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The Justification of a Business Plan for Rebecca’s Hotel
The significance of business plans in all types and sizes of business organizations can never be threaten. The entrepreneurial inquiry puts the entrepreneurs in situations that require judgment. Hence, the need and identification of an approach to address these situations arise (Foss, Foss & Klein, 2006, p. 4-5). Such as the justification for business plans as one of the approaches to address business problems, particularly in the event of uncertainties. The use of a business plan is one such approach as it is defined as a formal declaration of what the business wants to achieve. During uncertainties entrepreneurs should find tools to manage them (Sull, 2004, par. 2). Guinipero, Denslow, and Melton (2008) indicated that high propensity risks increase the formality of business plans. A business plan allows the anticipation of risks and improbabilities. A carefully formulated business plan should be able to communicate to stakeholders about the intended direction of the company. Through this, stakeholders should be guided with an understanding of the business situation and subsequently enable them to execute appropriate actions (Honig and Karlson, 2004, p. 30-35). To protect their interests in the business, stakeholders can be guaranteed with action in expectation of favourable business outcomes.
The justification for a business plan appears to raise the significance for business successions as they posture challenges. The transition of managerial control frequently “simply do not work out” (Dalpiaz, Tracey & Phillips, 2014, p. 3). Since this paper is based on the succession of a family business, the case study about Rebecca’s family business provides insight into the important of business plans even for a small family-run hotel. This paper shall explain the importance of a business plan for Rebecca’s case and consequently convince her to undertake the preparation of a business plan. Her case shall be interpret considering the ‘mitigating’ factors as to why the business plan is necessary.
The ‘mitigating’ factors
The retirement of Rebecca’s parents had generally prompt the need for a business plan. Nonetheless, the presenting scenario also questions its practicality as their business is started out by her parents, has possibly overcome various business challenges, and is still currently operating, all without a business plan. The need for a business plan is followed by these conditions. Beyond these circumstances, Rebecca’s succession to manage the business also presents potential threats. Though Rebecca’s work as a kitchen assistant and junior cook despite having those knowledge is useful for the business since the hotel includes a restaurant, but the operation and management of a bar and hotel would require competencies which may not be sufficiently provided by her short time because she went backpacking travel in South-East Asia. Additionally, a three-year backpack travel exposure may not be suitable for Rebecca to develop an understanding of the tourism industry in their locale since the activities and opportunities presented in the different locations can be varied. It is important to note the difference in the tourism needs and activities of a travel destination such as the marina compared to the tourism locale Rebecca visited in her three-year adventure.
On the other hand, as part of the family, she could have obtained insight into the business operations and her parents’ management style and business practices. Nevertheless, family-run organizations encounter unique problems due to its inherent nature (Peters & Buhalis, 2004; Agyapong & Boamah, 2013). Supporting literature shall clarify this in the next section.
Even though Kerstin is not a part of this family but because of her relations with Rebecca and also because of her competencies and training, she can be possibly consulted about these consequences. Though small businesses are less likely to hire specialists than large corporations (Wu, Bacon, & Hoque, 2014, p. 7), by moral of Rebecca’s relationship to her, Kirsten’s expertise might be confess or at least consulted. It is, however, uncertain that her international exposure at work and the level of training would be suitable for a small family-run hotel.
The nature of family-run businesses
Family businesses rely on paternalism (Peters & Buhalis, 2004, p. 537). Successors operate under the path of their parents especially when the founders are still around. Successors may attempt to introduce new systems and approach which may run contradicting to the ‘family tradition’ when running the business. But the predecessor may not be able to let go or to completely allow the decision making processes and the management of the enterprise under the new relative-manager. The vision and goals of this relative may be inconsistent with how the parents perceive the business. Likewise, Agyapong and Boamah (2013, p. 533) described family-based relatedness in their study, which appears to produce these problems. The dynamics of family relationships may get in the way of business operations. There may be a cause of separation of the family concerns and business matters, conflicts or inefficiency may be occurred in the business.
Family-run businesses are also usually characterized by informal business practices. As a result, these enterprises lack planning or the use of a systematic approach to manage the business especially when problematic activity occur. In the family businesses they commonly use improvisation by the family members (Peters & Buhalis, 2004, p. 5), which lead to inconsistencies. There are no product or service standardizations or appropriate consistent controls. The informality of the practice arises from the dynamics of the family relationship. This situation is further entangled by another informal business practice which is inaccurate financial recording that results in financial losses (Peters & Buhalis, 2004, p. 6). Family members also make their decisions that tend to be irrational since there appears a lack of information to guide them. In addition, misjudgement of performance indicators also occur and consequently affect the quality of future business decisions. This information could be made consistent, reliable, and more permanent when a proper business plan is created.
Succession in family businesses
Succession in family businesses is considered an interesting area of research. Studies focus on examining the change which aid or hinder the transfer of power to the succeeding generation, family relationships, and the process (Dalpiaz, Tracey & Phillips, 2014, p. 6). A more outstanding evaluation from the studies is the “causation” approach which indicates that family businesses evolve linearly. In a statistical perspective, the continuity of the family business is related to certain variables which indicate the future state of the business. In the causation approach, a set of goals is identified as one of the factors in which family businesses are described to be established on. However, the goals are recognised to lack systematic process due to the informal nature of family enterprises. Nevertheless, planning, among the other components such as intentionality and resource acquisition, are essential foundations of this approach. Therefore, the continuity of the family business relies on the continuity of establishing plans. However, this time for Rebecca, a conscious formulation and systematic approach for business planning must be used.
A few studies shows the reasons why business plans become critically important for family-operated businesses. The studies of Peters and Buhalis (2004) and Agyapong and Boamah (2013) provide important insights into these types of business ownership, particularly in the hotel industry. Both types of research emphasize the need for competitiveness in the industry. Peters and Buhalis (2004) claimed that the competitiveness of destinations is characterized by the domination of small businesses in the tourism and hospitality industry, as such in the case of Austria, the study’s research locale. The operations of 240 small family businesses in Austria’s tourism destination industry were part of the study in 2003. Research findings suggested that training is an essential element to run family businesses. In addition, a key component of this training includes the development of plans, strategies and the development of conceptualisation of new products or services among other important areas of running the family hotel business. These specific areas are being pick to emphasize the important role of business plans in the small enterprise. This research further indicate the need to develop strategic plans, both as a competitive strategy and advantage for the small family hotels.
Growth and future sustainability are indicated to be the likely outcomes when strategic plans are created and then implemented. Meanwhile, Agyapong and Boamah (2013) conduct in their research the effects of business strategies and leadership in family businesses. Family hotel businesses in Ghana were the focus of this study, covering 50 small hotels in the country. The vital findings relevant to this paper is that the use of strategies, which may be provided by business plans, offer the family business the ability to predict problems, to vision the future, and to maintain flexibility. The business environment in Ghana was described to be highly competitive, and thus, the need for well-thought of strategies enable good business performance to survive in a competitive market situation. Furthermore, the unique characteristics of family businesses can be apply in implementing particular business conditions such as cost leadership and differentiation strategies (Agyapong & Boamah, 2013, p. 537). In the case of Ghana’s family hotel businesses, competitive strategies were purposeful to provide the assertion of survival of the 50 small hotels. Hence, the advantage of the business plan is to help the family business to be competitive in its formation. Another advantage implied in the studies is that the business plan could help support the inherent characteristics of small family businesses. Considering the scope of these two studies and similar competitive situations, those research indicate a broad-applicable situation for small family-run hotels.
Alternative studies illustrate the importance of business plans for entrepreneurs in general. Brinckmann, Grichnik and Kapsa (2010, p. 24) cleverly stated in the title of their study – ‘Should entrepreneurs plan or just storm the castle?’ – the quote of whether to create a business plan or not. This analysis study specified that planning is beneficial, although that factors such as culture and the newness of the enterprise affect the planning-performance relationship. Relevant to this, the newness of the enterprise may not be a concern for Rebecca’s case, since the business has existed during her parents’ time. Culture appears to be a critical factor as to refer to the norms, values, and relationships within the family. Since this is identified to affect the planning-performance relationship, the guarantee of success for Rebecca’s family business is yet to be determined. Besides, another research, Zahrani, Nikmaram and Latifi (2014, p.245) specified the need for developing a strategic plan, which is especially useful for succession planning. It is important for the successor to have the right outlook about the business plans. Furthermore, according to Aronoff and Ward (2014, p. 2), shared opinion help conquer conflicts within the family organizations. It is believed that since visions are reflections of values, shared visions should also result in more unify outcomes for a family business. Visions and values can be clarify when they are justify out rather than assumed. Identifying and specifying them in a business plan should help in making decisions which link to the family expectations.
Successions in family-run businesses present potential problems. This is further complicated by the inherent features of family-operated enterprises since they lack planning and is characterized by informality which results in inconsistencies, conflict, and lack of control. Research has provided evidence based on the need to develop strategic plans to ensure the future performance of the business. The planning-performance link support needs for business plans as a family-oriented business culture is identified a plausible barrier to the business success. Business plans offer the business successor a means of continuing the business with the appropriate business outlook – one that reflects family vision and values. Furthermore, business plans provide a means for avoiding the consequences arising from the inherited nature of family-run enterprises. Studies specific to the hotel industry have also identified that competitive market environments can be survived by developing strategic plans. Presented with the benefits of developing strategies and the analysis of Rebecca’s situation, Rebecca should be convinced that a means for her successful succession of the family-run hotel is through the development of a business plan.
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