Finals Flashcards
five pitfalls in business plan
➢ No realistic goals
➢ Failure to anticipate
roadblocks
➢ No commitment or dedication
➢ Lack of demonstrated
experience (business or
technical)
➢ No market niche (segment)
lack of any
attainable goals, lack of a time frame
to accomplish things, lack of
priorities, and lack of action steps
what pitfall
no realistic goals
how to avoid no realistic goals?
set up a
timetable of specific steps to
be accomplished during a
specific period
when an entrepreneur is immersed
in his or her idea that objectively
goes out the window
what pitfall
faliure to anticipate roadblocks
Person does not recognize the
possible problems that may
arise
what pitfall
failure to anticipate roadblocks
Indicators include: no
recognition of future
problems, no admission of
possible flows or weaknesses
in the plan, and no contingency
or alternative plans
faliure to anticipate roadblocks
how to avoid failing to anticipate roadblocks
Avoid by listing all possible
obstacles may arise and
alternatives that state what
might have to be done to
overcome the obstacles
– too
many entrepreneur appear to lack
real commitment to their ventures
what pitfall
no committment or dedication
Indicators include copying the
latest social media craze, no
interest in researching the
idea, no desire to invest
personal money, and the
appearance of making a “fast
buck” from an “app” or a
“whim”
no commitment or dedication
how to avoid no commitment or dedication
Avoid this by acting quickly
and to be sure to follow up all
professional appointments
many investor weight very heavily
the entrepreneur’s actual experience
in a venture, so it is important that
entrepreneurs demonstrate what
background they possess
what pitfall
lack of demonstrated experience
Indicators are: no experience
in business, no experience in
specific area of the venture,
lack of understanding of the
industry in which the venture
fits, and failure to convey a
clear picture of how and why
the venture will work and who
will accept it
lack of demonstrated experience
how to avoid lack of demonstrated experience
Avoid this by giving evidence
of personal experience and
background for the venture,
obtain assistance from those
who possess this knowledge
or skills
many
entrepreneurs proposing an idea
without establishing who the
potential customers will be
no market niche
indicators include: uncertainty
about who will buy the basic
idea(s) behind the venture, no proof of need or desire for the
good or product proposed, and
an assumption that the
customers or clients will
purchase just because the
entrepreneurs think so
no market niche
how to avoid no market niche
avoid this by having a market
segment specifically targeted
and to demonstrated why and
how the specific product or
service will meet the needs or
desires of this target group
written document
that details the proposed venture,
which must describe current status,
expected needs, and projected
results of the new business
business plan
referred to as
venture plan, a loan proposal, or an
investment prospectus
business plan
➢ minimum document required
by any financial source
➢ allows the entrepreneur
entrance into the investment
process
business plan
major thrust of the
this document is to
encapsulate the strategic
development of the project in
a comprehensive document
for outside investors to read
and understand.
business plan
read on the benefit of a business plan
+1
- Numerous professionals that may
involved with reading the business
plan (5)
venture capitalists
bankers
angel investors
potential large customers
lawyers, consultants, supliers
Three main viewpoints when
preparing the business plan
market’s viewpoint
investor’s viewpoint
entrepreneur’s viewpoint
because the entrepreneur is
the one developing the
venture and clearly has the
most in-depth knowledge of the technology or creativity
involved
what viewpoitn
Entrepreneur’s viewpoint
Most common
viewpoint in business
plans, and it is
essential
entrepreneur’s viewpoint
too many viewpoint and
neglect the viewpoints
of potential customers
and investors
entrepreneur’s viewpoint
second critical emphasis that
an entrepreneur must
incorporate into a business
plan
market’s viewpoint
concentrated in the financial
forecast, sound financial
projections are necessary if
investors are to evaluate the
worth of their investment
investor’s viewpoint
how many years of financial
projection is essential
for investors to use in
making their judgement
of a venture’s future
success
3-5 years
read on the potental investor expect the plan to (page 3)
➢ Look good, but not to good
➢ To be the right length
➢ To clearly and concisely
explain all the aspects of the
company’s business
➢ And not to contain bad
grammar and typographical or
spelling errors
Considered important for business
plan (5)
apperance
length
cover and title page
executive summary
table of contents
the binding and
printing must not be sloppy;
neither should the
presentation be too lavish. A
stapled compilation of
photocopied pages usually
looks amateurish, whereas
bookbinding with typeset
pages may arouse concern
about excessive and
inappropriate spending.
appearance
a business plan
should be no more than 20-25
pages long. Adherence to this
length forces entrepreneurs
to sharpen their ideas and
results in a document that is
likely to hold investors’
attention
length
he cover
should bear the name of the
company, its address and
phone number, and the month
and year in which the plan is
issued. Inside the front cover
should be a well-designed
title page in which the cover
information is repeated and, in
an upper or lower corner, the
“copy number” provided.
cover and title page
the 2 - 3
pages immediately following
the title page should concisely
explain the company’s current
status, its products or
services, the benefits to
customers, the financial forecasts, the venture’s
objectives in 3 - 7 years, the
amount of financing needed,
and how investors would
benefit
executive summary
- fter the
executive summary, include a
well-designed table of
contents. List each of the
business plan’s sections and
mark the pages for each
section.
table of contents
guidelines to remember when making a business plan (read up)
- 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 overdiversify
- Identify the target market
- Keep the plan written in 3rd person
- Capture the reader’s interest
questionst o be answered (read up)
- Is your plan organized so key facts
leap out to 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?
A detailed business plan includes
anywhere from ___ sections
(depending on the idea, the industry,
and technical details)
6-10
Ideal length is ___ pages, although
depending on the need for detail,
overall plan can range from 20 to
more than 30 pages
25
- Should be no longer than 2-3 pages
- Written only AFTER the entire
business plan have been completed - The summary must be a clever
snapshot of the complete plan. - The statements selected for a
summary segment should briefly
touch on the venture itself, the
market opportunities, the financial
needs and projections, and any
special research or technology
associated with the venture.
executive summary
parts of a business plan
executive summary
business description
marketing segment
market niche and market share
research, design, and development segment
operations segment
management segment
financial segment
critical risk segment
appendix/bibliography segment
The name of the venture
should be identified, along
with any special significance
(e.g. family name, technical
name).
business description
The industry background
should be presented in terms
of current status and future
trends. it is important that any
special industry developments
that may affect the plan
what segment
business description
read on business description
➢ The new venture should be
thoroughly described, along
with its proposed potential
All key terms should be
defined and made
comprehensible. Functional
specifications or descriptions
should be provided. Drawings
and photographs may also be
included.
➢ The potential advantages the
new venture possesses over
the competition should be
discussed in length. This
discussion may include
patents, copyrights, and
trademarks, as well as special
technological or market
advantages.
the
entrepreneur must convince
investors that a market exists, that
sales projections can be achieved
and that the competition can be eaten
marketing segment
often one of the most difficult
to prepare. It is also one of the
most critical, because almost
all subsequent sections of the
plan depend on the sales
estimates developed here
marketing segment
based
on market research and
analysis directly influence the
size of the manufacturing
operation, the marketing plan,
and the amount of debt, and
equity capital required
projected sales levels
- is a homogeneous
group with common characteristics-
-that is, all the people who have a
need for the newly proposed product
or service
market niche
When describing this niche,
the writer should address the
bases of customer purchase
decisions: price, quality,
service, personal contacts, or
some combination of these
factors
market niche
Sales projections should be
made for at least ____ years,
and the major factors affecting
market growth (industry
trends, socioeconomic trends,
governmental policy, and
population shifts) should be
discussed
three
The
entrepreneur should make an
attempt to assess the strengths and
weaknesses of the competing
products/services. Any sources used to evaluate the competition
should be cited. This discussion
should compare competing
products/services on the basis of
price, performance, service,
warranties, and other pertinent
features
competitive analyses
The general
marketing philosophy and approach
of the company should be outlined in
the marketing strategy. A marketing
strategy should be developed from
market research and evaluation data
and should include a discussion of
marketing strategy
➢ the kinds of customer groups
to be targeted by the initial
intensive selling effort
➢ the customer groups to be
targeted for later selling
efforts;
➢ methods of identifying and
contacting potential
customers in these groups
➢ the feature of the
product/service to be
emphasized to generate sales
➢ any innovative or unusual
marketing concepts that will
enhance customer
acceptance
marketing strategy
The price must be
“right” to penetrate the market,
maintain a market position, and
produce profits. Choose the most
suitable pricing strategy that you
must convincingly present.
pricing policy
A discussion of the
advertising and promotional
campaign contemplated to introduce the product/service and the kinds of
sales aids to be provided to dealers
should be included.
advertising plan
The extent of any research, design,
and development in regard to cost,
time, and special testing should be
covered in this segment.
* Investors need to know the status of
the project in terms of prototypes, lab
tests, and scheduling delays.
* Note that this segment is applicable
only if R & D is involved in the
business plan, otherwise, this
segment may be excluded
what segment
research, design, and development segment
- Describe the location of new venture
by choosing the site that should be
appropriate in terms of
➢ Labor availability
➢ Wage rate
➢ Proximity to suppliers and
customers
➢ Community support
➢ Local taxes and zoning
requirements
operations segment
Specific needs should be discussed
in terms of how the enterprise
actually operates and the facilities
required to handle the new venture
(plant, warehouse storage, and
offices), as well as any equipment
that needs to be acquired (special
tools, machinery, computers, and
vehicles)
operations segment
Other factors that might be
considered are the suppliers
(number and proximity) and the
transportation costs involved in
shipping materials. The labor, supply,
wage rates, and needed skilled
positions also should be presented
operations segment
- identifies the
key personnel, their positions and
responsibilities, and the career
experience that qualify them for
those particular roles.
management segment
- In summary, the discussion should be
sufficient so that investors can
understand each of the following
critical factors that have been
presented:
➢ organizational structure (with
organizational chart)
➢ management team and critical
personnel
➢ experience and technical
capabilities of the personnel
➢ ownership structure and
compensation agreements,
and
➢ board of directors (this is only
if the venture is a
‘corporation’) and outside
consultants and advisors
management segment
Three basic financial statements
must be presented in this part of the
plan:
pro forma balance sheet
income sheet
cash flow sheet
– means
projected (pro forma), projects what
the financial condition of the venture
will be at a particular point in time
pro forma balance sheet
- illustrates the
projected operating results based on
profit and loss. The ‘sales forecast”
which was developed in the
marketing segment is essential in
developing this document
income statement
- important in
the new-venture creation, because it
sets forth the amount and timing of
expected cash inflows and outflows
cash flow statement
- which shows the
level of sales (and production)
needed to cover all costs.
breakeven chart
- Potential risks such as the following
should be identified: (read)
➢ effect of unfavorable trends in
the industry
➢ design or manufacturing costs
that have gone over estimates
➢ difficulties of long lead times
encountered when purchasing
parts or materials
➢ unplanned-for new
competition
➢ what ifs?
- needs
to deal with such issues as management succession and
investor exit strategies.
harvest strategy segment
provides investors with a timetable
for the various activities to be
accomplished
what segment
milestone schedule segment
is a step-bystep approach to illustrating
accomplishments in a piecemeal
fashion
milestone scheduling
where diagrams, blueprints, financial
data, and other bibliographical information that supports the other
segments of the plan should be
placed
appendix and bibliography segment
read helpful hionts for developing business plan
page 9
provides the owner with
exclusive rights to hold, transfer, and
license the production and sale of the
patented product or process. Design
patents last for 14 years; all others
last for 20 years.
patent
Objective is to provide the
holder with a temporary
monopoly on his or her
innovation and thus to
encourage the creation and
disclosure of new ideas and
innovations in the
marketplace
patent
intellectual property
right. It is a result of a unique
discovery, and patent holders
are provided protection
against infringement by
others. In general, a number of
items can qualify for patent
protection, among them
processes, machines,
products, plants, composition
of elements (chemical
compounds
patent
Patent application must include
detailed specifications of the
innovation that any skilled person in the specific area can understand, two
parts of patent application:
specificaiton
claims
– is the text of a patent
that may include any accompanying
illustrations
specifications
read up on the specification descritpion page 11
+1
are series of short
paragraphs, each of which identifies
a particular feature or combination of
features that is protected by the
patent. The entire claims section, at
the end of the patent, is typically
about one pare or less.
claim
- provides exclusive rights
to creative individuals for the
protection of their literary or artistic
productions
copyright
This expression can take many
forms, including books,
periodicals, dramatic or
musical compositions, art,
motion pictures, lectures,
sound recordings, and
computer programs
copyright
Any works created after
January 1, 1978, and receiving
a copyright are protected for
the life of the author plus _____
years after his death (for
Philippines).
50
symbol indicates that the
work is protected by the
copyright law
(c)
read on copyright protection (read)
the material must be in a tangible
form so it can be communicated or
reproduced.
* also must be the author’s own work
and thus the product of his or her
skill or judgement.
* Concepts. principles, processes,
systems, or discoveries are not valid
for copyright protection until they are put in tangible form–written or
recorded.
eproduction of
a copyrighted work for purposes
such as criticism, comment, news
reporting, teaching (including
multiple copies for classroom use),
scholarship, or research.
fair use doctrine
- specifically excludes
copyright protection for any “idea,
procedure, process, system, method
of operation, concept, principle, or
discovery, regardless of the form in
which it is described, explained,
illustrated, or embodied
copyright act
- “a work formed by the
collection and assembling of
preexisting materials of data that are
selected, coordinated, or arranged in
such a way that the resulting work as
a whole constitutes an original work
of authorship.”
compilation
– distinctive name, mark,
symbol, or motto identified with a
company’s product(s) are registered
at the patent and trademark office
trademark
identify and
distinguish goods
what term
trademars
– identify and
distinguish services
what term
service goods
– denote
the quality, materials, or other
aspects of goods and services
and are used by someone
other than the mark’s owner
what term
certification marks
are
trademarks or service marks
that member groups or
organizations use to identify
themselves as the source of
goods or services.
what term
collective marks
can be
costly, and trademark infringement
can be more expensive
trademark registration
five basic rules that entrepreneur
should follow when selecting
trademarks for their new ventures (reaD)
- Never select a corporate name or
a mark without first doing a
trademark search. - If your attorney says you have a
potential problem with a mark,
trust his or her judgement. - Seek a coined or fanciful name or
mark before you settle for a
descriptive or highly suggestive
one. - Whenever marketing or other
consideration dictate the use of a
name or mark that is highly
suggestive of the product, select
a distinctive logotype for the
descriptive or suggestive words. - Avoid abbreviations and
acronyms wherever possible, and
when no alternative is acceptable,
select a distinctive logotype in
which the abbreviation or
acronym appears.
certain business
processes and information cannot be
patented, copyrighted, or
trademarked. Yet they may be
protected
trade secrets
Customer lists, plans,
research and development, pricing information, marketing
techniques, and production
techniques are examples of
potential trade secrets.
trade secrets
Law clearly outlines the area of trade
secrets, information is a trade secret
if: (read)
It is not known by the competition
2. The business would lose its
advantage if the competition
would obtain it
3. The owner has taken reasonable
steps to protect the secret from
disclosure
merging body of law
governing cyberspacec
cyberlaw
mark indicates the logo, slogan,
has been applied for trademark
TM
given approval to own the
trademark
R
- Three primary legal forms of
organization:
sole proprietorship
partnership
corporation
business that is
owned and operated by one person
sole proprietorship
➢ Has no existence apart from
the owner
➢ The individual has a right to all
of the profits and bears all of
the liability for the debts and
obligations of the business
➢ The individual also has
unlimited liability, which
means that his or her
business and personal assets
stand behind the operation
If the company cannot meet
its financial obligations, the
owner may be forced to sell
the family car, house, and
whatever assets would satisfy
the creditors.
sole proprietrship
If the proprietor chooses a
fictitious or assumed name, he or she
also must file this
certificate of assumed business name
reaad on advantage and disadvantage of sole proprietorship page 15
+1
is an association of two
or more persons who act as coowners of a business for profit. Each
partner contributes money, property,
labor, or skills, and each shares in
the profits (as well as the losses) of
the business.
partnership
equal sharing of profits, losses,
assets, management, and other
aspects of the business.
partnership
outline the
financial and managerial
contributions of the partners and
carefully delineate the roles in the
partnership relationship
article of partnership
article of partnership outline items such as
➢ Duration of agreement
➢ Character of partners
(general or limited, active or
silent)
➢ division of profits and losses
➢ salaries
➢ death of a partner (dissolution
and windup)
➢ authority (individual partner’s
authority on business
conduct)
➢ settlement of disputes, and
➢ additions, alterations, or
modifications of partnership
read on advantages and disadvantages of partnership page 16
+1
is an “artificial being,
invisible, intangible, and existing only
in contemplation of the law.” As such,
a corporation is a separate legal
entity apart from the individuals who
own it
corporation
is created by the
authority of state of laws and usually
is formed when a transfer of money
or property by the prospective
shareholders (owners) takes place in
exchange for capital stock
(ownership certificates, a.k.a. stock
certificates) in the corporation.
corporation
read on procedures to form a corporation
➢ Approval from the Securities
and Exchange Commission
➢ Articles of Incorporation
➢ At least 5 incorporators
➢ Subscription of the required
capital stock
read on advantages and disadvantages of corporation on page 17
+1
A design patent lasts for 15 years
while all others last for 20 years
TRUE/FALSE
False
A patent is an intellectual property
right
T/F
true
Personal names can never be
trademark
T/F
false
The text of a patent which include any
accompanying illustrations is
specifications
The Nike ‘swoosh’ is exclusively for
the use of Nike. The swoosh is
protected by
trademark
All ideas, with expression (art,
design, movies, process, etc.) or
without (a thought) can be protected
T/F
false
El Filibusterismo is a literary work
made by Dr. Jose Rizal. Assuming his
work is protected by copyright, then
copying his work today (year 2020)
will make the copier of the work
liable for infringement –
T/F
False
Trademark provides the owner with
exclusive rights to hold, transfer, and
license the production on sale –
T/F
False
Which is not found in the text portion
of the patent?
Definition and limitation of the
patented invention
Description of all prior that are
considered similar to the
invention
- Detailed description of the
invention
- Summary of the invention
Definition and limitation of the
patented invention
- Tom authored a book, he wants to
protect his work. He should apply for
a
copyright
using this to finance involves
a payback of the funds plus a fee
(interest) for the use of money
debt
Places a burden on the
entrepreneur of loan
repayment with interest,
whereas equity financing
force the entrepreneur to
relinquish some degree of
control
debt
– involves the sale of some
ownership in the venture
equity
Five Cs of Credit
➢ Character
➢ Capacity
➢ Capital
➢ Conditions
➢ collateral
not a choice but a
necessity, short-term borrowing (1
year or less) often is required to
obtain working capital
debt financing
term loans of 1-5
years or maturing in more than 5
years is used to finance the purchase
of property or equipment, with the
purchased asset serving as
collateral for the loans
long term debts
– most common
sources of debt financing
commercial banks
give sources of debt capital
➢ Commercial bank
➢ Trade credit
➢ Equipment suppliers
➢ Saving and loans
➢ Insurance companies
➢ Credit unions
➢ Private placements
To secure the bank loan, the
descriptive commentaries are
(read)
➢ What do you plan to do with
the money?
➢ How much do you need?
➢ When do you need it?
➢ How long will you need it?
➢ How will you repay the loan?
read of advantage and disadvantateg of debt financing page 19
+1
– credit given by
suppliers who sell goods on
an account
What debt financing sources
trading credit
is short-term financing that
involves either the Pledge of
receivables as collateral for a
loan or the sale of receivables.
Account receivable loans are
made by commercial banks
account receivable financing
are
asset-based lenders that lend
money against assets such as
receivables, inventory, and
equipment. The advantage of
dealing with a commercial
finance company is that it
often will make loans that
banks will not
finance companies
money invested in
the venture with no legal obligation
for entrepreneurs to repay the
principal amount or pay interest on it
equity financing
Source of Equity Capital
➢ Personal savings
➢ Friends and relatives
➢ Angels –
➢ Corporations –
➢ Venture capitalists (VCs) –
➢ Going Public (IPOs) –
individuals who wish
to assist others in their
business venture
angels
invest or
acquire smaller businesses
corporation
funds are more specialized
versus homogeneous, group
of people who collect funds
venture capitalists
read on financial equity statements page 20
+1
term used to refer to a
corporation’s raising capital through
the sale of securities on the public
markets
going public
selling
securities is one of the fastest ways
to raise large sums of capital in a
short period of time.
size of capital amount
provides liquidity for
owners since they can readily sell
their stock.
liquidity
The marketplace puts a value
on the company’s stock, which in turn
allows value to be placed on the
corporation
value
The image of a publicly
traded corporation is stronger in the
eyes of suppliers, financiers, and
customers
image
is
the major financial market where
stocks of publicly listed corporations
are traded,
philippine stock exchange
Two approaches:
to entrepreneurship
new-new
new-old
indicates the
importance of people’s awareness of
their daily lives (work and free time)
for developing new business ideas.
new-new approach
Most small
ventures do not start with a totally
unique idea. Instead, an individual
“piggy-backs” on someone else’s
idea be either improving a product or
offering a service in an area in which
it is not currently available
new-old approach
A prospective
entrepreneur may seek to purchase
this venture rather than start an
enterprise.
business venture
An
entrepreneur’s background,
skills, interests, and
experience are all important
factors in selecting the type of
business to buy
personal preferences
read on advantage of acquiring an ongoing venture page 21
+1
The
local environment for
business should be analyzed
to establish the potential of
the venture in its present
location
business environment
The business’s profit
potential is a key factor in
evaluating the venture’s
attractiveness and in later
determining a reasonable
price for it
profit, sales, operating ratios
he tangible
(physical) and intangible (e.g.
reputation) assets of the
business need to be assessed.
▪ Inventory
▪ Furniture, equipment,
fixtures
▪ Accounts receivable
▪ Trademarks, patents,
copyrights, business
name
▪ Goodwill
business assets
read on page 22
+1
s any arrangement in
which the owner of a trademark,
trade name, or copyright has
licensed others to use it in in selling
goods or services
franchise
generally is legally
independent but economically
dependent on the integrated
business system of the franchisor
franchisee
read on advantage and disadvantage of franchising page 23
+1
Some
people with unique ideas, use them
not only to earn profit for themselves
but to help others and/or address
some cause or social issues
social entrepreneurship
s a form of entrepreneurship
that exhibits characteristics of
nonprofit, governments, and
businesses, combining
private-sector focus on
innovation, risk taking, and
large-scale transformation
with social problem solving
social entrepreneurship
- has come to
mean a person (or small group of
individuals) who founds and/or leads
an organization or initiative engaged
in social entrepreneurship.
social entrepreneur
Sometimes referred to as
public entrepreneurs, civic
entrepreneurs, or social
innovators
social entrepreneurship
has famously
commented that “social
entrepreneurs are not content just to
give a fish or teach how to fish. They
will not rest until they have
revolutionized the fishing industry
Bill Drayton
