Chapter 10 Building an Effective Business Plan 03 10 2014 From Feasible Concept to Business Plan Purpose of Business Plan o Serves as a reality check for the entrepreneur who will be forced to think about every aspect of operating the business o It is an operating guide for the business o It is a statement of intent for the interested third parties Feasibility Analysis vs Business Plan A feasibility analysis is primarily a test of a new concepts viability in the market place will anybody buy it A business plan is more comprehensive and discusses the operational and financial aspects of a new business A business plan focuses on execution of the concept and the building of a company A Potential Investors Interests and Concerns Rate of growth Return on investment Degree of Risk Degree of Protection They tend to look for market driven rather than product of technology driven companies They expect predictions to be based on solid objective evidence and demonstrate a thorough knowledge of the market They want to know when and how their investment can be repaid They want to see that the entrepreneur understands the risks of challenges at hand Bankers Lenders Interests Company margins and cash flow projection they want to see how and when cash will be generated so they can understand how and when they will be repaid The specific amount of money needed The kind of positive impact the loan will have on the business they prefer to see the money used to grow a business rather than to pay The kinds of assets the business has for collateral General use off old debts assets are preferable How the bank will be protected if the business does not meet its projections What is the entrepreneur s Plan B Plan C The entrepreneurs stake in the business they want to see hat the entrepreneur has substantial skin in the game Strategic Partners Alliances Licensing another firm to test manufacture and or assemble your Supply raw materials or a component or product to another venture in exchange for an equity interest in that venture Maybe in the form of formal partnership agreements like purchase Starting the Process with a Compelling Pitch Prepare the elevator pitch A brief statement of the business product contracts concept Answer the following questions o What need is being served o Can the founding team product serve that need o Why is now the right time to launch this venture o What is this venture s competitive advantage o Can this venture make money Starting the Business Planning Process with a website The internet is the perfect place to communicate a new ventures message A new business can look as successful and established as any large company Have a website make it look professional and make sure it technically works This is the global face of your company A website demonstration can inexpensively communicate to the visitor what the business does who its customers are and what its value proposition is The Business Plan Strategy and Structure Tasks to guide the preparation of the Plan o Develop who is responsible for what o Develop a timeline based on tasks identified o Hold the team to the timeline and work diligently to get the plan done Components of the Business Plan page 218 Mistakes in Developing the Business Plan Projecting rapid growth beyond the capabilities of the founding team team Developing a plan who success is 100 reliant on the efforts of one entrepreneur Investors prefer teams to solo entrepreneurs and like to see multiple functional areas of expertise represented on the Projecting performance that exceeds industry averages Underestimating the venture s need for capital Mistaking tactics for strategy using price as a marketing strategy for a product or service The entrepreneur not investing in the business Successfully Presenting Keep presentation to less than 30 minutes Tell your compelling story first Do not use podium to speak this limits movement and gestures and use of visual aids Move about without distracting the audience no pacing Maintain eye contact with everyone Make the visual aids simple CEO should do the presentation Use live demonstrations PRACTICE IN ADVANCE Answering Questions Investors like to ask questions they already know the answer to Don t be afraid to not know the answer but assure them you ll find the answer and get back to them on it then do it Founding team should join the CEO for questions Exam Review Chapter 6 10 2 FILL in the blank 1 short essay paragraph 24 Multi choice Review PowerPoint slide o Feasibility analysis vs business plan When and why you would use them o Model how to understand industry Porters 5 forces model o Common start up premium pricing o know what to do so that IC does not get confused for your employee by the IRS o Know intellectual property Patent copyright trademarks trade secrets business plan o Know 6 common mistakes of Entre when they develop a o 5 Insufficient resources on product development o 4 types of change that can occur in an industry o 6 steps of product development cycle o Definitions Financial Break even Working capitol Gross profit Profit margin Gross Margin 03 10 2014 03 10 2014