Opportunity Assessment Plans

The value of a business plan

The business plan is a generally well-known document. Despite much emphasis being placed on business plans in the entrepreneurship field, there is still much discussion about the success of this tool to add value to entrepreneurs or their business ventures. The heated discussions emanate from the different purposes associated with the business plan as well as the uncertainty of the outcomes. A full understanding of past and present discussions is required in order to substantiate the theoretically supported and statistically untested purpose for the business plan: assessing opportunities.

The comprehensive analysis of the business plan revealed a variety of available business plan definitions, which is a possible explanation of the non-commensurability of the business plan literature as well as the business plan content. The definition of the business plan for the purpose of this study is: "A business plan carefully articulates the merits, requirements, risks and potential rewards of the opportunity and how it is seized". It is also imperative to note that the UP-approved business plan framework, which is a more detailed business plan framework, is suggested as the necessary business plan structure for the study's investigation of opportunity assessmention. The business plan structure from the University of Pretoria was converged from the top 12 business plans from financial institutions such as commercial banks, angel investors and venture capitalists in July 2006 by Sasol ChemCity and the UP.

Types of business plans

There are different types of business plans depending on the purpose. Different circumstances will require different types of business plans. Depending on the type of business plan, certain sections will be emphasised, as some information will be more important for certain circumstances or purposes. The purpose of a business plan can be multifaceted; however, it has been stated (Struwig, 2009:104) that a business plan has three primary purposes: (1) to serve an internal purpose for the business (one of the main objectives being planning), (2) to obtain funding, and (3) to be used as a tool for reducing risk. A purpose that has not been mentioned as a primary purpose is survival or success. A possible reason for this is that survival or success emanates from the three primary purposes; that is, as a result of obtaining funding, internal planning or reducing risk in the business, the venture is able to survive or succeed. The literature either agrees, agrees somewhat or disagrees. Inconsistency in research results may have been due to an inconsistency in business plan definition, content or formulation.

Assessing ideas, opportunities and business plans

Not all literature distinguishes between ideas and opportunities. Perhaps the authors are unaware of the distinctive nature of these concepts, or else they disagree with distinguishing between the two concepts. There are some authors who allude to the distinction but do not state it clearly. However, there are numerous authors who do distinguish between the two concepts, primarily in the field of entrepre-neurship. This paper concurs with the latter group of authors. In fact, the distinction between these two concepts, ideas and opportunities, is significant to this study. Ideas, for the purpose of this study, are defined as a combination of the following: "A necessary but not sufficient condition for business opportunities to emerge", and "Not a feasible and viable business opportunity". Business or entrepreneurial opportunities, for the purpose of the study, are defined as the following: "A potentially feasible, profit-seeking business that offers a new product/ service to the market, improves an already-existing product/service or imitates a profitable product/service in a non-saturated market".

Evaluation is key to differentiating an idea from an opportunity. This study distinguishes two primary tasks included in opportunity assessment, resulting from two dominant definitions found through an analysis of the business opportunity literature: (a) distinguishing opportunities from ideas, and (b) developing opportunities. These two tasks may take place simultaneously or in random order.

The literature review concludes with opportunity assessment criteria and the similarities found to the UP business plan criteria. Table 1 reflects the comparison between the UP business plan content and opportunity assessment criteria). One opportunity assessment, as presented in Table 1, stood out from the rest, as it was the most extensive. This opportunity evaluation is presented by Timmons and Spinelli (2007: 128) and supported by Nieman and Nieuwenhuizen (2009:87). Table 1 demonstrates the corresponding information needed to assess an opportunity accurately and the information needed to be gathered and interpreted to formulate a business plan. However, Timmons and Spinelli (2007:228) suggest that there are differences between the business plan and the opportunity assessment. They state that the business plan needs to contain more detail and strategies and this was also adopted in the UP business plan framework. It is stated that the opportunity assessment is the foundation for the business plan. Nonetheless, the extensive overlap cannot be ignored. Approximately 90 per cent of information required to assess opportunities corresponds with information that is required in the business plan, which in both instances would need to be researched, gathered and processed by the potential entrepreneur.

Thus this study was conducted to establish whether potential entrepreneurs assess opportunities through the formulation of a detailed business plan such as the UP business plan.

There are hundreds of examples of what the business plan should constitute. This paper now compares the content (business plan framework) of business plans from leading development institutions, software programmes and textbooks, to the content of the UP's business plan, presented in the above table. Australia's business plan (for immigrants acquiring a 'Business Talent Visa'), Business Plan Pro-Writer, and Business Partners' business plan are all reputable in the entre-preneurship field. Morrisette and Hatfield (2010:125) state that the "canned" structure of the business plan taken from Jeffrey Timmon's text, is also excellent.

From analysing the information shown in the tables above, it is concluded that the UP business plan framework is indeed an effective and detailed business plan structure and is a good framework and foundation to follow. However, the entrepreneur must remember that the amount of detail and the order in which information is presented can vary for each particular situation and will depend upon the purpose of the plan and the age and stage of the business venture, among other factors.

Table 2

The business plan for the purpose of assessing opportunities

It is suggested that by addressing the types of questions necessary to shape the opportunity, the resources and the team, the founder begins to mould the idea into an opportunity, and the opportunity into a business plan. This paper postulates that the inverse is also true, by gathering and interpreting the information needed to formulate the business plan, one then has all the information in order to make a more accurate and informed decision of whether their idea is an opportunity. Furthermore the process of formulating the business plan (researching, gathering, and analysing information) allows for opportunity development/exploration. There are a few authors who have already alluded to the business plan's potential to assess opportunities. Delmar and Shane, include as part of business planning: the processes of gathering and analysing information, evaluating required tasks, identifying risks and strategy, projecting financial developments, and documenting these things in a written plan, in other words formulating a business plan. Wyckham and Wedley demonstrated the value of the business plan in distinguishing feasible ventures (opportunities) from unfeasible ventures (ideas).

The business plan itself is the culmination of a usually lengthy, arduous, creative, and iterative process that can transform a caterpillar (a raw idea) into a magnificent butterfly (an opportunity). In writing and developing the business plan, the potential entrepreneur is forced to think about the various aspects of the business venture. This in itself means that information needs to be collected on all aspects of the opportunity and the resulting business venture.

Pretorius states that a full opportunity analysis and assessment is a similar task to that undertaken for the start-up of a new venture, and core to the components of a business plan. Bishop and Nixon suggested that developing assessment decision aids might help improve potential entrepreneurs' evaluations, regardless of their experience levels. An evaluation tool would help entrepreneurs make more objective decisions regarding opportunity assessment. It could be argued that it might be difficult for entrepreneurs, especially for potential entrepreneurs, to just rely on cognitive ability to assess opportunities. Therefore a tool that could guide them would be most advantageous. This study postulates that the business plan, being so populous and similar to opportunity assessment, could be this tool.

"A good business plan must be developed in order to exploit the defined opportunity". This study is in agreement with this statement but also postulates that the formulation of a business plan is even more important for the evaluation of business opportunities. The distinguishment between ideas and opportunities results from the gathering and interpreting of the required corresponding information for business plans and opportunity assessment. Figure 2 highlights that the development of opportunities through the formulation of a business plan, which allows a potential idea to be shaped, transformed, or improved into a business opportunity, is imperative to this study and will substantiate the value of a business plan for potential entrepreneurs. Thus a theoretically supported and statistically untested purpose for the formulation of a business plan is hypothesised, assessing opportunities.