Preparing a Business Plan- Context and Format

Question 1

Important to do this before beginning a business plan.

Answer 1

Conduct a Feasability Analysis

Question 2

1. Strong market potential
2. An attractive industry
3. The right individual or team to execute the plan

Answer 2

3 Elements Evident from the Feasability Analysis Before you Move to the Business Plan

Question 3

1. The content and format of the plan
2. The effectiveness of the written presentation

Answer 3

Two Issues are of Primary Concern When Writing the Business Plan

Question 4

Strategies and financial plans will follow naturally if this is a good one. It should be thought about first and foremost and is identified by your feasibility analysis.

Answer 4

Opportunity

Question 5

1. Opportunity
2. Critical resources
3. The entrepreneural team
4. Financing the structure
5. The context (or external factors)

Answer 5

Basic Factors to Give Consideration in a Business Plan

Question 6

Should reflect the potential and the attractiveness of the market and industry.

Answer 6

Opportunity

Question 7

Include not just money, but also human assets (suppliers, accountants, lawyers, investors, etc.) and hard assets (accounts recievable, inventories, etc.). An entrepreneur should think of ways to minimize the resources necessary for startup.

Answer 7

Critical Resources

Question 8

Must possess integrity, as well as bredth and depth of experience.

Answer 8

The Entrepreneurial Team

Question 9

How a firm is financed (i.e. debt versus equity) and how the ownership percentage is shared by the founders and investors will have a significant impact on an entrepreneur’s incentive to work hard. The goal is to find a win-win deal.

Answer 9

Financing Structure

Question 10

Includes the regulatory environment, interest rates, demographic trends, inflation, and other factors that inevitably change but cannot be controlled by the entrepreneur.

Answer 10

The Context (External Factors) of an Opportunity

Question 11

• Cover Page
• Table of contents
• Executive summary
• Company description
• Industry, target customer, and competitor analysis
• Product/service plan
• Marketing plan
• Operation and development plan
• Management team
• Critical risks
• Offering
• Exit strategy
• Financial plan
• Appendix of supporting documents

Answer 11

Abbreviated Business Plan Outline

Question 12

• Company name
• Logo
• Tagline
• Contact information
• Copy number
• Date prepared
• Disclaimer (If needed)

Answer 12

Cover Page

Question 13

• Listing of the key sections of the business plan.

Answer 13

Table of Contents

Question 14

• One- to three-page overview of the significant points, intended to motivate the reader to continue reading.

Answer 14

Executive Summary

Question 15

• Company objectives
• The nature of the business
• Its primary product or service
• Its current status (startup, buyout, or expansion) and history (if applicable)
• The legal form of organization

Answer 15

Company Description

Question 16

• Key characteristics of the industry including the different segments, and the niche where you plan to compete.

Answer 16

Industry, Target Customer, and Competitor Analysis

Question 17

Justification for why people will buy the product or service, based on its unique features.

Answer 17

Product/Service Plan

Question 18

• Marketing strategy, including the methods of identifying and attracting customers
• Selling approach
• Type of sales force
• Distribution channels
• Types of sales promotions and advertising
• Credit and pricing policies

Answer 18

Marketing Plan

Question 19

• Operatering and manufacturing methods
• Opering facilities (location, space, and equipment)
• Quality-control methods
• Procedures to control inventory and operations
• Sources of supply
• Purchasing procedures

Answer 19

Operations and Development Plan

Question 20

• Description of the management team
• Outside investors and/or directors
• Plans for recruiting and training employees

Answer 20

Management Team

Question 21

Any known risks in the venture.

Answer 21

Critical Risks

Question 22

How much capital the entrepreneur needs and how the money will be used (section used to attract investors).

Answer 22

Offering

Question 23

Ways an investor and the entrepreneur may be able to harvest their business investment.

Answer 23

Exit Strategy

Question 24

• Contemplated sources of financing
• Any historical financial statements, if available.
• Pro forma financial statements for three to five years, including some investments
• Balance sheets
• Cash flow statements
• Cash budgets

Answer 24

Financial Plan

Question 25

Various supplementary materials and attachments to expand the reader's understanding of the plan.

Answer 25

Appendix of Supporting Documents

Question 26

In the cover page, this should preferably be for the president and should include the mailing address, phone number, fax number, and e-mail address.

Answer 26

Contact Information

Question 27

In a cover page, if it is being given to investors, this states that the plan is being provided on a confidential basis to qualified investors only and is not to be reproduced without permission.

Answer 27

Disclaimer

Question 28

On the cover page, this is to keep track of how many copies have been given out.

Answer 28

Copy Number

Question 29

This allows the reader to spot-read a plan (a common practice) rather than read the plan from front to back.

Answer 29

Table of Contents

Question 30

Often thought to be the most important section of the business plan. A section of the business plan that conveys a clear and concise overall picture of the proposed venture and creates interest in the venture. * Comes at the beginning of the business plan but should be written last.

Answer 30

Executive Summary

Question 31

* A description of the opportunity * An explaination of the business concept * An industry overview * The target market * The competitive advantage you how to achieve in the market * The economics of the opportunity * The management team * The amount and purpose of the money being requested (the "offering"), if you are seeking financing.

Answer 31

Subsections of the Executive Summary

Question 32

* Synopsis * Narrative

Answer 32

Forms of the Executive Summary

Question 33

Briefly covers all aspects of the business plan, giving each topic relatively equal treatment. It relates, in abbreviated fashion, the conclusions of each section of the completed business plan. * Although it is easy to prepare, it can be dry reading for the prospective investor

Answer 33

Synopsis

Question 34

Tells a story, it can convey greater excitement than the synopsis. Requres a gifted writer who can communicate the necessary information and generate enthusiasm without crossing the line into hype. More appropriate for businesses that are breaking new ground with a new product, a new market, or new operational techniques. It is also better business format for ventures that have one dominate advantage. Works well for companies with interesting or impressive backgrounds or histories.

Answer 34

Narrative

Question 35

1. When and where is the business to be started 2. What is the history of the company 3. What are the firm's objectives 4. What changes have been made in structure and/or ownership 5. In what stage of development is the firm 6. What has been achieved to date 7. What is the firm's competitive advantage or distinctive competence 8. What are the basic nature and activity of the business 9. What is the primary product or service 10. What customers will be served 11. What is the firm's form organization (sole proprietorship, partnership, limited liability company, corporation, or some other form). 12. What are the current and projected economic states of the industry 13. Does the firm intend to sell another company or investment group. Does it plan to be a publicly traded company, or do the owners want to transfer ownership to the next generation of the family

Answer 35

Company Description- Questions to Answer

Question 36

1. Present the opportunity and demonstrate why there is a significant market to be served. The broader industry to be competing- industry size, growth rate, fundamental trends, major players. 2. Identify the segments of the industry and describe in detail the niche in which you plan to participate. 3. Describe your target customers in terms of demographics and psychological variables (values, attitudes, fears) 4. Know your customer- serves as the basis for understanding who your competitors are. 5. Analyze competitors in terms of product or service attributes that they offer or are failing to provide.

Answer 36

Industry, Target Customer, and Competitor Analysis

Question 37

A section of the business plan that describes the product and/or service to be provided and explains its merits. * Make a convincing presentation of your company's competitive advantage. * How your product or service fills a gap in the market and how it is "better, cheaper and/or faster." * Provide working model or prototype for physical products * Growth strategy for the product (primary determinant of a firm's value). * If relevant, describe secondary markets the firm will pursue.

Answer 37

Product/Service Plan

Question 38

A section of the business plan that describes how the firm will reach and service customers within a given market. * Marketing strategy, including the methods of identifying and attracting customers * Pricing strategies * Selling approach * Types of sales force * Distribution channels * Types of sales promotions and strategies * Credit and pricing policies * Sales forecasts will need to be developed based on this information * Describe and warranties, as well as planned product updates.

Answer 38

Marketing Plan

Question 39

A section of the business plan that offers information on how a product will be produced or a service provided, including descriptions of the firm's facilities, labor, raw materials, and processing requirements.

Answer 39

Operations and Development Plan

Question 40

A section of the business plan that describes a new form's organizational structure and the backgrounds of its key employees. * Well balanced team= pme that includes financial and marketing expertise as well as production experience and innovate talent.

Answer 40

Management Team Section

Question 41

A section of the business plan that identifies the potential risks that may be encountered by an investor. Common risks: * Lack or market acceptance * Competitor retaliation * Longer time and higher expenses than expected to start and grow the business. * Inadequate financing * Government regulations

Answer 41

Critical Risk Section

Question 42

A section of the business plan that indicates to an investor how much money is needed, and when and how the money will be used. * Helpful to convey this information on a sources and uses table- that indicates the type of fnancing being requested (debt or equity) and how the funds will be used. * If equity- how much ownership he or she is willing to give up. * Amount of money being raised should carry the firm for 12 to 18 months

Answer 42

Offering

Question 43

A section of the business plan that focuses on options for cashing out of the investment. * Most equity investors absolutely will not invest in a startup or early-stage business if they are not reasonably confident that at some time in the future there will be an opportunity to recover their principal investment, plus a nice return on the investment.

Answer 43

Exit Strategy (Harvest)

Question 44

A section of the business plan that projects the company's financial position based on well-substantiated assumptions and explains how the figures have been determined. * A business can be profitable but fail if it does not produce positive cash flows.

Answer 44

Financial Plan

Question 45

Projections of a company's financial statements for up to five years, including balance sheets, income statements, and statements of cash flows, as well as cash budgets.

Answer 45

Pro Forma Statements (Included in Financial Plan)

Question 46

Supporting documents: * The resumes of the key investors and owners/managers * Photographs of products, facilities, and buildings * Professional references * Marketing research studies * Pertinent published research * Signed contracts of sale Nothing is more important to investors than the qualifications of the management team.

Answer 46

Appendix of Supporting Documents