Entrepreneurship and the Importance of Business Plans – Thesis Proposal Example
Entrepreneurship and the importance of business plans The proposed study shall analyze the relevance and importance of business plans for projects and new businesses that depend on venture capital financing for initial seed capital. More generally, the study shall consider the role of a business plan in guiding a business or project towards achieving all defined objectives besides serving as a document containing specific benchmarks that need to be followed.
Capital and seed funding are crucial for an entrepreneur to transform a potential business idea into a successful revenue generating enterprise. However, most entrepreneurs do not possess adequate funds, and therefore need to approach external investors for obtaining the necessary capital. However, such new businesses have a high failure rate. Zacharakis (2011) surveyed new high-tech ventures in the Silicon Valley between 2003 and 2009 and concluded that over 90% of new ventures did not exist after 5 years or were unable to generate a profit.
Venture Capital (VC) firms specialize in investing in new ventures that are founded on the basis of unique value-creating business ideas. Based on years of experience, Venture Capitalists identify and invest in the most promising business ideas and generate returns from among those that transform successfully to profitable business. As external investors, VCs need to gain a thorough overview on the potential of a business idea in terms of cash flows over the future, return on investment (ROI) and realizable returns (through exit strategies such as a sale or Initial Public Offering (IPO)) (Jinnett, 2009).
A business plan is the most crucial element in convincing potential VC investors on the strengths of a business proposition and serves as an assessment tool for both the investor and the entrepreneur in improving the idea, understanding possible risk factors and analyzing the proposition from all perspectives. A typical business plan contains an elaborate estimate of realizable cash flows over the coming years besides providing an insight into all cost factors and the payback period (Covello, 2005). In addition, a business plan serves as a reference during every stage of growth and allows both parties to monitor and manage the evolution of the business. Thus, a business plan is not only required for raising capital, but is also instrumental in transforming the idea into a sustainable enterprise.
McKeever (2010) says that start-ups and entrepreneurship are essential for innovation and continued growth in an economy. At a time when much of the developed world is facing a financial crisis of epic proportions, encouraging the development of sustainable business ideas is necessary for GDP (Gross Domestic Product) and job creation. Since the topic focuses on understanding a core tool (the business plan) that is essential for new entrepreneurs, no hypothesis shall be proposed or evaluated as part of this study. The primary goal of the analysis shall revolve around the significance of business plans for raising new capital and the quality of such plans in the current industry (Stutely, 2008). The outcomes of this study will be useful for anyone who aspires to start a company based on novel proposition. The study will also be useful for firms that seek to raise capital for funding new projects or fulfilling strategic objectives through acquisitions etc.
The proposed study shall utilize both primary and secondary sources the analysis. The study shall utilize information from a number of related books, journals and magazine articles that deal with the topic and others aspects associated with business plans. Given the widespread coverage of the Venture Capital industry, it is believed that these secondary sources contain vast information that can help in understanding the role of business plans in entrepreneurship and innovation. The study shall also derive considerable information from entrepreneurs and venture capitalists that are currently active in the industry and have participated in such funding. These professionals will either be interviewed or requested to answer a questionnaire that will offer deep insights into their expectations and observations on the current nature of business plans. The study will also involve some quantitative analysis, based mainly on the inputs obtained through surveys, which will be used to analyze trends in different aspects of business plans such as preferred length, success rates (against the total number of business proposals received), years of forecasts required etc. Thus, the study aims to provide a comprehensive overview of all identifiable characteristics associated with business plans.
Covello, J., 2005. Your first business plan: a simple question-and-answer format designed to help you write your own plan. Boston: Sourcebooks.
Jinnett, J., 2009. Anatomy of a business plan: a step-by-step guide to starting smart, building the business, and securing your companys future. University of California.
McKeever, M., 2010. How to Write a Business Plan. London: Nolo.
Stutely, R., 2008. The Definitive Business Plan: The Fast-Track to Intelligent Business Planning for Executives and Entrepreneurs. FT Press.
Zacharakis, A., 2011. Business Plans that Work: A Guide for Small Business 2/E. New York: McGraw Hill.