different from that in the 20th century and leading up to the year 2000. One of the ways that have changed the way that we do business today is the internet. Thus, the lowering of the price of computers and insurgents of the internet and having a website, entrepreneurs can now have a global company. With just these three items, entrepreneurs have more of a level playing field and can now be on pair as the larger counterparts. Plus, the addition of other digital platforms such as Software-as-a-Service (SaaS) that can strengthen small to medium-size enterprises ( SMSE) performs as if they were larger organizations.