Entrepreneurship
A Critique on Business Plan

Perform critical assessment and evaluation on the Business Plan for Ancient China Hotel at the following link: http://businessessays.net/marketing-management/a-business-plan-for-ancient-china-hotel/

 

Abstract

In this article, the relative strengths and weaknesses of the business proposal prepared will be outlined. Basically speaking, the strengths of the business proposal is that it is comprehensive, well structure, concise, parsimonious and indeed, included all the necessary and important information for the investors to evaluate the attractiveness of the proposal. There are also limitations and inherent weaknesses to the business proposal. The weaknesses, when corrected, can further enhance the possibility of the proposal to get funded. Then, the article proceeds to discuss the key success factors important for the business to achieve success in the real world. Overall, the business proposal has a fair chance to get funded, but it should be subjected to continuous improvement to make it more appealing to investors.

Strengths of the Business Proposal

There are several strong points of the business plan being prepared, that make it a viable plan to be presented to the equity capital investors. The strengths of the business proposals are as follow:

Comprehensive in nature. The business proposal, albeit relatively short, is pretty comprehensive, whereby many of the factors possibly affecting the proposed business venture are discussed. Both the external as well as the internal factors regarding the business venture are discussed in great depth, with supporting evidences and backed by peer-reviewed journal and literature. Many of the discussions presented is also supported by famous and valid theoretical frameworks such as the PESTLE analysis to analyze the macroeconomic related forces possibly affecting the business venture, and the 4Ps of marketing mixes for formulation of marketing management and strategies to reach the customers around the world. Not only is that, the business proposal is also aware of the potential risks from the venture. It is not presented in a one-sided manner only, whereby only opportunities or potential rewards are discussed. Thus, it present a balance view on the venture and it is prepared in an objective manner. This will surely impress the potential investors on the integrity of the business plan, and enable them to understand the risks in advance before commit their money in the venture.

Important information is provided. Apart from that, the usual crucial and highly important information about the business venture is provided. For example, many of the information required by the investors, when evaluating any investment opportunities are presented. One of the critical information provided is the management team, and the skills of the people to commit in the business venture. Besides, the general distinctive advantages and the unique value proposition of the business venture is also outlined. The information is also presented in a parsimonious manner, making the investors easy to analyze the various dimensions of the proposed business venture.

Well structured. Apart from that, the business proposal is well structured. At first, the external forces giving rise to the tourism industry is discussed. Then, the discussion move to describe the business venture from the internal perspectives. Among factors discussed include the business vision, mission, value proposition, marketing management, operation, critical success factors for the business venture, financial projection, calculation of financial metrics, the respective business opportunities as well as the risks of the business venture. All the materials are arranged in a relatively systematic and common manner, and it definitely will ease the easy understanding of the readers.

Dream big. Another important advantage of the business proposal is that it has a grand vision, which is to build one of the highest class and first of its kind hotel in the world. Nothing can be achieved unless there is first a dream. As we would have to dream, we might as well dream big. Thus, having the ambitious desire to score big in the business venture is a valuable strength in this business venture.

Weaknesses of the Business Proposal

Nonetheless, it is acknowledged that the business proposal prepared does suffer from several limitations as will be discussed in paragraphs below.

More details about the hotel and operations. In the proposal, very few operational details are outlined. In order to persuade the investors that the entrepreneurs understand deeply on the business venture, the details about the operation should be included. For example, the details on the staffs’ operations schedule, the value chain of the operation, the suppliers for foods and beverages, the details of the cafeterias in the hotel to serve the customers as well as the hotel rates and revenue management program can be included.

Beautiful pictures and nicely designed graphics. In the tourism industry, the beauty of the hotel as well as the atmosphere is crucial to the success of the services oriented industry. However, there is no beautiful graphics being included in the proposal. If there are many nice and appealing graphics being included in the proposal, it can show the management team commitment and attention to details. Besides, when the decoration is truly unique, nice, and professionally done, it can deliver a great deal of confidence to investors on the business venture (Lagerwerf et. al., 2002).

Scenario planning can be included. In business management, there will be a lot of unforeseen circumstances. In order to demonstrate that the management team had already considered the many possible scenarios from various perspectives, the business proposal can include discussion on how the management team is well prepared to handle the various possibilities of hardship in the future. A properly done scenario planning can enhance the management team understand on the business venture, while at the similar time, to impress the investors with a sense of professionalism and high level of attentions to details by the entrepreneurs (Whalen, 1978).

Sensitivity analysis can be performed. So far, the proposal only outlines the potential risks facing the business venture. However, the risks are not quantified. Thus, in order to quantify the risks, from the perspective of the potential impacts to the profitability of the business venture. For this, sensitivity analysis can be performed.

Other financial metrics, such as payback period, accounting rate of return and other profitability related ratios can be discussed. In order to provide more information for the investors to evaluate the risk and rewards of the business venture, other useful and frequently computed financial metrics can be provided. For example, payback period can be useful for risk adverse investors to judge when their initial investment outlay can be fully returned.

The assumptions accompanying the financial projection should be outlined. In the business proposal, financial projections are provided. However, the many assumptions used in the calculation of the financial projection presented in the business proposal are not outlined. It is possible that certain investors may want to check on the validity of the assumptions used, as well as to compare the projection to their personal estimates (Hall et. al., 1993). Thus, in a comprehensive and highly details financial projection, the assumptions should be outlined.

Critical Success Factors of the Business Proposal

There are certain skills and areas to be focused on to ensure the business proposal written able to get funded. Firstly, it is about the business writing skills. The language used to present the proposal must be professional, concise and easy to read. This is necessary to communicate the details and the nature of the business venture to potential and interested investors, or to financial institutions willing to lend out money to support the business venture. Secondly, there must be a fair chance for the business venture to gain success in the real world. This is because if the venture is too risky, or is perceived as not viable, then investors will not be likely to fund the risky investment (Kampmeier, 1999). Thirdly, an ability to connect to the investors is crucial. It is necessary for the entrepreneur to understand the perceptions and demands of the investors, and to attend to the concerns of these investors (Jablonski, 1999). When the entrepreneur can handle the expectations and meet the subliminal requirements of the investors, it is more likely to convince the investors that they should fund the project for future mutual benefits. Not only are that, the presentation skills of the entrepreneurs must be good as well. It is necessary for the entrepreneur to be able to speak in a convincing manner to motivate the investors to participate in the venture (Morrison, 2005), so the proposal can get funded and brought to reality.

Sources of Financing

As outlined in the business proposal, the sources of financing can come in three equal parts, namely, financing from the venture capitalists, financing from bank borrowing and financing from entrepreneurs’ own capital. Such an arrangement is a reasonable one. Firstly, when the entrepreneur as well as the management team able to commit their own money in the venture, it will deliver strong confidence to the other investors or lenders (Schilit, 1987). This also means that the management team is convinced on the business venture, and will likely work harder to achieve the business vision and mission outlined in the proposal. Apart from that, the rest of the capital requirements can be financed from equity or venture capitalists and bank borrowing. This is a viable plan as the burden of debt will not be excessive in the new venture, as bank borrowing will be consists only 33.33% of the total assets of the business venture. Besides, as the business venture is an attractive one, it is reasonable to use certain degree of leverage to further enhance the returns to shareholders.

Likelihood Success of the Business Proposal

The business proposal has a fair chance to get funded due to several factors as outline here: (a) viable and unique business proposition; (b) the profitability of the venture is supported by the business and economic trends around the world; (c) tourism is a green industry; (d) the business venture is first of its kind in the world, creating the first mover advantage to the investors, (e) the management or entrepreneur team consisted of people with complementary skill sets with different networks; (f) the management team has vast experiences in business management and tourism industry; as well as (g) the information provided is comprehensive and convincing. Thus, judging all of the positive points outlined above, it is not unreasonable to expect that the business proposal have a relatively good chances to attract the attention of the investors.

Nonetheless it is also fair to comment that the business proposal may subject to trial and error, and to be edited, after getting feedback from the potential investors on the weaknesses of the business proposal. The worries as well as the ideas from the investors can add value to the viability of the business proposal and enhance the chance of the proposal to get funded in the future. It is also acknowledge that other factors may come into picture, affecting the possibility of the business venture getting funded. The other factors that can be improved to enhance the possibility of the proposal being funded include: (a) good presentation to the potential investors, (b) impression management on the entrepreneurs; (c) allowing the equity investors to have a say in the business management (Paladino, 1992); (d) willing to negotiate with the terms outlined by the venture capitalist, (e) providing more details to potential and interested investors.

References & Bibliography

Hall, J., & Hofer, C. W. (1993). Venture capitalists’ decision criteria in new venture evaluation. Journal of Business Venturing, 8(1), 25.

Jablonski, J.  (1999). Teaching the complexity of business proposals. Business Communication Quarterly, 62(3), 108-111.

Kampmeier, C.  (1996). Writing Winning Business Proposals. Journal of Management Consulting, 9(1), 60.

Lagerwerf, L., & Bossers, E. (2002). Assessing business proposals: Genre conventions and audience response in document design. The Journal of Business Communication, 39(4), 437-460.

Morrison, R.  (2005). Persuasive Business Proposals: Writing to Win More Customers, Clients, and Contracts, 2nd Ed. Consulting to Management, 16(1), 63.

Paladino, J. E.  (1992). Mutual Respect Improves Proposal Process. The Public Relations Journal, 48(9), 29.

Schilit, W. K.  (1987). Financing Your Business. Management Accounting, 68(8), 50.

Whalen, T.  (1978). Evaluating Business Proposals. American Business Communication Association. ABCA Bulletin, 41(4), 27.

 

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