Tuesday, February 28, 2006


Does business have anything to do with experience?

(An informal Discussion Paper)

Could entrepreneurs be measured only by their ability to generate wealth with an uncompromising stand for business principles? Or better still, can business consultants quantify their achievements without feeling that, despite their years of experience, they can only measure the differences made to societies especially those that are impoverished. It does appear that in both fields, there is a marked division of labour and variations in the way both an entrepreneur and a business consultant operate in their respective provinces. One is deemed a practitioner and the other, a specialist or expert, yet they perform one basic function; they sell products and services to consumers based on demands. They both have to account for what they produce and sell too, hence the delicate balance between the profit motive and (consumer) social responsibility.

Basically, entrepreneurs are people whose ideas are often considered radical, unconventional and contradictory to the norms of society (meaning groups of experts who sometimes claim legitimacy to the rules of business engagement). Business consultants are credited with experience in a particular type of enterprise or with considerable expertise in the principles and practices of a range of enterprise sectors.

Oddly, there is a direct relationship between a business owner and business consultant on the basis of shared expectations and outcomes. One expects to benefit from reputable technical support, while the other expects that advice and support will eventually result in tangible benefits for business start-ups. Are these expectations realistic or are they troubled by the way in which potential entrepreneurs choose to pursue their business ideals? This informal discussion paper will examine the challenges of starting a business from scratch and the pitfalls that should be avoided, if the original idea of setting up a productive entity is to be fruitful, let alone rewarding.

Starting a business is a painful and frustrating process, but for the most part, there are tangible rewards, if you stick to the task at hand. What about your present job in the public service, is there scope for growth? What about the opportunities in your current private sector employment? Do you have a real chance of sustaining yourself in relation to career development and fulfilling your dreams of financial independence? Starting a business despite your present occupation, has nothing to do with being overly ambitious or being an occupational `show-off’. It is an effective way of harnessing your honed skills and placing them to work in a uniquely different way that your are generally accustomed.

Nevertheless, besides cash, you need ingredients of knowledge, experience, skills, contacts and a good dose of common sense. Other essential qualities are self-confidence and (calculated) risk taking techniques, along with a desire to self-manage and manage others in a business setting. How many of us who manage departments, units or sections of a public or private sector agency, recognise, that in effect, we are involved in aspects of business management and risk taking? It is just a question of adapting and or transplanting the same experience into a more self-driven business mould and this is where the MIGHTY challenge begins.

How can you really start a business? Should you begin by reading a business plan or manual? Should you read the latest book on marketing, financial management, corporate planning, risk assessment or the latest audit of a major corporation in town? Should you seek out a business management guru? Should you ignore all of these leads and just get on with it? The answers to these searching questions are both complex and straightforward. No business can be established without due care given to advice, expertise and proper decision-making. The fruits of one’s labour in business should not be taken for granted – it is a huge sacrifice and for many at the outset, it can be daunting, if not awesome, yet it is entirely possible with the right mindset and excellent support.

How do you begin the business race from the starting block when there is nothing – no competitors by your side, no sound of a whistle and no murmur from spectators? There is a strange feeling around you; you are treading into the unknown, you are chartering into `choppy’ waters and there is no real guide to help you. At the beginning of this process, believe it or not, your greatest believer and supporter is you – you are your greatest fan and this is not a selfish before or after thought, it is real as it can get.

You should begin by jotting down your business idea – no matter how unclear or unsure it may appear - on paper, stating what you aim to do, how you are going to do it, where the investment will come from, how many people would be involved, where the business will be located and so on. Prepare an exhaustive `hit’ list of what you need and what you want. This might be a bit difficult bearing in mind that wants are classified as desires and needs as necessities, but experience teaches that at the beginning of your business, you will have to convert customers' wants into real needs by adapting the product or service to suit their requirements. The mere thought of that side to the business, presents another daring challenge.

Steps to Climb

Consequently, there are several steps to take before actual business start-up; you might call it the process syndrome. It is advisable to prepare a list of Dos and Don’ts and you may contact people you know in your line of business. Consulting with formal business plans or outlines is also invaluable. You might think of contacting your local enterprise agency, providing that it has adequate resources in terms of personnel, technical and related forms of support. In the modern world of business, such an agency should possess expertise in cultural, economic, social, technological and allied resources based on the sector of business you are aspiring to own and manage. There is evidence to suggest however, that there are severe limitations in the operations of enterprise. There are drawbacks such as scare resources, including their limited capacity to provide sector-based enterprise support with a culturally sensitive approach. In your list of Dos, make sure you include the following: -

(a) Time of official business launch or start-up
(b) Number of products and services on offer
(c) Pricing strategy for your product(s)
(d) Type of staff to be recruited
(e) Channels of advertising and promotion to be used
(f) Type of quality control procedures
(g) Knowledge of your sector market (known as micro environment)
(h) Knowledge of the economy (better known as macro environment)
(i) Number of market researches you will carry out
(j) Actual start up funds required.

The above is by no means exhausted, but it is important to consider as many areas as possible. Equally, you also need to make a list of Don’ts for formal guidance - it is not necessarily a golden rule, but doing it is very satisfying. Some of the vital Don’ts are: -

(a) Don’t underestimate the timeframe for your product launch
(b) Never undervalue your initial products
(c) Don’t deal with customers randomly
(d) Never undervalue the cost of start-up
(e) Experience is not always wisdom in running a business
(f) Do not ignore criticisms regarding your business idea
(g) Never feel that businesses outside your sector are not your competitors

Once you have completed both lists and you have decided to start the business, you should embark on writing a business plan. This is also a challenging undertaking because contrary to most business advisers, while the main principles of a business plan remain the same throughout, every sector demands a unique approach towards defining it and ensuring that the contents are clear, with a rich presentational style to give it a professional outlook. Consultants in banking and other financial professions in particular, tend to argue against the volume and shape of business plans. The tendency occurs when a completely new business idea is sprung and the expertise might not be there initially, or advisers are too proud to admit that they don’t have a clue about such an idea or product-service being proposed. Quite honestly, the number of pages in a business plan will not make a real difference since the important point to remember, is that it is aimed at persuading and convincing financiers to invest in the business, while providing a platform for the business to take off.

Principally however, a business plan is a marketing and sales document, as well as a strategic tool and in effect, it also defines whether or not the business idea could be turned into a tangle set of products and services capable of competing reasonably well or highly successful in the market place. It is a tool for measuring the growth periods of the actual business – short, medium and long term. The plan allows for the owner and investor(s) to monitor routinely, the progress of the business in terms of its own lifecycle. In short, a business plan is like a paddle or rudder to a boat. Without it, the business can falter badly and become insolvent by losing its market share because of a lack of (formal) direction and strategic focus.

Modern Business Plans

Yet it is not always possible to get it right, but it is very important that any new business owner try as much as possible to get the facts right. It might be useful to test your business ideas with someone in the particular sector. On the one hand, a firm that is based on the provision of services is essentially offering what is commonly known as `a set of intangibles’ – meaning, the owner has to sell, apart from the features, the benefits of the service(s) to customers. On the other hand, selling a product though not altogether, difficult, is a bit simpler. Products are tangible consumer items because they can be seen by buyers, but their long-term sales volume and financial success hinges again, on the method used to communicate features, including benefits such as usage and guarantees/warrantees, to a range of customers. That is precisely why in formulating business plans, potential entrepreneurs must take into consideration the type of products or services they intend to offer, along with the composition of the business organisation in general. There are several business plans that are produced frequently to benefit different start-up companies, but for the purposes of this guide, we will examine three known types: -

1. The Simple Business Plan, this plan is ideal for sole traders trading in a one product business; for example, a small retail shop or a micro sales firm selling stationery etc. It contains basic information regarding the would-be owner’s personal details, professional experience, qualifications and general expertise, along with relevant marketing and financial data. This type of plan also consists of a statement setting out the reason for wanting to start a business.

2. The Multiple Business Plan, this plan is relevant to partnership type firms such as legal firms, education and training agencies, public relations organisations and welfare support schemes, especially if they involve two or more people. The greater the personnel, the more complex legal issues are, compared with those of a sole trader, although sole traders are likely to suffer greater liabilities if their business investments are tied to personal assets or vice versa. This plan does include too, a wider range of information and data on the owner, partners and other details similar to the Simple Business Plan. The difference here is that this plan has to detail the type of business, along with sectors and possible segments, plus other information on marketing, customers, finance, quality control and possible contracting partnerships.

3. The Complex Business Plan covers a range or multiple business activities; for example, in the case of a manufacturing or a production firm. Issues such as staff recruitment, technology equipment, materials, investment portfolios including equities, marketing, procurement etc, all have a considerable impact on the process of business start-up. This type of business plan must have various managerial, technical and operational features, with controls to measure estimates, actual and projected income and expenditure schedules.

Besides experience, qualifications and the ability to deliver, the overall success of any business plan and its actual implementation, depends largely on the clarity of ideas (methodical and systematic approach is advisable), quality of expert advice received, the scale of market research undertaken and the sustainable level of start-up investment obtained. If these necessities are in place, then likelihood of hiccups occurring at the beginning phase of your business could be reduced considerably.

The literature on business planning is filled with prescriptive menus and suggestions as to how to make this process work effectively, but what is often unclear, are the angles to take when crafting business plans for specific sectors. It should be stressed that if you are concerned with sustainable business growth, you need to review your business plan at least every two years, though of course, this may depend on the type and nature of the business. The majority of successful firms have strong leadership, managerial competence, quality staff, loyal customers and a steady stream of contracts equal clients – all of which add to enrich your portfolio as a successful entrepreneur. A final piece of advice to those interested in starting a business and desirous of making it work, allocate quality time to read the business columns of newspapers – broadsheets and tabloids - business magazines, as well as biographies of successful business people. Develop an eternal commitment to developing business ideas and make it a habit of documenting them; you will soon realise that they can be very useful.

© Christopher A. Johnson, February 2006

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