MGT 375 Ch 5 P 1

Mission and Vision Statement

A mission statement expresses an entrepreneur's vision for what his or her company is and what it is to become. It is the broadest expression of a company's purpose and defines the direction in which it will move. no more than 25 words

Capacity

A synonym for capacity is cash flow. Lenders and investors must be convinced of a company's ability to meet its regular financial obligations and to repay the bank loan, and that takes cash. you will see that more small businesses fail from lack of cash than from lack of profit.

-Market Size and Trend

Assessing the size of the market is a critical step. How large is the potential market? Is it growing or shrinking? Why? Are customers' needs changing? Are sales seasonal? Is demand tied to another product or service?

-advertising and promotion

Only after entrepreneurs understand their companies' target markets can they design a promotion and advertising campaign to reach those customers most effectively and efficiently. When developing an advertising and promotion strategy, an entrepreneur should keep in mind what he or she learned when defining the communication channel in the business modeling process. Which media are most effective in reaching the target market? How will they be used? How much will the promotional campaign cost?

A business plan offers

● a systematic, realistic evaluation of a venture's chances for success in the market. ● a way to determine the principal risks facing the venture. ● a "game plan" for managing the business successfully during its start-up. ● a tool for comparing actual results against targeted performance. ● an important tool for attracting capital in the challenging hunt for money.

The following five-part framework helps entrepreneurs develop a meaningful elevator pitch:

1. Context. What does your company do in easy-to-understand words? 2. Benefit. What benefit or advantage does your company offer customers? 3. Target customers. For whom does your company provide the benefit? 4. Point of differentiation. How is your company different from other companies that provide similar products, services, or solutions? 5. Clincher. Can you leave the listener or reader with a memorable, bottom-line sound bite about your company.

Title Page and Table of Contents

A business plan should contain a title page with the company's name, logo, and address as well as the names and contact information of the company founders. Business plan readers appreciate a table of contents that includes page numbers so that they can locate the particular sections of the plan in which they are most interested.

Description of firm's product or service

An entrepreneur should describe the company's overall product line, giving an overview of how customers will use its goods or services. Drawings, diagrams, and illustrations may be required if the product is highly technical. It is best to write product and service descriptions so that laypeople can understand them. A statement of a product's position in the product life cycle might also be helpful. An entrepreneur should include a summary of any patents, trademarks, or copyrights that protect the product or service from infringement by competitors.

Character

An evaluation of character frequently is based on intangible factors such as honesty, competence, polish, determination, knowledge, experience, and ability. Although the qualities judged are abstract, this evaluation plays a critical role in a lender's or investor's decision.

Conditions

Banks consider factors relating to the business operation such as potential growth in the market, competition, location, form of ownership, and loan purpose. Again, the owner should provide this relevant information in an organized format in the business plan. Another important condition influencing the banker's decision is the shape of the overall economy, including interest rate levels, the inflation rate, and demand for money.

Collateral

Collateral includes any assets an entrepreneur pledges to a lender as security for repayment of the loan. If an entrepreneur defaults on the loan, the bank has the right to sell the collateral and use the proceeds to satisfy the loan.

-show customer interest

Entrepreneurs must be able to prove that their target customers actually need or want their goods or services and are willing to pay for them.

-documenting market claims

Entrepreneurs must support claims of market size and growth rates with facts, and that requires market research. Results of market surveys, customer questionnaires, and demographic studies developed in the feasibility analyses and business modeling steps in the business planning process lend credibility to an entrepreneur's frequently optimistic sales projections contained within the formal business plan.

-location

For many businesses, choosing the right location is a key success factor. For retailers, wholesalers, and service companies, the best location usually is one that is most convenient to their target customers.

Business and Industry Profile

If one goal of creating a plan to raise funding, the entrepreneur should include a section that acquaints lenders and investors with the industry in which a company competes. This section should provide readers with an overview of the industry or market segment in which the new venture will operate. Industry data such as key trends or emerging developments within the industry, market size and its growth or decline, and the relative economic and competitive strength of the major firms in the industry set the stage for a better understanding of the viability of a new business.

Executive Summary

It should be concise—a maximum of one page—and should summarize all of the relevant points of the proposed deal. After reading the executive summary, anyone should be able to understand the entire business concept, the attributes that differentiate the company from the competition, and the financing that is being requested.

Projected financial statements

One of the most important sections of the business plan is an outline of the proposed company's financial statements—the "dollars and cents" of the proposed venture. An entrepreneur should carefully prepare projected (pro forma) financial statements for the operation for the next year using past operating data (if available), published statistics, and research to derive forecasts of the income statement, balance sheet, cash forecast (always!), and a schedule of planned capital expenditures.Potential lenders and investors want to know how an entrepreneur derived forecasts for sales, cost of goods sold, operating expenses, accounts receivable, collections, accounts payable, inventory, taxes, and other items.

marketing strategy

Proving that a profitable market exists involves two steps: showing customer interest and documenting market claims.

Reality Test

The external component of the reality test involves proving that a market for the product or service really does exist. It focuses on industry attractiveness, market niches, potential customers, market size, degree of competition, and similar factors. prove there is strong demand for business idea The internal component of the reality test focuses on the product or service itself. Can the company really build it for the cost estimates in the business plan? Is it truly different from what competitors are already selling? Does it offer customers something of value?

Competitive Test

The external part of the competitive test evaluates the company's relative position to its key competitors. How do the company's strengths and weaknesses match up with those of the competition? ● Who is our target market? ● What current options exist for this target market? ● What do/will we offer the target market? ● What is the key problem it solves? ● Why is it better than other options the target market has to choose from? The internal competitive test focuses on management's ability to create a company that will gain an edge over existing rivals. To pass this part of the competitive test, a plan must prove the quality, skill, and experience of the venture's management team.

Entrepreneurs and managers resume

The most important factor in the success of a business venture is its management, and financial officers and investors weight heavily the ability and experience of a company's managers in financing decisions. Investors will never invest in just a good idea: There must be a strong team in place to ensure the idea will be implemented successfully. A plan should include the résumés of business officers, key directors, and any person with at least 20 percent ownership in the company.

Competitor Analysis

The plan should include an analysis of each significant competitor and how well the competing business is meeting the important criteria that target customers are currently using to make their purchase decisions among the various companies.

Market Entry Strategy

This section addresses the question of how to attract customers. By laying out a market entry strategy, an entrepreneur explains how he or she plans to enter the market and gain a competitive edge and how his or her value proposition sets the business apart from the competition. A key component of this section is defining what makes the company unique in the eyes of its customers.

Value Test

To convince lenders and investors to put their money into the venture, a business plan must prove to them that it offers a high probability of repayment or an attractive rate of return.

10/20/30 rule for PowerPoint presentations.

Use 10 slides that you can cover in 20 minutes. Use 30-point font to ensure you do not try to put too many words on each slide.

-pricing

What does the product or service cost to produce or deliver?

-target market

Who are the company's target customers? How many of them are in the company's trading area? What are their characteristics (e.g., age, gender, educational level, income)? What do they buy? Why do they buy? When do they buy? What expectations do they have about the product or service? Will the business focus on a niche? How does the company seek to position itself in the market(s) it will pursue?

Business plan

a written summary of an entrepreneur's proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers' skills and abilities.

Plan on operation

an entrepreneur should construct an organization chart identifying the business's key positions and the people who occupy them. Assembling a management team with the right stuff is difficult, but keeping it together until the company is established can be even harder. Finally, a description of the form of ownership (e.g., sole proprietorship, partnership, joint venture, C corporation, S corporation, LLC) and of any leases, contracts, and other relevant agreements pertaining to the operation is helpful.

5 c's of credit

capital, capacity, collateral, character, and conditions.

Capital

money for investment A small business must have a stable capital base before any lender will grant a loan. Otherwise the lender would be making, in effect, a capital investment in the business.

The best way to secure the necessary capital is to

prepare a sound business plan

Loan or Investment Proposal

should state the purpose of the financing, the amount requested, and the plans for repayment or, in the case of investors, an attractive exit strategy. When describing the purpose of the loan or investment, an entrepreneur must specify the planned use of the funds. Entrepreneurs should state the precise amount requested and include relevant backup data, such as vendor estimates of costs or past production levels. The proposal should include all sources of funding for the business from all intended sources including money the entrepreneur is investing into the business.

-distribution

this portion of the plan should describe the specific channels of distribution the business will use (e.g., the Internet, direct mail, in-house sales force, sales agents, retailers) to distribute its products and services.

A business plan presentation should cover five basic areas:

● Your company and its products and services. The presentation should answer in simple terms the first question that every potential lender and investor has: What does your company do? ● The problem to be solved, preferably told in a personal way through a compelling story. Is it eliminating the time, expense, and anxiety of waiting for the results of medical tests with a device that instantly reads blood samples? Or making hearing aids more effective at filtering out background noise while enhancing the dominant sound for the user? ● A description (again in simple terms) of your company's solution to the problem. Ideally, the solution your company has developed is unique and serves as the foundation of your company's competitive edge in the marketplace. ● Your company's business model. This part of the presentation explains how your company makes money and includes figures such as revenue per sale, expected gross profit and net profit margins, and other relevant statistics. This is your opportunity to show lenders and investors how your company will produce an attractive payback or payoff. ● Your company's competitive edge. Your presentation should identify clearly the factors that set your company apart from the competition