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Chapter 07: CREATING AND STARTING THE VENTURE PowerPoint Presentation
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  2. Business Plan • A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. • It addresses both short- and long-term decision making. • The business plan is like a road map for the business’ development. • The Internet also provides outlines for business planning. • Entrepreneurs can also hire or offer equity to another person to provide expertise in preparing the business plan.

  3. Scope and Value of Business Plan The business plan must be comprehensive enough to address the concerns of employees, investors, bankers, venture capitalists, suppliers, and customers. The entrepreneurunderstands the new venture better than anyone. Themarketing perspectiveconsiders the venture through the eyes of the customer. The investorlooks for sound financial projections.

  4. Scope and Value of Business Plan The business plan is valuable to the entrepreneur and investors because: • It helps determine the viability of the venture in a designated market. • It gives guidance in organizing planning activities. • It serves as an important tool in obtaining financing.

  5. Evaluating the Business Plan The entrepreneur’s credit history or character. Their ability to meet debt and interest payments (cash flow.) The collateral or tangible assets being secured. Equity contribution or the amount of personal equity that has been invested by the entrepreneur.

  6. INFORMATION NEEDS • Following information are needed on priority basis while preparing the business plan • Market Information • Operations Information • Financial Information

  7. Internet as Resource Tool Through Internet entrepreneurs are able to access information efficiently, expediently, and at very little cost. The Internet can serve as an important source of information in preparing the business plan. Information on industry analysis, competitor analysis, and measurement of market potential can be located. In addition, the Internet also provides opportunities for actually marketing the new venture’s products. A web site, or home page, typically describes a firm’s history, existing products, background of the founders, and other information to create a favorable image. The web site can be a vehicle for advertising or for direct marketing.

  8. Writing the Business Plan Introductory Page: The name and address of the company The name of the entrepreneur and a telephone number A paragraph describing the company and the nature of the business The amount of financing needed A statement of the confidentiality of the report It also sets out the basic concept that the entrepreneur is attempting to develop.

  9. Writing the Business Plan Executive Summary Brief description of the business concept Any data that support the opportunity for the venture. Statement of you this opportunity will be pursued. Highlight some key financial results that can be achieved

  10. Writing the Business Plan Environmental Analysis Identify trends and changes occurring on a national and international level that may impact the new venture. It includes Economy, Culture, Technology and Legal concerns External Factors are generally uncontrollable

  11. Writing the Business Plan Description of Venture: This should begin with the mission statement or company mission, which describes the nature of the business and what the entrepreneur hopes to accomplish. The new venture should be described in detail, including the product, location, personnel, background of entrepreneur, and history of the venture. If the building or site decision involves legal issues, the entrepreneur should hire a lawyer.

  12. Writing the Business plan

  13. Description of Venture • Product(s) • Service(s) • Size of Business • Office equipment and Personnel • Background of entrepreneur

  14. Production Plan Manufacturing process Physical plant Machinery and equipment Names of suppliers of raw material

  15. Marketing Plan Pricing Distribution Promotion Product forecasts Controls

  16. Organizational Plan Form of ownership Identification of partners or principal shareholders Authority of principals Management team background Roles and responsibilities of members of organization

  17. Assessment of risk Evaluate weakness of business New technologies Contingency Plans

  18. Financial Plan Pro forma Income statement Cash flow projections Pro forma balance sheet Break even analysis Sources and application of funds

  19. Appendix It contains back up material like: Letters Market research data Leases or contracts Price lists from suppliers

  20. Using and implementing the Business plan

  21. Introduction • Planning is necessary to ascertain the progress of business • Planning phase should go side by side in every aspect of business • Without planning business collapses • Entrepreneur can enhance effective implementation of the business plan by developing a schedule to measure progress

  22. Measuring Plan Progress An entrepreneur should check: Profit and loss statement Cash flow projections Information o inventory Production Quality Sales Collection of account receivables

  23. Control Elements in Measuring Plan Progress (Contd..) Inventory Control Production Control Quality Control Sales Control Disbursements

  24. Updating the Plan The most effective business plan can become out of date if conditions change Entrepreneur should focus on the internal and external factors to make his plan up to date. Entrepreneur should maintain reasonalbe targets and goals

  25. Why some business plan fail Goals are unreasonable Goals are not measurable Lack of commitment by the entrepreneur Lack of experience of entrepreneur Ignoring the customer need Entrepreneur has no sense of potential threats to the business