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RMB 402
Dr. Anurag Joshi
Unit 4
Business Plan
•Executive Summary
1.Description of Business concept & Business
opportunity and strategy
2.Target market and projections
3.Competitive advantage
4.Cost
5.Sustainability
6.The team
7.The offering
•The Industry & Company, its product(s)/service
1.The Industry
2.The Company and the Concept
3.The product(s) or Service(s)
4.Entry & Growth strategy
•Market Research and Analysis
1.Customers
2.Market size and Trends
3.Competition & Competitive Edges
4.Estimated Market Share and Sales
5.Ongoing Market Evaluation
•The Economies of the Business
1.Gross & Operating Margin
2.Profit Potential & Durability
3.Fixed, Variable & Semi Variable Costs
4.Months of Break down
5.Months to reach Positive Cash Flow
•Marketing Plan
1.Overall Marketing Strategy
2.Pricing
3.Sales Tactics
4.Service & Warranty Policies
5.Advertising & Promotion
•Design & Developmental Plans
1.Development Status and Tasks
2.Difficulties and Risks
3.Product Improvement and New Products
4.Costs
5.Proprietary Issues
•Manufacturing & Operating Plan
1.Operating cycle
2.Geographical Location
3.Facilities & Improvements
4.Strategies & Plans
5.Regulatory & Legal Issues
•Management Team
1.Organization
2.Key Management personnel
3.Management Compensation & Ownership
4.Other Investors
5.Employment & other Agreements
6.Stock option & Bonus Plan
7.Board of Directors
8.Other Shareholders, Rights & Restrictions
9.Supporting Professional Advisors & Services
•Overall Schedule
•Critical Risks, Problems and Assumptions
•The Financial Plan
1.Actual Income statements & Balance Sheets
2.Pro forma Income
3.Pro Forma Balance Sheet
4.Break Even Chart and Calculation
5.Cost Control & Highlights
•Proposed Company Offering
1.Desired Financing
2.Offering
3.Capitalization
4.Use of Funds
Do’s in Business Planning
•Involve all the management team in the
preparation of the business plan
•Make the plan logical, comprehensive, readable
and as precise as possible
•Demonstrate commitment to the venture by
investing a significant amount of the time and
some money in the preparing the plan
•Articulate what the critical risks and
assumptions are & how and why are tolerable
•Discuss and disclose any current or potential
•Identify several alternative source of Financing
•Spell out the Proposed deal- how much for
what ownership share- and how investors will
Win
•Be creative in gaining the attention & interest
of potential investors
•Accept orders and customers that will generate
a positive cash flow, even if it means you have to
postpone writing the plan
•Know your targeted investor group (Venture
capitalist, bank or leasing company, angel
investor etc.) & what they really want and what
Don’ts in Business Planning
•Have unnamed, mysterious people on
management team
•Make ambiguous, vague unsubstantiated
statements, such as estimating sales on the
basis of what the team would like to produce
•Describe technical products or manufacturing
processes using jargon or in a way that only an
Expert can understand, because this limits the
usefulness of the plan
•Spend money on developing fancy brochures',
elaborate PowerPoint and Flash presentations
Feasibility Analysis
• Feasibility analysis is the process of
determining whether a business idea is viable.
• It is the preliminary evaluation of a business
idea, conducted for the purpose of determining
whether the idea is worth pursuing.
Feasibility Analysis
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Product/Service Feasibility Analysis
Purpose
• Is an assessment of the overall
Product/Service appeal of the product or service
Feasibility Analysis being proposed.
• Before a prospective firm rushes
a new product or service into
development, it should be sure
that the product or service is what
prospective customers want.
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Product/Service Feasibility Analysis
Components of product/service
feasibility analysis
Product/Service Product/Service
Desirability Demand
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Product/Service Desirability
First, ask the following questions to determine the basic
appeal of the product or service.
• will
Does it excited
get make sense? Is it reasonable? Is it something consumers
about?
• problem,
Does it takeor advantage
take of anofenvironmental
advantage a gap in the trend, solve a
marketplace?
• market?
Is this a good time to introduce the product or service to the
• or
Areconcept?
there any fatal flaws in the product or service’s basic design
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Product/Service Desirability
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Product/Service Demand
•Product/Service Demand
–Their are two steps to assessing product/service demand.
–Step 1: Administer a Buying Intentions Survey
–Step 2: Conduct library, Internet, and Gumshoe research
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Product/Service Demand
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Product/Service Demand
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Product/Service Demand
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Product/Service Demand
Gumshoe Research-Explanation
• A gumshoe is a detective or an investigator
that scrounges around for information or clues
wherever they can be found.
• Be a gumshoe. Ask people what they think
about your product or service idea. If your idea
is to sell educational toys, spend a week
volunteering at a day care center and watch how
children interact with toys.
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Product/Service Demand
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Industry/Target Market Feasibility Analysis
Purpose
• Is an assessment of the overall
appeal of the industry and the
Industry/Target Market target market for the proposed
Feasibility Analysis business.
• An industry is a group of firms
producing a similar product or
service.
• A firm’s target market is the
limited portion of the industry it
plans to go after.
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Industry/Target Market Feasibility Analysis
Target Market
Industry Attractiveness
Attractiveness
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Industry Attractiveness
•Industry Attractiveness
–Industries vary in terms of their overall attractiveness.
–In general, the most attractive industries have the
characteristics depicted on the next slide.
–Particularly important—the degree to which environmental
and business trends are moving in favor rather than against
the industry .
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Industry Attractiveness
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Target Market Attractiveness
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Organizational Feasibility Analysis
Purpose
• Is conducted to determine
Organizational Feasibility whether a proposed business has
Analysis sufficient management expertise,
organizational competence, and
resources to successfully launch
a business.
• Focuses on non-financial resources.
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Organizational Feasibility Analysis
Components of organizational
feasibility analysis
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Management Expertise
•Management Expertise
–A firm should candidly evaluate the prowess, or ability, of
its management team to satisfy itself that management has
the requisite passion and expertise to launch the venture.
•An indication of passion is the willingness of a new venture
team to complete a comprehensive feasibility analysis.
–Two of the most important factors in this area are:
•The passion that the solo entrepreneur or the founding
team has for the business idea.
•The extent to which sole entrepreneur or the founding
team understands the markets in which the firm will
participate.
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Resource Sufficiency
•Resource Sufficiency
–This topic pertains to an assessment of whether an
entrepreneur has sufficient resources to launch the proposed
venture.
–To test resource sufficiency, a firm should list the 6 to 12
most critical nonfinancial resources that will be needed to
move the business idea forward successfully.
•If critical resources are not available in certain areas, it
may be impractical to proceed with the business idea.
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Resource Sufficiency
Examples of nonfinancial resources that may be critical
to the successful launch of a new business
Availability of affordable office or lab space.
Likelihood of local and state government support of the business.
Quality of the labor pool available.
Proximity to key suppliers and customers.
Willingness of high quality employees to join the firm.
Likelihood of establishing favorable strategic partnerships.
Proximity to similar firms for the purpose of sharing knowledge.
Possibility of obtaining intellectual property protection in key areas.
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Financial Feasibility Analysis
Purpose
• Is the final component of a
Financial Feasibility comprehensive feasibility analysis.
Analysis • A preliminary financial assessment
is sufficient.
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Financial Feasibility Analysis
Components of financial
feasibility analysis
Overall Financial
Attractiveness of the
Proposed Venture
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Total Start-Up Cash Needed
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Overall Financial Attractiveness of the
Proposed Venture
Financial Factors Associated With Promising Business
Opportunities
Steady and rapid growth in sales during the first 5 to 7 years in a clearly
defined market niche.
High percentage of recurring revenue—meaning that once a firm wins a
client, the client will provide recurring sources of revenue.
Ability to forecast income and expenses with a reasonable degree of
certainty.
Internally generated funds to finance and sustain growth.
Availability of an exit opportunity for investors to convert equity to cash.
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