competencies in entrepreneurial development and small business management. It also provides you the desired knowledge, skills, and competencies that. Small Business Management Entrepreneurship and Beyond FIFTH EDITION TIMOTHY S. HATTEN Mesa State College Australia • Brazil • Japan • Korea. Entrepreneurship and Small Business Management Business Ethics. [Pdf] Available at: pdf>.
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This article reviews the case for business schools becoming more seriously involved in teaching and research in the field of entrepreneurship. Title: Entrepreneurship and small business: start-up, growth and maturity /. Paul Burns. Small business—Case studies. Managing change and uncertainty. 5. Experiences in Entrepreneurship ancl small Business fulanagement is . entrepreneurship and small business management are the next best thing to being.
It is better entrepreneurs begin the process of putting together their business plans by writing a draft of the executive summary, then putting together the full plan, and finally revising the executive summary when everything else has been completed. High certainty with When the determinants of the underlying respect to technology and stability of mass industrial structure are stable, the industry consumer markets dictated that it was known structure itself would not be expected to what to produce, how it should be produced, change. This section should. For these countries, three of which are countries across various phases of economic Scandinavia, the rate of business ownership is development see Reynolds et al. These changes occur in the people's interpretation of facts and concepts. Different entrepreneurial competencies are identified by different authors and researchers.
Australia, Greece, Italy, Portugal, countries in the period Audretsch and New Zealand, the business ownership rate and Thurik, ; Audretsch et al. Note that three of these Van Stel for a detailed documentation of countries are Mediterranean. Table I shows that there the number of business owners in the 23 has been considerable disparity among OECD countries grew from about 29 million in to countries in business ownership rates both about 45 million in Business owners include unincorporated and incorporated self-employed, and exclude unpaid family workers.
Business owners in agriculture, hunting, forestry and fishing are excluded. Germany is West Germany for and Source: Clearly, the USA is the country with confined to manufacturing industries. Brock the highest number of business owners: They owners in the 23 countries in are situated provide four more reasons why this shift has within the USA, about the same percentage as occurred: Countries that increased in business 1 the increase in labour supply leading to ownership rate by more than lower real wages and coinciding with an 2.
There are four countries suffering a influence of two trends of industrial decline in the business ownership rate in both restructuring: Denmark, France, Luxembourg, and vertical disintegration the breaking-up of large Norway. Although Japan only had a decline in plants and businesses and that of the formation business ownership in the second period of new business communities. These , this decline is particularly intermediate forms of market coordination noteworthy, since its share in total business flourish owing to declining costs of transaction.
Audretsch and Thurik point to the necessary shift towards the Causes of the change knowledge-based economy being the driving force behind the move from large to smaller Acs and Audretsch and Carlsson businesses. In their view globalization and provide evidence concerning manufacturing technological advances are the major industries in countries in varying stages of determinants of this challenge of the Western economic development. Carlsson countries see Loveman and Sengenberger, advances two explanations for the shift toward ; Acs et al.
The first deals with fundamental further documentation of industrial changes changes in the world economy from the s and their causes. These changes relate to the intensification of global competition, the increase in the degree of uncertainty and the growth in market fragmentation. The second Consequences of the change explanation deals with changes in the character The causes of this shift are one thing.
Its of technological progress. Carlsson shows that consequences cover a different area of research. He in a shift from large to smaller firms. The distinguishes four consequences of the pervasiveness of changes in the world economy, increased importance of small firms: Also 3 industry dynamics; and Piore and Sable argue that the instability 4 job generation. Baumol amply self-employment, particularly in countries with deals with the role of entrepreneurial activities less generous social security schemes.
The role of Audretsch et al. In Reynolds of the relation between the role of small firms et al. Despite their entirely different about the shift from the managed to the approaches both studies show a positive entrepreneurial economy see also Audretsch correlation between entrepreneurship and and Thurik One four mentioned by Acs For instance, an has to be cautious about too simplistic views of increase in the share of small firms may lead, the relation between entrepreneurship in the ceteris paribus, to a lower orientation towards sense of business start-ups and subsequent exports, a lower propensity to export economic growth: The no employment growth is generated, let alone literature of the consequences of smallness is economic growth Van Stel and Storey, They show that a rise in The growth penalty the share of smallness in a certain economy and a high share of smallness in a certain industry, In short, a series of studies has identified that respectively, generate additional output in the the industry structure is generally shifting entire economy and industry, respectively.
Schmitz provides a theoretical model However, the extent and timing of this shift are with a similar result. Audretsch and Thurik anything but identical across countries. Rather, show that an increase in the rate of the shift in industry structures has been entrepreneurship number of business owners heterogeneous and apparently shaped by per labour force led to lower levels of country-specific factors Carree et al.
There is assumed to be a two-way underlying factors, by shifting to a less causation between changes in the level of centralized industry structure than has been the entrepreneurship and those in the level of case in other countries Audretsch et al. They use a database linking structure? It is beyond the scope of this paper to industry structure to growth rates for a panel of define or even discuss this Audretsch et al.
For an intimation we have to refer to test the hypothesis that deviations from the the field of industrial organization. They find that deviations from the identifying the determinants of industry optimal industry structure, measured in terms structure. Blair stated that technology is of the relative importance of small firms, have the most important determinant of industry had an adverse effect on economic growth rates.
Dosi , p. Conclusion Each production activity is characterized by a particular distribution of firms. Government policy in the managed economy was largely about control. High certainty with When the determinants of the underlying respect to technology and stability of mass industrial structure are stable, the industry consumer markets dictated that it was known structure itself would not be expected to what to produce, how it should be produced, change.
However, a change in the underlying and who would produce it.
This led to a determinants would be expected to result in a predominance of scale economies. The role of change in the optimal industry structure. Under the managed economy the policy the first two-thirds of the previous century as a debate aimed at competition policies result of changes in the underlying technology antitrust , regulation and public ownership of along with other factors.
In the entrepreneurial economy these While the evidence suggests that the constraining policies have become increasingly restructuring paths of industry vary irrelevant. The central role of government considerably across countries, virtually nothing policy in the entrepreneurial economy is is known about the consequences of lagging enabling in nature.
The focus is to foster the behind in this process. Do countries with an production and commercialisation of industry structure that deviates considerably knowledge. Rather than focus on limiting the from the optimal industry structure forfeit freedom of firms to contract through antitrust, potential economic growth in comparison with regulation and public ownership, government countries deviating less from the optimal policy in the entrepreneurial economy targets industry structure?
This question is crucial to education, increasing the skills and human policy makers, because, if the opportunity cost, capital of workers, facilitating the mobility of measured in terms of forgone growth, of a slow workers and their ability to start new firms, adjustment towards the optimal industry lowering administrative burdens for small structure is low, the consequences of not business and promoting knowledge transfer to engaging in a rapid adjustment process are innovative new enterprises.
This high unemployment, Acs, Z. Entrepreneurship is seen democracy in the 21st century: Furthermore, Economics, Vol. From the managed to the can help resolve social issues. Audretsch, D. M Eds b , Entrepreneurship: Determinants debate to focus more and more on the role of and Policies in the New Economy, Kluwer Academic entrepreneurship for economic growth. Baumol, W.
A Policy at War Reynolds et al. Brock, W. Carree, M. Economics, Vol. Jr , The Visible Hand: Press, Cambridge, MA. Reynolds, P. Jr , Scale and Scope: The Dynamics of Autio, E. First Annual Vol. Development, Oxford University Press, Oxford. Second Schumpeter, J.
Stevenson, H. Fourth Annual Boston, MA. Eds , Global Entrepreneurship Monitor Sixth Report, submitted to the Enterprise College, pp. European Commission , Green Paper: Wennekers, A. Business Economics, Vol. Galbraith, J. Kirchhoff, B. Loveman, G. European Communities, Luxembourg. Francisco J. Entrepreneurial intentions in diverse development contexts: International Entrepreneurship and Management Journal 11, Ferreira, Cristina I. Entrepreneur location decisions across industries.
International Entrepreneurship and Management Journal. Chrisman, Alfredo De Massis. The impact of small- and medium-sized family firms on economic growth. Small Business Economics. An exploratory study of entrepreneurship barriers: New firm registration and the business cycle. Michael Sheriff, Moreno Muffatto. The present state of entrepreneurship ecosystems in selected countries in Africa.
Sizhong Sun, Sajid Anwar. Electricity consumption, industrial production, and entrepreneurship in Singapore. Energy Policy 77, Teresa de Noronha, Eric Vaz. Framing urban habitats: The small and medium towns in the peripheries. Habitat International 45, Journal of Developmental Entrepreneurship 19, Carl Marnewick. Information and communications technology adoption amongst township micro and small business: The case of Soweto.
SA Journal of Information Management Stephan F. Gohmann, Jose M. Proprietorship and unemployment in the United States. Journal of Business Venturing 29, Max Hogeforster. Procedia - Social and Behavioral Sciences , Freie Berufe und Unternehmertum: Influence of intellectual property, foreign investment, and technological adoption on technology entrepreneurship.
Journal of Business Research 66, Yagoub Ali Gangi, Elfadil Timan. An empirical investigation of entrepreneurial environment in Sudan. Entrepreneurship at the Periphery: Entrepreneurship Theory and Practice Journal of Small Business Management Miira Niska, Kari Mikko Vesala. SME policy implementation as a relational challenge. Muhammad Rahatullah Khan. Mapping entrepreneurship ecosystem of Saudi Arabia.
Patrick M. Kreiser, Louis D. Marino, Donald F. Kuratko, K. Mark Weaver. Disaggregating entrepreneurial orientation: Small Business Economics 40, Entrepreneurial opportunities in peripheral versus core regions in Chile.
Management theories linking individual and organizational level analysis in entrepreneurship research. International Entrepreneurship and Management Journal 8, Panagiotis Piperopoulos. Could higher education programmes, culture and structure stifle the entrepreneurial intentions of students?. Journal of Small Business and Enterprise Development Influence of institutional environment on entrepreneurial intention: Emilia Herman.
Procedia Economics and Finance 3, Carlos A. Entrepreneurship research in service industries: International Entrepreneurship and Management Journal 7, Jonathan Deacon, Jacqueline Harris. Reflective Practice 12, Jen Nelles, Tim Vorley. Entrepreneurial Architecture: A Blueprint for Entrepreneurial Universities. Virginie Vial. Micro-entrepreneurship in a hostile environment: Bulletin of Indonesian Economic Studies 47, Relationship between individualist—collectivist culture and entrepreneurial activity: Small Business Economics 37, Just consider greetings!
Japanese greet each other with a bow bend over , the lower the bow the more respectful the greeting. They don't shake hands normally, but in business circles, they will live with nations. Americans normally can combine a bow and a handshake when meeting Japanese, the bow coming first, shaking hands lightly, not firmly. Many Chinese prefer not to even shake hands and would rather give a moderate bow.
How does that compare to our tradition of a strong handshake? Our behavior of receiving and forward feedback is extremely influenced by our culture.
What do you feel if someone gives feedback on your weak side? What is your response when you see individuals doing wrong regardless of your personal interest you have with the individual?
Men are often motivated by the desire to control their own destinies to make things happen. This drive often stems from disagreements with their bosses or a feeling that they can run things better. In the filed of their ventures, men more often are recognized specialists in their fields or have attained competence in a variety of business skills. In addition, their experience is often in manufacturing finance or technical areas. Women tend to be more motivated by independence and achievement arising from job frustration in not being.
Women often leave a previous occupation with only a high level of job frustration and enthusiasm for the new venture rather than experience making the transition more difficult.
Most women usually have administrative experience which is limited to the middle- management level usually in more service related areas such as education secretarial work, or retail sales. Women are more likely to start a business in a service related area-retail public relations educational services where men are more likely to enter manufacturing construction, or high- tech fields.
The result is often smaller female-owned businesses with lower net earnings. There are certain personality types, which can lead even the brightest entrepreneurs with the best ideas into bankrupting. An entrepreneur with an excess of non-entrepreneurial characteristics may need to modify it in order to have a higher probability in successfully launching a new venture.
Eight of these personality types are profiled as follows. Simplicity sues - is an entrepreneurial type who always thinks everything a lot simpler than it is to create a successful business through one or more easy solutions. This entrepreneur can make even the most impossible deal seem possible.
Shotgun some - is an entrepreneurial type who quickly identifies new promising business opportunity but rarely he ever follow through on the opportunity to create a successful new venture. Prima Donna Paul-is an entrepreneurial type who is so in love with his own idea that feels everyone is out to take his ideas and take advantage of him while the true entrepreneur seeks out feedback from other actively.
Ralph the Rookie - is an entrepreneurial type who is well grounded in theory but lacks real - world business. Yet successful entrepreneurs are opportunity and goal oriented. Meticulous Mary - is perfectionist entrepreneurial type who is used to having things under control that he or she cannot manage during a catastrophe and cannot handle periods of ambiguity and chaos.
Underdog Ed- is an entrepreneurial type who is not comfortable with actually transforming the invention into tangible business success. Hidden Agenda Harry - is one who does not have the right motives and objectives for developing and expediting a new enterprise. Inventor Irving- is one who is more concerned about the invention itself rather than creating and expediting a business. B All these non - entrepreneurial characteristics can be found in anyone but can be modified into entrepreneurial characteristics, as the entrepreneurial qualities are more of learned or acquired.
James A. Lowery Business planning tends to get treated as an academic exercise by many writers and consultants. Entrepreneurs can enhance their chance of success by taking time to write a business plan. The process of thinking about your business venture and then articulating it on paper will assist you in thinking through how you are going to accomplish your goal.
There are many successful entrepreneurs who will tell you their business plan was instrumental in keeping them focused on their objectives. Entrepreneurs are not the only business people who write and use business plans. Many large corporations engage in planning. The anatomy of their plans resembles in many aspects the basic plan. What is a business plan? As basic as this question may seem, it is the most appropriate place to begin the planning process. Having the right view of the business plan will help you develop the kind of plan that will do you and your business the most good.
All kinds of definitions are thrown around about what a business plan is. The ''road map'' metaphor used by James Lowry is appropriate one. Others take account of tactics and strategy.
In this chapter we see three definitions of a business plan, partly for the sake of contrast. Both are accurate. Definition 1: A business plan is a document that convincingly demonstrates that your business can sell enough of its product or service to make a satisfactory profit and be attractive to potential backers.
Definition 3: A business plan is a selling document. It sells your business and its executives to potential backers of your business, from bankers to investors to partners to employees. A business plan should be a selling document. It should sell the business to stake holders. The business plan describes the direction the company is taking, what its goals are, where it wants to be and how it is going to get there. Be aware that a business is not a document that you sit down and write over a weekend.
Invariably, it is the result of many weeks and months of research and evaluation. A business runs without a plan is reactive instead of proactive. In today's changing world, a businessperson must plan in order to succeed. Without a plan, it is difficult to know when additional employees, materials, or machinery will be required to support growth, and when products or services will be ready for release to the market. In short, the business plan is the entrepreneur's best insurance against launching a business destined to fail or mismanaging a potentially successful company.
Many entrepreneurs agonize about writing a business plan because they find it so difficult to get started. As you go through the start-up process of evaluating ideas, considering prospective employees, and calculating cash flow needs, you should take various points that raised in this section. The business plan allows the entrepreneurs to exploit the opportunities that arise in the life of a business. A written business plan becomes entrepreneur's business representative, much as a sales person or executive serves as its representative during sales and conference presentations and meeting.
Why write a business plan? Every entrepreneur has a business plan. The problem is, a plan that is in your head is a lot different from one that is written down. It is less precise. It is more fluid. It is unknown to others working with you.
If you talk to entrepreneurs who have gone through the process of writing a complete business plan, you invariably learn that it was one of the most difficult tasks they ever accomplished. This is understandable, when you stop to think about it. Few of us really enjoy exerting the discipline required to turn into writing something as demanding and complex as the workings of a business. A plan is a reflection of its creator.
It should demonstrate that the entrepreneur has thought seriously about the venture and what will make it succeed. Preparing a solid plan demonstrates that the entrepreneur has taken the time to commit the idea to paper. Building a plan also forces the entrepreneur to consider both the positive and the negative aspects of the business.
A detailed and thoughtfully developed business plan makes a positive first impression on those who read it. In most cases, potential lenders and investors read a business plan before they ever meet with the entrepreneur behind it. Sophisticated investors will not take the time to meet with an entrepreneur whose business plan fails to reflect a serious investment of time and energy.
They know that an entrepreneur who lacks the discipline to develop a good business plan likely lacks the discipline to run a business. An entrepreneur cannot allow others to prepare the business plan for him or her because outsiders cannot understand the business nor envisioned the proposed company as well the entrepreneur can. The entrepreneur is the driving force behind the business idea and is the one who can best convey the vision and the enthusiasm he has for transforming that idea into a successful business.
Also, because the entrepreneur will make the presentation to potential lenders and investors, he must understand every detail of the business plan.
Otherwise, an entrepreneur cannot present it convincingly, and in most cases the financial institution or investors will reject it. But it is wise to seek the advice and assistance of outside professionals. There are many extremely important reasons for writing a business plan. Obtaining bank financing: For most banks, it is usually enough that an applicant provides past and current financial statements to get a formal hearing of a loan.
Because more businesses are seeking bank financing than banks have money available, only those businesses that make the best case will receive funds. A business plan helps get you apart from the crowd. Companies that submit plans immeasurably improve their chances of getting the funds they seek. Seeking investment funds: Venture capitalists and others investors require a business plan from any company that wants to be taken seriously for funding.
It is the first thing most ask for, much as a personnel manger asks job applicants for a resume investors use business plans as a screening device, looking to be turned on to a business with a significant growth potential when something catches their eyes, they read more carefully and, not they are still intrigued, they will come back the executives for further discussion. Arranging strategic alliances. Strategic alliances are arrangements between large and small companies to carryout joint research, marketing, and other activities.
They have become more common in the last few years. For small companies, arranging a strategic alliance with a large company can mean gaining access to important financial, distribution and other resources.
Obtaining large contracts: Smaller companies seeking to obtain a large chunk of business from a major corporation can encounter a common obstacle. It comes when the corporate representative says something like: Attracting key employees: When a new or early-stage company goes to hire top managers, it faces a difficulty unlike large companies. A prospective manager your company wants to hire may be considering leaving a secure job with a larger business and wondering how long your company is going to be around.
If he or she gets too insecure, you may not convince that persons to join your company. In the case of recruiting, it can also save you much valuable time explaining all your plans and answering the many questions a prospective manger is likely to ask.
That is, a business plan can save a lot of conversation, besides instilling the necessary confidence to snare that hot shots. Completing mergers and acquisitions: Whether you want to sell your company or acquire another one, a business plan can go a long way toward helping you stand out from the crowd. When you go to sell your company, potential buyers who are looking at many companies will scrutinize you.
Similarly, not you are doing the acquiring; you will be looking at many companies before you decide to plunge ahead. Should you be in competition to acquire a business, your business plan can once again inspire the confidence essential to completing the deal.
Motivating your management team: Other benefits are derived from a business plan for both the entrepreneur and the financial sources that read it and evaluate the venture. Specifically for the entrepreneur, the following benefits are gained: The financial sources that read the plan derive the following benefits from the business plan: Each business plan is unique and must be tailor made because each business is unique.
So the plans are not cast in stone: Entrepreneurs may want to make alterations to suit the specifics of their business. The elements of a business plan may be standard, but how entrepreneurs tell their story should be unique and reflect their personal excitement about the new venture. A business plan typically ranges from 25 to 55 pages in length. Shorter plans typically are too sketchy to be of any value and those much longer than this run the risk of never getting used or read.
However, entrepreneurs must recognize that, like every business venture, very. Cover page: The purpose of a cover is to tell the reader bankers, investor, or other stakeholder what the document is about.
Fonts used should be easily read, and color contrasts should be pleasant to the eye. The table of content: Be sure to list headings for the major sections as well as for important subsections. The executive summary: To summarize the presentation to each potential financial institution or investor, the entrepreneur should write an executive summary. This is the single most important section of the business plan. That is because most readers- especially lenders and investors- turn to it first and decide whether to take the rest of the plan seriously.
It should be concise and should summarize all of the relevant points of the proposed deal. The executive summary presents the essence of the plan in a capsulated form, i. It should explain the purpose of the financial request, the birr amount requested, how the funds will be used, and how and when any loan will be repaid.
It should be logical, clear, interesting- and exciting. When readers finish the executive summary, they should have a good sense of what you are trying to do in your business. Capturing an entire business plan within two pages sounds like a difficult task. It is better entrepreneurs begin the process of putting together their business plans by writing a draft of the executive summary, then putting together the full plan, and finally revising the executive summary when everything else has been completed.
Business description: In this section entrepreneurs provide a detailed description of their business. An excellent question to ask yourself is: Remember, however, that as you develop your business plan, you have to modify or revise your initial questions. The business description section is divided in to three primary sections. Section 1 actually describes your business, section 2 the product or service you will be offering and section 3 the location of your business, and why this location is desirable?
The licenses or permits you will need. What are the growth opportunities? Will franchising impact on growth opportunities? In the description of the business, describe the unique aspects and how they appeal to consumers. Emphasize any special feature that you feel will appeal to customers and explain how and why these features are appealing.
The description of your business should clearly identify goals and objectives and it should clarify why you are, or why you want to be, in business.
Drawings, diagrams, and illustrations, may be required if the product is highly technical. It is best to write product and service descriptions so that laypeople can understand them. The entrepreneur should include a summary of any patent, trademarks, or copyrights. Successful business owners know or at least have an idea of what their customers want or expect from them. This type of anticipation can be helpful in building customer satisfaction and loyalty.
And, it certainly is good strategy for beating the competition or retaining your competitiveness. Your location should be built around your customers, it should be accessible and it should provide a sense of security.
Most authorities on small business would quickly agree that failing to do your homework in searching for the best location is a serious mistake. Too many entrepreneurs never look for a location beyond their own home cities or towns. Consider these questions when addressing this section of your business plan: The building desirable? Is street lighting adequate? The marketing plan Marketing plays a vital role in successful business ventures; hence it should be the crucial concern of entrepreneurs.
Perhaps the worst marketing error an. By identifying these factors, you can develop a marketing strategy that will allow you to arouse and fulfill their needs. At first, target only those customers who are more likely to purchase your product or service. As your customer base expands, you may need to consider modifying the market plan to include other customers. Your marketing plan should be included in your business plan and contain answers to the questions outlined below.
What needs and wants drive their purchase decisions? Successful entrepreneurs know that a solid understanding of their target markets is the first step in building an effective market strategy. Indeed, every other aspects of marketing depend on having a clear picture of the customers and their unique needs and wants.
The marketing plan comprises the following: We compete for jobs, promotions, scholarships to institutes of higher learning, in sports and in almost every aspect of our life. Trade associations, customers, industry journals, marketing representatives, and sales literature are valuable sources of data.
What does the product or service cost to produce or deliver? What image is the company trying to create in the market? Can it produce a profit? How does the planned price compare to those of similar products or services? Are customers willing to pay it?
What price tiers exist in the market? How sensitive are customers to price changes? Will the business sell to customers on credit? Advertising is any sales presentation that is non personal in nature and is paid for by an identified sponsor.
How you advertise and promote your goods and services may make or break your business. Having a good product or service and not advertising and promoting, like not having a business at all. Many business owners operate under the mistaken concept that the business will promote itself, and channel money that should be used for advertising and promotion to other areas of the business.
Advertising and promotions, however, is the lifeline of a business and should be treated as such. Develop short, descriptive copy text material that clearly identifies your goods or services, its location and price. Use catchy phrases to arouse the interest of your readers, listeners or viewers. Questions that might be raised in this section include: It should discuss your supply sources, equipment, capacity, and quality control.
Can the subcontractors deliver on time? This section should also provide information about manufacturing costs.
The management plan: It demands dedication, persistence, and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundations for and facilitates the success of your business.
Like plants and equipment, people are resources they are the most valuable assets a business has. It is imperative that you know what skills you posses and those you lack since you will have to hire personnel to supply skills that you lack. Additionally, it is imperative that you know how to manage and treat your employees. Make them a part of team. Keep of them informed of, and get their feedback regarding changes.
Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness.
This section should include: Your management plan should answer questions such as: The financial management plan: Sound financial management is one of the best ways for your business to remain profitable and solvent.
How well you manage the finances of your business venture. Each year thousands of potentially successful businesses fail because of poor financial management. The business plan needs to provide as clear and precise a picture. You provide that picture primarily through a presentation of three types of financial statements: Your business plan should discuss the most important revelations and issues raised by financial statements, such as when your business will reach break-even, when it is expected to become profitable, and what the most significant expenses are.
If your company has an operating history, you should be able to use your past performance as guidance in looking ahead.
Here is some detail about the three types of financial statements: Cash flow: Cash flow is the difference between the movements of money in and out of your business over a certain period-typically measured on a monthly or quarterly basis.
Too often, cash flow is confused with sales and profits. Yet it is not an uncommon occurrence for a small company to make a significant sale or operating on a profitable basis and go broke because of insufficient cash flow. A cash flow statement shows readers of the business plan how much money will be needed, when it will be needed, and where the money will come from.
In general terms, the cash flow statement looks at cash and sources of revenue minus expenses and capital requirements to derive a net cash flow figure. This is done with respect to a given time frame. Initial cash flow statements should reflect the time frames of operation, whether weekly, monthly, or quarterly.
The time frame selected most often corresponds to a natural period of the businesses cycle. For the purpose of your business plan, you should track cash flow historically and on a monthly basis for the first year and quarterly for the next two to four years.
The cash flow statement helps show when and under what circumstances the break-even point will be reached. Income statement: Some times called the profit-and-loss statement. The income statement reports the results of your business from an accounting point of view over the specific period of time, typically quarterly or yearly. In addition to being considered essential information by lenders and investors, it is used to calculate income taxes and should be prepared by your accountant.
It reports net sales, less costs and expenses to arrive at income or loss before taxes. Generally, sales and expenses are recorded when they occur, not when the cash is actually received or paid out. There fore, in an income statement, revenue from sales is not the same as revenue from sales in cash flow statement.
The income statement is where a planner makes a case for the business potential to generate cash.
This document is where the writer records revenue, expenses, capital, and cost of goods. The outcome of the combination of these elements demonstrates how much money a business made or will make, or lost or will lose, during the year. An income statement and a cash flow statement differ in that an income statement does not include details of when revenue was collected or expenses paid. Accrual accounting and cash basis accounting methods will influence the "bottom line" shown.
An income statement projected for a business plan should be broken out by month the first year. The second year can be broken down quarterly, and annually for each year after. Analyze the results of the income statement briefly and include this analysis in the business plan. If the business already exists, include income statements for up to five previous years. As with all financial documents, having the income statement prepared or at least reviewed by a reputable accountant is money well spent.
Any exceptional data should be explained. Balance sheet: While not particularly useful for start-up business, a balance sheet is required by most lenders and some investors.
The balance sheet is a status report. Unlike other financial statements a balance sheet is created only once a year to calculate the net worth of a business. If your business plan is for a start-up business, you will need to include a personal balance sheet summarizing your personal assets and liabilities. A new business almost always requires the strength of personal financial commitments. Proving that the entrepreneur can keep commitments is important. If the business exists already, include several of the past years balance sheets.
Analyze the results of the balance sheet briefly and include this analysis in the business plan. As with all financial documents, have the balance sheet prepared or at least reviewed by a reputable accountant. Decisions about assets and whether they should be classified as owner debt equity or capital investment will greatly influence the perceived strength of the balance sheet APPE: The appendix is where related documents and support materials are included.
This section should. In other words, it should not be included with the main body of your business plan. Your business plan is your communication tool. As such, it will be seen by a lot of people. Some of the information in the business section you will not want everyone to see.
However, specific individuals such as creditors may want access to this information in order to make lending decisions. Therefore, it is important to have the appendix within easy reach.
The appendix would include:. Any copies of your business plan should be controlled. Keep a distribution record of who has a copy of your plan. This will allow you to update and maintain your business plan on an as- needed basis.
Remember, too, that you should include a private placement disclaimer with your business plan if you plan to use it to raise capital. Guidelines to remember These guidelines are presented as tips for successful business plan development. Entrepreneurs need to adhere to them in order to understand the importance of the various segments of a business plan they are creating, which will be discussed in the next section. Keep the plan respectably short: Readers of business plan are important people who refuse to waste time.
Therefore entrepreneurs should explain the venture not only carefully and clearly but also concisely. A table of contents, an executive summary, an appendix, exhibits, graphs, proper grammar, a logical arrangement of segments, and overall neatness are elements critical to the effective presentation of a business plan Orient the plan toward the future: Entrepreneurship should attempt to create an air of excitement in the plan by developing trends and forecasts that describe what the venture intends to do and what the opportunities are for the use of the product or service.
Avoid exaggeration: Many times a best-case, worst-case, and probable-case scenario should be developed for the plan. Highlight critical risks: Give evidence of an effective entrepreneurial team: The management segment of the business plan should clearly identify the skills of each key person as well as demonstrate how all such persons can effectively work together as a team in managing the venture.
Do not over diversify: Focus the attention of the plan on one main opportunity for the venture. A new business should not attempt to create multiple markets nor pursue multiple ventures until it has successfully developed one main strength.
Identify the target market: This segment of the business plan is pivotal to the success of the other parts. Market research has to be included to demonstrate how this market segment has been finished. Keep the plan written in the third person: Flag for inappropriate content. Related titles. Jump to Page. Search inside document. Middle Ages In the middle ages, the term entrepreneur was used to describe a person managing large production projects.
In the late 19th and early 20th Centuries In the late 19th and early 20th centuries, entrepreneurs were frequently not distinguished from managers and were viewed mostly from an economic perspective.
In the Middle of 20th Century According to Joseph Schumpeter, the function of an entrepreneur is to reform or revolutionize the patter- of production by exploiting an invention, or more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or a new outlet for products, by organizing a new industry.
According to this definition, innovation can occur through: Changes in the organization and management The concept of entrepreneurship is further refined when principles and terms from a business, managerial and personnel perspective are considered.
This definition stresses on four basic aspects of being an entrepreneur. Benefits and Limitation of Entrepreneurship People start their own business for a variety of reasons. Who is an entrepreneur? An entrepreneur is a person or one who wants to work for himself or herself. The following are the major ones: Achievement Cluster: Commitment to the work contract II. Planning Cluster 6. Systematic planning and Monitoring III. Power Cluster 9. Independence and self-confidence Other lines of authorities suggested the following qualities: Entrepreneurial Background Although a variety of backgrounds are very important for the success of entrepreneurs, only a few backgrounds have differentiated the entrepreneur from the general populace or managers.
Generalized Research Results 1. Childhood Family Environment a. Education Important in the upbringing of the entrepreneurs: Personal Values It also can be used to differentiate entrepreneurs from managers, unsuccessful entrepreneurs, or even from the general public. Most entrepreneurs: Goals versus objectives There is no common understanding regarding the difference between goals and objectives. Griffin, The other category discussed that goals are broader than objectives.
Objectives must: Goals have hierarchies. Strategic objectives. These are goals that: They are derived from strategic goal. Goals are multiple in numbers Individuals may set different kind of goals at one time and sometimes can experience conflict or contradiction among goals.
Goals can be: Goals have priority. Modes of formulating goals 1. Doing -activities to be performed I want to do or I will work on Owning- possession of some thing I want to own Changing one- setting personal standards in position, experience and status. I want to become.
I want to achieve Goal setting process Goal setting involves certain logical and interrelated tasks. But you can use your own procedures 1. Describe long term and short goals. Relate to what you want to achieve in life vision and mission. Identify resources required to accomplish the intended goals timely. Set performance standards or measurement criteria. The value given to businessmen. Encouraging versus discouraging word.
The value given for time. Social life. Providing immediate feedback. Men entrepreneurs Men make up the majority of people who start and own their own businesses. Women entrepreneurs Women tend to be more motivated by independence and achievement arising from job frustration in not being. Women usually rely on personal assets or savings. The result is often smaller female-owned businesses with lower net earnings: The appendix would include: Mohd Fuad Mohd Salleh, Unisel.
Khushbu Kaushik. Senelwa Anaya. Pritish Patnaik.
Gopalan Kathiravan. Atharva Inamdar. Zubair A Khan. Ray Sangqu. Anant Dhuri. Popular in Research. Alex Voos.