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Don’t just start a business... Start a successful one!
Entrepreneurship Manual
Don’t just start a business...
Start a successful one!
Structural Funds Programme for Malta 2004-2006
Project part-financed by the European Union: European Social Fund
Co-financing rate: 75% European Union, 25% Malta Government
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Don’t just start a business... Start a successful one!
Structural Funds Programme for Malta 2004-2006
Project part-financed by the European Union: European Social Fund
Co-financing rate: 75% European Union, 25% Malta Government
First published in November 2007
Researched and written by Marika Fsadni
© Employment and Training Corporation, 2007
Employment and Training Corporation (ETC)
Óal Far BBÌ 3000, Malta
Tel: (+356) 2220 1100
Fax: (+356) 2220 1802
Email: [email protected]
www.etc.gov.mt
Employment and Training Corporation (ETC)
Valletta Training Centre
76 Old Theatre Street
Valletta VLT 1427, Malta
Tel: (+356) 2124 5778/9
Fax: (+356) 2124 5242
Email: [email protected]
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system or transmitted
in any form or by any means without prior permission in
writing of the Employment & Training Corporation,
which must be obtained beforehand.
ISBN-13: 978-99932-686-6-6
Production: Outlook Coop
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Don’t just start a business... Start a successful one!
Contents
Entrepreneurship is the key ...................................................................................... 5
Foreword ......................................................................................................................... 7
How to use this business manual ............................................................................11
Phase 1: Identifying the personal strengths
Introduction .................................................................................................................16
Who is an entrepreneur? ...........................................................................................16
The major personal strengths ................................................................................16
A positive attitude is essential ......................................................................... 17
Strong leadership skills .......................................................................................18
Successful entrepreneurs are successful leaders .................................18
Task-oriented and person-oriented leadership ......................................18
The effective decision-maker ............................................................................. 21
A results-oriented problem-solver ................................................................ 22
Addressing the ‘am i good enough?’ syndrome .......................................... 23
Other personal strengths ................................................................................... 26
Phase 2: Turning your idea into a successful business idea!
Introduction ................................................................................................................30
The steps to be taken by the entrepreneur ........................................................ 31
Using outside resources ...........................................................................................39
Engaging business consultants .......................................................................40
Using services offered by Government Agencies/Departments ............ 42
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Don’t just start a business... Start a successful one!
Phase 3: Writing a business plan for your successful idea
Strategic management and developing a business plan ..............................44
The search for a competitive advantage ...........................................................44
Writing the business plan .......................................................................................46
The entrepreneur’s business plan .................................................................. 47
The marketing plan .............................................................................................55
The operations plan ............................................................................................60
The financial plan ..................................................................................................61
Setting up my own successful business - a re-cap! .........................................65
Author’s final words ..................................................................................................70
List of references ........................................................................................................ 71
Project Leader’s Acknowledgements ................................................................... 72
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Don’t just start a business... Start a successful one!
Entrepreneurship is the key
The Employment and Training
Corporation then further developed
this service by introducing an
innovative business start-up
scheme commonly known as the
INT scheme or Ibda Negozju Tieg?ek
(Start Your Own business), which
besides training also provides
guidance, support, mentoring and
a start-up grant to successful
participants.
Following the success of the above
initiatives, the Employment and
Training Corporation embarked
on a new venture, to promote
an entrepreneurial culture
among women. With the financial
backing of ESF funds, the project,
in particular, aims at encouraging
women to consider the option of
setting up their own business and
at the same time, create more
and better jobs and promote
entrepreneurship. Some of the
outcomes of this ESF project were
the provision of training to a number
of female participants interested
in starting their own business, the
setting up of a resource centre,
organisation of a marketing
campaign promoting business
start-ups as a route to employment
and the development of a training
manual as a guide to starting a
business.
The Employment and Training Corporation (ETC) has during
the past years been one of the forerunners in the promotion of
an entrepreneurial culture. The Corporation was one of the first
entities to start offering training opportunities to individuals
who were inclined to set up their own business and to others
who had already launched their business but who could also
benefit through improved business management skills.
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Don’t just start a business... Start a successful one!
This manual illustrates the different
steps one must take when entering
the field of entrepreneurship. It
was developed by Marika Fsadni
on behalf of the Corporation
with financial support from the
European Social Fund. The aims
and objectives of the project are
in line with those portrayed by
the European Social Funds in that
it aims to promote economic and
social cohesion in member states
and as this manual illustrates,
makes a real difference to the lives
of persons benefiting from this
fund.
I would like to thank the Project
Leader, Philippe Vancell, and staff
within the Corporation for their
dedication to making this project a
success, as well as the management
team and the administrative
staff for their equally important
contributions. Last but by no
means least, the successful
outcome of this project is also due
to the collaborative effort of a
number of entities that enabled the
Corporation to utilise these funds
for the benefit of its clients. While
an exhaustive list is not possible,
the Corporation would like to thank
in particular the various Ministries
as well as the Managing Authority
for its support in the application for
and utilisation of these funds.
Michael Balzan
Chairperson
ETC
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Don’t just start a business... Start a successful one!
Foreword
Ten years ago, I was at a crossroad
in my career. Armed with little more
than my education and some work
experience in the public and private
sector; saddled with hefty monthly
house loan repayments and with no
regular income; my choices at the
time were limited, so I decided to
take the plunge and start my own
business.
Today, ten years later, I run my own
marketing and HR development
consultancy firm, I have a sound
client base, employ my own work
team, have my own office with a 5-
workstation LAN and about to move
into larger offices very shortly…
and, I am, above all, a woman
entrepreneur!
Is this a unique experience? Not at
all! Every successful entrepreneur
relates his/her own experience on
how it all started. From a survey
I conducted with local male and
female entrepreneurs last year
[a survey commissioned by Malta
Enterprise in November 2006], 31%
of the entrepreneur respondents
claimed that the reason for setting
up their own business was because
they wanted to do something
of their own and wanted to be
their own ‘boss,’ while a close
28% indicated that it was always
their ambition/dream to set up
their own business. The rest of
the entrepreneur respondents
indicated that they either
wanted a new challenge, sought
a new business opportunity, had
quarrelled with their previous boss
and hence were out of a job, or
simply because they set up their
business by sheer chance and
coincidence.
Whatever the initial reason for
starting your own business, what is
really important is not the ‘why’ or
‘how’ you start but what degree of
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Don’t just start a business... Start a successful one!
commitment you are prepared to
take to not just starting a business,
but to start a successful one!
It is not by chance that I chose
the title of this business manual
“Don’t just start a business... Start
a successful one!” – I chose this
title with a purpose. Anyone can set
up his/her own business. We hear
of and see so many businesses,
large and small, being set up but
which, sadly, by their third or
fourth year of operation, they
simply either phase out, disappear
or go bankrupt. From my own
experience, I found that the real
challenge is not actually starting
a business but to, year after year
of sheer hard work and dedication,
manage to make it grow and
render it successful!! This, I admit,
is not an easy task! I distinctly
remember some ten years ago
when I had decided to give it a try,
I had promised myself not to look
back for a good three years but to
evaluate my position at the close
of the third year and then decide
on whether to continue to grow or
phase out. At the close of my third
year of operation, there was no
such decision to be taken as the
seeds I had sowed for three solid
years were already bearing fruit!
What renders a business successful,
be it large or small, a service-
oriented operation, an importing
house or a manufacturing concern,
etc, is when the business manages
to identify and sustain, what
is known in management as a
“competitive advantage” [Michael
Porter, 1980] over its competitors.
This “competitive advantage” is the
aggregation of factors that sets a
business apart from its competitors
and gives it a unique position in
the market, i.e. how successful
the budding entrepreneur is in
differentiating his/her business/
product from the rest of his/her
competitors within the industry.
How can an entrepreneur do this?
By skilfully identifying his/her
company’s “core competences,”
which are a unique set of lasting
capabilities that the entrepreneur
develops in key operational
areas, e.g. in customer service,
product quality, product design,
packaging, etc, which are perceived
as essential by customers and
which are difficult for competitors
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Don’t just start a business... Start a successful one!
to copy. When the entrepreneur
manages to identify his/her
business’s core competences and
match these with what are known
as the “key success factors”
[critical factors] of the industry
sector the business is operating
in, then the entrepreneur is
guaranteed success!
However, one may argue, is all
this relevant to an entrepreneur,
who is typically characterised by a
small operation, limited resources,
limited liquidity, etc? Well, I ask:
have you ever heard the saying
“small is beautiful”? Do you agree
with it? Do you recall the story of
David and Goliath? Is this story
still relevant in the light of today’s
increasingly fierce and cut-throat
competition? Well, it all depends
on whether you are the optimist
who perceives a glass half full or
the pessimist who perceives it
half empty! The small size of the
entrepreneur’s business venture
may be used as an ‘advantage’
because this smallness will allow
him/her to do things which larger
competitors, sometimes known
as ‘sleeping giants’ cannot do,
eg. speed of delivery, closeness
to customers, ability to innovate
fast, etc. The key to success of
these core competencies is for the
entrepreneur to concentrate them
on providing superior service and
value for the entrepreneur’s target
customers. The entrepreneur would
hence have identified the ‘winning
formula’!
‘Small is beautiful’, the ‘young
David’, the ‘sleeping giant,’ the
‘half-full glass’, the ‘smallness’
advantage... All these become
reality only if the entrepreneur
truly believes in them and above all,
adopts the right positive attitude
coupled with sheer hard work.
When the Employment and Training
Corporation asked me to write this
business manual, I was pleased to
be able to share my own personal
experience as a local entrepreneur.
In fact, I have tried to adopt a
simple, structured approach to the
subject. Moreover, I have purposely
chosen to write this business
manual in the ‘first person,’ i.e.
‘I’, to render the approach more
personal, ‘hands-on’ and credible.
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Don’t just start a business... Start a successful one!
I wrote this business manual to
encourage all those promising,
up-and-coming would-be
entrepreneurs, male or female,
who are seriously thinking of
setting up their own business.
The suggestions, proposals and
recommendations contained in
this manual are largely based on
my own ten-year experience as an
entrepreneur operating in Malta,
on my experience as consultant
and trainer with local start-up
businesses and entrepreneurs. I
have also kept in mind the research
findings of a qualitative market
research survey I conducted in
2006 with local entrepreneurs
and would-be entrepreneurs on
behalf of the Malta Enterprise and
the Euro-Info Centre [November
2006]. This research study focused
on the identification of the needs,
difficulties and challenges faced by
the local entrepreneur in Malta.
I would like to thank the
Employment and Training
Corporation for granting me this
opportunity of writing this Business
Manual. I augur that this publication
will be of assistance to all those
budding entrepreneurs who are
seriously thinking of setting up
their own business.
I am also indebted to my family and
close friends who have supported
me throughout these last ten years.
I would like to take this opportunity
to express my appreciation for the
love and affection that have been
forthcoming for so many years. One
last word goes to the people who
have assisted me in compiling this
business manual, namely Laurence
Zerafa B.Pharm, M.Phil., Dip.L.I.S,
Terence Portelli B.Ed.(Hons.), M.A.,
Carmen Mangion and Marilena Vella
for their invaluable assistance with
the Maltese translation.
Marika Fsadni
November 2007
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Don’t just start a business... Start a successful one!
This Don’t start a business... Start
a successful one! Business Manual
has been written to assist all those
enterprising, up-and-coming,
would-be entrepreneurs who are
seriously considering setting
up their own business. But, in
reality, who is an “entrepreneur”?
Who qualifies to be called an
“entrepreneur”?
As we shall see later on in this
manual, an entrepreneur is an
individual who:
w has the ability to identify and
pursue a business opportunity,
w undertakes a business venture,
w raises the capital to finance it,
w gathers the necessary physical,
financial and human resources
needed to operate the business
venture,
How to use
this business manual
w sets goals for him/herself and
others,
w initiates appropriate action to
ensure success,
w and assumes all or a major portion
of the risk!
This definition of an entrepreneur
is clearly quite a mouthful. Does
every entrepreneur need to possess
all these qualities? My reply to
this is a definite yes! Although
management theory does provide us
with an array of varied definitions
of the term ‘entrepreneur’ and
‘entrepreneurship,’ the above
definition encapsulates the essential
actions to be performed by an
entrepreneur and if he/she manages
to perform each of these actions
well, then this will undoubtedly lead
him/her to manage a successful
business.
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Don’t just start a business... Start a successful one!
As the name of this business
manual suggests, the object of
this manual is not simply to list
the business start-up steps which
should be taken by the would-be
entrepreneur who wants to set
up his/her business, but to clearly
illustrate what goes into setting up
a new business, ranging from the
attitude, approach and personal
preparation of the entrepreneur
to the very development of an
effective business plan to attain a
successful business.
The Manual is divided into three
essential Phases, namely:
w Phase 1 - Identifying
the Personal Strengths
Characterising The Successful
Entrepreneur.
w Phase 2 - Turning Your Idea Into
A Successful Business Idea!
w Phase 3 - Writing A Business
Plan For Your Successful Idea.
In my opinion, these are the three
pillars which characterise the
‘winning formula’ of a successful
business. The First Phase focuses
on the ‘entrepreneur’ persona,
i.e. who is an entrepreneur, what
attitude should he/she adopt,
what leadership skills must he/
she possess and what personal
strengths characterise a successful
entrepreneur.
The Second Phase focuses on how
a skilled entrepreneur may turn his/
her idea into a successful business
idea. As we all know, NOT all ideas,
as good as they may seem, may be
turned into business opportunities.
However, this Section illustrates
how a would-be entrepreneur may
assess whether his/her idea fills
a need and whether it meets the
criteria for a business opportunity.
At this stage, it is essential that
the entrepreneur conducts a
feasibility analysis of the business
idea to determine whether it is
viable or not. The Section also
illustrates how the effective use
of outside sources and networking
business relationships may assist
the entrepreneur to solve existing
problems as well as to avoid
potential ones.
The Third Phase focuses on
ensuring that the entrepreneur,
notwithstanding adopting a
positive attitude, possessing
effective leadership skills and
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Don’t just start a business... Start a successful one!
strong personal strengths, may still
be ‘blinded’ into venturing into a
potential unsuccessful business.
Writing a Business Plan for the
business idea serves as a ‘game
plan’ or ‘road map’ to guide the
entrepreneur to accomplish the
business venture’s vision, mission,
goals and objectives and even more
importantly, keep him/her from
straying off the desired course.
All three phases comprise ‘Points To
Remember’ Checklists and ‘Questions
To Ask Yourself’ Sections which assist
the reader entrepreneur to assimilate
the essential elements of these three
phases.
As a conclusive re-cap, the two
essential questions to be asked are:
w Are you personally prepared to
become a promising entrepreneur?
w Have you conducted a good
initial preparation for your new
business?
If the would-be entrepreneur answers
‘yes’ to these two questions, then he/
she has completed the first essential
stage of setting up a business...
successfully!
Getting started
Too much analysis
brings paralysis!
At times, the most difficult
phase of doing new things is to
actually get started, i.e. to take
the plunge and start operations.
It is good for one to conduct
a good thorough assessment
of his/her situation before
plunging into setting up a new
business. However, one must
also be careful not to analyse
too much as this might hinder
him/her from ever actually
getting started. As the saying
goes: “too much analysis brings
paralysis!” So, once one feels
that he/she has what it takes to
run a business, the next step is
“Getting started!”
Just a few pointers before
you proceed with reading this
Business Manual:
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Don’t just start a business... Start a successful one!
w Buy a notebook!
Buy a notebook and always keep
it with you… in your pocket,
beside your bed, when you are
driving [obviously do make
sure to park the car before you
decide to jot something down!],
when having a bath, etc. Ideas
can strike at any time. Write
them down immediately! Also,
make use of forms and charts.
These may help you organise
information logically and
systematically in order to assist
you in your decision-making
process.
w Enrol on a simple management
training course
Don’t be alarmed! I am not
suggesting that you enrol for a
PhD in business management. A
simple short training programme
in management can do the trick!
There is an array of training
programmes being offered in
Malta both by the pubic and
private sectors. The Employment
and Training Corporation [ETC],
the National Commission For
The Promotion of Equality
[NCPE], Malta Enterprise [ME], all
offer interesting short training
programmes for business start-
ups. Also, the Internet may act
as an excellent source to identify
good educational business start-
up sites.
w And lastly... develop an
observant eye and become a
24/7 entrepreneur!
All around us there are people
running businesses. What do
you think you can do better?
You may not wish to open a
restaurant, however thinking
about how your favourite
restaurant [which is very popular
and always very busy] operates,
will be a useful exercise for you.
As Philip Kotler, a marketing
guru, once said: “Behind every
problem there exists a potential
business opportunity,” [Philip
Kotler, 2006] and the real 24/7
entrepreneur is the one who
identifies this ‘potential business
opportunity’, while the rest see
only the ‘visible’ problem!
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Don’t just start a business... Start a successful one!
Identifying
the personal strengths
characterising
the successful entrepreneur
Should I set up my own business, or not?...
No pain, no gain!
Phase1
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Don’t just start a business... Start a successful one!
The major personal
strengths characterising
a successful entrepreneur
In my opinion, based on my
own experience, on the recent
survey I conducted with local
entrepreneurs and on contacts
with my entrepreneur clients, the
five major personal strengths
characterising a successful
entrepreneur are:
a] Have a positive attitude.
b] Possess strong leadership skills.
c] Have a decision-making ability.
d] Be a results-oriented problem-
solver.
e] Address the ‘Am I good enough?’
syndrome.
Who is an entrepreneur?
An individual who:
w has the ability to identify and
pursue a business opportunity;
w undertakes a business venture;
w raises the capital to finance it;
w gathers the necessary
physical, financial and human
resources needed to operate
the business venture;
w sets goals for him/herself and
others;
w initiates appropriate action to
ensure success; and
w assumes all or a major portion
of the risk!
Introduction
Many people go through life wishing they were someone else or they were
doing another type of work. Most people have a desire to change their life
situation. But few people take action to do so…
A small proportion of people are willing to take risks to change their
lives for the better. These people are entrepreneurial because they take
advantage of opportunities to improve their lives. The true entrepreneur
is the person who is constantly changing and growing. Having positive
attitudes and a healthy self-image is essential for all entrepreneurs.
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Don’t just start a business... Start a successful one!
A positive attitude is essential
Accentuate the positive
and eliminate the negative!
Paul Arden
The biggest asset to sustaining
entrepreneurial ability is a positive
attitude. In addition, determination,
experience, persistence and just
sheer hard work are essential to
being a successful entrepreneur.
The right mental attitude towards
work is extremely important. A
successful entrepreneur enjoys his/
her work and is totally dedicated
to what he/she is doing. His/her
positive mental attitude turns the
job into exciting, interesting and
rewarding work.
w Concentrate only on being
involved in positive activities.
w Select positive objectives in his/
her work.
w Associate with people who think
and act in an entrepreneurial
manner.
w Be constantly alert for
opportunities to improve his/her
situation, whether it is personal
life, work life or life in the
community.
w Not be afraid to give up an idea
if it is not producing the right
results. It is better to change
direction than to pursue an
idea that is not working out
satisfactorily.
w Recognise that he/she controls
his/her mind and must use it
productively.
w Avoid negative thoughts and ideas.
w Believe in him/herself and his/her
talents. Success comes to those
who have faith in their own
abilities and use their abilities
to the fullest extent.
w Relieve mental stress by taking
action, i.e. by focusing his/her
thoughts on a specific problem.
Once he/she has reached a
decision, he/she must take
action to solve the problem. The
entrepreneur must try to solve
mental conflicts as quickly as
possible.
Points to remember
To develop a positive attitude an entrepreneur must:
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Don’t just start a business... Start a successful one!
Many people go through life wishing
that they were someone else or
that they were doing another type
of work. Most people have a desire
to change their life situation. But
few people take action to do so.
A small proportion of people are
willing to take risks to change their
lives for the better. These people
are entrepreneurial because they
take advantage of opportunities
to improve their lives. The true
entrepreneur is the person who is
constantly changing and growing.
Having a positive attitude and a
healthy self-image is essential for
all entrepreneurs.
Strong Leadership Skills
Your vision of where or who
you want to be is the greatest
asset you have! Without having
a goal it’s difficult to score!
Paul Arden
Successful entrepreneurs
are successful leaders
The total performance of a
business is mainly determined by
the attitudes and actions of the
entrepreneur. The effectiveness
of the entrepreneur as a leader is
determined by the results he/she
achieves. A guideline for good
leadership is to “treat others as you
would like to be treated.”
Task-oriented and
Person-oriented leadership
Entrepreneurs are leaders by the
very nature of their activities.
There are, in fact, two types of
leadership behaviour which the
entrepreneur has to adopt: [a]. a
goal-setting, goal-achievement,
task-orientation leadership and
. a motivating, human relations,
person-orientation leadership.
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Don’t just start a business... Start a successful one!
A task-oriented leader
entrepreneur normally exhibits
the following behaviour patterns:
w Clearly defines his/her role and
those of his/her personnel.
w Sets difficult but achievable
goals and lets the staff know
what is expected of them.
w Sets procedures for measuring
progress towards the goal and
for measuring goal attainment,
i.e. goals are clearly and
specifically defined.
w Actively exercises a leadership
role in planning, directing,
guiding and controlling goal-
oriented activities.
w Is interested in achieving
productivity increases.
A person-oriented leader
entrepreneur tends to exhibit
the following behaviour
patterns:
w Show concern for maintaining
harmony in the organisation
and easing tensions when they
arise.
w Show concern for workers as
people rather than as a means
of production.
w Show understanding and
respect for employees’ needs,
goals, desires, feelings and
ideas.
w Establish good two-way
communication with staff.
w Give positive reinforcement to
improve worker performance.
w Delegate authority and
responsibility and encourage
initiative.
w Create an atmosphere of
teamwork and co-operation in
the organisation.
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Don’t just start a business... Start a successful one!
w Are you more a leader than a
follower?
w Do people look to you for
leadership and advice?
w Can you develop and
implement new ideas?
w Do you take an active part in
the life of the community?
w Do you continuously try to
improve your strengths as well
as eliminate your weaknesses?
w Do you organise your time and
activities to be more efficient
and effective?
w Do you have a specific plan or
programme to improve your
leadership capabilities?
w Do you allow other people
to help you to achieve your
goals?
Questions to ask yourself
To assess whether you have the leadership qualities required of an
entrepreneur, you may ask yourself these questions:
w Do you learn from your
mistakes?
w Are you result-oriented and
do you finish something you
start?
w Do you use your power as a
leader to help others?
w Do other people have
confidence in your abilities?
w Do the opinions of others help
you to make your decisions?
w Are you able to deal with
people effectively?
w Do you make changes in what
you are doing to make your
company better?
w Do you delegate authority
and responsibility to your
employees?
w Do you share your success
with your employees?
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Don’t just start a business... Start a successful one!
The effective decision-maker
The one thing worse than
making a wrong decision,
is to avoid making a decision.
An entrepreneur must strongly
believe in him/herself and his/her
ability to make good decisions.
The typical entrepreneur is required
to make some critical decisions very
frequently and which are not easy
to make. The one thing worse than
making a wrong decision, is to avoid
making a decision. One must keep in
mind that ‘decision-making’ is an art:
the more you practise it, the more
expert you will become at it.
w How do you maintain self-
confidence when making an
important decision?
w What examples illustrate
your ability to make realistic
decisions?
w What fears or weaknesses
do you have when making
decisions?
w In what ways do you use
creativity and/or intuition
when making decisions?
w What have you learnt from
mistakes you made in previous
decisions?
w In what ways do you
procrastinate and delay
making decisions?
Questions to ask yourself
To assess whether you have the decision-making skills required of an
entrepreneur, you may ask yourself these questions:
w Do you give up or avoid
problems which appear difficult?
w How well do you adjust to
changes which occur around
you?
w What action do you take once
you have reached a decision?
w How do you provide the
leadership necessary to achieve
the desired outcomes?
w How do you use resources in
your environment to make
decisions?
w In what ways do you use your
personal and professional
contacts to gain information
which will help you to make a
decision?
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Don’t just start a business... Start a successful one!
A results-oriented
problem-solver
If you think you can, you can.
If you think you can’t,
you’re right!
George Bernard Shaw
For the entrepreneur to be a
results-oriented problem-solver,
he/she must be able to see every
aspect of a problem, as well as
understand it in its entirety. Most
of the people within the company,
involved in specific operations
and activities, may see parts of
the problem, however it is up to
the entrepreneur to put all the
parts together so that a complete
understanding of the problem
becomes possible.
This nine-step approach is a
logical and sensible way to solve
most business problems however
it does NOT guarantee that a
particular solution will work. The
entrepreneur’s effective leadership
and decision-making skills are
needed to implement a solution
successfully.
One effective nine-step
problem-solving
approach includes
the following steps:
1. Become acquainted with the
problem in general.
2. Determine the key facts
relating to it.
3. Identify major problem/s.
4. Identify related problems.
5. Search for possible causes of
the problem.
6. Consider potential solutions
to the problem.
7. Select the most feasible
solution.
8. Implement the solution.
9. Verify that the solution is
correct.
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Addressing the
‘am I good enough?’
syndrome - the biggest killer
of would-be entrepreneurs
It’s not how good you are,
it’s how good you want to be!
Paul Arden
The thought of setting up your
own business is very exciting
and it is also very thrilling and
gratifying informing others that
you have set up your own company.
Notwithstanding this, no one has
ever said that setting up your own
business is easy; one must find,
what I call the “winning formula”
to be able to succeed in business!
Unfortunately, from my ten years
of experience consulting small
businesses I can very well say
that I have seen many would-
be entrepreneurs who had this
“winning formula” potential but
whose business never got off the
ground because of their worst
enemy, i.e. themselves! Why?
Because of self-doubt!
Points to remember
The ten key action roles
associated with effective
entrepreneurs. Effective
entrepreneurs...
1. Are individuals who make a
significant difference.
2. Are creative and innovative.
3. Spot and exploit
opportunities.
4. Find the resources required
to exploit opportunities.
5. Are good networkers.
6. Are determined in the face
of adversity.
7. Manage risk.
8. Have control of the
business.
9. Put the customer first.
10. Create Capital.
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Self-doubt is considered as one of
the greatest killers of innovation
and entrepreneurship. Invariably,
whoever starts a small business
is inflicted with self-doubt on
whether he/she is able to see it
through! These self-doubt feelings
are normal [and at times, healthy],
though one must learn how to
manage them.
Some common self-
doubts among would-be
entrepreneurs:
w I am not bright enough
Well, sometimes you can be
too bright to succeed. At times,
innocence and naivety can
actually protect you from fear.
w I am not pushy enough
If this is what you think than
may I ask you a question: Do you
like doing business with pushy
people, or do you prefer to deal
with pleasant and reasonable
people like yourself?
w I will fail!
You might fail, it’s true but equally
you will not manage to build a
successful business if you don’t
try! Also, building a business is a
great learning experience in itself.
w I am usually pessimistic and
don’t like taking risks
I do not consider myself a high
risk-taking person however in
these last ten years I have taken
several calculated risks, i.e. risks
based on sound assessment.
In business, as long as you
don’t make false assumptions
and leap in the dark without
taking a torch with you, you are
fine. On the other hand, some
degree of risk must be taken … if
entrepreneurship wasn’t as risky
then we would have a lot more
small businesses being set up,
right?
w I know my limitations
Incredible though it may seem, we
all know what our limitations are
and we underestimate the value
of our strengths. No one is perfect
and nor is any business. That is
why there is room for you too!
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Don’t just start a business... Start a successful one!
w I am not good with numbers!
Number-crunching is always
one of the biggest hurdles for
would-be entrepreneurs to
overcome! Relax! Spreadsheets
and accounting software and
a pocket calculator render
the numbers easy to work
out. Always take time to work
it out before jumping into an
opportunity! A little secret which
works for me: I always carry a
pocket calculator wherever I go!
w Competitors will eat me alive!
I used to think this too, however
in fact, it resulted as quite the
opposite. Whilst your business is
small your rivals will not see you
as a threat. It is once you start
growing steadily that you must
keep your competitors at bay.
w I am not rich enough
Looking back at my ten years
of entrepreneurship, I sincerely
believe that one of my biggest
strengths has been that I always
strived to retain my overhead
costs very low. In fact, one of the
best ways to watch your costs is
to have no money to waste and
to take care of your pennies.
As the saying goes: “Take care
of the pennies, and the pounds
take care of themselves.” Many
wealthy people start businesses
that lose money!
For the would-be entrepreneur,
although not real, these feelings
may seem very realistic to the
extent that they stop him/her from
taking the plunge and kick off
the business. As the saying goes:
“Practice makes perfect.” Equally,
self-confidence is built upon
relevant knowledge and positive
experience – the more you learn
and practise, the better you will
get. You will make many mistakes
along the way which is fine, as
long as you don’t make the same
mistake twice!
Remember
It’s not how good you are,
it’s how good you want to be!
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Don’t just start a business... Start a successful one!
w A Vision
“Your vision of where or who
you want to be is the greatest
asset you have! Without having a
goal it’s difficult to score.” [Paul
Arden, 2006]. Without a clear
picture of what you want to do,
it will be difficult to create. The
entrepreneur must try and think
about the finest details and bring
the product/service to life.
w Determination
You must decide whether
you really want to set up a
business. As indicated earlier,
the entrepreneur must deal with
the doubts before starting. Once
committed, there is no turning
back.
w Ethics
Whether the entrepreneur
decides to start a manufacturing,
importing, consultancy or a
service-oriented operation,
he/she must be ready to
commit him/herself to adopting
the ‘code of business ethics’
required of him/her and of the
business. This is imperative if
you want to grow and win the
respect of customers, suppliers,
competitors, intermediaries,
alike.
w Hard Work and Perseverance
Setting up one’s own business
means hard work … and also
perseverance! As the saying
goes: “No pain, no gain!”
w Cash
Inevitably, your business will
take longer than you think to
pay you a wage. The bigger your
cash reserve, the longer you
can wait before drawing income
from your new business. In the
first few months, you must get
used to not receiving the usual
paycheque at the end of the
month, which you used to receive
when you were employed.
Other Personal Strengths Characterising
A Successful Entrepreneur
There are other just as important personal strengths which characterise a
successful entrepreneur. These include:
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w Fit and healthy
One of your major concerns will
be: what happens if I get sick?
Unfortunately, the entrepreneur
cannot afford time off sick,
particularly at the early stages of
setting up the business.
w Mental health
Although many people around
you will say that you are mad
to start your own business,
however you must not be!!
Starting a business is stressful
and one needs to be resilient.
w Love and affection
You are going to need a shoulder
to cry on [whether you are a
man or a woman]. If you have
someone to share your thrills
and spills with, you will enjoy it
more.
w Caution
Sometimes it is easy to see the
opportunities and difficult to
spot the threats. You need to
be cautious, without being too
risk averse. My motto over these
last ten years has always been:
“Always take calculated risks!”
w Flexibility
Usually when you start a
business, it is just YOU. That
means that you must make the
coffee, do the filing, take out the
trashcan, and anything that is
required.
w A little bit of humour helps
In the beginning you are
definitely going to make mistakes
– we all do! The ability to accept
the fact that you have made a
mistake and to also laugh it off is
important. What is imperative is
that you must learn quickly from
your mistakes, assess what you
did wrong and to never make the
same mistake twice! You cannot
afford it!
w Generosity
When you enjoy success, invest in
those who made it possible. These
can be your family members,
your assistant, your clients …. by
giving them your time, attention
and positive feedback. Another
motto of mine: “Always try and
aim for a win-win situation!”
This way all parties involved are
encouraged to give more!
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Phase 2
Turning your idea
into a successful
business idea!
Don’t look for the next opportunity.
The ONE you have in hand IS the opportunity!
Paul Arden
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Don’t just start a business... Start a successful one!
It is very unfortunate that so many
new businesses, large and small,
are set up and are simply ‘non-
starters’ from the word ‘go’! Why
does this happen? What could have
gone wrong? Could this be the
result of lack of good preparation
and analysis prior to setting up the
business? Was the product/service
in question not such a good idea,
after all?
For an entrepreneur to start not
only a business, but a successful
one, it is imperative that very
early on in the initial preparation
to assess whether his/her idea is
a good one or not. At this stage,
we must explain the difference
between the terms “opportunity”
and “idea.”
Essentially, a good entrepreneur
recognises an opportunity and
turns it into a successful business.
An ‘opportunity’ is a favourable
set of circumstances that creates
a need for a new product, service
or business. An ‘opportunity’ has
four essential qualities: it is [a]
attractive, durable, [c] timely
and [d] anchored in a product,
service or business that creates
or adds value for the customer or
end-user. An ‘idea’ is a thought,
impression or notion, which may
or may not meet the criteria of an
opportunity.
Most entrepreneurs start their
businesses in two ways: [a] they
decide to launch a company, search
for and recognise an opportunity
and then start a business or
they recognise a problem or
an opportunity gap and create
a business to fill it. Regardless
of which of these two ways
entrepreneurs start a new business,
it is always difficult to identify
a product, service or business
opportunity that is not merely a
different version of something
already available.
This is why many businesses are set
up but only a few are successful.
Many businesses fail not because
the entrepreneur did not work hard
but rather because there was no
real business opportunity in the
market to begin with.
Introduction
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Don’t just start a business... Start a successful one!
1. Observe trends
The first approach to identifying
opportunities in the market is to
observe trends and study how
they create opportunities for the
entrepreneur to pursue. Economic
factors, social factors, technological
opportunities and political action
and regulatory changes are the
most important trends to follow.
2. Solving a problem
Does your ‘idea’ solve problems?
Sometimes identifying opportunities
simply involves noticing a problem
and finding a way to solve it. In
your business sector and market
you wish to enter, do customers
complain? Try and seek whether
there are still any unresolved
problems in the market you wish
to enter? Think about this: “Every
problem is a brilliantly disguised
opportunity!”
The steps to be taken by the entrepreneur to turn
his/her idea into a successful business idea
3. Protect your idea
If your idea is an innovation of
some sort, it might be opportune
for you to assess whether you may
‘protect’ it by some ‘intellectual
property’ tool such as a patent,
trademark or copyright, etc.
4. Conduct marketing research
Many entrepreneurs often make
the mistake of basing their
decisions on their own feelings,
intuition and opinions. However,
to be valid, their decisions should
be based on the best information
available. Entrepreneurs have a
constant need for information and
knowledge about their markets.
The would-be entrepreneur is no
different. Marketing research is a
very effective tool for the budding
entrepreneur who has an idea and
who wishes to assess its business
potential! Market research assists
So, it is crucial for the entrepreneur that before getting excited
about a new business idea, he/she must assess whether the idea fills
a need and meets the criteria for an opportunity.
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entrepreneurs to identify new
markets and to find new customers
in existing markets. It also assists
them to know the reasons for their
current products/services’ success
or failure, and to provide ideas
about new products/services which
have potential.
Marketing research is the
systematic gathering, recording
and analysing of information about
matters relating to the marketing
of products/services. Marketing
research may assist the would-be
entrepreneur to find some answers
to the following questions:
w What are the present and
potential needs of the
customers?
w What additional markets may be
explored?
w What are the special
characteristics of the
customers?
w What makes the entrepreneur’s
product/service different from
those of competitors?
Marketing research attempts to
evaluate markets in a scientific
manner. However, it is also an art,
because it involves the constantly
changing attitudes of people.
By collecting marketing data in
an orderly, objective manner,
the would-be entrepreneur will
be able to know more about the
market/s he/she is interested in. No
matter what the size of business
is, whether big or small, there is
always a need to determine the
attitudes, opinions and beliefs of
customers.
Marketing research provides
timely information and data the
entrepreneur needs to:
w Reduce business risks.
w Identify problems and potential
problems in the existing markets.
w Identify new market
opportunities.
w Obtain basic information and
facts about the markets to help
him/her to make better decisions
and set up effective action plans.
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Large businesses have the funds
to engage marketing consultants.
Unfortunately, the would-be
entrepreneur does not have
the necessary funds to do so.
However, this does not mean that
a budding entrepreneur cannot
conduct research. In fact, when
I am approached by would-be
entrepreneurs to conduct some
marketing research for them, I
always encourage them to conduct
the research themselves.
When the would-be entrepreneur
conducts the field work him/herself,
it is a learning experience for
him/her, in that while researching
the market, he/she is getting
more acquainted with the market
forces at play, he/she will learn
more about the attitudes, opinions,
tastes and purchasing behaviour
of potential customers, he/she will
also learn more about competitors,
their strategies, weaknesses and
strengths, etc.
The entrepreneur can conduct two
types of market research,
a] Desk research: this entails
conducting research on
publications, past surveys,
internet, official government
statistics, etc, to collect
secondary data.
b] Field research: This entails
conducting primary research and
collecting fresh data specifically
for the research objective. As
field research is extremely
time-consuming and expensive
to conduct, the entrepreneur
might need to opt for conducting
qualitative market research by
way of conducting focus group
sessions, conducting few in-
depth interviews with potential
customers, etc.
Conducting quantitative research
is not an option for the would-be
entrepreneur as this proves too
difficult to conduct, too expensive
and time-consuming.
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Don’t just start a business... Start a successful one!
w Is the product/service in a
growth industry?
w Will the future demand for
the product/service increase,
remain stable or decrease?
w What is the nature of
competition for the product/
service?
w Does the entrepreneur have
sufficient finances to meet
the expenses of introducing
the new product/service for at
least the first year?
Questions to ask yourself
Evaluating the potential success of a new product/service is a difficult
but necessary activity. The following questions will assist you to
identify market opportunities for a particular product/service:
w To what extent is the
entrepreneur dependent on
suppliers and other related
businesses?
w What are the specific
disadvantages of the new
product/service?
w In what ways will the
product/service be similar to
and different from those of
competitors?
w To what extent will marketing
contribute towards the success
of the product?
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5. Conduct a feasibility analysis
Apart from conducting marketing
research, it is also essential
that the entrepreneur conducts
a feasibility analysis of his/her
business idea to determine whether
it is viable or not, i.e. to assess
whether the business idea is
worth pursuing before spending
resources on it. As painful as it may
be, if the feasibility analysis shows
that the business idea is deemed
unworkable, it should be dropped
completely or rethought afresh.
Conducting a feasibility analysis of
your business idea will comprise
the following steps:
a] Draw up a ‘concept statement’
for your business idea.
This concept statement is a
preliminary description of
your prospective business. It
should include a description
of the product/service being
offered, your intended target
market segment/s, the benefits
of your product/service and
a description of how your
product/service will be sold and
distributed.
b] Conduct a ‘product/service’
feasibility analysis
A product/service feasibility
analysis is an assessment of the
overall appeal of your product/
service being proposed. This
feasibility analysis involves
conducting two primary tests,
namely, ‘concept testing’ and
‘usability testing.’
i. The ‘concept test’ involves
a representation of the
product/service to prospective
users to gauge customer
interest, desirability and
purchase intent. The three
primary purposes for concept
testing is to [a] validate
the underlying premises
behind a product or service
idea, i.e. to test this idea
the entrepreneur must ask
prospective customers what
they think about it, to help
develop the idea rather than
just test it and [c] to estimate
the potential market share
the potential product/service
might command.
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Don’t just start a business... Start a successful one!
ii. Usability Testing is a
method by which users of a
product/service are asked
to perform certain tasks
in order to measure the
product/service’s ease of use
and the user’s perception
of and satisfaction with the
experience.
c] Conduct an ‘industry/market’
feasibility analysis
An industry/market feasibility
analysis is an assessment of the
overall appeal of the market
for the product/service being
proposed. There are three
primary issues that a proposed
business should consider here:
i. The industry attractiveness
The entrepreneur must
assess the profitability and
growth of the industry he/
she intends entering into.
The competitive forces that
determine an industry’s
growth and profitability are
the threat of new entrants
in the industry, the rivalry
among existing firms,
the bargaining power of
suppliers, the bargaining
power of buyers and the threat
of substitute products. These
forces, better known as Michael
Porter’s five competitive
forces [Michael Porter, 1980]
determine the average rate
of return for the companies
engaged in an industry.
d] Conduct an ‘organisational’
feasibility analysis
This organisational analysis is
conducted to determine whether
the entrepreneur has sufficient
management expertise and
organisational competence and
also whether the potential new
venture has sufficient resources
to move forward to successfully
develop the ‘product/service’ idea.
e] Conduct a ‘financial’
feasibility analysis
This ‘financial’ analysis is a
preliminary financial analysis of
whether a business idea is prudent
or not. The most important issues
to be considered here are [a] the
capital requirements to produce
the product/service idea, the
financial rate of return and [c]
the overall attractiveness of the
investment per se.
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Don’t just start a business... Start a successful one!
It might be opportune for a
would-be entrepreneur to seek
the assistance of a professional
consultant when conducting this
feasibility analysis.
I always reiterate with my ‘would-
be entrepreneur’ clients, who are
assessing whether their business
idea is worth pursuing or not that
it is better to spend a few pennies
at the start and proceed with the
business idea if found viable rather
than spend many pounds in setting
up the whole business venture and
launching their product/service,
only to find that their business is a
complete flop!
Once this preliminary evaluation of
the business idea is conducted and
the above feasibility analyses show
that the idea is worth pursuing,
then this leads the entrepreneur
into the next important stage
of setting up his/her successful
business… that of writing a
business plan for his/her idea!
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Don’t just start a business... Start a successful one!
1. This new idea [product/
service] should have a
relative advantage over
existing products/services.
For example, your product/
service offers your customer
something that the existing
products/services do not.
2. This idea or the advantage it
offers over existing products/
services must be compatible
with existing attitudes and
beliefs of customers, in
that it should not require a
drastic change in the buyer’s
behaviour.
3. The idea should NOT be so
complex that the buyer has a
difficult time understanding
how to use it.
Points to remember
Characteristics of a successful product-service idea! A successful idea
should have most, if not all, of the following characteristics:
4. The results or benefits of
the idea must be easily
communicable to customers
and potential users.
5. It would be helpful if customers
and potential users can try out
this idea without incurring a
large risk. e.g. the distribution
of samples, or trial users,
would allow potential buyers to
use this new product/service
without risking a purchase.
6. This idea [product/service]
must be readily available
for purchase once the buyer
decides to make a purchase.
7. The buyer must also believe
that this new idea [product/
service] satisfies one of
his/her needs by giving some
immediate benefit.
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Entrepreneurs have limited
human resources, limited time
and limited money, yet their need
for information and advice is
continuous be it financial, taxation,
management, legal, marketing,
IT, insurance, production, etc. In
such cases, entrepreneurs must
resort to outside help. How? By
using the services of professional
consultants, the entrepreneur may
focus on his/her core business
and on what he/she does best and
at the same time, obtain timely
and professional advice on other
matters. Using outside resources
can assist the entrepreneur to
solve existing problems as well as
to avoid potential problems.
The crucial question arises “how
does one select the right outside
resources?” In my own business,
whenever I need some professional
assistance, say, I need a new legal
advisor, accountant, insurance
advisor or even some technical
specialist, e.g., an IT consultant, I
always use the following procedure:
a] First, I ask around amongst
colleagues, friends and fellow
entrepreneurs, to see if they can
recommend the names of a few
good consultants.
b] Once I short-list two or three
prospective consultants, I then
meet up with them separately.
c] I then ask each short-listed
prospective consultant the
following questions:
i. How long have you been
practising?
ii. What are your areas of
specialisation?
iii. How have you helped
entrepreneurs in a similar
business with similar problems
to mine?
iv. Can you mention the name
of some local businesses you
have assisted to date?
v. What are your professional
fees?
Using outside resources
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Don’t just start a business... Start a successful one!
There is no way to be sure that
you have selected the ‘right’
professional, advisor or consultant
to serve your needs. However,
what I do is first I appoint the
professional on a project-basis,
then if I feel that the professional
has done a good job on the
project, I will start working almost
exclusively with that professional.
However, I have learnt not to
enter into exclusive contractual
agreements with professionals
unless I have worked with them
for quite some time and they have
invariably proven to offer a timely,
reasonably-priced and useful
advice which has assisted me in
improving my business venture.
Engaging business consultants
Business consultants may range
from management consultants,
marketing consultants, marketing
communications consultants
[formerly known as advertising
consultants], IT consultants,
production consultants, trainers to
health and safety consultants, etc.
However, some entrepreneurs may
be reluctant to engage business
consultants largely because of
the belief that consultant fees are
too high or because they fear that
consultants would give confidential
information about their business
to other people. Another reason
could be due to a reluctance to
gather information needed for the
consultant to do the job properly.
Sadly, for these and other reasons,
many entrepreneurs are not
aware of the costs or benefits of
business consultants. Business
consultants should be viewed as
another resource. Like all typical
entrepreneurs, in my first year of
operation, I tried to do everything
myself under the presumptuous
standpoint that ‘no one does
it better than me’ and that ‘if
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Don’t just start a business... Start a successful one!
you want something to be done
right, do it yourself!’ On realising
how wrong I was, after a mere
18 months of operation I had
engaged a financial advisor and tax
consultant, an insurance advisor, an
IT specialist and a legal advisor for
my business venture.
Another selection criterion which
worked for me whether selecting
and engaging professional
services advisors or consultants,
was to engage relatively young
professionals who run their
own consultancy firm and are
entrepreneurs themselves.
Invariably, I found that these are
more sensitive to my company’s
requirements and limitations, given
that they themselves manage
their own small operation and will
empathize more with my position.
w You know exactly what specific
tasks you want the consultant
to accomplish.
w Gather information on the
services offered and the
general reputation of various
consultants from your
business acquaintances.
w Ask each potential consultant
to provide you with current
references.
w Know the specific areas
of business in which each
consultant is especially
competent.
In the light of the above discussion, before you select a business
consultant or advisor, you must ensure that:
w When you are considering a
large consulting firm, ensure
that you talk to the persons
who will actually be assigned to
work with you.
w Ask each consultant to
prepare a written proposal
that indicates the work tasks
to be undertaken [the project
deliverables], how these
tasks will be accomplished,
the proposed deadline/s and
also an estimate of the total
cost and terms of payment to
complete the project.
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Using services offered by
Government Agencies/
Departments
During my ten years of operation,
I have seen a concerted attempt
from the part of the Malta
Government to promote and
assist local entrepreneurs via
its Government agencies and
departments, e.g. the Malta
Enterprise [ME], the Euro-
Information Centre [EIC], the
Korradino Business Incubation
Centre [KBIC], the ex-Institute
for the Promotion of Small and
Medium-sized Enterprises [IPSE],
Government’s Small Business and
Crafts Directorate, the Employment
and Training Corporation [ETC],
etc. However, notwithstanding
this, local entrepreneurs still
believe that there is still much
room for improvement vis-à-vis
Government’s small business
assistance strategy. In fact, in
the qualitative research survey I
conducted with local entrepreneurs
in 2006, [Entrepreneurship Base
Document – Malta, ME-EIC, 2006] the
major assistance/support schemes/
incentives requested from the
public sector agencies/departments
by local entrepreneurs comprised
the following:
w More financial assistance;
w More training assistance;
w Assistance to obtain larger
office/factory space;
w More marketing and
management assistance;
w Various other specialised
consultancy services;
w Less red tape/bureaucracy from
Government departments.
For those would-be entrepreneurs
who are interested in setting up
their own company, I suggest
that they approach and schedule
meetings with representatives
of these public sector entities
and enquire on what services,
schemes, incentives they may avail
themselves of. Other private sector
entities, like the local commercial
banks, the Malta Chamber of
Commerce and Enterprise
[MCOC], the General Retailers and
Traders’ Union [GRTU] offer useful
assistance/advice to prospective
entrepreneurs and hence these
entities are definitely worth
contacting.
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Phase 3
Writing a business plan
for your successful idea
Failing to plan
means planning to fail!
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Don’t just start a business... Start a successful one!
Strategic management
and developing
a business plan
In today’s highly competitive and
fierce external environment, the
would-be entrepreneur needs a
powerful weapon to cope with
such a hostile environment. This
important powerful weapon
is the process of ‘strategic
management.’
Strategic management involves the
development of a business plan,
which is like a ‘game plan’ or ‘road
map’ to guide the entrepreneur
as he/she strives to accomplish
his/her business venture’s vision,
mission, goals and objectives and
to keep him/her from straying off
the desired course.
The search for a
competitive advantage
There is no traffic jam
on the extra mile.
The goal of developing a strategic
plan is to create a ‘competitive
advantage’ for the entrepreneur.
This competitive advantage is the
aggregation of factors that sets
a small business apart from its
competitors and gives it a unique
position in the market.
Every entrepreneur or small
business must establish a plan
for creating a unique image in the
minds of its customers. NO business
can be everything to everyone.
In fact, one of the biggest pitfalls
many entrepreneurs stumble into
is failing to differentiate their
business from the rest of the
competitors within the industry.
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Strategic management can increase
an entrepreneur’s effectiveness,
however small businesses must
have a procedure designed to
meet their needs and their small
company’s special characteristics.
It is a mistake to apply a big
company’s strategic development
techniques to a small business
because a small business is NOT
a little big business. Because of
their size and their particular
characteristics, which are
typically a flexible managerial
style, an informal organisational
structure and adaptability to
change, small businesses need a
different approach to the strategic
management process.
The strategic management
procedure for a small business
must include the following features:
w Use a relatively short planning
horizon – two years or less for
most small companies.
w Be informal and not overly
structured.
w Encourage the participation of
employees and ‘trusted’ outside
parties to improve the reliability
and creativity of the resulting
business plan.
w Focus on the customer. Rather
than building your business
strategies around your
competitors’ actions, focus
your strategies around your
customers.
w Do not begin with setting
objectives because extensive
objective setting early
on may interfere with the
creative process of strategic
management.
w Focus on strategic thinking and
not just planning, by linking
long-term goals to day-to-day
operations. Strategic thinking
encourages creativity, innovation
and employee involvement in the
entire process.
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Writing the business plan
Strategic planning is not a result
or an outcome but an ongoing
process. To be useful, the
development of a business plan
must become part of the very
foundation of the entrepreneur’s
business venture. There is no
substitute for a well-prepared
business plan, and there are no
shortcuts to creating one! The
business plan may be the most
important business document that
he/she will ever prepare for his/her
business venture and it will also
probably be the most difficult.
A business plan
has two essential functions:
a] First and more important, it
guides the company’s operations
by charting its future course and
devising a strategy for following
it. As is indicated below, the plan
provides a set of tools which the
entrepreneur must use, namely,
a mission statement, goals,
objectives, budgets, financial
forecasts, target markets, etc
to assist him/her to lead the
business venture successfully.
It gives the entrepreneur and
his/her employees a sense of
direction and as more team
members are committed to
making the plan work, it takes on
a special meaning.
b] The second function of the
business plan is to attract
lenders and investors. A business
plan must prove to potential
lenders and investors that the
entrepreneur’s business venture
will be able to repay loans and
produce an attractive rate of
return.
Although the elements comprised in
a business plan are standard, every
business plan is unique and must
be tailor-made to the individual
entrepreneur’s business idea and
industry environment. If this is a
first attempt at writing a business
plan, it might be opportune for
the would-be entrepreneur to
seek the advice of professionals
with experience in this process.
Although building a business plan
does not guarantee success, it does
raise an entrepreneur’s chances of
succeeding in business.
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The Entrepreneur’s business plan should include
the following sections:
1. Executive Summary
The Executive Summary is a short
overview of the entire business
plan: it provides a busy reader with
everything that needs to be known
about the new venture’s distinctive
nature. It must capture the reader’s
attention. If it misses the mark,
the chances of the remainder of
the plan being read are minimal. A
well-developed, coherent summary,
including the financial proposal,
establishes a favourable first
impression of the entrepreneur and
the business and can go a long way
towards obtaining financing.
Although the executive summary
appears at the beginning of the
business plan, it should be written
after the plan is finished. Only then
can an accurate overview of the
plan be written.
2. The Mission Statement
The Mission Statement addresses
the first question of any business
venture: “What business am I
in?” Establishing the purpose of
the business in writing must come
first in order to give the business
venture a sense of direction.
Without a concise, meaningful
mission statement, an entrepreneur
risks wandering aimlessly in the
marketplace, with no idea of
where to go or how to get there!
The mission statement ‘anchors’
a company in reality and sets the
tone for the entire company.
3. The Company History
This section involves writing a
brief summary, highlighting the
significant financial and operational
events of the business since its
inception. This section should
also describe when and why the
company was formed, how it has
evolved over time and what the
entrepreneur envisions for the
future.
4. The Business
and Industry Profile
This section should begin with
a statement of the company’s
business goals and a narrower
definition of its immediate
objectives. Business Goals are
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broad, long-range statements
of what the entrepreneur plans
to achieve in the future. They
express the business venture’s
raison d’etre, that guide its overall
direction, i.e. they address the
question: “Why am I in business?”
Business objectives, on the
other hand, are short-term,
specific performance objects that
are attainable, measurable and
controllable. Every objective should
reflect some general business
goal and include a technique for
measuring progress towards its
accomplishment. To be meaningful,
an objective must have a timeframe
for achievement. Both goals and
objectives should relate to the
company’s basic mission.
This section should also provide
the reader with an overview of
the industry and the market
segment in which the new venture
will operate. Industry data such as
market size, growth trends and the
relative economic and competitive
strength of the major companies
in the industry all set the stage
for a better understanding of the
viability of the new product/service.
In this section, the entrepreneur
must also turn his/her attention
to assessing his/her company’s
strengths and weaknesses.
Building a successful strategy
demands a business to
capitalise on its strengths and
also overcome or compensate
for its weaknesses. Company
strengths are positive factors
over which the entrepreneur
has full control and that he/she
can use to accomplish his/her
mission, goals and objectives,
while company weaknesses are
negative factors [which are also
controllable factors] that inhibit
the accomplishment of a company’s
mission, goals and objectives.
Typical weaknesses may be: lack
of capital, a shortage of skilled
workers, an inferior location site,
etc.
The entrepreneur must also
strive to identify any market
opportunities or market threats
that might have a significant
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impact on the business. Market
opportunities are, in fact, positive
forces, over which the entrepreneur
has no control, but that the firm
can still exploit to accomplish its
mission, goal and objectives. On
the other hand, market threats
are negative forces, over which the
entrepreneur has no control, but
that may inhibit his/her company’s
ability to achieve its mission,
goals and objectives. Although
the entrepreneur cannot control
the opportunities and threats
emanating from the market, it
is essential that he/she tries, as
much as possible, to capitalise on
the positive market opportunities
and also shield the business from
market threats.
A very effective management tool
which assists the entrepreneur
in conducting this four-factor
assessment is called the SWOT
Analysis tool. The acronym ‘SWOT’
stands for strengths, weaknesses,
opportunities and threats.
5. Business Strategy
This section is a very important
part of the business plan because
here the entrepreneur will indicate
his/her view of the strategy that
is needed to beat the competition.
In the previous section the
entrepreneur defined WHERE
he wants to take the business
by establishing the goals and
objectives. This section will address
HOW to get there, i.e. the business
strategy. How can this be done?
There are a number of management
tools available for the entrepreneur
to assist him/her to develop an
effective business strategy:
a] Identify the Company’s
Core Competencies
In this section of the business
plan, the entrepreneur must
explain how he/she plans to
gain a sustainable competitive
edge [which we explained on
page 44] in the market and what
sets the business apart from the
competition. The entrepreneur
should comment on how he/she
plans to achieve the business
goals and objectives in the face
of competition and government
regulation and should identify
the image that the business
will try to project. Here, the
entrepreneur must define his/her
company’s core competencies.
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Core competencies are a unique
set of lasting capabilities that
a company develops in key
operational areas, such as quality,
service, innovation, flexibility,
responsiveness, etc which allow it
to vault past competitors.
Normally, a company is likely to
build core competencies in no
more than four or five areas.
These core competencies become
the nucleus of a company’s
competitive advantage but to
be effective these competencies
should be difficult for competitors
to copy and they must provide
customers with some kind of
perceived benefit. The small
size of the entrepreneur’s
business venture may be used
as an ‘advantage’ because
this smallness will allow him/
her to do things which larger
competitors cannot do, e.g.
speed of delivery, closeness to
customers, ability to innovate
fast, etc. The key to success of
these core competencies is to
concentrate them on providing
superior service and value for the
entrepreneur’s target customers.
b] Identify the Key Factors for
Success in the Business
[better known as the
Key Success Factors].
Key success factors are
relationships between a
controllable variable and a
critical factor influencing a
company’s ability to compete in
the market. Let’s give a typical
example: everyone agrees
that the key success factors
of a typical restaurant include:
maintaining the food quality,
cleanliness, consistency, a good
friendly and attentive service by
a well trained waiting personnel,
a right location, and a trained,
dependable restaurant manager.
Restaurants lacking these key
success factors are not likely to
survive but those restauranters
who build their businesses
with these factors in mind
will prosper! So it is essential
that when an entrepreneur is
entering a new industry sector,
he/she must identify the key
success factors of this industry
and then build a strategy on the
foundation of these factors.
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c] Formulating Strategic Options
and Selecting an Appropriate
Business Strategy
By now, the entrepreneur should
have a clear picture of what his/
her business does best and what
its competitive advantages are.
Similarly, he/she should know its
business venture’s weaknesses
and limitations as well as those
of its competitors. This next
step involves evaluating the
strategic options available
and then preparing a business
strategy designed to achieve
the business’s goals and
objectives.
The entrepreneur has largely
three strategic options to
choose from. In his classic
book, Competitive Strategy,
1980, Michael Porter defines
these three strategies, as
indicated below. Which strategy
to select will largely depend
on the entrepreneur’s [a] core
competencies and the key
success factors of the industry
sector he/she is operating in.
i. A cost leadership strategy:
The entrepreneur pursuing
a cost leadership strategy
strives to be the lowest-
cost producer relative to its
competitors in the industry.
Low-cost leaders have a
competitive advantage in
reaching buyers whose
primary purchase criterion is
‘price’ and these companies
have the power to set the
industry’s price floor.
ii. A differentiation strategy:
The entrepreneur pursuing
a differentiation strategy
seeks to build customer
loyalty by positioning its
products/services in a unique
or different way. There
are many ways to create
a differentiation strategy,
but the key concept is to be
special at something that is
important for the customer. In
other words, the entrepreneur
must strive to be better
than his/her competitors at
something that customers
value, because not every
product/service difference is a
differentiator!
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iii. A Focus Strategy:
A focus strategy recognises
that not all markets are
homogeneous [the same].
In fact, in a given market,
there are a number of market
segments, each segment
having different needs, wants
and characteristics. The
principal idea of this strategy
is for the entrepreneur to select
one or more market segments,
identify the customers’ special
needs, wants and interests and
approach them with a product/
service designed to excel in
meeting these needs, wants
and interests. A focus strategy
builds on differences among
market segments.
The strategic options available to the entrepreneur
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Don’t just start a business... Start a successful one!
d. Identify a Market Segmentation
and Product Positioning
Strategy
Here the entrepreneur must
segment the whole market and
identify the market segment
or segments he/she would like
to meet the requirements of.
This requires the entrepreneur
to know who his/her customers
are, their characteristics, their
likes and dislikes, etc. To segment
a market successfully, the
entrepreneur must first identify
the characteristics of two or more
groups of customers with similar
needs and wants. The key is to
develop a basis for segmenting
the whole market, e.g., on benefits
sought, product usage, brand
preferences, purchase patterns,
etc, and then use this basis to
identify the various submarkets
[market segments] to enter.
The entrepreneur must then
verify that the selected market
segments are large enough and
have enough purchasing power to
generate a profit for the company.
He must then assess whether
these market segments are
accessible, i.e. that they may be
reached.
Once the entrepreneur
has identified the market
segments he/she wants to
target, he/she must now
position its product offer
to these market segments
in a way that the latter
perceive the entrepreneur’s
product/service in a desired
image for the business and
its products/services. So
product positioning involves
the entrepreneur influencing
the customers’ perceptions
to create the desired image
for the business and its
products/services. Proper
product positioning gives the
small business [entrepreneur]
a way of setting itself apart
from the competition, which
may be its foundation for
developing a competitive
advantage. A typical way how
an entrepreneur may establish
a competitive advantage is to
rely on a ‘natural’ advantage of
being a small business, e.g. a
small firm’s ability to respond
quickly to the target markets’
needs; its ability to remain
flexible and willing to change
to reach the market segment in
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Don’t just start a business... Start a successful one!
question, its special knowledge
of a particular product/service,
etc.
The business strategy the
entrepreneur will select, the
market segments he/she decides
a] When segmenting the market,
the entrepreneur must ask:
What groups of customers in
my market are similar enough
that the same product/service
will appeal to all of them?
b] When selecting a target
market, the entrepreneur must
ask: Which specific group of
customers do I want to target?
Questions to ask yourself
In a nutshell, the process of selecting a target market and positioning
strategy can be summarised in three basic questions:
c] When developing a unique
positioning strategy, the
entrepreneur must ask: What
position will my company or
product/service occupy in the
minds of my customers and
potential customers that will
differentiate it from all my
competitors?
to compete in, will depend on
the competitive advantages
the company enjoys in each
market segment. In some
cases, an entrepreneur may
be implementing different
strategies across a number of
market segments.
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6. Translating the Business
Strategy Plan into distinct
Action Plans
No strategic plan is complete
until it is put into action! The
entrepreneur must now convert
his/her firm’s business strategy
plan into distinct operations
plans that will guide the company
on a daily basis and become a
visible and active part of the
business. These action plans will
now turn the business plan into
a real working document instead
of letting it sit on an office shelf
collecting dust!
At this stage, the entrepreneur
will develop three essential Action
Plans:
wThe Marketing Plan
wThe Operations Plan
wThe Financial Plan.
The marketing plan
No Customers, No Business!
Don’t wait for customers to come to you, go out and find them!
As we have already discussed,
the first steps in developing an
effective marketing strategy are:
[a] conduct marketing research,
segment the market into
distinct market segments, [c]
identify the market segments the
entrepreneur wishes to target and
[d] develop an effective product
positioning strategy. This means it
will position its product/service in a
unique position as perceived by its
customers or potential customers
that will differentiate it from all of
its competitors.
Having done this, the entrepreneur
must now plan the details of his/her
company’s marketing mix. The
firm’s company mix is the set of
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controllable, tactical marketing
tools that it uses to produce the
response it wants from each of its
target markets. Every entrepreneur
has 7 tools in his/her marketing
tool box and these are usually
referred to as the 7 Ps: the product,
price, promotion, place, people,
physical evidence and process.
i. The Product
The product/service is the
entrepreneur’s core product. The
entrepreneur must decide on the
main characteristics of his/her
product/service, namely:
w The quality level of the product/
service.
w The features of the product/
service.
w The design of the product/
service.
w A brand name for the new
product/service.
w The packaging for the product/
service.
w The after-sales service
w The warranty [where applicable].
ii. The Price
The entrepreneur must decide on
the price of the product/service.
Given the small size of the company
of a would-be entrepreneur, the
latter will normally be a price-taker
and not a price-maker, which means
that he/she must accept the price
levels as dictated by the market in
question.
However, from his/her end, when
setting the price of the product/
service, the entrepreneur must
keep in mind that pricing plays
a critical role in the company’s
overall strategy and the pricing
strategy must be compatible with
the company’s total business [and
marketing] plan. The entrepreneur
must also keep the following issues
in mind when establishing a price
for the product/service:
w Assess the customer’s perceived
price value for the product/
service in question.
w Assess the actual demand for the
product/service.
w Calculate the total cost of
producing the product/service,
i.e. the variable costs and
overhead costs.
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w Calculate the break-even point of
the company.
w Assess the pricing of competing
products/services.
w Research the prices and
discounts already available on
the market.
w Keep in mind that the ‘price’ is
only one of the many attributes
of the product/service and hence
he/she must assess the other
elements of the marketing mix
and that of competition, e.g. the
product quality, delivery times,
etc.
w Not to think that the new
product/service has to be the
cheapest on the market.
iii. Promotion
Given the limited financial
resources of the would-be
entrepreneur, more often than not,
at the start of the business, the
entrepreneur is the key person in
any promotion effort and he/she
has the main responsibility for
developing position relationships
between the business and the
customers. The reputation of a
small business is usually directly
related to the personality and
actions of the owner – the
entrepreneur! This is why the
new entrepreneur must look
professional and equip him/herself
with professionally-produced
business cards, office stationery,
etc and also produce a corporate
profile.
However, the entrepreneur may
still make effective use of other
promotional tools:
w Word-of-mouth promotion [most
effective promotional tool]
which is triggered by satisfied
customers who would have used
the entrepreneur’s product/
service.
w A professionally drawn up
website of the company.
w Sales promotion, e.g. some
special offers to increase sales,
demonstrations, free samples,
special introductory offers, etc.
w Participate in a local specialised
trade fair/exhibition.
w Public relations, e.g. press
releases, advertorials, etc.
w At a later stage, the
entrepreneur might even
consider some mass media
advertising, e.g. advertising
on local radio, newspapers, TV,
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billboards, bus advertising, etc.
This promotional tool, although
very effective, is also relatively
expensive.
iv. Place [distribution]
The entrepreneur must decide
whether he/she wants to sell
the product/service directly
to consumers or through
intermediaries [e.g. wholesalers
and retailers]. If the entrepreneur
is interested in opening a new retail
outlet, e.g a boutique, a hair and
beauty salon, an antiques shop,
etc, the choice of the business
location for the retail outlet itself
has to be made very carefully. To
increase the chances of success,
considerable thought should be
given to the problem of selecting
the right location of the business. A
good location may allow a not-so-
good business to survive, whereas
a bad location may result in failure
for even the best planned business.
The relative importance of the
location differs according to the
nature of the business of the
retail outlet, however in general,
the entrepreneur must decide the
location of the outlet, largely based
on the following:
w Is the location close to the target
customers?
w Is the location visible and easy to
find by the customers?
w Is there a lot of road traffic to
reach the site?
w Is there adequate parking?
w Is there room for future
expansion?
w What is the reputation of the
site?
w Where are competitors’ retail
outlets located?
v. People, Physical Evidence
and Process
People, physical evidence and
process are very important tools
for the entrepreneur producing
a ‘service’ product. ‘People’ refer
to the entrepreneur’s employees
who will be interfacing with the
customers. ‘Physical evidence’
refers to the entrepreneur’s efforts
to “tangibilise” the intangible
aspects of the service product, e.g.
produce promotional brochures,
promotional CDs, etc. And the last
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P stands for ‘Process.’ This tool
assists the entrepreneur to, as
much as possible, standardise the
process of his service product, e.g.
if the hair-styling salon has three
employees who wash customers’
Questions to ask yourself
Many entrepreneurs start their business by working from home. I was,
in fact, one of these as for the first 18 months, I operated by business
from home. Although at first this may be a most suitable first base
for the starting business, one must ask him/herself these questions
to prevent expensive mistakes, whether emanating from a legal or
practical matter.
Issue to address Check with
Planning permission & building regulations MEPA
Mortgage Bank
Insurance Insurance advisor
Tax consequences Accountant
Business plan legislation MEPA and legal advisor
Disturbance Neighbours
Effect on family life and social life Family
Your own work efficiency at home Yourself
hair, then the entrepreneur will try
and standardize the hair-washing
process of all three employees
so that the same quality service
is given every time, irrespective
of which employee is washing the
customer’s hair.
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The Operations plan deals with the
day-to-day operations of the
company. For example, in the case
of a manufacturing company, this
section of the plan should begin by
describing how the firm plans to
manufacture its first product. The
reader will want to know how much
of the manufacturing the company
will be doing itself, and how much,
if any, will be sub-contracted out to
others.
The location of the manufacturing
facility should also be specified
in the operations plan. Another
important aspect is how much
inventory will need to be carried
in stock in order to meet the
customer demand. If the firm is
a service organisation, similar
information should be provided.
The operations plan should also
include a description of the
network of suppliers, business
partners and service providers
that will be necessary to build the
product or produce the service the
firm will sell.
The operations plan
The operations plan should also
include an explanation of the firm’s
quality control procedures. The
plan should give an overview of
what monitoring or inspection
processes will be built into the
manufacturing process to ensure
high quality. Customer-support
strategies should then be
discussed. If the company is obliged
to provide after-sales support to
its customers through a call centre
or other means, these obligations
should also be clearly described.
For product-manufacturing
companies, the operations plan
must also indicate the risks and
regulations pertaining to the
operations of the firm, such as non-
routine regulations regarding waste
disposal and worker safety.
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The financial plan must
demonstrate the financial viability
of the business.
Most entrepreneurs, whether they
are at start-up stage or have been
in business for several years, have
four main financial objectives:
w Profitability - This refers to
a company’s ability to make a
profit.
w Liquidity - This refers to a
company’s ability to meet its
short-term obligations.
w Efficiency – This refers to how
productively a company is
utilizing its assets.
w Stability – This refers to the
overall health of the financial
structure of the company,
particularly as it relates to its
debt-to-equity ratio.
The financial plan should begin
with an explanation of the funding
that will be needed by the business
during the next two to three years
along with an explanation of
how the funds will be used. This
The financial plan
Questions to ask yourself
A properly managed company
[large or small] must also
stay on top of the following
questions:
w How are we doing? Are we
making or losing money?
w How much cash do we have in
hand?
w Do we have enough cash
to meet our short-term
obligations?
w How efficiently are we
utilising our assets?
w How does our growth and net
profits compare to those of
our industry peers?
w Where will the funds we need
for capital improvements
come from?
w Are there ways we can
partner with other firms to
share risk and reduce the
amount of cash we need?
w Overall, are we in good shape
financially?
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Don’t just start a business... Start a successful one!
information is called a sources and
uses of fund statement.
The next portion of this section
should include the financial
projections, which are intended to
further demonstrate the financial
viability of the business. The
financial projects should include
two to three years of projected
income statements, balance sheets
and statements of cash flows. It
is also crucial that an assumption
sheet precedes the projections.
This assumption sheet explains the
basis for the numbers included in
the projected financial statements.
Points to remember
The process of financial management involves the following 4 steps.
A start-up company will obviously start at Step 2 as it would not have
any historic financial statements.
Step 1 – The Preparation of Historic Financial Statements
w Income statement
w Balance sheet
w Statement of cash flows
Step 2 – Preparation of Forecasts
w Income
w Expenses
w Capital Expenditure
Step 3 – Preparation of Projected Financial Statements
w Income statement
w Balance sheet
w Statement of cash flows
Step 4 – Ongoing Analysis of Financial Results
w Ratio analysis
w Measuring results vs. plans
w Measuring results vs. industry norms.
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Don’t just start a business... Start a successful one!
7. Establish Accurate Controls
for The Business Plan
Good planning includes controls
necessary to implement the plan
successfully. Although long-term
plans may be changed, they provide
direction for all business activities.
Planning without control has little
operational value, and so a sound
planning programme requires a
practical control process. The
proposed actions and activities
indicated in the business plan
become the standards against
which actual performance is
measured.
Controlling projects and keeping
them on schedule means that
the entrepreneur must identify
and track key performance
indicators. The source of these
indicators is the operating data
from the company’s normal
business activity; these are the
guideposts for detecting deviations
from established standards.
Accounting, production, sales,
inventory and other operating
records are primary sources of
data the entrepreneur can use for
controlling activities.
8. Critical Risks Factors
Although a variety of potential
risks may exist, e.g. management
risks, marketing risks, operating
risks, financial risks, etc, the
entrepreneur must tailor this
section to depict its truly critical
risks. By highlighting these critical
risks, the entrepreneur is showing
that he/she understands and is fully
aware of the critical risks facing the
business.
The critical risks a new business
may face depend largely on
its industry and its particular
situation. At this stage, the
entrepreneur must also highlight
the contingency plan or actions,
which he/she might need to take
if the business plan does not
materialise.
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Don’t just start a business... Start a successful one!
Points to remember
The ten important questions a business plan should answer:
1. Is the business just an idea,
or is it a business opportunity
with real potential?
2. Does the business venture
have an exciting and sensible
business model? Will other
firms be able to copy its
business model or will the firm
be able to defend its position
through patents, copyrights
or some other intellectual
property means?
3. Is the product/service viable?
Does it add significant value to
the customer? Has a feasibility
analysis been completed? If so,
what are the results?
4. Is the industry in which the
product/service will compete
growing, stable or declining?
5. Does the business venture
have a well-defined target
market?
6. How will the company’s
competitors react to its
entrance into its markets?
7. Is the entrepreneur skilled and
up to the task of launching the
new business venture?
8. Is the business venture
organised in an appropriate
manner? Are its strategy and
business practices legal and
ethical?
9. Are the financial projections
realistic, and do they project
a bright future for the firm?
What rate of return can
investors expect?
10. What are the critical risks
surrounding the business, and
does the entrepreneur have
contingency plans in place if
risks become actual problems?
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Don’t just start a business... Start a successful one!
Setting up my own
successful business
- a re-cap!
Get it right, first time!
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Don’t just start a business... Start a successful one!
Now that you have read this
manual, I have two questions to ask
you:
1. Do you feel personally prepared
to take the plunge and
become a promising, budding
entrepreneur?
2. Do you feel you have conducted
a good initial preparation for
your new business?
I have drawn up two checklists
to assess [a] your personal
preparation and the initial
preparation for your business
venture. If you answer ‘yes’ to
these checklist questions then this
means you have completed the
first essential stage of setting up a
business ...successfully!
Checklist 1 - Personal preparation
Are you personally prepared to become a promising entrepreneur?
1. Are your physical health and
age compatible with your
proposed project?
2. Can you cope mentally
with the new stresses and
demands?
3. Do you welcome calculated
risks and responsibility?
4. Have you demonstrated
management ability?
5. Do you have the quality of
endurance?
6. Can you work alone for a
sustained period of time?
7. Can you accept a reduced
income, at least, at the
beginning?
8. Will you work without the
usual financial security that a
regular employee has?
9. Are you self-confident in
the face of adversity and
rejection?
10. Do you know how many
hours per week you wish to
work?
11. Do you know how supportive
your family members will be?
continues on next page...
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Don’t just start a business... Start a successful one!
12. Have you discussed the
project with your family
members?
13. Do you appreciate what
effect the project can have
on your family life and your
family home?
14. Have you identified your
personal skills?
15. Are you knowledgeable
enough on the business
sector you are going to enter
into?
16. Can you identify what your
business project will need
from you?
17. Do you know why you want to
start the project?
18. Have you set out truthfully
what you want out of the
business, and by when?
19. Will this project affect your
personality?
20. Do you know what your
attitude is towards: long
working hours, selling, asking
for money, asking for help,
power, success and above all,
failure?
21. Can you take decisions?
22. Do you get on well with
people?
23. Have you realistically listed
your personal attributes and
shortcomings?
24. Have you discussed these
attributes and shortcomings
with an honest and respected
friend?
from previous page...
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Don’t just start a business... Start a successful one!
Checklist 2 - Initial preparation for business
Have you conducted a good initial preparation for your new business?
1. Do you have a clear idea of
the business opportunity now
facing you?
2. Will your product sell?
3. Do you accurately
understand your intended
product/service?
4. Have you looked at the
market for it and can answer
the following questions:
a] What do people buy?
b] When do they buy it?
c] Where do they buy it?
d] Who does the buying?
e] Why should they choose
your product/service?
f] How will you set about
selling your product/
service?
g] How big is the market for
your product?
i] Do you think this market
will grow or contract?
j] Once you start operating,
what share of the market
are you aiming at?
5. Have you checked the moral,
legal and environmental
objections to your project?
6. Do you know why your
product/service is better
than those of competitors?
7. Can you explain this clearly
to customers?
8. Does it do what you say it
does? Has it been tested?
9. Will you continue to improve
your product?
10. Have you sold your product/
service yet?
11. Are you familiar with what
customers want, in terms
of delivery and after-sales
service requirements, quality
levels and discount levels?
12. Do you know who your
competitors are?
13. Do you know what they will
do if you start doing well?
14. Can you keep up to date with
changing techniques and
technology?
continues on next page...
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Don’t just start a business... Start a successful one!
15. Have you spoken to any
potential customers about
the market?
16. Do you know what your
product will cost to make?
17. Have you calculated your
overhead costs, including
selling and distribution?
18. Have you attempted to
produce a simple cash flow
projection?
19. At this stage do you have an
idea of:
a] How much cash you
will need in the next 12
months?
b] How much cash you can
personally raise?
c] How much external cash
you need?
d] When you can repay it?
20. Have you agreed within the
family what security you can
offer your financiers?
21. Do your business partners/
shareholders understand your
project?
22. Do you know how much it
will cost to promote your
product?
23. Do you have:
a] A legal advisor?
b] An accountant or financial
advisor?
c] A bank manager?
d] A management/marketing
consultant?
e] Other technical specialists?
24. Have these advisors been
properly briefed about the
services you require from
them and have they formally
informed you about the cost
of their services?
from previous page...
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Don’t just start a business... Start a successful one!
Author’s final words
I trust that all those promising and
up-and-coming entrepreneurs, male
or female, have found this Manual
useful in their quest to set up their
own ‘successful’ business. I augur
you all the best of luck for your new
‘successful’ business!
I am writing this manual while
inaugurating the tenth year of
operation of my own business…
I am sure that in ten years’ time,
one of you readers will be writing
a similar Business Manual for the
budding entrepreneurs of the
following decade!
I leave you with this interesting quotation:
People fall into three categories:
- Those who make things happen.
- Those who watch things happen.
- Those who are left to ask what did happen.
George Bernard Shaw
I ask: In which category of people would you like to be?
Good luck for your new business venture!
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Don’t just start a business... Start a successful one!
List of references
Arden P., It’s Not How Good You Are, It’s How Good You Want To Be
(Phaldon Press 2006).
Ashton R., The Entrepreneur’s Book of Checklists
(Pearson Prentice Hall 2004).
Barringer B., & Ireland R., Entrepreneurship – Successfully
Launching New Ventures (Pearson Prentice Hall 2006).
Birley S., & Muzyka D., Mastering Enterprise
(Pearson Professional 2002).
Bolton B., & Thompson J., Entrepreneurs – Talent, Temperament,
Technique (Butterworth-Heinemann 2005).
Burch J., Entrepreneurship (John Wiley & Sons 1992).
Fsadni M., Entrepreneurship Base Document (Malta) – A Qualitative
Research Project (Malta Enterprise – Euro Info Centre 2006).
Kotler P., & Armstrong G., Principles of Marketing
(Prentice Hall 2006).
Malhotra N., Marketing Research – An Applied Orientation
(Prentice Hall 2006).
Meredith G., Nelson R., & Neck P., The Practice of
Entrepreneurship (International Labour Organisation 1987).
Porter M., Competitive Strategy: Techniques for Analysing
Industries and Competitors (Free Press 1980).
Rosthorn J., Haldane A., Blackwell E., & Wholey J., The Small
Business Action Kit (Kogan Page 2002).
Zimmerer T., & Scarborough N., Essentials of Entrepreneurship
and Small Business Management
(Pearson Education International 2004).
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Don’t just start a business... Start a successful one!
The present project which I have
had the honour to lead has given
me the opportunity to work with a
number of people whose important
contribution has proved crucial
to its success. It is with heartfelt
gratitude that I am pleased to
acknowledge the determination and
commitment shown by everyone
involved in achieving this common
goal.
First and foremost, I am grateful
to the Employment and Training
Corporation (ETC), particularly the
Chief Executive Officer, Dr. Sue
Vella and Senior Manager - Training
Services, Mr. Joe Cutajar, for their
continuous and generous support
throughout the various stages of
the implementation of the project.
I would also like to thank Ms. Marika
Fsadni B.A. (Hons) Bus. Mgt., M.B.A.
(Brunel), who, in researching and
writing this manual, has produced
a remarkably professional work
which is still user-friendly even
for those clients of ours who are
Project Leader’s Acknowledgements
approaching entrepreneurship for
the first time. Users of this manual
will be fortunate in benefiting from
the experience of an expert who
is not only fully qualified and well-
published in her field of expertise
but is also an entrepreneur in
her own right. Writing also from
her personal experience as an
entrepreneur who has, in the past
ten years, helped a large number
of other entrepreneurs start
and grow their own business, Ms
Fsadni, has written a manual that
will assist those starting on a new
entrepreneurial career avoid many
of the pitfalls awaiting the new
entrepreneur.
Finally I would also like to thank the
Corporation’s EU Unit at ETC and
the contractor, for their proficient
approach to their work, and their
support and patience in helping
me administer such an interesting
project.
Philippe Vancell
ESF 47 Project Leader
doc_559897883.pdf
In such a detailed explanation pertaining to entrepreneurship manual dont just start a business. start a successful one.
1
Don’t just start a business... Start a successful one!
Entrepreneurship Manual
Don’t just start a business...
Start a successful one!
Structural Funds Programme for Malta 2004-2006
Project part-financed by the European Union: European Social Fund
Co-financing rate: 75% European Union, 25% Malta Government
2
Don’t just start a business... Start a successful one!
Structural Funds Programme for Malta 2004-2006
Project part-financed by the European Union: European Social Fund
Co-financing rate: 75% European Union, 25% Malta Government
First published in November 2007
Researched and written by Marika Fsadni
© Employment and Training Corporation, 2007
Employment and Training Corporation (ETC)
Óal Far BBÌ 3000, Malta
Tel: (+356) 2220 1100
Fax: (+356) 2220 1802
Email: [email protected]
www.etc.gov.mt
Employment and Training Corporation (ETC)
Valletta Training Centre
76 Old Theatre Street
Valletta VLT 1427, Malta
Tel: (+356) 2124 5778/9
Fax: (+356) 2124 5242
Email: [email protected]
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system or transmitted
in any form or by any means without prior permission in
writing of the Employment & Training Corporation,
which must be obtained beforehand.
ISBN-13: 978-99932-686-6-6
Production: Outlook Coop
3
Don’t just start a business... Start a successful one!
Contents
Entrepreneurship is the key ...................................................................................... 5
Foreword ......................................................................................................................... 7
How to use this business manual ............................................................................11
Phase 1: Identifying the personal strengths
Introduction .................................................................................................................16
Who is an entrepreneur? ...........................................................................................16
The major personal strengths ................................................................................16
A positive attitude is essential ......................................................................... 17
Strong leadership skills .......................................................................................18
Successful entrepreneurs are successful leaders .................................18
Task-oriented and person-oriented leadership ......................................18
The effective decision-maker ............................................................................. 21
A results-oriented problem-solver ................................................................ 22
Addressing the ‘am i good enough?’ syndrome .......................................... 23
Other personal strengths ................................................................................... 26
Phase 2: Turning your idea into a successful business idea!
Introduction ................................................................................................................30
The steps to be taken by the entrepreneur ........................................................ 31
Using outside resources ...........................................................................................39
Engaging business consultants .......................................................................40
Using services offered by Government Agencies/Departments ............ 42
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Don’t just start a business... Start a successful one!
Phase 3: Writing a business plan for your successful idea
Strategic management and developing a business plan ..............................44
The search for a competitive advantage ...........................................................44
Writing the business plan .......................................................................................46
The entrepreneur’s business plan .................................................................. 47
The marketing plan .............................................................................................55
The operations plan ............................................................................................60
The financial plan ..................................................................................................61
Setting up my own successful business - a re-cap! .........................................65
Author’s final words ..................................................................................................70
List of references ........................................................................................................ 71
Project Leader’s Acknowledgements ................................................................... 72
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Don’t just start a business... Start a successful one!
Entrepreneurship is the key
The Employment and Training
Corporation then further developed
this service by introducing an
innovative business start-up
scheme commonly known as the
INT scheme or Ibda Negozju Tieg?ek
(Start Your Own business), which
besides training also provides
guidance, support, mentoring and
a start-up grant to successful
participants.
Following the success of the above
initiatives, the Employment and
Training Corporation embarked
on a new venture, to promote
an entrepreneurial culture
among women. With the financial
backing of ESF funds, the project,
in particular, aims at encouraging
women to consider the option of
setting up their own business and
at the same time, create more
and better jobs and promote
entrepreneurship. Some of the
outcomes of this ESF project were
the provision of training to a number
of female participants interested
in starting their own business, the
setting up of a resource centre,
organisation of a marketing
campaign promoting business
start-ups as a route to employment
and the development of a training
manual as a guide to starting a
business.
The Employment and Training Corporation (ETC) has during
the past years been one of the forerunners in the promotion of
an entrepreneurial culture. The Corporation was one of the first
entities to start offering training opportunities to individuals
who were inclined to set up their own business and to others
who had already launched their business but who could also
benefit through improved business management skills.
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Don’t just start a business... Start a successful one!
This manual illustrates the different
steps one must take when entering
the field of entrepreneurship. It
was developed by Marika Fsadni
on behalf of the Corporation
with financial support from the
European Social Fund. The aims
and objectives of the project are
in line with those portrayed by
the European Social Funds in that
it aims to promote economic and
social cohesion in member states
and as this manual illustrates,
makes a real difference to the lives
of persons benefiting from this
fund.
I would like to thank the Project
Leader, Philippe Vancell, and staff
within the Corporation for their
dedication to making this project a
success, as well as the management
team and the administrative
staff for their equally important
contributions. Last but by no
means least, the successful
outcome of this project is also due
to the collaborative effort of a
number of entities that enabled the
Corporation to utilise these funds
for the benefit of its clients. While
an exhaustive list is not possible,
the Corporation would like to thank
in particular the various Ministries
as well as the Managing Authority
for its support in the application for
and utilisation of these funds.
Michael Balzan
Chairperson
ETC
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Don’t just start a business... Start a successful one!
Foreword
Ten years ago, I was at a crossroad
in my career. Armed with little more
than my education and some work
experience in the public and private
sector; saddled with hefty monthly
house loan repayments and with no
regular income; my choices at the
time were limited, so I decided to
take the plunge and start my own
business.
Today, ten years later, I run my own
marketing and HR development
consultancy firm, I have a sound
client base, employ my own work
team, have my own office with a 5-
workstation LAN and about to move
into larger offices very shortly…
and, I am, above all, a woman
entrepreneur!
Is this a unique experience? Not at
all! Every successful entrepreneur
relates his/her own experience on
how it all started. From a survey
I conducted with local male and
female entrepreneurs last year
[a survey commissioned by Malta
Enterprise in November 2006], 31%
of the entrepreneur respondents
claimed that the reason for setting
up their own business was because
they wanted to do something
of their own and wanted to be
their own ‘boss,’ while a close
28% indicated that it was always
their ambition/dream to set up
their own business. The rest of
the entrepreneur respondents
indicated that they either
wanted a new challenge, sought
a new business opportunity, had
quarrelled with their previous boss
and hence were out of a job, or
simply because they set up their
business by sheer chance and
coincidence.
Whatever the initial reason for
starting your own business, what is
really important is not the ‘why’ or
‘how’ you start but what degree of
8
Don’t just start a business... Start a successful one!
commitment you are prepared to
take to not just starting a business,
but to start a successful one!
It is not by chance that I chose
the title of this business manual
“Don’t just start a business... Start
a successful one!” – I chose this
title with a purpose. Anyone can set
up his/her own business. We hear
of and see so many businesses,
large and small, being set up but
which, sadly, by their third or
fourth year of operation, they
simply either phase out, disappear
or go bankrupt. From my own
experience, I found that the real
challenge is not actually starting
a business but to, year after year
of sheer hard work and dedication,
manage to make it grow and
render it successful!! This, I admit,
is not an easy task! I distinctly
remember some ten years ago
when I had decided to give it a try,
I had promised myself not to look
back for a good three years but to
evaluate my position at the close
of the third year and then decide
on whether to continue to grow or
phase out. At the close of my third
year of operation, there was no
such decision to be taken as the
seeds I had sowed for three solid
years were already bearing fruit!
What renders a business successful,
be it large or small, a service-
oriented operation, an importing
house or a manufacturing concern,
etc, is when the business manages
to identify and sustain, what
is known in management as a
“competitive advantage” [Michael
Porter, 1980] over its competitors.
This “competitive advantage” is the
aggregation of factors that sets a
business apart from its competitors
and gives it a unique position in
the market, i.e. how successful
the budding entrepreneur is in
differentiating his/her business/
product from the rest of his/her
competitors within the industry.
How can an entrepreneur do this?
By skilfully identifying his/her
company’s “core competences,”
which are a unique set of lasting
capabilities that the entrepreneur
develops in key operational
areas, e.g. in customer service,
product quality, product design,
packaging, etc, which are perceived
as essential by customers and
which are difficult for competitors
9
Don’t just start a business... Start a successful one!
to copy. When the entrepreneur
manages to identify his/her
business’s core competences and
match these with what are known
as the “key success factors”
[critical factors] of the industry
sector the business is operating
in, then the entrepreneur is
guaranteed success!
However, one may argue, is all
this relevant to an entrepreneur,
who is typically characterised by a
small operation, limited resources,
limited liquidity, etc? Well, I ask:
have you ever heard the saying
“small is beautiful”? Do you agree
with it? Do you recall the story of
David and Goliath? Is this story
still relevant in the light of today’s
increasingly fierce and cut-throat
competition? Well, it all depends
on whether you are the optimist
who perceives a glass half full or
the pessimist who perceives it
half empty! The small size of the
entrepreneur’s business venture
may be used as an ‘advantage’
because this smallness will allow
him/her to do things which larger
competitors, sometimes known
as ‘sleeping giants’ cannot do,
eg. speed of delivery, closeness
to customers, ability to innovate
fast, etc. The key to success of
these core competencies is for the
entrepreneur to concentrate them
on providing superior service and
value for the entrepreneur’s target
customers. The entrepreneur would
hence have identified the ‘winning
formula’!
‘Small is beautiful’, the ‘young
David’, the ‘sleeping giant,’ the
‘half-full glass’, the ‘smallness’
advantage... All these become
reality only if the entrepreneur
truly believes in them and above all,
adopts the right positive attitude
coupled with sheer hard work.
When the Employment and Training
Corporation asked me to write this
business manual, I was pleased to
be able to share my own personal
experience as a local entrepreneur.
In fact, I have tried to adopt a
simple, structured approach to the
subject. Moreover, I have purposely
chosen to write this business
manual in the ‘first person,’ i.e.
‘I’, to render the approach more
personal, ‘hands-on’ and credible.
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Don’t just start a business... Start a successful one!
I wrote this business manual to
encourage all those promising,
up-and-coming would-be
entrepreneurs, male or female,
who are seriously thinking of
setting up their own business.
The suggestions, proposals and
recommendations contained in
this manual are largely based on
my own ten-year experience as an
entrepreneur operating in Malta,
on my experience as consultant
and trainer with local start-up
businesses and entrepreneurs. I
have also kept in mind the research
findings of a qualitative market
research survey I conducted in
2006 with local entrepreneurs
and would-be entrepreneurs on
behalf of the Malta Enterprise and
the Euro-Info Centre [November
2006]. This research study focused
on the identification of the needs,
difficulties and challenges faced by
the local entrepreneur in Malta.
I would like to thank the
Employment and Training
Corporation for granting me this
opportunity of writing this Business
Manual. I augur that this publication
will be of assistance to all those
budding entrepreneurs who are
seriously thinking of setting up
their own business.
I am also indebted to my family and
close friends who have supported
me throughout these last ten years.
I would like to take this opportunity
to express my appreciation for the
love and affection that have been
forthcoming for so many years. One
last word goes to the people who
have assisted me in compiling this
business manual, namely Laurence
Zerafa B.Pharm, M.Phil., Dip.L.I.S,
Terence Portelli B.Ed.(Hons.), M.A.,
Carmen Mangion and Marilena Vella
for their invaluable assistance with
the Maltese translation.
Marika Fsadni
November 2007
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Don’t just start a business... Start a successful one!
This Don’t start a business... Start
a successful one! Business Manual
has been written to assist all those
enterprising, up-and-coming,
would-be entrepreneurs who are
seriously considering setting
up their own business. But, in
reality, who is an “entrepreneur”?
Who qualifies to be called an
“entrepreneur”?
As we shall see later on in this
manual, an entrepreneur is an
individual who:
w has the ability to identify and
pursue a business opportunity,
w undertakes a business venture,
w raises the capital to finance it,
w gathers the necessary physical,
financial and human resources
needed to operate the business
venture,
How to use
this business manual
w sets goals for him/herself and
others,
w initiates appropriate action to
ensure success,
w and assumes all or a major portion
of the risk!
This definition of an entrepreneur
is clearly quite a mouthful. Does
every entrepreneur need to possess
all these qualities? My reply to
this is a definite yes! Although
management theory does provide us
with an array of varied definitions
of the term ‘entrepreneur’ and
‘entrepreneurship,’ the above
definition encapsulates the essential
actions to be performed by an
entrepreneur and if he/she manages
to perform each of these actions
well, then this will undoubtedly lead
him/her to manage a successful
business.
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Don’t just start a business... Start a successful one!
As the name of this business
manual suggests, the object of
this manual is not simply to list
the business start-up steps which
should be taken by the would-be
entrepreneur who wants to set
up his/her business, but to clearly
illustrate what goes into setting up
a new business, ranging from the
attitude, approach and personal
preparation of the entrepreneur
to the very development of an
effective business plan to attain a
successful business.
The Manual is divided into three
essential Phases, namely:
w Phase 1 - Identifying
the Personal Strengths
Characterising The Successful
Entrepreneur.
w Phase 2 - Turning Your Idea Into
A Successful Business Idea!
w Phase 3 - Writing A Business
Plan For Your Successful Idea.
In my opinion, these are the three
pillars which characterise the
‘winning formula’ of a successful
business. The First Phase focuses
on the ‘entrepreneur’ persona,
i.e. who is an entrepreneur, what
attitude should he/she adopt,
what leadership skills must he/
she possess and what personal
strengths characterise a successful
entrepreneur.
The Second Phase focuses on how
a skilled entrepreneur may turn his/
her idea into a successful business
idea. As we all know, NOT all ideas,
as good as they may seem, may be
turned into business opportunities.
However, this Section illustrates
how a would-be entrepreneur may
assess whether his/her idea fills
a need and whether it meets the
criteria for a business opportunity.
At this stage, it is essential that
the entrepreneur conducts a
feasibility analysis of the business
idea to determine whether it is
viable or not. The Section also
illustrates how the effective use
of outside sources and networking
business relationships may assist
the entrepreneur to solve existing
problems as well as to avoid
potential ones.
The Third Phase focuses on
ensuring that the entrepreneur,
notwithstanding adopting a
positive attitude, possessing
effective leadership skills and
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strong personal strengths, may still
be ‘blinded’ into venturing into a
potential unsuccessful business.
Writing a Business Plan for the
business idea serves as a ‘game
plan’ or ‘road map’ to guide the
entrepreneur to accomplish the
business venture’s vision, mission,
goals and objectives and even more
importantly, keep him/her from
straying off the desired course.
All three phases comprise ‘Points To
Remember’ Checklists and ‘Questions
To Ask Yourself’ Sections which assist
the reader entrepreneur to assimilate
the essential elements of these three
phases.
As a conclusive re-cap, the two
essential questions to be asked are:
w Are you personally prepared to
become a promising entrepreneur?
w Have you conducted a good
initial preparation for your new
business?
If the would-be entrepreneur answers
‘yes’ to these two questions, then he/
she has completed the first essential
stage of setting up a business...
successfully!
Getting started
Too much analysis
brings paralysis!
At times, the most difficult
phase of doing new things is to
actually get started, i.e. to take
the plunge and start operations.
It is good for one to conduct
a good thorough assessment
of his/her situation before
plunging into setting up a new
business. However, one must
also be careful not to analyse
too much as this might hinder
him/her from ever actually
getting started. As the saying
goes: “too much analysis brings
paralysis!” So, once one feels
that he/she has what it takes to
run a business, the next step is
“Getting started!”
Just a few pointers before
you proceed with reading this
Business Manual:
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w Buy a notebook!
Buy a notebook and always keep
it with you… in your pocket,
beside your bed, when you are
driving [obviously do make
sure to park the car before you
decide to jot something down!],
when having a bath, etc. Ideas
can strike at any time. Write
them down immediately! Also,
make use of forms and charts.
These may help you organise
information logically and
systematically in order to assist
you in your decision-making
process.
w Enrol on a simple management
training course
Don’t be alarmed! I am not
suggesting that you enrol for a
PhD in business management. A
simple short training programme
in management can do the trick!
There is an array of training
programmes being offered in
Malta both by the pubic and
private sectors. The Employment
and Training Corporation [ETC],
the National Commission For
The Promotion of Equality
[NCPE], Malta Enterprise [ME], all
offer interesting short training
programmes for business start-
ups. Also, the Internet may act
as an excellent source to identify
good educational business start-
up sites.
w And lastly... develop an
observant eye and become a
24/7 entrepreneur!
All around us there are people
running businesses. What do
you think you can do better?
You may not wish to open a
restaurant, however thinking
about how your favourite
restaurant [which is very popular
and always very busy] operates,
will be a useful exercise for you.
As Philip Kotler, a marketing
guru, once said: “Behind every
problem there exists a potential
business opportunity,” [Philip
Kotler, 2006] and the real 24/7
entrepreneur is the one who
identifies this ‘potential business
opportunity’, while the rest see
only the ‘visible’ problem!
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Identifying
the personal strengths
characterising
the successful entrepreneur
Should I set up my own business, or not?...
No pain, no gain!
Phase1
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The major personal
strengths characterising
a successful entrepreneur
In my opinion, based on my
own experience, on the recent
survey I conducted with local
entrepreneurs and on contacts
with my entrepreneur clients, the
five major personal strengths
characterising a successful
entrepreneur are:
a] Have a positive attitude.
b] Possess strong leadership skills.
c] Have a decision-making ability.
d] Be a results-oriented problem-
solver.
e] Address the ‘Am I good enough?’
syndrome.
Who is an entrepreneur?
An individual who:
w has the ability to identify and
pursue a business opportunity;
w undertakes a business venture;
w raises the capital to finance it;
w gathers the necessary
physical, financial and human
resources needed to operate
the business venture;
w sets goals for him/herself and
others;
w initiates appropriate action to
ensure success; and
w assumes all or a major portion
of the risk!
Introduction
Many people go through life wishing they were someone else or they were
doing another type of work. Most people have a desire to change their life
situation. But few people take action to do so…
A small proportion of people are willing to take risks to change their
lives for the better. These people are entrepreneurial because they take
advantage of opportunities to improve their lives. The true entrepreneur
is the person who is constantly changing and growing. Having positive
attitudes and a healthy self-image is essential for all entrepreneurs.
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A positive attitude is essential
Accentuate the positive
and eliminate the negative!
Paul Arden
The biggest asset to sustaining
entrepreneurial ability is a positive
attitude. In addition, determination,
experience, persistence and just
sheer hard work are essential to
being a successful entrepreneur.
The right mental attitude towards
work is extremely important. A
successful entrepreneur enjoys his/
her work and is totally dedicated
to what he/she is doing. His/her
positive mental attitude turns the
job into exciting, interesting and
rewarding work.
w Concentrate only on being
involved in positive activities.
w Select positive objectives in his/
her work.
w Associate with people who think
and act in an entrepreneurial
manner.
w Be constantly alert for
opportunities to improve his/her
situation, whether it is personal
life, work life or life in the
community.
w Not be afraid to give up an idea
if it is not producing the right
results. It is better to change
direction than to pursue an
idea that is not working out
satisfactorily.
w Recognise that he/she controls
his/her mind and must use it
productively.
w Avoid negative thoughts and ideas.
w Believe in him/herself and his/her
talents. Success comes to those
who have faith in their own
abilities and use their abilities
to the fullest extent.
w Relieve mental stress by taking
action, i.e. by focusing his/her
thoughts on a specific problem.
Once he/she has reached a
decision, he/she must take
action to solve the problem. The
entrepreneur must try to solve
mental conflicts as quickly as
possible.
Points to remember
To develop a positive attitude an entrepreneur must:
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Many people go through life wishing
that they were someone else or
that they were doing another type
of work. Most people have a desire
to change their life situation. But
few people take action to do so.
A small proportion of people are
willing to take risks to change their
lives for the better. These people
are entrepreneurial because they
take advantage of opportunities
to improve their lives. The true
entrepreneur is the person who is
constantly changing and growing.
Having a positive attitude and a
healthy self-image is essential for
all entrepreneurs.
Strong Leadership Skills
Your vision of where or who
you want to be is the greatest
asset you have! Without having
a goal it’s difficult to score!
Paul Arden
Successful entrepreneurs
are successful leaders
The total performance of a
business is mainly determined by
the attitudes and actions of the
entrepreneur. The effectiveness
of the entrepreneur as a leader is
determined by the results he/she
achieves. A guideline for good
leadership is to “treat others as you
would like to be treated.”
Task-oriented and
Person-oriented leadership
Entrepreneurs are leaders by the
very nature of their activities.
There are, in fact, two types of
leadership behaviour which the
entrepreneur has to adopt: [a]. a
goal-setting, goal-achievement,
task-orientation leadership and
. a motivating, human relations,
person-orientation leadership.
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A task-oriented leader
entrepreneur normally exhibits
the following behaviour patterns:
w Clearly defines his/her role and
those of his/her personnel.
w Sets difficult but achievable
goals and lets the staff know
what is expected of them.
w Sets procedures for measuring
progress towards the goal and
for measuring goal attainment,
i.e. goals are clearly and
specifically defined.
w Actively exercises a leadership
role in planning, directing,
guiding and controlling goal-
oriented activities.
w Is interested in achieving
productivity increases.
A person-oriented leader
entrepreneur tends to exhibit
the following behaviour
patterns:
w Show concern for maintaining
harmony in the organisation
and easing tensions when they
arise.
w Show concern for workers as
people rather than as a means
of production.
w Show understanding and
respect for employees’ needs,
goals, desires, feelings and
ideas.
w Establish good two-way
communication with staff.
w Give positive reinforcement to
improve worker performance.
w Delegate authority and
responsibility and encourage
initiative.
w Create an atmosphere of
teamwork and co-operation in
the organisation.
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w Are you more a leader than a
follower?
w Do people look to you for
leadership and advice?
w Can you develop and
implement new ideas?
w Do you take an active part in
the life of the community?
w Do you continuously try to
improve your strengths as well
as eliminate your weaknesses?
w Do you organise your time and
activities to be more efficient
and effective?
w Do you have a specific plan or
programme to improve your
leadership capabilities?
w Do you allow other people
to help you to achieve your
goals?
Questions to ask yourself
To assess whether you have the leadership qualities required of an
entrepreneur, you may ask yourself these questions:
w Do you learn from your
mistakes?
w Are you result-oriented and
do you finish something you
start?
w Do you use your power as a
leader to help others?
w Do other people have
confidence in your abilities?
w Do the opinions of others help
you to make your decisions?
w Are you able to deal with
people effectively?
w Do you make changes in what
you are doing to make your
company better?
w Do you delegate authority
and responsibility to your
employees?
w Do you share your success
with your employees?
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The effective decision-maker
The one thing worse than
making a wrong decision,
is to avoid making a decision.
An entrepreneur must strongly
believe in him/herself and his/her
ability to make good decisions.
The typical entrepreneur is required
to make some critical decisions very
frequently and which are not easy
to make. The one thing worse than
making a wrong decision, is to avoid
making a decision. One must keep in
mind that ‘decision-making’ is an art:
the more you practise it, the more
expert you will become at it.
w How do you maintain self-
confidence when making an
important decision?
w What examples illustrate
your ability to make realistic
decisions?
w What fears or weaknesses
do you have when making
decisions?
w In what ways do you use
creativity and/or intuition
when making decisions?
w What have you learnt from
mistakes you made in previous
decisions?
w In what ways do you
procrastinate and delay
making decisions?
Questions to ask yourself
To assess whether you have the decision-making skills required of an
entrepreneur, you may ask yourself these questions:
w Do you give up or avoid
problems which appear difficult?
w How well do you adjust to
changes which occur around
you?
w What action do you take once
you have reached a decision?
w How do you provide the
leadership necessary to achieve
the desired outcomes?
w How do you use resources in
your environment to make
decisions?
w In what ways do you use your
personal and professional
contacts to gain information
which will help you to make a
decision?
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A results-oriented
problem-solver
If you think you can, you can.
If you think you can’t,
you’re right!
George Bernard Shaw
For the entrepreneur to be a
results-oriented problem-solver,
he/she must be able to see every
aspect of a problem, as well as
understand it in its entirety. Most
of the people within the company,
involved in specific operations
and activities, may see parts of
the problem, however it is up to
the entrepreneur to put all the
parts together so that a complete
understanding of the problem
becomes possible.
This nine-step approach is a
logical and sensible way to solve
most business problems however
it does NOT guarantee that a
particular solution will work. The
entrepreneur’s effective leadership
and decision-making skills are
needed to implement a solution
successfully.
One effective nine-step
problem-solving
approach includes
the following steps:
1. Become acquainted with the
problem in general.
2. Determine the key facts
relating to it.
3. Identify major problem/s.
4. Identify related problems.
5. Search for possible causes of
the problem.
6. Consider potential solutions
to the problem.
7. Select the most feasible
solution.
8. Implement the solution.
9. Verify that the solution is
correct.
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Addressing the
‘am I good enough?’
syndrome - the biggest killer
of would-be entrepreneurs
It’s not how good you are,
it’s how good you want to be!
Paul Arden
The thought of setting up your
own business is very exciting
and it is also very thrilling and
gratifying informing others that
you have set up your own company.
Notwithstanding this, no one has
ever said that setting up your own
business is easy; one must find,
what I call the “winning formula”
to be able to succeed in business!
Unfortunately, from my ten years
of experience consulting small
businesses I can very well say
that I have seen many would-
be entrepreneurs who had this
“winning formula” potential but
whose business never got off the
ground because of their worst
enemy, i.e. themselves! Why?
Because of self-doubt!
Points to remember
The ten key action roles
associated with effective
entrepreneurs. Effective
entrepreneurs...
1. Are individuals who make a
significant difference.
2. Are creative and innovative.
3. Spot and exploit
opportunities.
4. Find the resources required
to exploit opportunities.
5. Are good networkers.
6. Are determined in the face
of adversity.
7. Manage risk.
8. Have control of the
business.
9. Put the customer first.
10. Create Capital.
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Self-doubt is considered as one of
the greatest killers of innovation
and entrepreneurship. Invariably,
whoever starts a small business
is inflicted with self-doubt on
whether he/she is able to see it
through! These self-doubt feelings
are normal [and at times, healthy],
though one must learn how to
manage them.
Some common self-
doubts among would-be
entrepreneurs:
w I am not bright enough
Well, sometimes you can be
too bright to succeed. At times,
innocence and naivety can
actually protect you from fear.
w I am not pushy enough
If this is what you think than
may I ask you a question: Do you
like doing business with pushy
people, or do you prefer to deal
with pleasant and reasonable
people like yourself?
w I will fail!
You might fail, it’s true but equally
you will not manage to build a
successful business if you don’t
try! Also, building a business is a
great learning experience in itself.
w I am usually pessimistic and
don’t like taking risks
I do not consider myself a high
risk-taking person however in
these last ten years I have taken
several calculated risks, i.e. risks
based on sound assessment.
In business, as long as you
don’t make false assumptions
and leap in the dark without
taking a torch with you, you are
fine. On the other hand, some
degree of risk must be taken … if
entrepreneurship wasn’t as risky
then we would have a lot more
small businesses being set up,
right?
w I know my limitations
Incredible though it may seem, we
all know what our limitations are
and we underestimate the value
of our strengths. No one is perfect
and nor is any business. That is
why there is room for you too!
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w I am not good with numbers!
Number-crunching is always
one of the biggest hurdles for
would-be entrepreneurs to
overcome! Relax! Spreadsheets
and accounting software and
a pocket calculator render
the numbers easy to work
out. Always take time to work
it out before jumping into an
opportunity! A little secret which
works for me: I always carry a
pocket calculator wherever I go!
w Competitors will eat me alive!
I used to think this too, however
in fact, it resulted as quite the
opposite. Whilst your business is
small your rivals will not see you
as a threat. It is once you start
growing steadily that you must
keep your competitors at bay.
w I am not rich enough
Looking back at my ten years
of entrepreneurship, I sincerely
believe that one of my biggest
strengths has been that I always
strived to retain my overhead
costs very low. In fact, one of the
best ways to watch your costs is
to have no money to waste and
to take care of your pennies.
As the saying goes: “Take care
of the pennies, and the pounds
take care of themselves.” Many
wealthy people start businesses
that lose money!
For the would-be entrepreneur,
although not real, these feelings
may seem very realistic to the
extent that they stop him/her from
taking the plunge and kick off
the business. As the saying goes:
“Practice makes perfect.” Equally,
self-confidence is built upon
relevant knowledge and positive
experience – the more you learn
and practise, the better you will
get. You will make many mistakes
along the way which is fine, as
long as you don’t make the same
mistake twice!
Remember
It’s not how good you are,
it’s how good you want to be!
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w A Vision
“Your vision of where or who
you want to be is the greatest
asset you have! Without having a
goal it’s difficult to score.” [Paul
Arden, 2006]. Without a clear
picture of what you want to do,
it will be difficult to create. The
entrepreneur must try and think
about the finest details and bring
the product/service to life.
w Determination
You must decide whether
you really want to set up a
business. As indicated earlier,
the entrepreneur must deal with
the doubts before starting. Once
committed, there is no turning
back.
w Ethics
Whether the entrepreneur
decides to start a manufacturing,
importing, consultancy or a
service-oriented operation,
he/she must be ready to
commit him/herself to adopting
the ‘code of business ethics’
required of him/her and of the
business. This is imperative if
you want to grow and win the
respect of customers, suppliers,
competitors, intermediaries,
alike.
w Hard Work and Perseverance
Setting up one’s own business
means hard work … and also
perseverance! As the saying
goes: “No pain, no gain!”
w Cash
Inevitably, your business will
take longer than you think to
pay you a wage. The bigger your
cash reserve, the longer you
can wait before drawing income
from your new business. In the
first few months, you must get
used to not receiving the usual
paycheque at the end of the
month, which you used to receive
when you were employed.
Other Personal Strengths Characterising
A Successful Entrepreneur
There are other just as important personal strengths which characterise a
successful entrepreneur. These include:
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w Fit and healthy
One of your major concerns will
be: what happens if I get sick?
Unfortunately, the entrepreneur
cannot afford time off sick,
particularly at the early stages of
setting up the business.
w Mental health
Although many people around
you will say that you are mad
to start your own business,
however you must not be!!
Starting a business is stressful
and one needs to be resilient.
w Love and affection
You are going to need a shoulder
to cry on [whether you are a
man or a woman]. If you have
someone to share your thrills
and spills with, you will enjoy it
more.
w Caution
Sometimes it is easy to see the
opportunities and difficult to
spot the threats. You need to
be cautious, without being too
risk averse. My motto over these
last ten years has always been:
“Always take calculated risks!”
w Flexibility
Usually when you start a
business, it is just YOU. That
means that you must make the
coffee, do the filing, take out the
trashcan, and anything that is
required.
w A little bit of humour helps
In the beginning you are
definitely going to make mistakes
– we all do! The ability to accept
the fact that you have made a
mistake and to also laugh it off is
important. What is imperative is
that you must learn quickly from
your mistakes, assess what you
did wrong and to never make the
same mistake twice! You cannot
afford it!
w Generosity
When you enjoy success, invest in
those who made it possible. These
can be your family members,
your assistant, your clients …. by
giving them your time, attention
and positive feedback. Another
motto of mine: “Always try and
aim for a win-win situation!”
This way all parties involved are
encouraged to give more!
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Phase 2
Turning your idea
into a successful
business idea!
Don’t look for the next opportunity.
The ONE you have in hand IS the opportunity!
Paul Arden
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It is very unfortunate that so many
new businesses, large and small,
are set up and are simply ‘non-
starters’ from the word ‘go’! Why
does this happen? What could have
gone wrong? Could this be the
result of lack of good preparation
and analysis prior to setting up the
business? Was the product/service
in question not such a good idea,
after all?
For an entrepreneur to start not
only a business, but a successful
one, it is imperative that very
early on in the initial preparation
to assess whether his/her idea is
a good one or not. At this stage,
we must explain the difference
between the terms “opportunity”
and “idea.”
Essentially, a good entrepreneur
recognises an opportunity and
turns it into a successful business.
An ‘opportunity’ is a favourable
set of circumstances that creates
a need for a new product, service
or business. An ‘opportunity’ has
four essential qualities: it is [a]
attractive, durable, [c] timely
and [d] anchored in a product,
service or business that creates
or adds value for the customer or
end-user. An ‘idea’ is a thought,
impression or notion, which may
or may not meet the criteria of an
opportunity.
Most entrepreneurs start their
businesses in two ways: [a] they
decide to launch a company, search
for and recognise an opportunity
and then start a business or
they recognise a problem or
an opportunity gap and create
a business to fill it. Regardless
of which of these two ways
entrepreneurs start a new business,
it is always difficult to identify
a product, service or business
opportunity that is not merely a
different version of something
already available.
This is why many businesses are set
up but only a few are successful.
Many businesses fail not because
the entrepreneur did not work hard
but rather because there was no
real business opportunity in the
market to begin with.
Introduction
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1. Observe trends
The first approach to identifying
opportunities in the market is to
observe trends and study how
they create opportunities for the
entrepreneur to pursue. Economic
factors, social factors, technological
opportunities and political action
and regulatory changes are the
most important trends to follow.
2. Solving a problem
Does your ‘idea’ solve problems?
Sometimes identifying opportunities
simply involves noticing a problem
and finding a way to solve it. In
your business sector and market
you wish to enter, do customers
complain? Try and seek whether
there are still any unresolved
problems in the market you wish
to enter? Think about this: “Every
problem is a brilliantly disguised
opportunity!”
The steps to be taken by the entrepreneur to turn
his/her idea into a successful business idea
3. Protect your idea
If your idea is an innovation of
some sort, it might be opportune
for you to assess whether you may
‘protect’ it by some ‘intellectual
property’ tool such as a patent,
trademark or copyright, etc.
4. Conduct marketing research
Many entrepreneurs often make
the mistake of basing their
decisions on their own feelings,
intuition and opinions. However,
to be valid, their decisions should
be based on the best information
available. Entrepreneurs have a
constant need for information and
knowledge about their markets.
The would-be entrepreneur is no
different. Marketing research is a
very effective tool for the budding
entrepreneur who has an idea and
who wishes to assess its business
potential! Market research assists
So, it is crucial for the entrepreneur that before getting excited
about a new business idea, he/she must assess whether the idea fills
a need and meets the criteria for an opportunity.
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entrepreneurs to identify new
markets and to find new customers
in existing markets. It also assists
them to know the reasons for their
current products/services’ success
or failure, and to provide ideas
about new products/services which
have potential.
Marketing research is the
systematic gathering, recording
and analysing of information about
matters relating to the marketing
of products/services. Marketing
research may assist the would-be
entrepreneur to find some answers
to the following questions:
w What are the present and
potential needs of the
customers?
w What additional markets may be
explored?
w What are the special
characteristics of the
customers?
w What makes the entrepreneur’s
product/service different from
those of competitors?
Marketing research attempts to
evaluate markets in a scientific
manner. However, it is also an art,
because it involves the constantly
changing attitudes of people.
By collecting marketing data in
an orderly, objective manner,
the would-be entrepreneur will
be able to know more about the
market/s he/she is interested in. No
matter what the size of business
is, whether big or small, there is
always a need to determine the
attitudes, opinions and beliefs of
customers.
Marketing research provides
timely information and data the
entrepreneur needs to:
w Reduce business risks.
w Identify problems and potential
problems in the existing markets.
w Identify new market
opportunities.
w Obtain basic information and
facts about the markets to help
him/her to make better decisions
and set up effective action plans.
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Large businesses have the funds
to engage marketing consultants.
Unfortunately, the would-be
entrepreneur does not have
the necessary funds to do so.
However, this does not mean that
a budding entrepreneur cannot
conduct research. In fact, when
I am approached by would-be
entrepreneurs to conduct some
marketing research for them, I
always encourage them to conduct
the research themselves.
When the would-be entrepreneur
conducts the field work him/herself,
it is a learning experience for
him/her, in that while researching
the market, he/she is getting
more acquainted with the market
forces at play, he/she will learn
more about the attitudes, opinions,
tastes and purchasing behaviour
of potential customers, he/she will
also learn more about competitors,
their strategies, weaknesses and
strengths, etc.
The entrepreneur can conduct two
types of market research,
a] Desk research: this entails
conducting research on
publications, past surveys,
internet, official government
statistics, etc, to collect
secondary data.
b] Field research: This entails
conducting primary research and
collecting fresh data specifically
for the research objective. As
field research is extremely
time-consuming and expensive
to conduct, the entrepreneur
might need to opt for conducting
qualitative market research by
way of conducting focus group
sessions, conducting few in-
depth interviews with potential
customers, etc.
Conducting quantitative research
is not an option for the would-be
entrepreneur as this proves too
difficult to conduct, too expensive
and time-consuming.
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w Is the product/service in a
growth industry?
w Will the future demand for
the product/service increase,
remain stable or decrease?
w What is the nature of
competition for the product/
service?
w Does the entrepreneur have
sufficient finances to meet
the expenses of introducing
the new product/service for at
least the first year?
Questions to ask yourself
Evaluating the potential success of a new product/service is a difficult
but necessary activity. The following questions will assist you to
identify market opportunities for a particular product/service:
w To what extent is the
entrepreneur dependent on
suppliers and other related
businesses?
w What are the specific
disadvantages of the new
product/service?
w In what ways will the
product/service be similar to
and different from those of
competitors?
w To what extent will marketing
contribute towards the success
of the product?
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5. Conduct a feasibility analysis
Apart from conducting marketing
research, it is also essential
that the entrepreneur conducts
a feasibility analysis of his/her
business idea to determine whether
it is viable or not, i.e. to assess
whether the business idea is
worth pursuing before spending
resources on it. As painful as it may
be, if the feasibility analysis shows
that the business idea is deemed
unworkable, it should be dropped
completely or rethought afresh.
Conducting a feasibility analysis of
your business idea will comprise
the following steps:
a] Draw up a ‘concept statement’
for your business idea.
This concept statement is a
preliminary description of
your prospective business. It
should include a description
of the product/service being
offered, your intended target
market segment/s, the benefits
of your product/service and
a description of how your
product/service will be sold and
distributed.
b] Conduct a ‘product/service’
feasibility analysis
A product/service feasibility
analysis is an assessment of the
overall appeal of your product/
service being proposed. This
feasibility analysis involves
conducting two primary tests,
namely, ‘concept testing’ and
‘usability testing.’
i. The ‘concept test’ involves
a representation of the
product/service to prospective
users to gauge customer
interest, desirability and
purchase intent. The three
primary purposes for concept
testing is to [a] validate
the underlying premises
behind a product or service
idea, i.e. to test this idea
the entrepreneur must ask
prospective customers what
they think about it, to help
develop the idea rather than
just test it and [c] to estimate
the potential market share
the potential product/service
might command.
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ii. Usability Testing is a
method by which users of a
product/service are asked
to perform certain tasks
in order to measure the
product/service’s ease of use
and the user’s perception
of and satisfaction with the
experience.
c] Conduct an ‘industry/market’
feasibility analysis
An industry/market feasibility
analysis is an assessment of the
overall appeal of the market
for the product/service being
proposed. There are three
primary issues that a proposed
business should consider here:
i. The industry attractiveness
The entrepreneur must
assess the profitability and
growth of the industry he/
she intends entering into.
The competitive forces that
determine an industry’s
growth and profitability are
the threat of new entrants
in the industry, the rivalry
among existing firms,
the bargaining power of
suppliers, the bargaining
power of buyers and the threat
of substitute products. These
forces, better known as Michael
Porter’s five competitive
forces [Michael Porter, 1980]
determine the average rate
of return for the companies
engaged in an industry.
d] Conduct an ‘organisational’
feasibility analysis
This organisational analysis is
conducted to determine whether
the entrepreneur has sufficient
management expertise and
organisational competence and
also whether the potential new
venture has sufficient resources
to move forward to successfully
develop the ‘product/service’ idea.
e] Conduct a ‘financial’
feasibility analysis
This ‘financial’ analysis is a
preliminary financial analysis of
whether a business idea is prudent
or not. The most important issues
to be considered here are [a] the
capital requirements to produce
the product/service idea, the
financial rate of return and [c]
the overall attractiveness of the
investment per se.
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It might be opportune for a
would-be entrepreneur to seek
the assistance of a professional
consultant when conducting this
feasibility analysis.
I always reiterate with my ‘would-
be entrepreneur’ clients, who are
assessing whether their business
idea is worth pursuing or not that
it is better to spend a few pennies
at the start and proceed with the
business idea if found viable rather
than spend many pounds in setting
up the whole business venture and
launching their product/service,
only to find that their business is a
complete flop!
Once this preliminary evaluation of
the business idea is conducted and
the above feasibility analyses show
that the idea is worth pursuing,
then this leads the entrepreneur
into the next important stage
of setting up his/her successful
business… that of writing a
business plan for his/her idea!
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1. This new idea [product/
service] should have a
relative advantage over
existing products/services.
For example, your product/
service offers your customer
something that the existing
products/services do not.
2. This idea or the advantage it
offers over existing products/
services must be compatible
with existing attitudes and
beliefs of customers, in
that it should not require a
drastic change in the buyer’s
behaviour.
3. The idea should NOT be so
complex that the buyer has a
difficult time understanding
how to use it.
Points to remember
Characteristics of a successful product-service idea! A successful idea
should have most, if not all, of the following characteristics:
4. The results or benefits of
the idea must be easily
communicable to customers
and potential users.
5. It would be helpful if customers
and potential users can try out
this idea without incurring a
large risk. e.g. the distribution
of samples, or trial users,
would allow potential buyers to
use this new product/service
without risking a purchase.
6. This idea [product/service]
must be readily available
for purchase once the buyer
decides to make a purchase.
7. The buyer must also believe
that this new idea [product/
service] satisfies one of
his/her needs by giving some
immediate benefit.
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Entrepreneurs have limited
human resources, limited time
and limited money, yet their need
for information and advice is
continuous be it financial, taxation,
management, legal, marketing,
IT, insurance, production, etc. In
such cases, entrepreneurs must
resort to outside help. How? By
using the services of professional
consultants, the entrepreneur may
focus on his/her core business
and on what he/she does best and
at the same time, obtain timely
and professional advice on other
matters. Using outside resources
can assist the entrepreneur to
solve existing problems as well as
to avoid potential problems.
The crucial question arises “how
does one select the right outside
resources?” In my own business,
whenever I need some professional
assistance, say, I need a new legal
advisor, accountant, insurance
advisor or even some technical
specialist, e.g., an IT consultant, I
always use the following procedure:
a] First, I ask around amongst
colleagues, friends and fellow
entrepreneurs, to see if they can
recommend the names of a few
good consultants.
b] Once I short-list two or three
prospective consultants, I then
meet up with them separately.
c] I then ask each short-listed
prospective consultant the
following questions:
i. How long have you been
practising?
ii. What are your areas of
specialisation?
iii. How have you helped
entrepreneurs in a similar
business with similar problems
to mine?
iv. Can you mention the name
of some local businesses you
have assisted to date?
v. What are your professional
fees?
Using outside resources
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There is no way to be sure that
you have selected the ‘right’
professional, advisor or consultant
to serve your needs. However,
what I do is first I appoint the
professional on a project-basis,
then if I feel that the professional
has done a good job on the
project, I will start working almost
exclusively with that professional.
However, I have learnt not to
enter into exclusive contractual
agreements with professionals
unless I have worked with them
for quite some time and they have
invariably proven to offer a timely,
reasonably-priced and useful
advice which has assisted me in
improving my business venture.
Engaging business consultants
Business consultants may range
from management consultants,
marketing consultants, marketing
communications consultants
[formerly known as advertising
consultants], IT consultants,
production consultants, trainers to
health and safety consultants, etc.
However, some entrepreneurs may
be reluctant to engage business
consultants largely because of
the belief that consultant fees are
too high or because they fear that
consultants would give confidential
information about their business
to other people. Another reason
could be due to a reluctance to
gather information needed for the
consultant to do the job properly.
Sadly, for these and other reasons,
many entrepreneurs are not
aware of the costs or benefits of
business consultants. Business
consultants should be viewed as
another resource. Like all typical
entrepreneurs, in my first year of
operation, I tried to do everything
myself under the presumptuous
standpoint that ‘no one does
it better than me’ and that ‘if
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Don’t just start a business... Start a successful one!
you want something to be done
right, do it yourself!’ On realising
how wrong I was, after a mere
18 months of operation I had
engaged a financial advisor and tax
consultant, an insurance advisor, an
IT specialist and a legal advisor for
my business venture.
Another selection criterion which
worked for me whether selecting
and engaging professional
services advisors or consultants,
was to engage relatively young
professionals who run their
own consultancy firm and are
entrepreneurs themselves.
Invariably, I found that these are
more sensitive to my company’s
requirements and limitations, given
that they themselves manage
their own small operation and will
empathize more with my position.
w You know exactly what specific
tasks you want the consultant
to accomplish.
w Gather information on the
services offered and the
general reputation of various
consultants from your
business acquaintances.
w Ask each potential consultant
to provide you with current
references.
w Know the specific areas
of business in which each
consultant is especially
competent.
In the light of the above discussion, before you select a business
consultant or advisor, you must ensure that:
w When you are considering a
large consulting firm, ensure
that you talk to the persons
who will actually be assigned to
work with you.
w Ask each consultant to
prepare a written proposal
that indicates the work tasks
to be undertaken [the project
deliverables], how these
tasks will be accomplished,
the proposed deadline/s and
also an estimate of the total
cost and terms of payment to
complete the project.
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Using services offered by
Government Agencies/
Departments
During my ten years of operation,
I have seen a concerted attempt
from the part of the Malta
Government to promote and
assist local entrepreneurs via
its Government agencies and
departments, e.g. the Malta
Enterprise [ME], the Euro-
Information Centre [EIC], the
Korradino Business Incubation
Centre [KBIC], the ex-Institute
for the Promotion of Small and
Medium-sized Enterprises [IPSE],
Government’s Small Business and
Crafts Directorate, the Employment
and Training Corporation [ETC],
etc. However, notwithstanding
this, local entrepreneurs still
believe that there is still much
room for improvement vis-à-vis
Government’s small business
assistance strategy. In fact, in
the qualitative research survey I
conducted with local entrepreneurs
in 2006, [Entrepreneurship Base
Document – Malta, ME-EIC, 2006] the
major assistance/support schemes/
incentives requested from the
public sector agencies/departments
by local entrepreneurs comprised
the following:
w More financial assistance;
w More training assistance;
w Assistance to obtain larger
office/factory space;
w More marketing and
management assistance;
w Various other specialised
consultancy services;
w Less red tape/bureaucracy from
Government departments.
For those would-be entrepreneurs
who are interested in setting up
their own company, I suggest
that they approach and schedule
meetings with representatives
of these public sector entities
and enquire on what services,
schemes, incentives they may avail
themselves of. Other private sector
entities, like the local commercial
banks, the Malta Chamber of
Commerce and Enterprise
[MCOC], the General Retailers and
Traders’ Union [GRTU] offer useful
assistance/advice to prospective
entrepreneurs and hence these
entities are definitely worth
contacting.
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Phase 3
Writing a business plan
for your successful idea
Failing to plan
means planning to fail!
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Don’t just start a business... Start a successful one!
Strategic management
and developing
a business plan
In today’s highly competitive and
fierce external environment, the
would-be entrepreneur needs a
powerful weapon to cope with
such a hostile environment. This
important powerful weapon
is the process of ‘strategic
management.’
Strategic management involves the
development of a business plan,
which is like a ‘game plan’ or ‘road
map’ to guide the entrepreneur
as he/she strives to accomplish
his/her business venture’s vision,
mission, goals and objectives and
to keep him/her from straying off
the desired course.
The search for a
competitive advantage
There is no traffic jam
on the extra mile.
The goal of developing a strategic
plan is to create a ‘competitive
advantage’ for the entrepreneur.
This competitive advantage is the
aggregation of factors that sets
a small business apart from its
competitors and gives it a unique
position in the market.
Every entrepreneur or small
business must establish a plan
for creating a unique image in the
minds of its customers. NO business
can be everything to everyone.
In fact, one of the biggest pitfalls
many entrepreneurs stumble into
is failing to differentiate their
business from the rest of the
competitors within the industry.
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Strategic management can increase
an entrepreneur’s effectiveness,
however small businesses must
have a procedure designed to
meet their needs and their small
company’s special characteristics.
It is a mistake to apply a big
company’s strategic development
techniques to a small business
because a small business is NOT
a little big business. Because of
their size and their particular
characteristics, which are
typically a flexible managerial
style, an informal organisational
structure and adaptability to
change, small businesses need a
different approach to the strategic
management process.
The strategic management
procedure for a small business
must include the following features:
w Use a relatively short planning
horizon – two years or less for
most small companies.
w Be informal and not overly
structured.
w Encourage the participation of
employees and ‘trusted’ outside
parties to improve the reliability
and creativity of the resulting
business plan.
w Focus on the customer. Rather
than building your business
strategies around your
competitors’ actions, focus
your strategies around your
customers.
w Do not begin with setting
objectives because extensive
objective setting early
on may interfere with the
creative process of strategic
management.
w Focus on strategic thinking and
not just planning, by linking
long-term goals to day-to-day
operations. Strategic thinking
encourages creativity, innovation
and employee involvement in the
entire process.
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Writing the business plan
Strategic planning is not a result
or an outcome but an ongoing
process. To be useful, the
development of a business plan
must become part of the very
foundation of the entrepreneur’s
business venture. There is no
substitute for a well-prepared
business plan, and there are no
shortcuts to creating one! The
business plan may be the most
important business document that
he/she will ever prepare for his/her
business venture and it will also
probably be the most difficult.
A business plan
has two essential functions:
a] First and more important, it
guides the company’s operations
by charting its future course and
devising a strategy for following
it. As is indicated below, the plan
provides a set of tools which the
entrepreneur must use, namely,
a mission statement, goals,
objectives, budgets, financial
forecasts, target markets, etc
to assist him/her to lead the
business venture successfully.
It gives the entrepreneur and
his/her employees a sense of
direction and as more team
members are committed to
making the plan work, it takes on
a special meaning.
b] The second function of the
business plan is to attract
lenders and investors. A business
plan must prove to potential
lenders and investors that the
entrepreneur’s business venture
will be able to repay loans and
produce an attractive rate of
return.
Although the elements comprised in
a business plan are standard, every
business plan is unique and must
be tailor-made to the individual
entrepreneur’s business idea and
industry environment. If this is a
first attempt at writing a business
plan, it might be opportune for
the would-be entrepreneur to
seek the advice of professionals
with experience in this process.
Although building a business plan
does not guarantee success, it does
raise an entrepreneur’s chances of
succeeding in business.
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The Entrepreneur’s business plan should include
the following sections:
1. Executive Summary
The Executive Summary is a short
overview of the entire business
plan: it provides a busy reader with
everything that needs to be known
about the new venture’s distinctive
nature. It must capture the reader’s
attention. If it misses the mark,
the chances of the remainder of
the plan being read are minimal. A
well-developed, coherent summary,
including the financial proposal,
establishes a favourable first
impression of the entrepreneur and
the business and can go a long way
towards obtaining financing.
Although the executive summary
appears at the beginning of the
business plan, it should be written
after the plan is finished. Only then
can an accurate overview of the
plan be written.
2. The Mission Statement
The Mission Statement addresses
the first question of any business
venture: “What business am I
in?” Establishing the purpose of
the business in writing must come
first in order to give the business
venture a sense of direction.
Without a concise, meaningful
mission statement, an entrepreneur
risks wandering aimlessly in the
marketplace, with no idea of
where to go or how to get there!
The mission statement ‘anchors’
a company in reality and sets the
tone for the entire company.
3. The Company History
This section involves writing a
brief summary, highlighting the
significant financial and operational
events of the business since its
inception. This section should
also describe when and why the
company was formed, how it has
evolved over time and what the
entrepreneur envisions for the
future.
4. The Business
and Industry Profile
This section should begin with
a statement of the company’s
business goals and a narrower
definition of its immediate
objectives. Business Goals are
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Don’t just start a business... Start a successful one!
broad, long-range statements
of what the entrepreneur plans
to achieve in the future. They
express the business venture’s
raison d’etre, that guide its overall
direction, i.e. they address the
question: “Why am I in business?”
Business objectives, on the
other hand, are short-term,
specific performance objects that
are attainable, measurable and
controllable. Every objective should
reflect some general business
goal and include a technique for
measuring progress towards its
accomplishment. To be meaningful,
an objective must have a timeframe
for achievement. Both goals and
objectives should relate to the
company’s basic mission.
This section should also provide
the reader with an overview of
the industry and the market
segment in which the new venture
will operate. Industry data such as
market size, growth trends and the
relative economic and competitive
strength of the major companies
in the industry all set the stage
for a better understanding of the
viability of the new product/service.
In this section, the entrepreneur
must also turn his/her attention
to assessing his/her company’s
strengths and weaknesses.
Building a successful strategy
demands a business to
capitalise on its strengths and
also overcome or compensate
for its weaknesses. Company
strengths are positive factors
over which the entrepreneur
has full control and that he/she
can use to accomplish his/her
mission, goals and objectives,
while company weaknesses are
negative factors [which are also
controllable factors] that inhibit
the accomplishment of a company’s
mission, goals and objectives.
Typical weaknesses may be: lack
of capital, a shortage of skilled
workers, an inferior location site,
etc.
The entrepreneur must also
strive to identify any market
opportunities or market threats
that might have a significant
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impact on the business. Market
opportunities are, in fact, positive
forces, over which the entrepreneur
has no control, but that the firm
can still exploit to accomplish its
mission, goal and objectives. On
the other hand, market threats
are negative forces, over which the
entrepreneur has no control, but
that may inhibit his/her company’s
ability to achieve its mission,
goals and objectives. Although
the entrepreneur cannot control
the opportunities and threats
emanating from the market, it
is essential that he/she tries, as
much as possible, to capitalise on
the positive market opportunities
and also shield the business from
market threats.
A very effective management tool
which assists the entrepreneur
in conducting this four-factor
assessment is called the SWOT
Analysis tool. The acronym ‘SWOT’
stands for strengths, weaknesses,
opportunities and threats.
5. Business Strategy
This section is a very important
part of the business plan because
here the entrepreneur will indicate
his/her view of the strategy that
is needed to beat the competition.
In the previous section the
entrepreneur defined WHERE
he wants to take the business
by establishing the goals and
objectives. This section will address
HOW to get there, i.e. the business
strategy. How can this be done?
There are a number of management
tools available for the entrepreneur
to assist him/her to develop an
effective business strategy:
a] Identify the Company’s
Core Competencies
In this section of the business
plan, the entrepreneur must
explain how he/she plans to
gain a sustainable competitive
edge [which we explained on
page 44] in the market and what
sets the business apart from the
competition. The entrepreneur
should comment on how he/she
plans to achieve the business
goals and objectives in the face
of competition and government
regulation and should identify
the image that the business
will try to project. Here, the
entrepreneur must define his/her
company’s core competencies.
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Core competencies are a unique
set of lasting capabilities that
a company develops in key
operational areas, such as quality,
service, innovation, flexibility,
responsiveness, etc which allow it
to vault past competitors.
Normally, a company is likely to
build core competencies in no
more than four or five areas.
These core competencies become
the nucleus of a company’s
competitive advantage but to
be effective these competencies
should be difficult for competitors
to copy and they must provide
customers with some kind of
perceived benefit. The small
size of the entrepreneur’s
business venture may be used
as an ‘advantage’ because
this smallness will allow him/
her to do things which larger
competitors cannot do, e.g.
speed of delivery, closeness to
customers, ability to innovate
fast, etc. The key to success of
these core competencies is to
concentrate them on providing
superior service and value for the
entrepreneur’s target customers.
b] Identify the Key Factors for
Success in the Business
[better known as the
Key Success Factors].
Key success factors are
relationships between a
controllable variable and a
critical factor influencing a
company’s ability to compete in
the market. Let’s give a typical
example: everyone agrees
that the key success factors
of a typical restaurant include:
maintaining the food quality,
cleanliness, consistency, a good
friendly and attentive service by
a well trained waiting personnel,
a right location, and a trained,
dependable restaurant manager.
Restaurants lacking these key
success factors are not likely to
survive but those restauranters
who build their businesses
with these factors in mind
will prosper! So it is essential
that when an entrepreneur is
entering a new industry sector,
he/she must identify the key
success factors of this industry
and then build a strategy on the
foundation of these factors.
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c] Formulating Strategic Options
and Selecting an Appropriate
Business Strategy
By now, the entrepreneur should
have a clear picture of what his/
her business does best and what
its competitive advantages are.
Similarly, he/she should know its
business venture’s weaknesses
and limitations as well as those
of its competitors. This next
step involves evaluating the
strategic options available
and then preparing a business
strategy designed to achieve
the business’s goals and
objectives.
The entrepreneur has largely
three strategic options to
choose from. In his classic
book, Competitive Strategy,
1980, Michael Porter defines
these three strategies, as
indicated below. Which strategy
to select will largely depend
on the entrepreneur’s [a] core
competencies and the key
success factors of the industry
sector he/she is operating in.
i. A cost leadership strategy:
The entrepreneur pursuing
a cost leadership strategy
strives to be the lowest-
cost producer relative to its
competitors in the industry.
Low-cost leaders have a
competitive advantage in
reaching buyers whose
primary purchase criterion is
‘price’ and these companies
have the power to set the
industry’s price floor.
ii. A differentiation strategy:
The entrepreneur pursuing
a differentiation strategy
seeks to build customer
loyalty by positioning its
products/services in a unique
or different way. There
are many ways to create
a differentiation strategy,
but the key concept is to be
special at something that is
important for the customer. In
other words, the entrepreneur
must strive to be better
than his/her competitors at
something that customers
value, because not every
product/service difference is a
differentiator!
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iii. A Focus Strategy:
A focus strategy recognises
that not all markets are
homogeneous [the same].
In fact, in a given market,
there are a number of market
segments, each segment
having different needs, wants
and characteristics. The
principal idea of this strategy
is for the entrepreneur to select
one or more market segments,
identify the customers’ special
needs, wants and interests and
approach them with a product/
service designed to excel in
meeting these needs, wants
and interests. A focus strategy
builds on differences among
market segments.
The strategic options available to the entrepreneur
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Uniqueness perceived
by the customers
Low-cost position
N
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u
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Differentation Low-cost
Differentation
Focus
Cost Focus
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Don’t just start a business... Start a successful one!
d. Identify a Market Segmentation
and Product Positioning
Strategy
Here the entrepreneur must
segment the whole market and
identify the market segment
or segments he/she would like
to meet the requirements of.
This requires the entrepreneur
to know who his/her customers
are, their characteristics, their
likes and dislikes, etc. To segment
a market successfully, the
entrepreneur must first identify
the characteristics of two or more
groups of customers with similar
needs and wants. The key is to
develop a basis for segmenting
the whole market, e.g., on benefits
sought, product usage, brand
preferences, purchase patterns,
etc, and then use this basis to
identify the various submarkets
[market segments] to enter.
The entrepreneur must then
verify that the selected market
segments are large enough and
have enough purchasing power to
generate a profit for the company.
He must then assess whether
these market segments are
accessible, i.e. that they may be
reached.
Once the entrepreneur
has identified the market
segments he/she wants to
target, he/she must now
position its product offer
to these market segments
in a way that the latter
perceive the entrepreneur’s
product/service in a desired
image for the business and
its products/services. So
product positioning involves
the entrepreneur influencing
the customers’ perceptions
to create the desired image
for the business and its
products/services. Proper
product positioning gives the
small business [entrepreneur]
a way of setting itself apart
from the competition, which
may be its foundation for
developing a competitive
advantage. A typical way how
an entrepreneur may establish
a competitive advantage is to
rely on a ‘natural’ advantage of
being a small business, e.g. a
small firm’s ability to respond
quickly to the target markets’
needs; its ability to remain
flexible and willing to change
to reach the market segment in
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Don’t just start a business... Start a successful one!
question, its special knowledge
of a particular product/service,
etc.
The business strategy the
entrepreneur will select, the
market segments he/she decides
a] When segmenting the market,
the entrepreneur must ask:
What groups of customers in
my market are similar enough
that the same product/service
will appeal to all of them?
b] When selecting a target
market, the entrepreneur must
ask: Which specific group of
customers do I want to target?
Questions to ask yourself
In a nutshell, the process of selecting a target market and positioning
strategy can be summarised in three basic questions:
c] When developing a unique
positioning strategy, the
entrepreneur must ask: What
position will my company or
product/service occupy in the
minds of my customers and
potential customers that will
differentiate it from all my
competitors?
to compete in, will depend on
the competitive advantages
the company enjoys in each
market segment. In some
cases, an entrepreneur may
be implementing different
strategies across a number of
market segments.
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6. Translating the Business
Strategy Plan into distinct
Action Plans
No strategic plan is complete
until it is put into action! The
entrepreneur must now convert
his/her firm’s business strategy
plan into distinct operations
plans that will guide the company
on a daily basis and become a
visible and active part of the
business. These action plans will
now turn the business plan into
a real working document instead
of letting it sit on an office shelf
collecting dust!
At this stage, the entrepreneur
will develop three essential Action
Plans:
wThe Marketing Plan
wThe Operations Plan
wThe Financial Plan.
The marketing plan
No Customers, No Business!
Don’t wait for customers to come to you, go out and find them!
As we have already discussed,
the first steps in developing an
effective marketing strategy are:
[a] conduct marketing research,
segment the market into
distinct market segments, [c]
identify the market segments the
entrepreneur wishes to target and
[d] develop an effective product
positioning strategy. This means it
will position its product/service in a
unique position as perceived by its
customers or potential customers
that will differentiate it from all of
its competitors.
Having done this, the entrepreneur
must now plan the details of his/her
company’s marketing mix. The
firm’s company mix is the set of
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controllable, tactical marketing
tools that it uses to produce the
response it wants from each of its
target markets. Every entrepreneur
has 7 tools in his/her marketing
tool box and these are usually
referred to as the 7 Ps: the product,
price, promotion, place, people,
physical evidence and process.
i. The Product
The product/service is the
entrepreneur’s core product. The
entrepreneur must decide on the
main characteristics of his/her
product/service, namely:
w The quality level of the product/
service.
w The features of the product/
service.
w The design of the product/
service.
w A brand name for the new
product/service.
w The packaging for the product/
service.
w The after-sales service
w The warranty [where applicable].
ii. The Price
The entrepreneur must decide on
the price of the product/service.
Given the small size of the company
of a would-be entrepreneur, the
latter will normally be a price-taker
and not a price-maker, which means
that he/she must accept the price
levels as dictated by the market in
question.
However, from his/her end, when
setting the price of the product/
service, the entrepreneur must
keep in mind that pricing plays
a critical role in the company’s
overall strategy and the pricing
strategy must be compatible with
the company’s total business [and
marketing] plan. The entrepreneur
must also keep the following issues
in mind when establishing a price
for the product/service:
w Assess the customer’s perceived
price value for the product/
service in question.
w Assess the actual demand for the
product/service.
w Calculate the total cost of
producing the product/service,
i.e. the variable costs and
overhead costs.
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w Calculate the break-even point of
the company.
w Assess the pricing of competing
products/services.
w Research the prices and
discounts already available on
the market.
w Keep in mind that the ‘price’ is
only one of the many attributes
of the product/service and hence
he/she must assess the other
elements of the marketing mix
and that of competition, e.g. the
product quality, delivery times,
etc.
w Not to think that the new
product/service has to be the
cheapest on the market.
iii. Promotion
Given the limited financial
resources of the would-be
entrepreneur, more often than not,
at the start of the business, the
entrepreneur is the key person in
any promotion effort and he/she
has the main responsibility for
developing position relationships
between the business and the
customers. The reputation of a
small business is usually directly
related to the personality and
actions of the owner – the
entrepreneur! This is why the
new entrepreneur must look
professional and equip him/herself
with professionally-produced
business cards, office stationery,
etc and also produce a corporate
profile.
However, the entrepreneur may
still make effective use of other
promotional tools:
w Word-of-mouth promotion [most
effective promotional tool]
which is triggered by satisfied
customers who would have used
the entrepreneur’s product/
service.
w A professionally drawn up
website of the company.
w Sales promotion, e.g. some
special offers to increase sales,
demonstrations, free samples,
special introductory offers, etc.
w Participate in a local specialised
trade fair/exhibition.
w Public relations, e.g. press
releases, advertorials, etc.
w At a later stage, the
entrepreneur might even
consider some mass media
advertising, e.g. advertising
on local radio, newspapers, TV,
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Don’t just start a business... Start a successful one!
billboards, bus advertising, etc.
This promotional tool, although
very effective, is also relatively
expensive.
iv. Place [distribution]
The entrepreneur must decide
whether he/she wants to sell
the product/service directly
to consumers or through
intermediaries [e.g. wholesalers
and retailers]. If the entrepreneur
is interested in opening a new retail
outlet, e.g a boutique, a hair and
beauty salon, an antiques shop,
etc, the choice of the business
location for the retail outlet itself
has to be made very carefully. To
increase the chances of success,
considerable thought should be
given to the problem of selecting
the right location of the business. A
good location may allow a not-so-
good business to survive, whereas
a bad location may result in failure
for even the best planned business.
The relative importance of the
location differs according to the
nature of the business of the
retail outlet, however in general,
the entrepreneur must decide the
location of the outlet, largely based
on the following:
w Is the location close to the target
customers?
w Is the location visible and easy to
find by the customers?
w Is there a lot of road traffic to
reach the site?
w Is there adequate parking?
w Is there room for future
expansion?
w What is the reputation of the
site?
w Where are competitors’ retail
outlets located?
v. People, Physical Evidence
and Process
People, physical evidence and
process are very important tools
for the entrepreneur producing
a ‘service’ product. ‘People’ refer
to the entrepreneur’s employees
who will be interfacing with the
customers. ‘Physical evidence’
refers to the entrepreneur’s efforts
to “tangibilise” the intangible
aspects of the service product, e.g.
produce promotional brochures,
promotional CDs, etc. And the last
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P stands for ‘Process.’ This tool
assists the entrepreneur to, as
much as possible, standardise the
process of his service product, e.g.
if the hair-styling salon has three
employees who wash customers’
Questions to ask yourself
Many entrepreneurs start their business by working from home. I was,
in fact, one of these as for the first 18 months, I operated by business
from home. Although at first this may be a most suitable first base
for the starting business, one must ask him/herself these questions
to prevent expensive mistakes, whether emanating from a legal or
practical matter.
Issue to address Check with
Planning permission & building regulations MEPA
Mortgage Bank
Insurance Insurance advisor
Tax consequences Accountant
Business plan legislation MEPA and legal advisor
Disturbance Neighbours
Effect on family life and social life Family
Your own work efficiency at home Yourself
hair, then the entrepreneur will try
and standardize the hair-washing
process of all three employees
so that the same quality service
is given every time, irrespective
of which employee is washing the
customer’s hair.
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Don’t just start a business... Start a successful one!
The Operations plan deals with the
day-to-day operations of the
company. For example, in the case
of a manufacturing company, this
section of the plan should begin by
describing how the firm plans to
manufacture its first product. The
reader will want to know how much
of the manufacturing the company
will be doing itself, and how much,
if any, will be sub-contracted out to
others.
The location of the manufacturing
facility should also be specified
in the operations plan. Another
important aspect is how much
inventory will need to be carried
in stock in order to meet the
customer demand. If the firm is
a service organisation, similar
information should be provided.
The operations plan should also
include a description of the
network of suppliers, business
partners and service providers
that will be necessary to build the
product or produce the service the
firm will sell.
The operations plan
The operations plan should also
include an explanation of the firm’s
quality control procedures. The
plan should give an overview of
what monitoring or inspection
processes will be built into the
manufacturing process to ensure
high quality. Customer-support
strategies should then be
discussed. If the company is obliged
to provide after-sales support to
its customers through a call centre
or other means, these obligations
should also be clearly described.
For product-manufacturing
companies, the operations plan
must also indicate the risks and
regulations pertaining to the
operations of the firm, such as non-
routine regulations regarding waste
disposal and worker safety.
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The financial plan must
demonstrate the financial viability
of the business.
Most entrepreneurs, whether they
are at start-up stage or have been
in business for several years, have
four main financial objectives:
w Profitability - This refers to
a company’s ability to make a
profit.
w Liquidity - This refers to a
company’s ability to meet its
short-term obligations.
w Efficiency – This refers to how
productively a company is
utilizing its assets.
w Stability – This refers to the
overall health of the financial
structure of the company,
particularly as it relates to its
debt-to-equity ratio.
The financial plan should begin
with an explanation of the funding
that will be needed by the business
during the next two to three years
along with an explanation of
how the funds will be used. This
The financial plan
Questions to ask yourself
A properly managed company
[large or small] must also
stay on top of the following
questions:
w How are we doing? Are we
making or losing money?
w How much cash do we have in
hand?
w Do we have enough cash
to meet our short-term
obligations?
w How efficiently are we
utilising our assets?
w How does our growth and net
profits compare to those of
our industry peers?
w Where will the funds we need
for capital improvements
come from?
w Are there ways we can
partner with other firms to
share risk and reduce the
amount of cash we need?
w Overall, are we in good shape
financially?
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Don’t just start a business... Start a successful one!
information is called a sources and
uses of fund statement.
The next portion of this section
should include the financial
projections, which are intended to
further demonstrate the financial
viability of the business. The
financial projects should include
two to three years of projected
income statements, balance sheets
and statements of cash flows. It
is also crucial that an assumption
sheet precedes the projections.
This assumption sheet explains the
basis for the numbers included in
the projected financial statements.
Points to remember
The process of financial management involves the following 4 steps.
A start-up company will obviously start at Step 2 as it would not have
any historic financial statements.
Step 1 – The Preparation of Historic Financial Statements
w Income statement
w Balance sheet
w Statement of cash flows
Step 2 – Preparation of Forecasts
w Income
w Expenses
w Capital Expenditure
Step 3 – Preparation of Projected Financial Statements
w Income statement
w Balance sheet
w Statement of cash flows
Step 4 – Ongoing Analysis of Financial Results
w Ratio analysis
w Measuring results vs. plans
w Measuring results vs. industry norms.
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7. Establish Accurate Controls
for The Business Plan
Good planning includes controls
necessary to implement the plan
successfully. Although long-term
plans may be changed, they provide
direction for all business activities.
Planning without control has little
operational value, and so a sound
planning programme requires a
practical control process. The
proposed actions and activities
indicated in the business plan
become the standards against
which actual performance is
measured.
Controlling projects and keeping
them on schedule means that
the entrepreneur must identify
and track key performance
indicators. The source of these
indicators is the operating data
from the company’s normal
business activity; these are the
guideposts for detecting deviations
from established standards.
Accounting, production, sales,
inventory and other operating
records are primary sources of
data the entrepreneur can use for
controlling activities.
8. Critical Risks Factors
Although a variety of potential
risks may exist, e.g. management
risks, marketing risks, operating
risks, financial risks, etc, the
entrepreneur must tailor this
section to depict its truly critical
risks. By highlighting these critical
risks, the entrepreneur is showing
that he/she understands and is fully
aware of the critical risks facing the
business.
The critical risks a new business
may face depend largely on
its industry and its particular
situation. At this stage, the
entrepreneur must also highlight
the contingency plan or actions,
which he/she might need to take
if the business plan does not
materialise.
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Don’t just start a business... Start a successful one!
Points to remember
The ten important questions a business plan should answer:
1. Is the business just an idea,
or is it a business opportunity
with real potential?
2. Does the business venture
have an exciting and sensible
business model? Will other
firms be able to copy its
business model or will the firm
be able to defend its position
through patents, copyrights
or some other intellectual
property means?
3. Is the product/service viable?
Does it add significant value to
the customer? Has a feasibility
analysis been completed? If so,
what are the results?
4. Is the industry in which the
product/service will compete
growing, stable or declining?
5. Does the business venture
have a well-defined target
market?
6. How will the company’s
competitors react to its
entrance into its markets?
7. Is the entrepreneur skilled and
up to the task of launching the
new business venture?
8. Is the business venture
organised in an appropriate
manner? Are its strategy and
business practices legal and
ethical?
9. Are the financial projections
realistic, and do they project
a bright future for the firm?
What rate of return can
investors expect?
10. What are the critical risks
surrounding the business, and
does the entrepreneur have
contingency plans in place if
risks become actual problems?
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Setting up my own
successful business
- a re-cap!
Get it right, first time!
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Don’t just start a business... Start a successful one!
Now that you have read this
manual, I have two questions to ask
you:
1. Do you feel personally prepared
to take the plunge and
become a promising, budding
entrepreneur?
2. Do you feel you have conducted
a good initial preparation for
your new business?
I have drawn up two checklists
to assess [a] your personal
preparation and the initial
preparation for your business
venture. If you answer ‘yes’ to
these checklist questions then this
means you have completed the
first essential stage of setting up a
business ...successfully!
Checklist 1 - Personal preparation
Are you personally prepared to become a promising entrepreneur?
1. Are your physical health and
age compatible with your
proposed project?
2. Can you cope mentally
with the new stresses and
demands?
3. Do you welcome calculated
risks and responsibility?
4. Have you demonstrated
management ability?
5. Do you have the quality of
endurance?
6. Can you work alone for a
sustained period of time?
7. Can you accept a reduced
income, at least, at the
beginning?
8. Will you work without the
usual financial security that a
regular employee has?
9. Are you self-confident in
the face of adversity and
rejection?
10. Do you know how many
hours per week you wish to
work?
11. Do you know how supportive
your family members will be?
continues on next page...
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Don’t just start a business... Start a successful one!
12. Have you discussed the
project with your family
members?
13. Do you appreciate what
effect the project can have
on your family life and your
family home?
14. Have you identified your
personal skills?
15. Are you knowledgeable
enough on the business
sector you are going to enter
into?
16. Can you identify what your
business project will need
from you?
17. Do you know why you want to
start the project?
18. Have you set out truthfully
what you want out of the
business, and by when?
19. Will this project affect your
personality?
20. Do you know what your
attitude is towards: long
working hours, selling, asking
for money, asking for help,
power, success and above all,
failure?
21. Can you take decisions?
22. Do you get on well with
people?
23. Have you realistically listed
your personal attributes and
shortcomings?
24. Have you discussed these
attributes and shortcomings
with an honest and respected
friend?
from previous page...
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Don’t just start a business... Start a successful one!
Checklist 2 - Initial preparation for business
Have you conducted a good initial preparation for your new business?
1. Do you have a clear idea of
the business opportunity now
facing you?
2. Will your product sell?
3. Do you accurately
understand your intended
product/service?
4. Have you looked at the
market for it and can answer
the following questions:
a] What do people buy?
b] When do they buy it?
c] Where do they buy it?
d] Who does the buying?
e] Why should they choose
your product/service?
f] How will you set about
selling your product/
service?
g] How big is the market for
your product?
i] Do you think this market
will grow or contract?
j] Once you start operating,
what share of the market
are you aiming at?
5. Have you checked the moral,
legal and environmental
objections to your project?
6. Do you know why your
product/service is better
than those of competitors?
7. Can you explain this clearly
to customers?
8. Does it do what you say it
does? Has it been tested?
9. Will you continue to improve
your product?
10. Have you sold your product/
service yet?
11. Are you familiar with what
customers want, in terms
of delivery and after-sales
service requirements, quality
levels and discount levels?
12. Do you know who your
competitors are?
13. Do you know what they will
do if you start doing well?
14. Can you keep up to date with
changing techniques and
technology?
continues on next page...
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Don’t just start a business... Start a successful one!
15. Have you spoken to any
potential customers about
the market?
16. Do you know what your
product will cost to make?
17. Have you calculated your
overhead costs, including
selling and distribution?
18. Have you attempted to
produce a simple cash flow
projection?
19. At this stage do you have an
idea of:
a] How much cash you
will need in the next 12
months?
b] How much cash you can
personally raise?
c] How much external cash
you need?
d] When you can repay it?
20. Have you agreed within the
family what security you can
offer your financiers?
21. Do your business partners/
shareholders understand your
project?
22. Do you know how much it
will cost to promote your
product?
23. Do you have:
a] A legal advisor?
b] An accountant or financial
advisor?
c] A bank manager?
d] A management/marketing
consultant?
e] Other technical specialists?
24. Have these advisors been
properly briefed about the
services you require from
them and have they formally
informed you about the cost
of their services?
from previous page...
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Don’t just start a business... Start a successful one!
Author’s final words
I trust that all those promising and
up-and-coming entrepreneurs, male
or female, have found this Manual
useful in their quest to set up their
own ‘successful’ business. I augur
you all the best of luck for your new
‘successful’ business!
I am writing this manual while
inaugurating the tenth year of
operation of my own business…
I am sure that in ten years’ time,
one of you readers will be writing
a similar Business Manual for the
budding entrepreneurs of the
following decade!
I leave you with this interesting quotation:
People fall into three categories:
- Those who make things happen.
- Those who watch things happen.
- Those who are left to ask what did happen.
George Bernard Shaw
I ask: In which category of people would you like to be?
Good luck for your new business venture!
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List of references
Arden P., It’s Not How Good You Are, It’s How Good You Want To Be
(Phaldon Press 2006).
Ashton R., The Entrepreneur’s Book of Checklists
(Pearson Prentice Hall 2004).
Barringer B., & Ireland R., Entrepreneurship – Successfully
Launching New Ventures (Pearson Prentice Hall 2006).
Birley S., & Muzyka D., Mastering Enterprise
(Pearson Professional 2002).
Bolton B., & Thompson J., Entrepreneurs – Talent, Temperament,
Technique (Butterworth-Heinemann 2005).
Burch J., Entrepreneurship (John Wiley & Sons 1992).
Fsadni M., Entrepreneurship Base Document (Malta) – A Qualitative
Research Project (Malta Enterprise – Euro Info Centre 2006).
Kotler P., & Armstrong G., Principles of Marketing
(Prentice Hall 2006).
Malhotra N., Marketing Research – An Applied Orientation
(Prentice Hall 2006).
Meredith G., Nelson R., & Neck P., The Practice of
Entrepreneurship (International Labour Organisation 1987).
Porter M., Competitive Strategy: Techniques for Analysing
Industries and Competitors (Free Press 1980).
Rosthorn J., Haldane A., Blackwell E., & Wholey J., The Small
Business Action Kit (Kogan Page 2002).
Zimmerer T., & Scarborough N., Essentials of Entrepreneurship
and Small Business Management
(Pearson Education International 2004).
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Don’t just start a business... Start a successful one!
The present project which I have
had the honour to lead has given
me the opportunity to work with a
number of people whose important
contribution has proved crucial
to its success. It is with heartfelt
gratitude that I am pleased to
acknowledge the determination and
commitment shown by everyone
involved in achieving this common
goal.
First and foremost, I am grateful
to the Employment and Training
Corporation (ETC), particularly the
Chief Executive Officer, Dr. Sue
Vella and Senior Manager - Training
Services, Mr. Joe Cutajar, for their
continuous and generous support
throughout the various stages of
the implementation of the project.
I would also like to thank Ms. Marika
Fsadni B.A. (Hons) Bus. Mgt., M.B.A.
(Brunel), who, in researching and
writing this manual, has produced
a remarkably professional work
which is still user-friendly even
for those clients of ours who are
Project Leader’s Acknowledgements
approaching entrepreneurship for
the first time. Users of this manual
will be fortunate in benefiting from
the experience of an expert who
is not only fully qualified and well-
published in her field of expertise
but is also an entrepreneur in
her own right. Writing also from
her personal experience as an
entrepreneur who has, in the past
ten years, helped a large number
of other entrepreneurs start
and grow their own business, Ms
Fsadni, has written a manual that
will assist those starting on a new
entrepreneurial career avoid many
of the pitfalls awaiting the new
entrepreneur.
Finally I would also like to thank the
Corporation’s EU Unit at ETC and
the contractor, for their proficient
approach to their work, and their
support and patience in helping
me administer such an interesting
project.
Philippe Vancell
ESF 47 Project Leader
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