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
