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Test 3—10,11,12,16o Purpose of a business plano 1. Reality check of the entrepreneur o 2. Living guide to the businesso 3. Statement of intent for interested parties investors, bankers, strategic partners they will all view the business plan from a different perspectiveo Investors interestso Rate of growth- how fast it is going to grow, when that growth will take place, what will ensure that the growth goes according to plan/o Return on investment- how and when the investors will get their money back, how much gain on investment will they see.o Degree of risk- how their investment is used, how riskyo Degree of protection- how well their investment is protected.o Bankers/Lenders Interests and concernso Company margins and cash flow projectionso The amount of money needed  a specific amount that can be justified with accurate calculationso The kind of positive impact the loan will have on the business Lenders want to know that the money they are lending is not going to pay off old deby or to pay salaries, but improve the business’ financials.o The kinds of assets the business has for collateral Not all assets are created equalo How the business will repay the loan Lenders are interested in the earning potential of the business over the life of the loan.o How the bank will be protected if the business does not meet its projections Lenders want to know that the entrepreneur has a contingency plan for situations where major assumptions prove to be wrong.o The entrepreneur’s stake in the business Lenders feel more confident about lending to a business in which the entrepreneur has substantial monetary investment. o Strategic Partners and Allianceso 1. Licenses for manufacturing and assemblyo 2. Supply of raw materials in exchange for equity interesto 3. Formal or informal partnership agreements o May take the form of formal partnership agreements o Start with a compelling pitch o Prepare an elevator pitch Brief statement of the business concepto Answer: why now, what need is being served, can the founding team serve the need, o Start the business planning process with a websiteo The first place a person goes to research a product is the internet.o Wait to put out a website until it is ready for customers to see. o Caution: proprietary information that is not protected by patents should not be put on the site.o It is important to differentiate yourself from the competition.o The internet is the perfect place to communicate a new venture’s messageo A new business can look as successful and established as any large company o Tasks to guide the preparation of the plano identify who is responsible for what information must be gathered about the industry, market, customero develop a timeline based on tasks identified make this realistico hold the team to the timeline o Mistakes in developing the business plano Projecting rapid growth beyond the capabilities of the founding teamo Envisioning a three-ring circus with only one ringleadero Reporting performance that exceeds industry averageso Underestimating the venture’s need for capitalo Mistaking tactics for strategyo Using price as a market strategy for a product/serviceo Not investing in the businesso Successfully presenting the business plano Keep the presentation to less than 30 minuteso Tell a compelling story firsto Do not use a podium to speako Move about without distracting the audienceo Maintain eye contact with everyoneo Make the visual aids simpleo CEO should do the presentationo Use live demonstrationso Practice in advanceo Answering questionso Answering the questions from investorso They like to ask questions that they already know the answer too They like to ask trick questionso They like to ask questions that addresses specific needs and concernso Founding team can join the CEO for questionso If you do not know the answer that is okay.o Types of Legal Formso Sole Proprietorship, Partnership, Limited Liability Company (LLC), Corporation (C or Subchapter S)o One of the most important business decisions you can make, but usually decided because of tax and legal ramifications Sole Proprietor- More than 76% of all businesses are sole proprietorships inthe United States- The owner is the only person responsible for the activities of the business and the one who can enjoy the profits and suffer the loses- Advantage: o Easy and inexpensive to createo 100% of ownership+ profits stay with the ownero Complete decision making authority for the ownero Income is taxed only at the owner’s personal incometax rateo No major reporting requirements exist- Disadvantage:o Owner has unlimited liability for all claims against the business-all debts must be paid from the owner’s assetso Difficult for the owner to raise debt capitalo Survival of the business depends upon the owner Partnership: two or more people agree to share the assets, liabilities and profits of a business  There are two types: General and Limited - General: all partners assume unlimited personal liability and responsibility for management of the business- Limited: the general partners have unlimited liability, but they seek investors who have a limited liability. - Secret partners- active but not publicly known- Silent partners- provide capital but do not actively participate in management- Dormant partners- generally not known publicly and are not active but still share the profits and loses People like them because you can pool your resources- Advantages: o Have same advantages as sole proprietorshipso Shared risk of doing businesso Shared partner clout with multiple financial statementso Shared ideas, expertise, decision makingo Partners receive pass-through earnings and losses taxed at their personal tax rates- Disadvantages:o Partners are personally liable for all business debts and obligationso Individual partners can bind the partnership contractuallyo Partnership dissolution results when a partner leaves or dies (unless otherwise stated in partnership agreement)o Partners can be sued individually for the full amountof partnership debt  Partnership Agreement: Based on the Uniform Partnership Act, it defines the relationship between partners in terms of business responsibilities, profit sharing, and transfer of interest Buy/Sell Agreement: a binding contract between two partnerswith three clauses that addresses these issues:- Who is entitled to purchase departing partner’s share?- What events trigger a


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FSU ENT 3003 - Test 3

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