Beyond the Business Plan

10 Principles for New Venture Explorers

S. Bridge,C. Hegarty

• Verlag: Palgrave Macmillan
• Jahr: 2013
• ISBN:
  9781137332875
• Thema: Commerce
• Thema: Stratégie commerciale

This insightful practical guide argues that the traditional business plan may not be appropriate for many new ventures and presents an alternative, effectual approach that encourages flexibility and development through exploration and experience. 10 principles demonstrate how to respond better to uncertainty during the business development process.

Part I
Why Look Beyond the Business Plan?

Key Learning Objectives

From Part I the reader should learn that:

• This book is for ‘new venture explorers’: people who want to explore the creation of a new enterprise in some form.
• Business plans are often advised as an essential requirement for new ventures. In particular, business ‘professionals’, who tend to apply big business thinking, like business plans and often advocate them.
• However, there is evidence that business plans do not help many new ventures and there is now considerable scepticism about them.
• There are other guides for early stage ventures and an ‘effectual’ approach is often used by successful entrepreneurs.
• An analogy with exploration suggests that new ventures are a form of exploration and that this is consistent with effectuation.
• Maps and pre-prepared route instructions are unlikely to be available to guide new venture explorers. Instead, a set of guiding principles for exploration is suggested.

This is a book for new venture explorers – people who, instead of being content always to wait for other people to do things first, want to see what they can do themselves to create and/or develop something that they think would be helpful.

However, anyone starting a new venture, especially if they describe it as a new business, is likely to be advised that they need to prepare a business plan. That advice is often favoured by accountants, consultants and other business advisers, since businesses plans are often helpful to them. However, it is based on big business thinking, which is not necessarily appropriate for small businesses and in particular start-ups.

There are criticisms of the business plan and alternative guides are available. Among the other views considered is the concept of effectuation, which is also consistent with looking at new venture start-ups as a form of exploration. Therefore, based on effectuation and exploration, a set of exploration principles is suggested in this book as a guide for new venture start-ups.

Chapter 1 is about the purpose of this book. Chapter 2 then introduces business plans and analyses why they are advocated. Chapter 3 shows why business plans are not helpful for most new ventures and Chapter 4 then considers alternative guides, especially effectuation. Effectuation is consistent with seeing new ventures as a form of exploration, and this analogy is considered in Chapter 5. A set of principles based on it are suggested in Chapter 6 as a guide for new venture explorers.

1

The Purpose of This Book

The Essence of This Chapter

• This is a book for ‘new venture explorers’: people who want to create a new enterprise.
• New ventures can take a wide variety of forms.
• Some of the terminology used in this area can be confusing.

Illustration 1.1 Starting a small consultancy business

For 20 years Peter ran a small (one person) consultancy business. Earlier in his life the thought of having his own business had never occurred to him, but at one time he worked for a small business support agency – a job which entailed encouraging other people to start businesses. Therefore, when a restructuring of the agency led to him being made redundant, he felt obliged to try it himself – although he did also keep an eye on the local job market in case any attractive jobs were advertised.

During his time in the agency two people with whom he had been working had started their own consultancy businesses and this was something he thought he could try also. Therefore he set up as a ‘sole trader’ using a computer and desk at home. He also ordered business cards and headed paper, registered for self-employment National Insurance, and advertised his services in general terms in Yellow Pages.

Shortly after starting up he was approached, separately, by two clients of the agency he had worked for who asked if he could help them to prepare their applications for agency support. He checked with his former colleagues and they encouraged him to go ahead, pointing out that they wanted to assist these clients, but needed plans with their submissions. He should be able to write plans which met all the agency’s requirements.

Thinking about this, he realised that, having worked on awarding grants, he was well placed to help people to apply for grants because he knew how the grant-givers thought and what information they needed. Thus he developed this as one of his areas of expertise. He found customers mainly through networking and word of mouth. Through the same media he also found indications of other services that he might offer. His business prospered to the extent that he stopped looking for other possible employment elsewhere. As the service he offered depended largely on his own contacts, experience and knowledge, he remained a one-person business, but he did sometimes collaborate with other self-employed people to work on larger projects. After a while his turnover grew to the level at which he needed to register for VAT, and after a couple of years (at his accountant’s suggestion) he formed a limited company which took over the business’s activities and acquired its goodwill. Officially he became its only employee.

Relatively early in this process he was asked, in a survey of new small businesses, what his business aims were. This made him think about them and he recorded them as follows, and in no particular order:

• To generate enough income to maintain his standard of living.
• To make a contribution to the local community.
• To enjoy his business activity.

He did not see the need subsequently to change these aims. He had seen a possibility for a business, made a start, used his contacts and built on opportunities when he found them, established a diverse client base, and clarified his objectives – and, as a result, the business sustained him until he reached retirement age while meeting his objectives for it. It was thus a successful venture.

Source: Based on S. Bridge and K. O’Neill, Understanding Enterprise Entrepreneurship and Small Business (Basingstoke: Palgrave Macmillan, 4th edn 2013) p. 249.

This is a book for people who want to create a new venture: people who, instead of being content always to wait for other people to do things, want to see what they can do themselves to create something helpful. That might be something that helps them personally – for instance by creating their own business because working for someone else does not provide enough income and/or job satisfaction (see, for example, Illustration 1.1); it might be something that helps a group to which they belong or the community in which they live (see, for example, Illustration 1.4); or it might be something they want to do to help other people – for instance by launching a new charity to provide aid for the victims of a disaster. All these are valid new ventures.

Illustration 1.2 Examples of enterprising ventures

As well as many examples of people starting small businesses or establishing freelance careers (see, for example Illustration 1.1), the following are also examples of enterprising ventures:

• Starting a series of car boot sales
• Devising a new academic course
• Establishing a community centre
• Opening a local tea shop
• Campaigning to save a local school
• Launching a new family support group
• Putting on a theatrical production
• Developing a new medical procedure
• Forming a youth club
• Forming a local art group
• Forming a building preservation trust (Illustration 1.4)
• Campaigning for a change in the law

‘An enterprise’ it has been said, ‘is a goal-realisation device’.¹ The enterprises listed in Illustration 1.2 are ventures which are designed to help people to achieve their goals. Some of those enterprises or ventures might be described as businesses (see Illustration 1.3), but whatever they are called they should be seen as the means to an end – not as ends in themselves. If the enterprises concerned are not going to help to achieve those goals, why pursue them?

Illustration 1.3 Enterprise terminology

There are many words which can be used to describe a new initiative of the sort described in this chapter, and many of those words can be used in a variety of ways because they don’t have single, clear, narrow definitions. Some of the words may apply only to some initiatives and not to others, and some can have adverse connotations because they are perceived by some to apply to initiatives of which they do not approve.

For instance, a few years ago it might have been assumed that any new economic venture would have been a new business, and if this book had been written then it would probably have described itself as a business start-up guide. However, many new ventures are not businesses and are not likely to become businesses later. Although businesses are often described as enterprises, not all enterprising ventures can be described as businesses. Businesses are often thought to be private trading enterprises launched for personal financial gain – but then there are social enterprises and community businesses to which that does not apply. Businesses are also thought to be founded by entrepreneurs – a term sometimes thought to refer to people whose sole interest is in making as much money as possible for themselves, even if it is at the expense of others. (See also the Further Information section for more on terminology).

Thus selecting an appropriate vocabulary for this book is not easy. Saying that it is about entrepreneurs and their new businesses would be too limiting, and the terms ‘business’ and ‘entrepreneur’ can have negative connotations for some people. ‘Enterprise’ is a possibility, but ‘enterprising people’ would be too broad. So instead this book talks about ‘ventures’, and refers to those people who are exploring the possibility of a new venture as ‘new venture explorers’.

Do you have a goal which might be achieved by a new venture? If so, this book is for you. It is a book for new venture explorers (in the terminology suggested in Illustration 1.3) – that is, people who want to find a way to develop a new venture, which might be self-employment and/or a business, but might also be something else, such as a new club, or society or charity. However, whatever it is, its essence is that the people concerned are prepared to take the initiative in doing it, because it would not otherwise happen.

Being able to launch a new venture – to start a new initiative rather than just hitching a ride on an existing one – is potentially a very useful ability. A new venture is inevitably something of a step into the unknown because the future is uncertain and not pre-ordained. A new venture is thus a form of exploration, and while exploration cannot be planned in detail in advance, it can be guided – and this book suggests a set of principles to guide such ventures. And new ventures will not happen unless new venture explorers are prepared to take the initiative to explore and make them happen.

First, however, this part of the book explores what guidance is already available and compares that with the real needs of small new ventures. It starts by looking at the business plan, which is often advocated. However, as explained above, a new venture does not necessarily have to be an embryonic business and, even if a new business is contemplated, a business plan is not necessarily the best tool to use. Similarly, other available guidance, although it may contain some useful points, is also generally limited in its application.

Therefore, to provide guidance applicable to most, if not all, new ventures, th...