Chapter 10 Flashcards
preparing to write a business plan
1) identify who is responsible for what
2) develop a timeline based on tasks identified
3) hold the team to the timeline and work diligently to get the plan done
concerns when considering a business plan and entrepreneur for a loan
1) the amount of money the entrepreneur needs
2) the kind of positive impact the loan will have on the business
3) the kinds of assets the business has for collateral
4) how the business will repay the loan
5) how the lender will be protected if the business doesn’t meet its projections
6) the entrepreneur’s stake in the business
proof of concept period (don’t have to memorize)
customer sales purchase order final product letter of intent for beta test working prototype
micro strategies
increase in uncertainty, fewer available resources, and a need for more innovation; calls for startups that can move and adapt quickly as they implement smaller strategies to accomplish near-term outcomes on the path to bigger, longer-term goals
entrepreneur’s micro strategy for proof of concept
outcomes: what do we want to achieve? why do we want to achieve this outcome? what is the value?
assets: what do we have that will help us achieve the outcomes we seek? do we have all the assets we need to achieve our outcomes?
actions: what specific tasks do we need to do to accomplish the outcomes? will our actions accomplish the outcomes we seek?
Types of market evaluation
Total available market (TAM)
serviceable available market (SAM)
serviceable obtainable market (SOM)
Technology readiness levels (don’t need to memorize)
1) new concept proposed
2) academic research to validate concept
3) lab proof of concept research
4) proof of concept validation in relevant environment
5) breadboard demonstration– primitive prototype
6) prototype demonstration
7) demonstration of pre-production hardware in operational environment
8) extended operation– system completed
9) commercialization
business part of business plan
provides the key information a reader would want to know about the business so that the rest of the business plan makes sense; start with elevator pitch
industry/market analysis
the environmental context for your business; determines whether the business can be profitable
product/service development plan
provides a detailed description of your product or service and the timeline for completion of the prototype and final product or service
founding or management team
present the qualifications of the team, how they will cover the critical tasks, and what gaps, if any, there are in the team
organization plan
discusses the legal form of organization that the venture will take; deals with the entrepreneur’s philosophy of management and company culture; includes an organization chart showing key management, talks about personnel required for specific duties and employee incentives, and discusses the use of strategic partners
operations plan
contains a detailed description of the business operations, including those processes that the new venture will own and undertake in-house, such as assembly, and those that will be outsourced to a strategic partner, such as manufacturing; explains how the business will operate, where it will get its raw materials, how a product will be manufactured and/or assembled, and what type and quantity of labor will be required to operate the business
marketing plan
distinct from marketing analysis; the strategy for communicating the company’s message, developing awareness of the product or service (brand equity), and enticing the customer to purchase; includes a discussion of the plan’s purpose, the market niche, the business’s identity, tools that will be used to reach the customer, a media plan for specific marketing tools, and a marketing budget
financial plan
demonstrates the financial viability of the venture and explains the assumptions you made in doing the forecasts; statement of cash flows, income statement, balance sheet
current ratio
provides information on the company’s ability to meet short-term obligations;
total current assets/total current liabilities
profit margin
uses net income and net sales from the income statement to give the percentage of each dollar of sales remaining after all costs of normal operations are accounted for;
net income/net sales
return on investment
provides a measure of the amount of return on the shareholders’ investment based on the earnings of the company;
net income/shareholders’ equity
inventory turnover
measure of the liquidity of the inventory or the number of times it turns over in a year; helps to judge whether the business has too much capital tied up in inventory
cost of goods sold/average inventory
break even analysis
tells how many units must be sold before your company can achieve a profit or the sales volume required to be profitable;
total fixed costs/(selling price-variable costs per unit)
growth plan
discusses how you plan to take your business from startup through the various stages of growth and outlines the strategy that will be used to ensure that the business model is sustainable and continues to scale over its life
contingency plan
presents potential risk scenarios, usually dealing with situations such as unexpected high or low growth or changing economic conditions, and then, fore each situation, suggests a plan to minimize the impact on the new business
timeline to launch
lists critical milestones and gives the reader a clear sense of when the business will launch
appendices
put items that support your claims in the main body of the report– things like resumes, calculations, surveys, spreadsheets, etc
end notes
the linked citations to material in the main body of the report that were gathered from sources other than the entrepreneur
mistakes in developing a business plan
boring your readers to death
trying to do too much too soon
drowning your plan in jargon
rapid growth that requires capabilities beyond those of the founding team
one ringleader in a 3-ring circus
performance that exceeds industry averages
price as a market strategy
not investing capital in your own business
