A BUSINESS PLAN: Don$$t Launch Without it

A recent study by the Small Business Administration reports that entrepreneurs who create business plans in the early stages of the start$-$up process are more likely to launch companies and complete typical start$-$up activities such as acquiring a patent, attracting capital, and assembling a start$-$up team more quickly than entrepreneurs who do not. $$Early formal planners are doers,$$ write the study$$s authors. $$Challenging prospective entrepreneurs to accomplish a formal business plan early in the venture creation process enables them to engage in additional start$-$up behaviors that further the process of venture creation.$$

Geo$-$Logical

Daniel Stewart is one entrepreneur who believes in the value of building a business plan. Stewart was running a sink$-$hole remediation business, Geo$-$Logical, that he had created with a partner in Port Richey, Florida when he realized that operating their business effectively required a unified software platform rather than the hodgepodge of software applications that they had been using to manage the projects on which the company was working. Stewart worked with a software developer to create a program that allowed his company to create proposals, track projects$$ status, send invoices promptly, and, most importantly, complete projects on time and within budget. The engineering companies and other businesses with which Geo$-$Logical worked took notice and began asking to purchase the software.

Stewart realized that to capitalize on this business opportunity he needed a business plan. Although Stewart and his partner were not seeking external financing, they decided that developing a business plan would be a crucial element in the company$$s success. $$We$$re our investors, $$says Stewart, $$but to be a responsible entrepreneur, you have to see things as they are$,$ Their first task was to conduct a feasibility analysis of their business idea, which involved analyzing the software package$$s market potential and preparing a fundamental financial forecast. Enthusiastic feedback from potential customers convinced them that a significant market existed for the product Stewart and his partner also created three sets of financial projections: a most likely forecast, an optimistic one, and a disaster scenario. Creating the plan also brought them to the realization that they needed to add to their team his partner recruited to their board of directors Jim Eddy, who had started and managed to profitability three technology start$-$ups, before launching their software company, Envala. All of their planning paid off. Envala, which targets small companies with its productivity software, is growing rapidly and now has customers across North America, Europe, and the Caribbean.

Roaring Lion Energy Drink

When Sean Hackney began writing his business plan, his intent was not to start a company but to convince a soft drink maker to hire him. When Hackney, who had worked for Red Bull North America, showed the plan to his father, a corporate attorney, and a family friend who had been a managing director for Red Bull. $$They said, $$Don$$t send this to Coke to Pepsi. Start the business, and we$$ll help you,$$ he recalls. Hackney took their advice and launched Roaring Lion Energy Drink. Based on customer feedback, he chose to distribute the energy drink as a boxed syrup that distributors can serve with a soda$-$dispensing gun rather than in cans, which restaurants, bars, and nightclubs dislike because of the storage space they require and the wasted product ear of they create. In this first year of operation, Roaring Lion generated $$900,000$ in sales. It reached its break$-$even point within $16$ months. The company now boasts sales of $$6\mathrm{.}2$ million and has customers across the United States and Europe. $$We$$ve grown the business from a $$62000$ investment to the number two energy drink in bars and nightclubs,$$ says Hackney. He credited the original business plan he wrote and has since updated several times with much of Roaring Lion$$s success. $$I had a lot of stuff in my head that needed to be put on paper,$$ he says. Hackney still relies on a regularly updated plan to guide the company, which now has $32$ employees.

$1.$ Some entrepreneurs claim that creating a business plan is not necessary for launching a successful business venture. Do you agree? Explain. $(20$ Marks$)$

$2.$ What benefits do entrepreneurs who create business plans before launching their companies reap? $(20$ Marks$)$

$3.$ Suppose that a friend who has never taken a course in entrepreneurship tells you about a business that he or she is planning to launch. When you ask about a business plan, the response is$.$Business plan? I don$$t have time to write a business plan! I know this business will succeed.$$ Write a one$-$page response to your friend$$s comment. $(20$ Marks$)$