Small Business Chapter 8

Private placement memorandum

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

Vision statement

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

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.

Operational plan

Business plans designed to be used internally for management purposes.

Informational plans

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

Preselling

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

Tagline (slogan)

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

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.

Test marketing

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

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.

Research and development

The part of a business 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.

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.

Industry

-tells the reader about the other firms producing this product or service—the competition.

Invention plan

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

Mission Statement

-A paragraph that describes the firm's goals and competitive advantages -Talks in terms of how it will make a difference in for the customer or the industry

Title Page

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

The Company: Product/service and industry

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

The Organization: Location

-Description of the facility -How it meets strategic and sales goal of the business -Own, lease, or rent the property -Plan to expand the facilities

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

The Organization: Legal and organization structures

-Legal form of the business -Organizational structure of the firm -Makes clear how many employees there are and whether they are full time or part time, permanent or seasonal, family or non-family

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

Company background

-Overall description of the company, the firm's current status, and the history of the business -Vision statement / mission statement -Specific goals, Business' competitive advantage

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

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

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

classic business plan

-cover letter -title page -table of contents -executive summary -the company -the industry -the market -the organization -the financials -the appendixes

5-M model

-mantra -mission -measures -method -mechanics

The Appendices

-one-page version of owner's resume -Product or service pictures or specifications -Copies of signed contracts -Results from marketing studies or pilot sales efforts -Industry reports

starting small and building up

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

The Elevator Pitch

A 30-second action-oriented description of a business designed to sell the idea of the business to another

Business plan

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.

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.

Executive summary

A one- to two-page (250-500 words) overview of the business, its business model, market, expectations, and immediate goals.

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.