The Business Plan


Dr. Donald E. Mitchell, D.B.A., here, my last two blogs, were the reason why entrepreneurs fail within five years. This blog will deal with one instrument essential in the success of a business enterprise, the business plan. I wrote my doctorate dissertation on this subject, on why entrepreneurs do not create a business plan. Enclosed are the first six pages of the dissertation that I would like to share with you. Thus, it was a draft; however, not the final draft.

Chapter 1: Introduction

Researchers and scholars equate the business plan as a roadmap for entrepreneurs to follow; without it, there are slim to no chances to reach their goals. Nevertheless, most entrepreneurs do not make a business plan, and these same scholars and researchers equate this to one of the reasons new ventures fail.

A well-written business plan will increase the chance of the firm’s survival and have a competitive advantage over one’s competitors in the marketplace. This well-thought-out plan will demonstrate immediate competition, the segmented market’s size, prospective clients, and other demographics. When contemplating starting a business, a carefully thought out business plan is essential to assure the entrepreneur that there is a market for the concept after that of the feasibility study.

Problem Statement

Researchers have found that the two main problem areas in new ventures are marketing and finance that entrepreneurs encounter. These two elements are so intertwined and essential that the incurring of these elements would increase the success of business achievements from the creation or the start of a new venture past the 5-year point (Hisrich, 1992). The problem with finance includes that of obtaining startup capital, that of financing growth, to that of cash flow management, and financial control (Hisrich, 1992). Whereas marketing problems, although separate, they are related to economic issues of the organization. The lack of planning related to financial or marketing aspects brings about a quicker failure rate (Hisrich, 1992).

Thus, this lack of planning can be, defined as laziness from the entrepreneur or the lack of knowledge on how to develop a business plan; why else would one not put down a formal plan and knowing in advance the failure rate is astronomical when such strategies are, not formally put in print? Then there is the concept that entrepreneurs/marketing perception of promotion is limited and little understanding of what marketing is or does for the organization (Hisrich, 1992). McMahon and Homes (1991) argue that sound fiscal management of small businesses is essential to their survival. Studies have shown that the lack of financial management is one of the prime causes of small businesses’ high failure rate. Careless financial management of the small business lacks financial planning and accounting, accounts payable, and the cash flow concentration.

Studies have shown that one of the significant problems of small business failure is the lack of financial planning and management (McMahon & Homes, 1991). Thus, this finding has prompted academia and writers to stress this cause and promote more educational awareness of this fact (McMahon & Homes, 1991). McMahon and Homes (1991) argue that since small business is not as formal as their more prominent corporate colleagues, when it comes to documentation and recordation of business process, if this process changes, the failure rate might also decrease? Thus, with this knowledge of the lack of financial management 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. So, how can entrepreneurs be motivated to change their ways?

The answer lies with more financial and marketing training to entrepreneurs from governmental, academia, 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 (McMahon & Homes, 1991).

Background of the Problem

Haag (2013) argues that some 600,000 new businesses are started each year in the United States, and some 200,000 will make it five years into the future, that is only one third, so why is there a two-thirds failure rate? Haag (2013) suggests the answer to this question is due to the entrepreneurs’ lack of a business plan. So, knowing this, why do so many entrepreneurs still not develop a business plan? Haag (2013) argues that the business plan is a written manuscript created by the entrepreneur that will describe some relevant internal and external events that could happen in this venture’s not too distant future.

This document refers to overtime and assistance to keep the entrepreneur on track and have metrics or 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 (Haag, 2013).  

Purpose Statement

The purpose of this study is to examine why more entrepreneurs do not use business plans in their operations. Since researchers have identified a lack of a written business plan as one of the reasons for business failures (Haag, 2013), this researcher’s objective is to find the central controlling phenomenon of why the entrepreneurs do not use this tool. This research will bring about an understanding and the discovery of why entrepreneurs do not take the time to research their competition and find out who they are, what they are pioneering, and their competitive advantages. How can one expect to defeat the competition in the marketplace without such knowledge of the competition? Thus, such knowledge is the purpose of a business plan that management can plan for various scenarios by an external force that seeks to eliminate them from the marketplace.

 Haag (2013) contends that she had attended a meeting at her local Chamber of Commerce to discuss the importance of developing a business plan and was amazed at how many entrepreneurs did not have a plan of action. The research adds to the literature addressing the necessities of entrepreneurs to develop a working business plan for their business. The study showed entrepreneurs the process of what is in the business plan, how it is structured, and why this written document is so essential for the survival of small businesses. Haag (2013) shares with entrepreneurs that creating a business plan is hard work, time-consuming, and necessary. The success of all companies is crucial to the economy due to small businesses being the most significant employer, and maintaining this economic progression is suitable for all.

Purpose of the Study

The drive or intent of this study is to examine why more entrepreneurs do not use business plans in their operations. Since researchers have identified that one of the reasons for business failures is the lack of a written business plan (Haag, 2013), this researcher’s objective is to find the central controlling phenomenon of why the entrepreneurs do not use this tool. The understanding and discovering why entrepreneurs do not take the time to research their competition and find out who they are, what they are pioneering, and their competitive advantages.

 The paper showed entrepreneurs the process of what is in the business plan, how it is structured, and why this written document is so essential for the survival of small businesses. Haag (2013) shares with entrepreneurs that creating a business plan is hard work, time-consuming, and necessary. The success of all companies is crucial to the economy due to small businesses being the most significant employer, and maintaining this economic progression is suitable for all stakeholders.

Nature of the Study

The type of study employed will be that of qualitative research and analysis. The researcher will go to the field and interview the subjects at their place of business. The focus of the questions will be on whether or not the entrepreneur uses a business plan or not.

The sample will be the entrepreneurs who are under one million dollars in sales revenue per year. The collected data will be examined to see what proportion of entrepreneurs use a business plan in their operation and, for those who do not, their reason on why not. The researcher will use an ethnography concept to understand better different cultural deviations and how each ethnic group reacts to developing a business plan and the reasons if not used, and their reasoning for not using a business plan.

The Significance of the Study

This study examines how the development of a business plan can increase an entrepreneur’s success in business. Thus, planning a business venture; has a common theme, the business plan. Whereas, researchers postulated that for an entrepreneur to be successful, they had to plan to be successful, and this started with the development of a business plan (Haag, 2013). Thus, this plan was a collaboration of research and study of the industry, the economic climate in which they operate, and the understanding of various social interests. Researchers found the lack of a physical business plan was one of the reasons for such a high rate of catastrophe within five years of startup, so why do so many entrepreneurs still refuse to develop a solid business plan (Haag, 2013)?

This study will benefit all stakeholders in the importance of entrepreneurs in developing a business plan. Haag (2013) has argued that some 600,000 new businesses will start each year in the United States and 400,000 businesses will fail within five years, and scholars suggest this is, caused due to the lack of a business plan. For the government, academia, and other NGOs to successful businesses lead to more money circulating due to wages, increasing merchants’ sales, which ripples down to more goods and services consumed by consumers and taxes collected by the government.

Research Questions

The study questions that guided this study were:

Research Question 1: Why does an entrepreneur not make a business plan?

Research Question 2: When deciding not to develop a business plan, what process was, used for planning?

Hypotheses

The following hypothesis was tested:

H01: When using a business plan, the business has a better chance of success.

HA1: When not using a business plan, the business has less success.

Conclusion

If your organization is having problems implementing a business plan and transitioning from a traditional environment to a digital ecosystem, call me, and we will design a transformational strategy for your organization. Enclosed is my calendar and schedule your free consultation. in this matter to see if we can be of service with a solution to your business issue.

Book Time On My Calendar Here

Email: donaldemitchell1@msn.com

Website: www.donaldemitchell.com 

I am interested in the readership commenting on this blog. And response will follow.

About the author:

Dr. Donald E. Mitchell work as a Small Business Consultant specializing in value solutions partnering, management software, digital transformation, digital marketing, e-commerce, website development, and alternative financing.  My primary focus is on small business growth and solutions for growth through sales and digital marketing.

Methodology
The author’s beliefs are personal and reflect his worldview, experience, and academic study and acumen, and research in the issues and practices mentioned in entrepreneurship and business management.`

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