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Feasibility Plan Intensive

ESBM 3700 Jan 15, 2003. Feasibility Plan Intensive. The goal of a feasibility plan is not to “sell” your idea. The goal of a feasibility plan is to help you decide WHETHER this is a venture you SHOULD pursue. See chapter 8 of FastTrac Book. Sections of the Feasibility Plan.

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Feasibility Plan Intensive

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  1. ESBM 3700 Jan 15, 2003 Feasibility Plan Intensive The goal of a feasibility plan is not to “sell” your idea. The goal of a feasibility plan is to help you decide WHETHER this is a venture you SHOULD pursue.

  2. See chapter 8 of FastTrac Book Sections of the Feasibility Plan • Executive Summary • Highlights from each section. • Letter form…do not exceed 2 pages. • Product/Service • Section discusses and explains the exact product/service to be offered and identifies the unique features and characteristics of the product or service. • The Market • Demonstrates the size of your market and what portion is yours to own. • Price & Profitability • Section will tell you how much is will take to start the business and if it can be profitable. • Plan for Further Action • Is it feasible and should you pursue the venture?

  3. FastTrac: Business Mentor CD-ROM The CD is designed to make your life easier…USE IT!

  4. Product/Service Section • 8 questions must be answered (see workbook p. 19) • A critical question is: • What new products/services (spinoffs) could be developed to meet the ever changing market needs in this industry or others? • Focus groups are helpful here. • The class as a focus group…

  5. Differentiating your product/service from the competition SEGMENTATION ANALYSIS products Feature 1 Feature 2 Feature 3 Feature 4 Feature 5 features ? ? ? ? ? … ? Your product x x Competitor 1 x x Competitor 2 x x Competitor 3 x x x Competitor 4 This also helps determine competitive advantage for the Market Section.

  6. The Market Section • Marketing consists of all the activities associated with: • The identification of potential customers, • Inviting those customers to buy the product/service, and • Reminding them to use the product or service again. • 8 questions to answer (see wkbk p. 24) MARKETING BEGINS WITH AN INDUSTRY STUDY

  7. Industry Study • Industry study is necessary for questions 1-3 in the market section. • Where can you get data? • FastTrac CD has sources (resourc2.pdf) • Links on course page (http://ucsu.colorado.edu/~mcmullej/links.htm) • B-library (extensive entrepreneurship section and databases for info) • Stat USA • Statistical Universe • Colorado by numbers • Lex-Nex

  8. Assessing growth of the industry • Look at analyst reports. • Think about economics… • We’re in a recession…what will happen to your product/service in a boom cycle. • Industry trends? • Changes in technology. • Changes in the economy.

  9. Identifying the Target Market • “Everybody” is not a target. • Upper and Middle class is not a target. • “All people that eat”…not a good target for a restaurant. • Develop a customer profile: • Potential customers (demographics and psychographic info) • Identify the user, the buyer, the decision maker, the influencer. • Understand buying behavior. • Where, when, what, how, and why do potential customers purchase products/services?

  10. Market Penetration • Most entrepreneurs underestimate their marketing budget by 100%. • Sales forces…what type is best for you? • Direct sales (in-house) • Sales agents (out-sourced) • Lead blockers (hired away from competitor)

  11. Direct Sales Force • Advantages: • Owner control. • More dedicated and loyal. • Easier for sales meetings and communication. • Disadvantages: • Higher cost through employee benefits, taxes. • Training can be expensive. • Support is expensive (supplies, clerical support, telephones, laptops, cell phones).

  12. Sales Agents • Advantages: • Paid when they sell and after collection from customers. • No employee benefits. • No sales force overhead. • Disadvantages: • No control over the sales force. • Agents will probably be selling other products as well. • Little loyalty to your company.

  13. Lead Blockers • Advantages: • Has a relationship with customers. • Knows pricing policy of competitors. • Has excellent product knowledge. • Does not need training. • Disadvantages: • Salary will be higher. • May want equity position in company. • Selling techniques are set…entrepreneur cannot mold this person.

  14. Media (trade & other) Fliers Signs Direct Mail Telemarketing Infomercials Distributors Licensing Trade shows Yellow Pages Coupons Fax marketing E-mail marketing Postcards Internet Sweepstakes/contest Advertising and Promotion to Penetrate Your Market BE CREATIVE WITH A SMALL BUDGET.

  15. Price & Profitability Pricing is the #1 weakness of entrepreneurs

  16. Price & Profitability Sections • Price List • Sales Estimate • Cost of product/service • Gross Margin • 3-year operating expenses • 3-year operating statement • Startup costs • Startup expenses (includes capital expenditures)

  17. Pricing Myth: Cost has everything to do with price. • “It cost me $1 to make the product, so I’ll sell it at $2. -------------------------------------------------- You may be underestimating the VALUE of your product…and sacrificing profit.

  18. Factors that can influence pricing: • The customer’s ego or self image. • The location of the business. • The level of competition. • Seasonality. • The nature of the marketplace. • Cost to manufacture or deliver the product or service.

  19. A good way to develop your price… Determine max price that would have sufficient #s of customers willing to pay. Determine absolute lowest price that could be charged and still make a sufficient profit. $$$ PRICE RANGE $$$ • Compare this price range with direct competitors. • same range? • below? • above? (Is your added value evident to the customer?) • SEE ANNUAL STATEMENT STUDIES (reference in blibrary) • Contains balance sheets, income statements, and 16 widely used ratios for over 300 industries.

  20. Startup Costs • See questions on page 42 of FT wkbk. • Include 3-6 months of operating costs in your projected startup costs. • Startup costs can include: Lease (before opening) Equipment (computers, furniture, fax, etc.) Opening inventory Deposits (telephone, lease, utilities) Signage/Marketing/Advertising Web registration, space Licenses Supplies Training Legal

  21. Operating Statement (3-year) Sales • COGS Gross Margin • Marketing Expenses • Administrative Expenses • General Expenses Gross Profit Rule of thumb: Target Gross Margin at 80%

  22. How to get your point across in 30-seconds or less Although the goal of a feasibility plan is not to “sell” your idea to someone else, the goal of a feasibility plan is to satisfy your curiosity sufficiently regarding whether you could “sell” the idea to someone else.

  23. Example • Ex: A pitch by Thornton Mellon of Mellon’s Tall & Fat • Ex: “Galpin purposely bought a lot of motor homes. But all the rain kept many of our customers away. We’ve got too many motor homes. Buy them during our three-day sale. Save up to eighteen thousand dollars off our regular list price. The savings can pay for your vacation for years. You can take up to twelve years to pay; many have an 11.9% finance plan. Prices start at $16,996. See Friday’s L.A. Times sports section. Don’t wait forever. It’s the things you don’t do that you regret.” (p. 16.)

  24. Finding Your Objective • Ask yourself the following questions: • Why am I going there? • What do I want to achieve? • Why do I want to have that conversation? • Why do I want to write that letter? • Why do I want to meet with this person? • Why do I want that interview? • Why do I want to address this meeting?

  25. Know Who You’re Talking To • They want some good reasons why they should give you the job. • They want to see how much you know about the job. • They want to know why you’d be better than other applicants. • They want to know why you think you can do the job. • They want to know how confident you are. • They want to know what the job will mean to you. • They want to see how you act under the pressure of the interview. • They want to know what your ambitions are. • They want to see what kind of person you are. • They want you to prove to them that you can do the job.

  26. Find the Right Approach • What am I talking about? • What’s the basis of my game plan? • What’s the heart of what I will say? • What’s the single best statement that will lead me to what I want? • Can I comfortably build a case around this statement? • What other vital statements will fit within or relate to this one? • Will this relate to the needs and interests of my listener?

  27. Finding Your Hook • What’s the most unusual part of your subject? Can you reduce it to one sentence? • What’s the most interesting and exciting part of your subject? Can you reduce it to one sentence? • What’s the most dramatic part? Can you reduce it to one sentence? • What’s the most humorous part? Can you reduce it to one sentence?

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