Chapter 6: Business Plan Visualizing the Dream

Business Model Risk 2

1. A component that identifies risks in the model based on supply and demand for your products or services. 2. Shows how the model can adjust to them.

Key Elements of a Business Plan 3

1. A logical statement of a problem and its solution 2. A significant amount of cold, hard evidence 3. Candor about the risks, gaps, and assumptions that might be proved wrong

Professional Assistance

1. Accountants 2. Marketing specialists 3. Attorneys 4. Investment banker 5. Financial intermediary

Industry Description 4

1. Broader industry in which the firm will compete 2. Industry size, growth rate, trends, and competitors 3. Niche in which the firm plans to participate 4. Different segments of the industry

Cover Page 6

1. Company name, address, phone number... 2. Tagline and company logo 3. Name and contact information of contact person 4. Date on which the business plan was prepared 5. Confidentiality disclaimer 6. Number of the copy

Resources for Business Plan Preparation 2

1. Computer-Aided Business Planning 2. Professional Assistance

Factors affecting the extent of a business plan 6

1. Cost in time and money to prepare the plan 2. Management style and ability 3. Preferences of the management team 4. Complexity of the business traditional business does not need an extensive plan but a complex business will. 5. Competitive environment 6. Level of uncertainty

Executive Summary (Overview/Synopsis) 8

1. Description of the opportunity 2. Explanation of the business concept 3. Industry overview 4. Target market 5. Competitive advantage to be achieved in the market 6. Economics of the opportunity 7. Management team description 8. Amount and purpose of the money being requested...

Key Factors for Success 5

1. Entrepreneurial Team 2. Resources 3. Context 4. Financing Structure 5. Opportunity

Understanding the Investor's Perspective 3

1. Entrepreneurs are optimists; investors are skeptics. 2. Investors seek to maximize return through cash flow... 3. Bad information and poor preparation cause investors...

Mistakes to avoid in preparing a business plan 8

1. Failing to provide solid data. 2. Failing to describe the product in lay terms. 3. Failing to thoroughly analyze the market. 4. Including financial statements that are overly detailed or incomplete 5. Hiding weaknesses. 6. Overlooking the fatal flaw. 7. Using bad grammar. 8. Making the overall plan too long.

Keeping The Right Perspective 2

1. Good business plans don't ensure success 2. Writing a business plan is an ongoing process...

How do you pitch to investors

1. Identify the problem to be solved 2. Introduce your solution to the problem 3. Discuss your beginning traction for sales. 4. Identify the target market 5. Explain the cost of acquiring customers in your target market 6. Communicate the value proposition relative to competitors. 7. Describe the basic of the revenue model 8. Provide financial projections, along with the assumptions. 9. Sell the team 10. Identify your funding needs. 11. Possible the possible exit strategies- how the investors may be able to cash out. 12. End on a high note- remind the investors why your product, service or team is so great.

Suggestions for Writing a Business Plan 7

1. Provide table of contents and section tabs. 2. Use a loose-leaf binder in case of revisions. 3. Use visual aids—graphs, exhibits, and tabular... 4. Indicate that all information is confidential. 5. Number copies of the plan and require written receipts. 6. Be careful about divulging competitive information... 7. Ask other entrepreneurs to review the plan.

Maximum Investment 5

1. Provides estimates of the types/amounts of investment... 2. Hard assets (equipment and buildings) 3. Amount of working capital in the form of operating cash 4. Accounts receivable 5. Inventory

Revenue Streams 4

1. Single stream~Revenue from one product 2. Multiple streams ~ revenues from multiple products 3. Interdependent streams ~ revenues from selling one or more products or services 4. Loss leader~sold at a loss to create sales

Appendix of Supporting Documents 7

1. Supplementary materials and attachments... 2. Résumés of key investors and owners/managers 3. Professional references 4. Photographs of products, facilities, and buildings 5. Marketing research studies 6. Pertinent published research 7. Signed contracts of sale

Issues critical in preparing a business plan 4

1. The content and basic format of the plan 2. Factual support for the concept in the form of strong... 3. The effectiveness of the written presentation 4. Clear writing that effectively communicates

Factors determine the content of a business plan...5

1. The opportunity 2. Critical resources 3. The entrepreneurial team 4. The financing structure 5. The context (or external factors)

Primary Functions 3

1. To provide a clearly articulated statement of goals... 2. Imposes discipline on the entrepreneur... 3. To serve as a selling document to be shared with...

Revenue Model Types 4

1. Volume or unit-based 2. Subscription/membership 3. Advertising-based 4. Licensing

Advice for Writing a Business Plan 11

1. What is the target market? 2. How large is the target market 3. What problems concern the market? 4. Are there any problems greater than the one that you are addressing? 5. How does your service fix the problem? 6. Who will buy your product or service? 7. How much are they willing to pay for it? 8. Why do they need it? 9. Why would they buy from you? what do you have to offer? 10, Who are your competitors 11. What are their strengths and weeknesses?

Computer-Aided Business Planning

1. Word-processors 2. Spreadsheets 3. Specialized business plan software packages

Business Model Elements

1. where revenue is coming from 2. The cost structures that drive the company's costs associated with the revenue 3. The maximum investment that will be required to grow the business. 4. Business model risk identifies risks in the model...

The Comprehensive Plan

A complete that provides an in-depth analysis of the critical factors that will determine a firm's success or failure, along with all the underlying assumptions.

Short Plan

A traditional business plan that presents only the most important issues and projections.

Business Model

Analysis of how a firm plans to create profits and cash...

Fixed Costs

Costs that do not vary at all with volume, such as rent...

Major Sections of Business Plans 14

Cover Page Table of Contents Executive Summary Industry, Target Customer, and Competitor Analysis Company Description Product/Service Plan Marketing Plan Operations and Development Plan Management Team Critical Risks Offering Exit Strategy Financial Plan ProForma Plan Appendix of Supporting Documents

Target Customers

Demographics and psychological variables—values...

Management Team

Describes the firm's organizational structure...

Product/Service Plan

Describes the product and/or service to be provided...

Marketing Plan

Describes the user benefits/type of market that exists

Semi-variable Costs

Expenses that include both variable costs/fixed costs...

Variable Costs

Expenses that vary directly and proportionately...

Operations and Development Plan

How product will be produced or service provided

Critical Risks

Identifies potential risks encountered by an investor

Exit Strategy

Lists possible options investors recover investment, returns through cashing out investment

Business Plan

Outlines the basic concept underlying a business- what problem will be solved and describes how the business will execute its plan to solve the problem.

Competitor Analysis

Product or service attributes that are or are not provided...

ProForma Statements

Projections of the company's financial statements for up to five years including a balance sheet, income statements, statement of cash flows, as well as cash budgets. Project by quarters for one year

Financial Plan

Projects the company's financial position Explains of how figures have been determined.

Table of Contents

Provides a sequential listing of the sections of the plan...

Offering

Shows investor money needed, when, and how the money will be used.

Company Description

When and where was this business started? What is the history of the company? What are the firm's objectives? What changes in structure and/or ownership? In what stage of development is the firm? What has been achieved to date? What is the firm's distinctive competence? What are the nature and activity of the business? What is its primary product or service? What customers will be served? What is the firm's form of organization? What are the projected economic states of the industry? How is ownership of the firm to be structured?

Cost Structures 3

component of the business model that estimates the costs and expenses 1. Fixed ~ costs will never change no matter how much you sell. 2. Variable ~ changes with sales or production. 3. Semi-variable ~ include both fixed and variable1.