Entrepreneurship Study Guide: Test 5

Critical-risks segment

Potential risks such as effect of unfavorable trends in the industry, design or manufacturing costs, difficulties of long lead times are a few that need to be considered.

The "Pitch"

Presentation of the Business Plan: •Know the outline •Use keywords •Rehearse •Be familiar with technology used in the presentation •Practice the complete presentation the day before

Value proposition

The products and services that create value for a specific customer segment. Value can be provided through various elements such as newness, performance, customization, design, brand, status, price, risk reduction, accessibility, and convenience.

Customer relationships

The types of relationships a venture establishes with specific customer segments. These may include personal assistance, self-service, automated services, or community platforms.

What are the 6 reasons to update the business plan?

There are many reasons to update the business plan which include: 1. financials changes 2. additional financing 3. changes in the market 4. launch of a new product or service 5. new management team 6. reflect the new reality

Key activities

These are the most important elements that a venture must do. For example, if lower prices are the unique value proposition then creating an efficient supply chain to drive down costs would be a key activity.

Operations segment

This segment begins by describing the location based on appropriate terms of labor availability, wage rate, proximity of suppliers and customers, and community support.

Management support

This segment identifies the key personnel, their positions and responsibilities, and the career experiences that qualifies them for those roles. The entrepreneur's role should be clearly outlined.

Marketing segment

This segment must be written as to convince investors that a market exists, that sales projections can be achieved, and that competition can be beaten.

Executive summary

This should be a clever snapshot of the complete plan. The statements for a summary should briefly touch on the venture itself, the market opportunities, the financial needs and projections, and any special research.

Growth

This stage is a transition from the entrepreneurial one-person leadership to managerial team-oriented leadership.

Milestone schedule segment

This will provide investors with a timetable for the various activities to be accomplished. They need to be realistic and can be established within any appropriate time frame such as quarterly, monthly, or weekly. They must be coordinated with other aspects of the production and operations schedule.

Channels

Ways the venture communicates with and reaches its customer segments. Effective channels nay be opening a store, using major distributors, or a combination of both. These channels need to be fast, efficient, and cost effective.

What are some questions to be answered?

•Is your plan organized so key facts leap out at the reader? •Is your product/service and business mission clear and simple? •Are you focused on the right things? •Who is your customer? •Why will customers buy? How much better is your product/service? •Do you have a competitive advantage? •Do you have a favorable cost structure? •Can the management team build a business? •How much money do you need? •How does your investor get a cash return?

Strategic positions

- Are often not obvious, and finding them requires creativity and insight. - Are unique positions that have been available but simply overlooked by established competitors. - Can help entrepreneurial ventures prosper by occupying a position that a competitor once held but has ceded through years of imitation and straddling.

Innovation or decline

Firms that begin to fail to innovate will die.

Revenue streams

The cash a new venture proposes to generate from the particular customer niche. These may include selling an item, service fees, subscription fees, lease or rental income, licensing fees, or advertising income.

What are some guidelines to remember?

•Keep the plan respectably short •Organize and package the plan appropriately •Orient the plan toward the future •Avoid exaggeration •Highlight critical risks •Give evidence of an effective entrepreneurial team •Do not over-diversify •Identify the target market •Keep the plan written in the third person •Capture the reader's interest

Key factors in the growth stage

- Control: Growth creates problems in command and control. Three questions need to be answered by the entrepreneur: (1) Does the control system imply trust? (2) Does the resource allocation system imply trust? (3) Is it easier to ask permission than to ask forgiveness? - Responsibility: As the company grows, the distinction between authority and responsibility becomes more apparent. Authority can always be delegated, but it is important to create a sense of responsibility. - Tolerance of failure: Three distinct forms of failure should be distinguished. Moral failure. Violation of trust Personal failure. Brought about by a lack of skill or application. Uncontrollable failure. Caused by external factors and is the most difficult to prepare for or deal with. - Change: Planning, operations, and implementation are all subject to continual changes as the venture mores through the growth stage and beyond.

Pitfalls to avoid in venture planning

- No realistic goals - Failure to anticipate roadblocks - No commitment or dedication - Lack of demonstrated experience (Business or Technical) - No market niche (Segment)

The administrative point of view

- What resources do I control? - What structure determines our organization's relationship to its market? - How can I minimize the impact of others on my ability to perform? - What opportunity is appropriate?

The entrepreneur's point of view

- Where is the opportunity? - How do I capitalize on it? - What resources do I need? - How do I gain control over them? - What structure is best?

Confronting the growth wall

Entrepreneurs should keep in mind these themes as they develop their ability to manage growth: •The entrepreneur is able to envision and anticipate the firm as a larger entity. •The team needed for tomorrow is hired and developed today. •The original core vision of the firm is constantly and zealously reinforced. •New "big-company" processes are introduced gradually as supplements to, rather then replacements for, existing approaches. •Hierarchy is minimized. •Employees hold a financial stake in the firm.

Lack of expertise/ skills

Entrepreneurs typically are generalists, and they often lack the specialized expertise necessary for the planning process.

Basic steps in strategic planning

1.Examine the internal and external environments of the venture (SWOT—strengths, weaknesses, opportunities, threats). 2.Formulate the venture's long-range and short-range strategies (mission, objectives, strategies, policies). 3.Implement the strategic plan (programs, budgets, procedures). 4.Evaluate the performance of the strategy. Take follow-up action through continuous feedback.

Marketing plan

1.Market strategy—sales and distribution 2.Pricing 3.Advertising and promotions

Business description

A general description of the business, industry background, goals and potential of the business and milestones, and the uniqueness of the product or service are included.

New venture developments

Consists of activities associated with the initial formulation of the venture.

Start-up activities

Encompasses the foundation work needed for creating a formal business plan.

Lack of trust and openness

Entrepreneurs are highly sensitive and guarded about their businesses and the decisions that affect them.

Lack of knowledge

Entrepreneurs have minimal exposure to, and knowledge of, the planning process.

Perception of high cost

Entrepreneurs perceive the cost associated with planning to be very high. This fear of expensive planning causes many business owners to avoid or ignore planning as a viable process.

Time scarcity

Entrepreneurs report that their time is scarce and difficult to allocate to planning in the face of day-to-day operating schedules.

Harvest strategy segment

Every business plan should provide insights into the future harvest strategy. With foresight, entrepreneurs can keep their dreams alive.

Business plan

Provides a more specific and detailed exploration of the venture's goals and operations with a clear path on how the venture will succeed. A written document that details the proposed venture: - Describes the current status, expected needs, and projected results of the new business. - Demonstrates a clear picture of what that venture is, where it is going, and how the entrepreneur proposes it will get there.

Business stabilization

Sales begin to stabilize and the entrepreneur must begin thinking about the enterprise will go over the next three to five years. This stage is often a "swing" stage in that it precedes the period when the firm either swings into a higher gear and greater profitability or swings toward decline and failure.

Strategic planning

Strategic planning is the formulation of long-range plans for the effective management of environmental opportunities and threats in light of a venture's strengths and weaknesses. It includes defining the venture's mission, specifying achievable objectives, developing strategies, and setting policy guidelines.

Business model canvas

Structured brainstorming tool for entrepreneurs to use to define and understand the strategic focus and the questions that need to be answered for each of the nine building blocks. - Value Proposition - Customer Segments - Channels - Customer Relationships - Revenue Streams - Key Activities - Key Resource - Key Partners - Cost Structure

Customer segments

The different groups of people or entities that the venture aims to reach and serve. Customers can be segmented based on different needs and attributes.

What are some benefits to a business plan?

The entire business planning process forces the entrepreneur to analyze all aspects of the venture and to prepare an effective strategy to deal with the uncertainties that arise, which may help avoid a project doomed to failure.

Key resources

The most important assets required to make the business model work and create value for the customer. These are needed to sustain and support the business and could be human, financial, physical, or intellectual.

Cost structure

The most significant costs incurred to operate the business model. Characteristics of cost structures include: a)Fixed costs—unchanged b)Variable costs—vary depending on the amount of production of goods or services c)Economies of scale—costs go down as the amount of good are ordered or produced d)Economies of slope—costs go down due to incorporating other businesses which have a direct relation to the original product

Key partners

The network of suppliers and partners that optimize operations and reduce risks to make the business model work.