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Seeing Audiences and Your Business Clearly
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
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Understand why and when to develop a business plan Know how to tell the business plan story Learn the major sections of the classic business plan Focus business plan sections to meet specific needs Identify the major risks to business plan success Master presenting your business plan to others
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A business plan is a«
a) b) c) d) 5-10 word sentence or tagline Document designed to detail major characteristics of a firm A paragraph that describes the firm¶s goals and competitive advantages A 30-second action-oriented description of a business designed to sell the idea of the business to another
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Business Plan Background
Business plan document designed to detail plan: major characteristics of a firm 2 circumstances when a business plan is necessary:
± External legitimacy ± Internal understanding
or treated as viable by organizations or people outside the small business or the owner¶s family Internal understanding extent to which understanding: employees. and family members in the business know the business¶s purposes and operations 8-5 . investors.e s b Chapter 8 External legitimacy extent to which a legitimacy: small business is taken for granted. accepted.
e s b Chapter 8 Starting Small and Building Up 8-6 .
Microsoft: running Microsoft software.e s b Chapter 8 The Vision Statement ± 5-10 word sentence or tagline Tagline memorable catchphrase that Tagline: captures the key idea of a business Good way to present a vision statement ± Microsoft ³A computer on every desk.´ 8-7 .
e s b Chapter 8 The Mission Statement ± A paragraph that describes the firm¶s goals and competitive advantages ± Talks in terms of how it will make a difference in for the customer or the industry ± Fantastic Gift Baskets ³The family at Baskets: Fantastic Gift Baskets puts the same care and love into designing our gourmet gift baskets as you would«if you had the time!´ 8-8 .
of the service. ends with where business is now ± What makes firm unique or superior? ± Sounds like a sales pitch 8-9 .e s b Chapter 8 The Elevator Pitch ± A 30-second action-oriented description of a business designed to sell the idea of the business to another ± Leads with the hook follows up with purpose hook.
com/money/financing/article58946. practice. wellrehearsed summary of who you are. what you do and why you are better at it than anyone else Verbal equivalent of your business card. practice . and it needs to say it very quickly Practice.e s b Chapter 8 Example The 30-Second Business Plan ³Elevator pitch"--a carefully prepared. much more.html .You never know when you will need your elevator pitch 8-10 http://www. but it needs to say much.entrepreneur.
finances ± Single most important written part of plan Most widely distributed Readers typically start with executive summary 8-11 . competitive advantages. market.to two-page (250-500 word) overview ± Product. management. business.e s b Chapter 8 The Executive Summary ± Key component of the written business plan ± One.
e s b Chapter 8 The Classic Business Plan Full (or classic) business plan: 25 single-spaced plan pages of text and 15 pages of financials and appendices 8-12 .
e s b Chapter 8 Business Plan Outline Cover letter one page document on business letter: stationery ± Introduces business plan and owner ± Indicates why recipient is being asked to read the plan 8-13 .
e s b Chapter 8 Title Page contains introductory Page: information ± ± ± ± ± Company name Contact information Date this version of the plan was completed Proprietary statement to protect your ideas Possible items: Securities disclaimer Name of person who prepared the business plan Notice of copyright for the plan. or brands/logos 8-14 .
e s b Chapter 8 Table of contents contents: ± Lists major section headings Boldface type ± Sections underneath major sections Normal type ± Put page numbers on every page of the business plan 8-15 .
the firm¶s current status.e s b Chapter 8 The Company Company: ± Company description 1-2 pp. and the history of the business Business¶ competitive advantage 8-16 . description: Vision statement / mission statement Specific goals Company background brief description of the background: company.
industry: Describe firm¶s product or service Include pictures Explain how the customer uses the product Proprietary technology Industry descriptions 8-17 .e s b Chapter 8 The Company Company: ± Product/service and industry 1-8 pp.
and past experience ± Common to have multiple target audiences 8-18 . customer: Total population of people or firms you plan to sell to Target customer section: focuses attention on who would buy ± Demographics¶ relation to the product.e s b Chapter 8 The Market Market: ± Market and target customer 1-3 pp. how often they buy.
Table: ± Major competitors ± Competing product or service: market share. competitive advantages and disadvantages Text 1 p. Text: ± what makes product or service unique 8-19 .e s b Chapter 8 The Market Market: ± Competition and competitive advantage: 1-2 pp. Table 1 p. price.
strategy: Overall strategy your firm pursues in the market Sales plan that shows specific ways you apply strategy to secure sales from your customers Longer-term competitive plan that shows how you protect your firm from efforts of the competition to unseat you 8-20 .e s b Chapter 8 The Market Market: ± Marketing strategy 1-3 pp.
structures: Legal form of the business Organizational structure of the firm Makes clear how many employees there are and whether they are full time or part time.e s b Chapter 8 The Organization Organization: ± Legal and organization structures 1/2-1 p. permanent or seasonal. family or non-family 8-21 .
e s b Chapter 8 The Organization Organization: ± Key personnel 1/2-3 pp. personnel: Sell the most important single element in the business plan ± you! Who are your key personnel? Talk about accomplishments rather than just experience Do not limit yourself to business 8-22 .
providers: Identify your bank and banker. other consultants Major relationships established with wellknown suppliers or customers Board of directors / board of advisors 8-23 .e s b Chapter 8 The Organization Organization: ± Related service providers 1/2-1 p. accountant or bookkeeper. attorney and legal firm.
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The Organization Organization:
± Location 1/2 p. Location:
Description of the facility How it meets strategic and sales goal of the business Own, lease, or rent the property Plan to expand the facilities
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The Financials Financials:
± Page 1 Critical assumptions 1: ± Page 2 The deal (if the plan is going to 2: investors) ± Page 3 Income statement for Year 1, by 3: month; assumptions marked by footnotes ± Page 4 Income statement for Year 2, by 4: month, and Year 3 (and later if needed) by year; assumptions marked with footnotes
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The Organization Organization:
± Page 5 Cash flow statement for Year 1, by 5: month; assumptions marked with footnotes ± Page 6 Cash flow statement for Year 2 by 6: month, and Year 3 (and later if needed) by year; assumptions marked with footnotes ± Page 7 Balance sheet for years 1-3 (or 1-5) 7: by year; assumptions marked with footnotes ± Page 8 Start-up cost budget 8: ± Page 9 Assumptions page for financial 9: statements
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The Appendices Appendices:
± Most popular appendix: one-page version of owner¶s resume ± Product or service pictures or specifications ± Copies of signed contracts ± Results from marketing studies or pilot sales efforts ± Industry reports ± Price lists for products or services ± Advertising copy
e s b Chapter 8 Question What is it called when a business is operating prior to writing a plan for it? a) b) c) d) Pioneering business New Entrant business Existing business Operational Plan 8-28 .
environmental impact 8-29 .e s b Chapter 8 Focusing Your Business Plan Pioneering business: product is truly new business New entrant business: product or service business already exists ± Firm is first of its kind in your market Existing business: entrepreneurs start a business business before they write a plan for it Business with significant government involvement: involvement zoning.
e s b Chapter 8 Screening plan basic overview of the plan: firm and detailed look at the financials Information plans gives potential plans: customers or suppliers information about the company and its product or service Proof-of-concept website internet-based Proof-ofwebsite: type of plan designed to solicit information on customer interest 8-30 .
e s b Chapter 8 Invention plan provides information to plan: potential licensees Operational plans used as working plans: document within a business ± Includes detailed specifications of the major techniques. formula. recipes. methods. and sources used by the firm to do its work 8-31 .
e s b Chapter 8 Critical Risks Overstated numbers Uncertain sales (especially conversion rates) Overlooked competition Experience deficits Inadequate cushion Inadequate payback 8-32 .
e s b Chapter 8 Circle of advisors advisors: ± Review the plan and help identify the critical risks and your coverage of them Service Corps of Retired Executives Small Business Development Center Ibis Associates Kauffman Foundation¶s Business EKG website BizStats 8-33 .
e s b Chapter 8 Question How long should your business plan take to present? a) b) c) d) 10-15 minutes with 15 minutes of questions 5 minutes with 5 minutes of questions 20 minutes with 5 minutes questions Open discussion about plan lasting 20 minutes 8-34 .
e s b Chapter 8 Presenting Your Plan Plan presentations usually last 10-15 minutes 10± 15 or more minutes for questions Key things things: ± ± ± ± Your passion for your business Your expertise about the business and the plan How professional you are in your work How easy it would be to work with you 8-35 .
e s b 7 Small Business Strategies: Imitation with a Twist McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies. Inc. All rights reserved. .
cost. and focus Use value chain analyses to apply strategy throughout the firm Learn how to sustain competitive advantage through attracting customers and discouraging competition 7-37 .e s b Chapter 7 Objectives: Learn the decisions needed to establish a foundation for strategic planning Learn the forms of imitative and innovative businesses Articulate the benefits that win over customers Use SWOT analysis to identify strategic options Under the major strategies of business-differentiation.
e s b Chapter 7 Strategy in the Small Business Strategy the ideas and actions that explain Strategy: how a firm will make its profit ± Good strategy leads to greater chances for survival and higher profits for small businesses ± What makes a strategy ³good´ is its fit to the particulars of your business and the resources you can bring to it 7-38 .
e s b Chapter 7 The Small Business Strategy Process 7-39 .
Prestrategy: First Step of Strategic Planning Goal is deciding on product or service you intend to offer and the general nature of your intended market Industry general name for line of product or Industry: service being sold.e s b Chapter 7 1. or the firms in that line of business 7-40 .
gov/epcd/naics02/ ± Trade association group of people in the association: same industry who band together to represent the industry to the public and government 7-41 .e s b Chapter 7 Industry ± Key is selecting an industry that offers good potential for making a profit ± Also needs to offer attractive opportunities to work with a minimum of risk and competition ± http://www.census.
e s b Chapter 7 Question The size of the market refers to: a) scale b) market mass c) scope d) niche 7-42 .
e s b Chapter 7 Market business term for the population Market: of customers for your product or service Scale size of the market Scale: ± Mass or Niche Scope geographic range covered by the Scope: market ± Local to Global 7-43 .
e s b Chapter 7 Scale most industries have both mass Scale: and niche markets ± Mass market large portions of the population market: Example: all men. all teens. all women. SimplyShe 7-44 . et al Mass market is broad ± Niche market narrowly defined segment of market: the population that is likely to share interests or concerns Example: Hallmark vs.
e s b Chapter 7 Example 3 Rules for Niche Marketing Niche marketing can be extremely costeffective Niche marketing can be a low risk way to grow your business following 3 rules: ± Meet their unique needs ± Say the right thing ± Always test-market 7-45 http://www.html .entrepreneur.com/marketing/marketingcolumnistkimtgordon/article49608.
regional. national. international. namely those within your market scope 7-46 .e s b Chapter 7 Scope local or global Scope: ± Can be local. or global ± Scope is important for two reasons: Knowing your scope helps deciding where to focus sales and advertising efforts Knowing your target market gives you a way to know which competitors to worry about most.
e s b Chapter 7 Imitative strategy doing more or less strategy: what others are doing ± Classic small business strategy ± Almost 2/3 of people starting business use this approach ± Advantages existing technologies. customers already know what you are offering 7-47 . Advantages: possibility to buy existing businesses.
e s b Chapter 7 Degree of similarity extent to which a similarity: product or service is like another ± Imitation is not likely to match precision or completeness or copying seen in franchising ± Imitation plus one degree of similarity: copying of existing businesses with the exception of one or two key aspects in hopes of improving them Pure innovation new product or service. innovation: also with a unique setting 7-48 .
such as current situation and trends ± Helps to estimate possible financial returns 7-49 .e s b Chapter 7 Tool: Industry Analysis Industry analysis (IA): a research process that provides the entrepreneur with key information about the industry.
e s b Chapter 7 Basics of Industry Analysis ± ± ± ± ± SIC/NAICS number and description: online Industry size over time: online Profitability How profits are made: interview or articles Target market competitor concentration: directory checking ± Analysis ± Sources 7-50 .
e s b Chapter 7 2. Benefits: Second Step of Strategic Planning Benefits characteristics of a product or service Benefits: that the target customer would consider worthwhile (low cost or high quality) ± Key decision is deciding what benefits you plan to offer to your customer 7-51 .
e s b Chapter 7 Value Benefits ± ± ± ± Quality Style Delivery Service ± Technology ± Personalization ± Assurance ± Place ± Credit ± Belonging ± Altruism ± Shopping Ease ± Brand/reputation Cost Benefits ± Lower costs ± Scale savings ± Organizational savings practices ± Learning 7-52 ± Scope .
e s b Chapter 7 Leveraging Opportunities During Entry 7 Entry Wedges ± ± ± ± ± ± ± Supply shortages Unutilized resources Customer contracting Second sourcing Market relinquishment Favored purchasing Government rules 7-53 .
wealth. organization. technology strengths. threats segment. weaknesses. opportunities. weaknesses. time social. opportunities.e s b Chapter 7 Question What are the components of a SWOT analysis? a) b) c) d) small. technology 7-54 . organization. working conditions.
e s b Chapter 7 Tool: SWOT Analysis S: Strength W: Weakness O: Opportunity T: Threat ± SWOT looks critically at these factors ± Used to organize and perform an analysis of your company¶s current and future resources and situations 7-55 .
e s b Chapter 7 SWOT: Strengths ± ± ± ± ± ± ± Customers ready to buy Specialized knowledge Trade secrets Patents. copyrights Brand or personal recognition Prior self-employment experience Prior sales experience 7-56 . trademarks.
e s b Chapter 7 SWOT: Weaknesses ± ± ± ± ± ± ± Customers not ready to buy Inadequate financial backing Easy-to-copy business Undistinctive product. service. or brand Location or facility disadvantages Lack of self-employment experience Lack of managerial experience 7-57 .
e s b Chapter 7 SWOT: Opportunities (from entry wedges) ± ± ± ± ± ± ± Supply shortages Unutilized resources Customer contracting Second sourcing Favored purchasing Technology creating new products/services New markets opening up 7-58 .
e s b Chapter 7 SWOT: Threats ± ± ± ± ± ± ± Economic downturn Oversupply Competitive pressures Supplier/customer pressures Major supplier/customer loss Missed window of opportunity Negative government regulations or actions 7-59 .
e s b Chapter 7 Inside the Firm 7-60 .
e s b Chapter 7 SWOT Analysis Final stage of SWOT analysis is to match it against the benefits sought by your market Strengths should match or support the benefits Weaknesses should not get in the way of delivering the desired benefits 7-61 .
try to involve other people. and what it does and doesn't do well Threats and opportunities are external-.html .e s b Chapter 7 Example Use SWOT to Kick-Start Your Planning The SWOT analysis--evaluating strengths.entrepreneur. history. strengths and weaknesses are about you and your company. weaknesses. opportunities and threats--is one good way to start thinking strategically As you perform a SWOT analysis.factors outside of your business 7-62 http://www.com/startingabusiness/businessplans/businessplancoachtimberry/article182034. its nature. it improves the brainstorming value To clarify.
e s b Chapter 7 Question Which strategy is clarifying how one product is unlike another in a mass market? mass market strategy b) focus strategy c) cost strategy d) differentiation strategy a) 7-63 .
e s b Chapter 7 Strategy Suggestion 3 Classic Strategies ± Differentiation strategy: clarifying how one product is unlike another in a mass market ± Cost strategy: firm offers a combination of cost benefits that appeals to the customer ± Focus strategy: targets a portion of the market (segment or niche) 7-64 .
e s b Chapter 7 7 Small Business Supra-Strategies Supra± ± ± ± ± ± ± Craftsmanship Customization Super-support Serving the underserved/interstices Elite Single-mindedness Comprehensiveness 7-65 .
Reputation (trust) 7-66 . capability.e s b Chapter 7 Competitive Advantage Resources Any asset. or knowledge that contributes to the firm¶s performance ± Tangible resources easily identified resources: Financial (cash). Physical (land) ± Intangible resources typically informational and resources: and expertise-based practices and routines that are not clearly evident Human (skill). organizational Resources: process. information.
capabilities skills. and competencies used by the firm to make profits from tangible and intangible resources Transformational competencies firm can competencies: make its product or service better in value Combinational competencies: combining competencies tangible and intangible resources ± Vermont Bear Company¶s Bear-Gram Bear7-67 .e s b Chapter 7 Organizational capabilities: abilities.
e s b Chapter 7 The VRIO Analysis ± Test 1: Value ± does the resource help you increase sales or decrease costs ± Test 2: Rareness ± is the resource rare enough that you can charge more than competitors without the resource ± Test 3: Imitability ± can the competition imitate the resource ± Test 4: Organization ± can the firm make use of the resource 7-68 .
e s b Chapter 7 7-69 .
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7/e Copyright © 2008 The McGraw-Hill Companies. All rights reserved. Inc.e s b Chapter 13 Entrepreneurial Strategy: Generating and Exploiting New Entries McGrawMcGraw-Hill/Irwin Entrepreneurship. McGraw- .
Offering an established product to a new market.e What s b is a New Entry? Offering a new product to an established or new market. . Creating a new organization.
1>> .Entrepreneurial Strategy: The Generation e s and Exploitation of New Entry b Opportunities <<Insert Figure 13.
± Inimitable. . ± Inputs into the production process. ± Rare. Resources need to be: ± Valuable. ± Can be combined in different ways. ± Provides a firm its capacity to achieve superior performance.e Resources: Source of s Competitive Advantage b Basic building blocks to a firm¶s functioning and performance.
. technology. technology knowhow/skills that provide insight to create new knowledge. ± Market knowledge: information. ± Technological knowledge: information.e Creating s b a Resource Bundle Entrepreneur possesses ability to obtain and recombine resources. knowhow/skills that provide insight to market/customers.
e s b Assessing Attractiveness: Information on a New Entry ± More knowledge ensures a more efficient search process. . Prior knowledge and information search Window of opportunity ± Period of time when the environment is favorable for entrepreneurs to exploit a particular new entry. ± Costs: both money and time. ± Search process represents a dilemma for an entrepreneur.
± Error of commission: negative outcome from acting.e s b Comfort with Making a Decision under Uncertainty Dilemma arising from the trade-off between more information and the likelihood of closure of the window of opportunity. ± Error of omission: negative outcome from not acting. .
2>> .e s b Decision to Exploit or Not to Exploit the New Entry Opportunity <<Insert Figure 13.
Better positioned to satisfy customers. Can secure important channels.e s b Strategy for New Entry: First-Mover Advantages Develop a cost advantage. Gain expertise through participation. . Face less competitive rivalry.
e First s b Mover (Dis)Advantages (1 of 2) Demand uncertainty: difficulty in estimating ± Potential size of the market. ± How fast it will grow. ± Whether alternate technologies will emerge and leapfrog over current technologies . ± Key dimensions along which it will grow. Technological uncertainty: difficulty in assessing ± Whether the technology will perform.
customer loyalty. . Create frame Of reference for potential customer. ± Overcoming customer uncertainty: Informational advertising. Customer uncertainty: difficulty in accurately assessing whether the new product or service provides value for them. Educate customer. Highlight product benefits over substitutions.set industry standard.e First s b Mover (Dis)Advantages (2 of 2) Adaptation: difficulty to adapt to the new environmental conditions.
Protecting product uniqueness. Creating barriers to entry for competition: ± ± ± ± Building customer loyalties. Securing access to important sources of supply and distribution. . Building switching costs.e Lead s b Time and First Mover Lead time: grace period in which the first mover operates in the industry under conditions of limited competition.
e Risk s b Reduction Strategies Risk: probability of. downside loss. and magnitude of. ± Technological development. Derived from entrepreneur¶s uncertainties over: ± Market demand. ± Actions of competitors. Two such strategies: ± Market scope. . ± Imitation.
localized business operations.e Market s b Scope Strategies: Narrow Scope Scope: choice about which customer groups to serve and how to serve them. ± Focuses on producing customized products. . ± Focuses on a specific group of customers. and high levels of craftsmanship. ± High-end of the market represents a highly profitable niche. Narrow scope: offers a small product range to a small number of customer groups to satisfy a particular need.
e Market s b Scope Strategies: Broad Scope Offers a range of products across many different market segments. ± Strategy emerges through the information provided by a learning process. ± Opens the firm up to many different ³fronts´ of competition. ± Reduction of risks associated with market uncertainties. .
± Cannot be rare or inimitable.e Imitation s b Strategy Involves copying the practices of other firms. ± Can help develop skills necessary to be successful in the industry. Advantages: ± Easier to imitate the practices of a successful firm. Why Do It? ± Minimizes risk of downside loss associated with a new entry. . ± Provides organizational legitimacy.
± Might be more difficult to successfully implement than initially expected ± Can potentially: Reduce the entrepreneur¶s costs associated with R&D. ³Me-too´ strategy: copying products that already exist and attempting to build an advantage through minor variations.e Types s b of Imitation Strategies Franchising: focuses on imitation to reduce the risk of downside loss for the franchisee. Make the new entry look legitimate from day one. . Reduce customer uncertainty over the firm.
. New firm need to: ± Pay special attention in education and training employees. ± Establishing formal and informal structures of communication. ± Conflict arising from overlap or gaps in responsibilities. ± Help employees develop knowledge and skills quickly.e Managing s b Newness Liabilities of newness arise from unique conditions: ± Costs in learning new tasks. ± Foster activities to foster informal relationships and a functional corporate culture.
systems. and processes provide a clean slate. giving a learning advantage. Heightened ability to learn new knowledge in a continuously changing environment.e Assets s b of Newness Lack of established routines. Flexibility and ability to accommodate new knowledge. .
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