Business plans MGT 470. Feasibility Study versus Business Plan Feasibility = screening opportunities...
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Transcript of Business plans MGT 470. Feasibility Study versus Business Plan Feasibility = screening opportunities...
Business plans
MGT 470
Feasibility Study versus Business Plan
• Feasibility = screening opportunities to decide the conditions under which you are willing to go forward
• Business Plan = execution plan for implementing the business
Business Plan
• A formal, written expression of the entrepreneur’s vision for converting ideas into a profitable, going business
• The entry card for serious consideration by venture capitalists, banks, and other sources of funding
Purpose of the Business Plan
• Reality Check—What’s it going to take?
• Living Guide to the Business
• Statement of intent for third parties– Investors
– Bankers/lenders
– Potential management
– Strategic partners
– Suppliers
Bankers/Lenders
• Margins – How much room for error?
• Cash flow– Can you pay them back?
• Qualifications and track record of management team– Do they have what it takes to execute
the plan?
Investors
• Predictors of growth
• Qualifications and track record of the management team
• Deal structure
• Exit
Strategic Partners
• Growth plans indicate potential business
• Ability to pay
• Future management
– Where do they fit in?
The entrepreneur: A Living Document
• A business plan changes often as a new business develops.
• Do just enough business planning to get the new company started.
• Refine the plan with information gathered from running the new venture.
What Every Plan Needs
• What need is being served?
• Do you have a team that can serve that need?
• Why is now the right time to launch this business concept?
• Can you make money at it?
The Components
• The business concept
• The industry/market analysis
• Competition
• The founding team + Management
• Development, production, location
The Components (cont.)
• Marketing plan
• Financial plan
• Contingency plan
• Growth plan
• Scheduling and milestones
• Deal structure
• Appendices
The Executive Summary
• Arguably the most important part of thebusiness plan
• Stimulates an investor, bankers, or other interested party to read the business plan
• Should be no more than two pages
• Contains the most important points from all sections of the plan
• Must capture the reader’s attention instantly
Background, Product, and Purpose
• What is the nature of the idea driving your company and how did it arise?
• What does the product have to offer?
• What is the basic nature of the company?
• What is the company’s mission?
Market Analysis
• What have you done to identify the market?
• How large is the market?
• How will products or services be promoted?
• What do you know about competing products and companies?
• How will the product or service be priced?
Development, Production, and Location
• Where are the products or services in the development process?
• What are the projected costs and timetable for making the product or delivering the service?
• What steps have been taken to assure quality and safety?
Management Team
• Do team members have the experience, expertise, skills, and personal characteristics needed?
• Do team members having good working relationships?
Financial Plans and Projections
• Proforma balance sheet
• Proforma income statement
• Cash flow statement
• Break-even analysis
Critical Risks
• Price cutting by competitors
• Unforeseen industry trends
• Sales projections not achieved
• Costs exceed estimates
• Schedules not met
• Difficulties raising financing
• Unforeseen trends
Harvest and Exit
• Management succession
• Exit strategies
Scheduling and Milestones
• Formal incorporation• Completion of design• Completion of
prototypes• Hiring of initial
personnel
• Product displays• Agreements • Moving into
production• Receipt of orders• First sales • Profitability
The Intangibles
• The extra “something”• Pay attention to organization, clarity, word
choice, and style• Have good writers read your plan• Revise according to their suggestions• You must support your claims
Seven Deadly Sins
• Plan is poorly prepared• Plan looks too slick• Executive summary is too long• Development stage of product is unclear• Fails to answer “Why would anyone ever want to
buy one?”• Doesn’t state management qualifications• Financial projections are wishful thinking
Oral Presentation
• Answer the fundamental questions
• Be under a half hour
• Catch the audience’s attention in the first sixty seconds
• Involve the key members of the founding team
• Demonstrate the product or service where possible
Take-Aways
• List what students took away from the discussion in real time