Preparing Effective business plans

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How is it possible for a firm to show a sizable net income on its income statements and still be running out of cash?

They have too many accounts receivable or be stockpiling product.

Describe the brainstorming process. How can brainstorming be used to create new business ideas?

"Session" is targeted to a specific topic about which a group is instructed to come up with ideas. One shares an idea, another reacts, another reacts to reaction, and so on.

Describe how a focus group is set up and how can it be used to generate new business ideas?

5-10 people, selected because of their relationship to issues being discussed.

What is an elevator pitch? How can the writing of an elevator speech help a firm write a more effective business plan?

A 2 minute speech about your company. You have a clear path of how you want your company to be.

What is a business plan? What are the advantages to preparing a business plan for a new venture?

A Business plan is a written document that carefully explains every aspect of a new business venture. The advantages are that you can identify the business idea, then screen its feasibility, then write it.

What is a board of advisers? What role does a board of advisers play in the management firm?

An advisory board is a panel of experts asked by a firm's managers to provide counsel and advice on an ongoing basis. no legal responsibility for the firm.

Why is it important for the founders of a firm to continually measure whether the type of company they are envisioning, as described by the business plan, is consistent with their goals and aspirations?

As the business evolves, the entrepreneur may find that aspects to the business are not as attractive as originally anticipated.

Describe the purpose of a product/service feasibility. Describe the two components.

Assessment of the overall appeal of the Product or service. Desirability - does it Make sense? is it Reasonable? Excitement? Flaws? Demand - Administer buying intentions survey

Describe why many people feel that the cash flow statement is the most valuable statement of the three financial statements normally included in a business plan.

Cash flow is the most important because it indicates whether the company will have enough money to get the company up and running.

Describe the purpose of a concept test and how it should be executed. Also, describe the purpose of buying intentions survey and how it should be executed?

Concept Test: description, Target Market, benefits, selling, mgmt team Buying Intentions Survey; How much willing to pay? Where do you expect to buy?

What 4 environmental trends provide the richest sources of of new business ideas? List each environmental trend and provide an example of the type of business that it might create.

Economic: interest rates; who has money, what they spend it on. Social trends: Facebook Tech. advancements: smartphone applications Political Action and Regulatory changes: Software / Hardware companies after Sarbanes-Oxley 2002

What is an industry "cluster?" Why might a semiconductor startup, for example, decide to launch in a geographic area where there are other semiconductors firm, rather than another area?

Geographical Area where multiple related firms locate. Employee networking purposes; easy access to specialized suppliers, scientific knowledge, and tech. expertise native to the area. Example Silicon Valley

Explain the purpose of industry/target market feasibility analysis. Briefly describe its three components?

Industry Attractiveness: Environmental/business trends Target Market Attractiveness: large enough, yet small to avoid attracting larger competitors Market Timeliness: Window of opportunity

Why is it important to include an operations plan in the business plan?

It focuses on how you will produce your product or service and run your business. Your readers want an overall sense, not too much detail.

Describe the difference between the market analysis section and the marketing plan section of a plan.

Marketing plan Focuses on classic marketing functions like price, promotion, and distribution.

What is a feasibility analysis? How does a feasibility analysis differ from a business plan?

Process of determining if a business idea is viable; more stringent test; Lays the foundation for a well reasoned and researched plan.

Describe the general rules-of-thumb for a firm to test the feasibility of its business idea prior to writing a business plan?

Screening the idea to determine preliminary feasibility... Conducting full feasibility analysis.

Describe the purpose of a financial feasibility analysis. Briefly describe its 3 components?

Startup Cash needed: how much and where from? Financial Performance of similar businesses Overall Financial attractiveness of proposed venture

Describe the 4 categories of new business ideas and the most realistic category for new firms.

Survival Lifestyle Managed Growth Aggressive Growth

What is the most important rule of thumb for writing the operations and product design and development sections of your business plan?

The most important rule of thumb is to focus on the areas that are either essential to the success of your business or that set you apart in the 7th year.

What are the four types of intellectual property, and why is it important to address intellectual property issues in a business plan?

Trade secrets, trademarks, copyrights, and patents

Purpose of Mission Statement.? Why important to include in Business plan?

Why company exists and what it aspires to do.

What are the two most common reasons that entrepreneurs write business plans?

a) It forces the founding team to work together to hammer out details of the business venture. b) It communicates the merits of a new venture to outsiders such as investors.

Explain why it's important to collect competitive intelligence, and describe some of the techniques that are used in collecting it?

helps a firm learn about its competitors to understand their strategy and behaviors. Conferences, trade shows, industry reports, purchase competitor products, ask customers why they buy your product and not the competitors.

Why is the industry trends portion of the industry analysis arguably the most important section of the analysis?

most important section of an industry analysis because it often lays the foundation for a new business idea in an industry.

What is an executive summary? Why is it often called the most important part of the business plan?

short overview of the entire plan; sometime investors only ask for Executive summary and decide from there if they want the full plan.

Describe the purpose of ratio analysis.

the most practical way to make sense of a firm's pro forma statement . Ratios are computed by taking numbers out of financial statements and forming ratios with them. Each ratio has a meaning.

Explain the purpose of the market analysis section of a plan.

to describe the target market, customers, and competitors, how it will compete in the marketplace and potential sales and market share. Breaks industry into segments to identify target market.

Briefly describe the four separate ways of estimating the annual sales and market share of a new business.

1) Contact trade association, 2) find a comparable firm selling comparable product, 3) find articles that focus on your industry, 4)Multiplication method.

what are the requirements for successfully segmenting the market?

1) Meet the needs/or wants within segment. 2) Should be possible to determine the size of the segment 3) the segment should be large enough to be profitable.

What are the 4 general Rules of thumb for completing the industry size, growth, and sales projections portion of an industry analysis?

1) display financial info in multi year format to spot trends, 2) Display information graphically, 3) provide info of industry on a regional or local basis, 4) avoid reporting only positive info about industry.

What role does a company's board of directors play in its overall management team?

A board of directors has three responsibilities: appoint the firm's officers, declare dividends and oversee the affairs of the corporation.

Describe what a management team skill profile is and how it is set up.

A management team skill profile is a grid that lists the major skills needed in a firm and the current members of the management team. The grid is completed by indicating which skills are satisfied by each management team member.

What are the 3 most common sources of new business ideas? Briefly describe how each of the sources spawns potential business idea.

Changing Environmental Trends, Unsolved Problems, disguised opportunity.

It is often argued that the process of writing a business plan is as important as the plan itself? How is this so?

The process of writing a business plan forces team to not only work together, but to turn abstract ideas into concrete realities. Has potential to develop a cohesive team.

Who are the primary consumers of business plans? In what ways do the people who read business plans differ in the information they are looking for?

The two primary audiences for a firm's business plan are a firm's employees and investors. Employees look for the vision and future plans of a firm. Investors are looking for viability and potential financial returns.

Why is it important for a firm to test the feasibility of its business idea prior to writing a business plan?

There is no reason to write a business plan for a business idea that has little chance of succeeding.

Why is knowledge of key success factors important?How can an industry's key success factors be identified?

They show the necessary requirements for firms in your industry to compete. Identify them through IBIS world.


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