Chapter 6: The Business Plan: Visualizing the Dream Flashcards
A document that outlines the basic concept underlying a business, what problem will be solved, and how you will execute your plan to solve the problem
Business plan
A tool to be used by company insiders for the direction and to aid in the development of relationships with outsiders
Business plan
A business plan is a tool to be used by these for the direction
Company insiders
A business plan is a tool to aid in the development of relationships with whom
outsiders
The entrepreneur must convince outsiders to do what?
Become linked with the firm
Investors need evidence that the entrepreneur will what?
Be around in the future
Only if you do this does the business plan have a chance of making a difference
Effectively execute it
An entrepreneur must find a balance between these
Planning and becoming operational
More often than not, entrepreneurs resist writing a business plan because
they lack the discipline to do so
If you want to capture the future potential of an opportunity and make a difference in lives, planning is the
rule, not the exception
What are the two basic choices when writing a business plan?
Short or comprehensive plan
What are the main issues found in the short plan?
Problem needing to be solved Strategy Measures used to gauge success Milestones to be met Tasks and responsibilities of the team Business model
When is a comprehensive plan beneficial?
Describing a startup
Facing significant change
Explaining a complex business situation
What part of writing a business plan is usually the hardest?
Getting started
Three elements must be evident in the feasibility analysis before starting a business plan
Strong market potential
An attractive industry
Right individual or team to execute the plan
These two issues are of primary concern with the business plan
Content and format of the plan
Effectiveness of the written presentation
The opportunity should reflect this
The potential and the attractiveness of the market and the industry
Critical resources include what?
Money, human assets, and hard assets
The entrepreneurial team must possess what?
Integrity, and breadth and depth of experience
The goal of the financing structure is to find
A win-win deal
The context of an opportunity includes what?
External factors
The business plan should give consideration to these
Opportunity Critical resources Entrepreneurial team Financing Structure Context
The business plan needs to demonstrate that the entrepreneur has done what?
Pulled together the right opportunity, resources, people, and financing structure, all within the right context
What should the cover page include?
Company name and information Tagline and logo Name of contact person with information Date of preparation Confidentiality disclaimer Number of copy
This provides a sequential listing of the sections of the plan
Table of contents
A one to three page overview of the significant points, intended to motivate the reader to continue reading
Executive Summary
Key characteristics of the industry, including different segments, and the niche where you can compete
Industry, Target Customer, and competitor Analysis
Company objectives, the nature of the business, its primary product or service, its current status and history, and the legal form of the organization
Company Description
Justification for why people will buy the product or service, based on its unique features
Product/service plan
Marketing strategy, including the methods of identifying and attracting customers, selling approach, type of sales force, distribution channels, types of sales promotions and advertising, and credit and pricing policies
Marketing Plan
Operating and manufacturing methods, operating facilities, quality-control methods, procedures to control inventory and operations, sources of supply, and purchasing procedures
Operations and Development Plan
Description of the management team, outside investors and/or directors, and plans for recruiting and training employees
Management Team
Any known inherent risks in the venture
Critical Risks
How much capital the entrepreneur needs and how the money will be used
Offering
Ways an investor and the entrepreneur may be able to harvest their business investment
Exit Strategy
Contemplated sources of financing
Any historical financial statements
Financial Plan
Various supplementary materials and attachments to expand the reader’s understanding of the plan
Appendix of supporting documents
This briefly covers all aspects of the business plan
Synopsis
This tells a story, conveying greater excitement than the synopsis
Narrative
At the most basic level, prospective investors have a single goal:
To maximize potential return while minimizing the risk they are taking
How are investors oriented?
More market oriented than product oriented
What is the essence of the entrepreneurial process?
To identify new products or services that meet an identifiable customer need
How should your product/service be described in the business plan?
Lay terms
Four key elements that make up the business model
Revenue model
Cost Structures
Maximum investment
Business model risk
Revenue stream in which a firm’s revenues come from a single product or service
Single Stream
Revenue stream in which a business realizes revenues from a combination of multiple products and services
Multiple Stream
A revenue stream where a company’s revenue comes from selling one or more products and/or services as a way to generate revenues from other products and/or services
Interdependent Streams
Revenue stream in which one or several revenue streams are sold at a loss in order to create sales in a profitable revenue stream
Loss Leader
Costs that do not vary at all with volume, such as rent expenses
Fixed Costs
Expenses that vary directly and proportionately with changes in volume
Variable Costs
Expenses that include both variable costs and fixed costs, which vary in direction of changes in the volume of sales
Semi-Variable Costs
