Entrepreneurship - Chapters 7 & 8

Mission Statement

A paragraph that describes the firm's goals and competitive advantages; Mission statements fell out of favor as they became too much like one another and too full of business jargon

The Company: P/S and Industry

Describe firm's product or service; Explain how the customer uses the product; Proprietary technology; Industry descriptions

Due Diligence

The process of investigating a business to determine its value

Maturity Stage

The third life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies

Scope

geographic range covered by the market; Local to Global

Incremental Innovation

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas

Executive Summary

A one- to two-page (250-500 words) overview of the business, its business model, market, expectations, and immediate goals; Typically put at the start of a business plan and is the most popular summary form for a business plan.

Cost Strategy

A generic strategy aimed at mass markets in which a firm offers a combination of cost benefits that appeals to the customer

Perceptual Map

A graphic display which positions products, services, brands, or companies according to their scores of important strategic dimensions

Decline Stage

A life cycle stage in which sales and profits of the firm begin a falling trend

Cover Letter (Letterhead)

A one-page document on business stationery that introduces the business plan and the business owner to the recipient and indicates why the recipient is being asked to read the plan

Industry Analysis (IA)

A research process that provides the entrepreneur with key information about the industry, such as its current situation and trends

Private Placement Memorandum

A specialized legal form of business plan crafted by lawyers for the purpose of soliciting formal investments

Differentiation Strategy

A type of generic strategy aimed at clarifying how one product is unlike another in a mass market

Boom Stage

A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time

Shake-Out Stage

A type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry

Retrenchment

An organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival

Innovative Strategy

An overall strategic approach in which a firm seeks to do something that is very different from what others in the industry are doing

Imitative Strategy

An overall strategic approach in which the entrepreneur does more or less what others are already doing

Supra-Strategies

classic benefit combinations which are designed to work where there are many small businesses in an industry, along with a few larger firms

Internal Understanding

extent to which employees, investors, and family members in the business know the business's purposes and operations

Screening Plan (Mini-Plan)

gives the basic overview of the firm and a detailed look at the financials

Focus Strategy

A generic strategy that targets a portion of the market, called a segment or niche

Data Room

An online repository for the documentation that back ups and details the specifics of your business and business plan; contents of the data room are very similar to those of the three-ring binder personal edition of the plan held and used by the founder

Operational Plan

Business plans designed to be used internally for management purposes

Industry Dynamics (Third Step of Strategic Planning)

Changes in competitors, sales and profits in an industry over time

Title Page

Company name, Contact information, Date this version of the plan was completed, Proprietary statement to protect your ideas

Strategic Actions

Competitive responses requiring a major commitment of resources

Tactical Actions

Competitive responses with low resource requirements

The Appendixes

Copies of signed contracts, letters of intent or commitment, or contingency contracts; Results of marketing studies or pilot sales efforts; Industry reports; Price lists for products or services; Floor plans of the location, if it is central to the business; Advertising copy, such ads, logos, catalog pages, brochures, sales letters, or press releases; Customer or spokesperson testimonials

Customers and Benefits: The Second Step of Strategic Planning

Corporate customers; Loyal customers; Local customers; Passionate customers

The Business Plan

Cover Letter, Title Page, Table of Contents, Executive Summary, The Company, The Industry, The Market, The Organization, The Financials, The Appendixes

Gross Profit

Funds left over after deducting the cost of goods sold

Informational Plans

Give potential customers or suppliers information about the company and its product or service

The Organization: Related Service Providers

Identify your bank and banker, attorney and legal firm, accountant or bookkeeper, other consultants; Major relationships established with well-known suppliers or customers; Board of directors / board of advisors

Crafting Your Pitch Deck (Slide Order)

Introductory slide, Company purpose slide, Problem slide, Solution slide, Product slide, Why Now slide, Market Size slide, Business Model slide, Competition slide, Team slide, Financials slide, The Ask and the Deal slide, Closing slide

Preselling

Involves introducing your product to potential customers and taking orders for later delivery

Competitive Advantage

The particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry

Competitor

all the firms also selling that product or service

The Elevator Pitch

A 30-second action-oriented description of a business designed to sell the idea of the business to another; Leads with the hook, follows up with purpose of the service, ends with where business is now; What makes firm unique or superior?

Invention Plan

A business plan that provides information to potential licensees; focuses on the details of an invention, including intellectual property rights

New Entrant Business

A firm whose product or service is established elsewhere, but is new to this market

Pioneering Business

A firm whose product or service is new to the industry or is itself creating a new industry

Vision Statement

A very simple 5-10 word sentence or tagline that expresses the fundamental idea or goal of the firm

Supply Chain

A way to think about the line of distribution of a product from its start as materials outside thetarget firm, to its handling in the target firm, to its handling by sellers, with placement into thehands of customers

Proof-of-Concept Web Site

An Internet-based type of business plan providing information or demonstration of a product or service designed to solicit information on customer interest

Parallel Competition

An imitative business that competes locally with others in the same industry

Growth Stage

An industry life cycle stage in which customer purchases increase at a dramatic rate

Entry Wedge

An opportunity that makes it possible for a new business to gain a foothold in a market; Supply shortages, Unutilized resources, Customer contracting, Second sourcing, Market relinquishment, Favored purchasing, Government rules

The Organization: Legal and Organization Structures

Legal form of the business; Where it is formally registered and located; Licenses or certifications along with the firm's intellectual property protections, like patents, trademarks and trade secrets.

Table of Contents

Lists major section headings (Boldface type; Sections underneath major sections (Normal type); Put page numbers on every page of the business plan

The Market: Competition and Competitive Advantage

Major competitors; Competing product or service: market share, price, competitive advantages and disadvantages; What makes product or service unique

Tagline (Slogan)

Memorable catchphrase that captures the key idea of a business, its service, product, or customer

The Market: Marketing Strategy

Overall strategy your firm pursues in the market; Sales plan that shows specific ways you apply strategy to secure sales from your customers; Longer-term competitive plan that shows how you protect your firm from efforts of the competition to unseat you

Most Common Critical Risks in a Plan

Overstated numbers, Numbers that are wrong, Inadequate cushion, Inadequate payback, Narrative and financials do not fit, No direct customer connection, Uncertain sales, Overlooked competition, Experience deficits, "What" problems, Deadly aggravations

Key Employee/Partner Plan

Provides information on the company, product/service, market, and critical risks to prospective business or marketing partners or to prospective key employees

The Organization: Key Personnel

Sell the most important single element in the business plan - you!; Who are your key personnel?; Talk about accomplishments rather than just experience; Do not limit yourself to business

Test Marketing

Selling your product or service in a limited area, for a limited time

Value Proposition

Small business owners' unique selling points (also known as benefits) that customers canexpect from your goods or services, including benefits that differentiate your offering fromthose of the competition

Net Profit

The amount of money left after operating expenses are deducted from the business

Profit Before Taxes

The amount of profit earned by a business before calculating the amount of income tax owed

External Legitimacy

The extent to which a small business is taken for granted, accepted, or treated as viable by organizations or people outside the small business or the owner's family

Industry

The general name for the line of product or service being sold, or the firms in that line of business; Key is selecting an industry that offers good potential for making a profit; Also needs to offer attractive opportunities to work with a minimum of risk and competition

Scale

size of the market

Pitching Your Plan

The key things an influential person looks for in you are: 1. Your passion for the business 2. Your expertise about the business and the plan 3. How professional you are in your work, 4. How easy it would be to work with you.

Introduction Stage

The life cycle stage in which the product or service is being invented and initially developed

Pitch

The name given to the formal presentation of a slideshow summarizing your business plangiven before judges or potential investors or partners

Pitch Deck

The name of a slideshow presentation that summarizes a business or more often a business plan

Research and Development

The part of a business (and a business plan)that is focused on creating new products or services and preparing new technologies, ideas, products, or services for the firm's market

Risks

The parts of a business or business plan that expose the firm to any kind of loss—profits, sales, reputation, assets, customers, and so on

Magic Number

The post-tax income the entrepreneur personally seeks from the business

Pure Innovation (Blue Ocean Strategy)

The process of creating new products or services, which results in a previously unseen product or service

Goals: The First Step of Strategic Planning

There are five initial key decisions: 1. As owner, what do you expect out of the business? 2. What is your product or service idea (and its industry)? 3. For your product or service, how innovative or imitative will you be? 4. Scale: Who do you plan to sell to—everyone or targeted markets? 5. Scope: Where do you plan to sell—locally, regionally, nationally, globally?

Generic Strategies (Strategy Selection: The Fourth Step in Strategic Planning

Three widely applicable classic strategies for businesses of all types—differentiation, cost, and focus

The Market: Market and Target Customer

Total population of people or firms you plan to sell to; Target customer section: focuses attention on who would buy; Demographics' relation to the product, how often they buy, and past experience

Business Plan (C8)

a document designed to detail the major characteristics of a firm— its product or service, its industry, its market, its manner of operating (production, marketing, management), and its financial outcomes with an emphasis on the firm's present and future

Market

business term for the population of customers for your product or service

Benefits

characteristics of a product or service that the target customer would consider worthwhile; value benefit, cost benefit; The best way to identify desirable benefits is through potential customers

Scope: Local to Global

important for two reasons: Knowing your market scope helps deciding where to focus sales and advertising efforts; Knowing your target market gives you a way to know which competitors to worry about most, namely those within your market scope

Mass Market

large portions of the population

Niche Market

narrowly defined segment of the population that is likely to share interests or concerns

Degree of Similarity

the extent to which a product or service is like another

Strategy (C7)

the ideas and actions that explain how a firm will make its profit; Good strategy leads to greater chances for survival and higher profits for small businesses; What makes a strategy good is its fit to the particulars of your business and the resources you can bring to it

Path to the Business Plan

vision (10 words, mission (20-50 words), elevator pitch (60-100 words), executive summary (250-500 words), business plan (40 pages)