Chapter 2: Business Plan
franchise
A business established or operated under an authorization to sell or distribute a company's goods or services in a particular area
Monopoly
A market in which there are many buyers but only one seller.
wholesaler
A type of business that buys goods in large amounts and resells them to other businesses in smaller lots.
mixed economy
An economy in which private enterprise exists in combination with a considerable amount of government regulation and promotion.
The Company
Brief history and background of the company and the industry it wishes to go into Helpful context (personal, historical, or societal) for why the entrepreneurs wants to start the business Help lenders/investors have an idea on the size, scale, scope, and type of business
Merger and Acquisition
Combining with a similar company/acquired by a larger one Normally a win-win situation when companies have complementary skills and resources
Merger and Acquisition Initial Public Offering (IPO) Sell to Friendly Individuals Liquidation and Closing
Common Exit Strategies
Cover Page
Company name, logo, tagline, contact information, copy number, date prepared, disclaimer
opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
Product/Service Plan
Describes products and/or services
The Industry
Describes the current landscape of the industry the company belongs in Scanning the firm's environment (competitors, key success factors in the industry, trends)
Product/Service
Details of each variety, type, difference of products/services that your company has with complete information Incorporates usp/mvp with each description Innovative products/features/patents and protection Explain growth strategy on development
Sell to Friendly Individuals
Easy way to cash out Buyer has more skills and interest on operations and is able to scale the company up
Projected Income Statement
Financial statements that represent expectations of what the results of actions and policies
Marketing
Focuses on how the business will market and sell its products
Reasons to Write A Business Plan
Forces business people to think through every aspect of the business Help them identify possible opportunities that may help the firm grow and succeed Helps firms and entrepreneurs to focus on what they want to do, how they will do it, and what they expect to accomplish Serves as a record to monitor and compare results To obtain bank financing, investments funds, initial contracts To attract key employees To motivate and focus the firm's management team
Supporting Documents/Appendix
Graphs, charts, articles, research, documents
Growth Strategies
How to make the company continue to grow
Pro torma
Imagined Balance Sheet
SWOT- R Analysis (Risks)
Internal and External factors that affect the business
Market and Industry
Market Research
Objectives
More specific that vision and mission statements (measurable, achievable, and time-bound)
Liquidation and Closing
Normally for failing businesses Close up shop and liquidate assets
Initial Public Offering (IPO)
Offer the company ownership for sale to the public Used to be preferred way of exiting but success rates are lower Rare and usually limited to corporations
Executive Summary
One of the most important pages Usually a one-paged summary, usually written after everything else Provides big picture overview
Business Operations
Ongoing, recurring activities involved in the running of a business for the purpose of producing value for the stakeholders.
Management and Operations
Organizational structures and heads Facilities, equipment, resourcing, etc.
Vision
Outlines what the company wants to be Long-term view and concentrates towards the future
Performance Targets
Part of the Objectives that are translated into key result areas Quantitative measurements that each objective is being achieved ('to-do list')
Cover Page Table of Contents Executive Summary Business Goals Marketing Plan Product/Service Plan Management and Operations Financial Plan SWOT-R Analysis (Risks) Exit Strategy Growth Strategies Supporting Documents/Appendix
Parts of a Business Plan
Marketing Mix
Product, Place, Price, Promotion
Functions of Business
Production, Finance, Marketing, and Management
Table of Contents
Quick page reference for quick searching for information (neat and readable)
Financial Plan
Strategies for handling finances Financial Statements and Capital Proposes a profitable, self-sustaining business Projected Income Statement Pro forma
Management/Operational
The Organizational Company and key personnel (top, middle, operational) Specific job descriptions and responsibilities, Number of employees, Specific Skills, Structure of company/organization, back-up plans, day-to-day management, experience needed, competencies
market structure
The nature and degree of competition among firms operating in the same industry.
Business Risk
The possibility of loss (failure) or gain (success) inherent in conducting business
Mission
The reason to be Why does the company exist? Why do we exist other than to make money?
Marketing Plan
Unique Selling Proposition
Business Goals
Vision and Mission Objectives and Performances
Exit Strategies
Way for business owners or stakeholders to reduce involvement in the business until they can leave it or let go of it completely If one's business is successful, how does it profit form the business/involvement? If the business is not successful, how does one limit losses and liability? Ways an entrepreneur/investor may be able to harvest business investment when closing
Business Plan
Well-written document that describes in details how a new business is going to achieve its goals Used by the firm internally (company management and employees) and externally (potential investors and banks)
Unique Selling Proposition
What can your product/service do for me that others can't?
Operations
What is involved in running the company? Process flow of products/services? Different suppliers/third part companies? Raw Materials? Equipment and materials needed? Location? Number of employees required? Manpower requirements? Salaries and wages?
contingency plan
Written plan of action to ensure a positive and rapid response to a changing situation.
manufacturer
a business that makes finished products out of raw materials and/or processed goods
Business Opportunity
a consumer need or want that can potentially be met by a new business
perfect competition
a market structure in which a large number of firms all produce the same product
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
Oligopoly
a market structure in which only a few sellers offer similar or identical products
good
a physical item that is produced and can be weighed or measured
retailer
a type of business that buys products from wholesalers or directly from manufacturers and resells them to consumers
product mix
all products that an organization sells
service
an activity, benefit, or satisfaction offered for sale that is essentially intangible
command economy
an economy in which production, investment, prices, and incomes are determined centrally by a government.
business
any activity that seeks to provide goods and services to others while operating at a profit
product
anything that an organization offers to satisfy consumer needs and wants, including both goods and services
Traditional Economy
citizens have just enough to survive, there is little to no manufacturing
nature of business
detailed description of products and/or services, size of business and location, industry background
small business
one that is independently owned and operated for profit and is not dominant in its field
supply and demand
relationship between the amount of product and the desire for the product
economics
the branch of knowledge concerned with the production, consumption, and transfer of wealth.
expenses
the costs of operating a business
revenue
the earnings that a business receives for the goods and services it sells.