Introduction of Entrepreneurship - Business Plan Consumer Behavior_Introduction_20080219 2008/2/19 Introduction of Entrepreneurship - Business Plan Chin-jung J. Luan Mar. 18. 2008 by C-J Luan at NDHU-IB 1

The Business Plan Objectives Carefully articulate the merits, requirements, risks, and potential rewards of the opportunity and how it will be seized Demonstrate how the four anchors reveal themselves to the founders and investors by converting all the research, careful thought, and creative problem solving from the Venture Opportunity Screening Exercises into a thorough business plan

What Does It Reveal? A business plan for a high potential venture reveals the business’ ability to: Create or add significant value to a customer or end user Solve a significant problem, or meet a significant want or need for which someone will pay a premium

What Does It Reveal? A business plan for a high potential venture reveals the business’ ability to: Have robust market, margin, and moneymaking characteristics Fit well with the founder(s) and management team at the time, in the marketplace, and with the risk-reward balance

What to Be Obsolete? The plan is obsolete the instant it emerges from the printer The pace of tech and info-age change, and the dynamism of the global marketplace shortened the already brief life expectancy of any business plan It’s impossible to find a year-old venture today that is identical in strategy, market focus, and so forth as the BP described

Work in Progress The BP should be thought of as a work in progress Never finish it even the funds, team, directors are raised It’s actually a contingent plan ahead One has to be prepared to continually adjust course to min risk and ensure successful completion of the journey

The Plan Is Not the Business Without a BP, it is exceedingly difficult to raise capital from informal or formal investors Some of the most impressive BPs never become great businesses; some the weakest plans lead to extraordinary businesses Case- Lotus Development Corp.

The Plan Is Not the Business What Mitch Kapor proposed originally? a brief letter of some description of nearly 10 separate products a one-year monthly startup budget a five-year goal of $30M capital required- $200K-300K

The Plan Is Not the Business What VC thought of the plan? basically discarded it the opportunity is much bigger a five-year revenue up to several hundred million capital required- $1M vital- first-mover advantage Result: $500M in revenue in the first 5 years

Some Tips of the Preparation Refer to Exhibit 6.1 Tom Huseby’s experience sharing sell-sell-sell myopia Entrepreneurs not only succeed at developing a great business concept but attract the right investors 2 powerful forces are unleashed in the process- discern and message (signals)

Who Develops the Plan? Reasons not (Con-) to hire an outside professional to prepare the business plan Consequences of different strategies and tactics can be considered Human and financial requirements for launching and building the venture can be examined Pro- the MGMT team can use its time to obtain financing and start the business

Writing a Business Plan Steps outlining the process by which a business plan is written Segmenting information Creating an overall schedule Creating an action calendar Doing the work and writing the plan

Business Plan I. EXECUTIVE SUMMARY Description of the business concept and the business opportunity and strategy Target market and projections Competitive advantages Costs Economics, profitability, and harvest potential The team The offering

Business Plan II. THE INDUSTRY AND THE COMPANY AND ITS PRODUCT(S) OR SERVICE(S) The industry The company and the concept The product(s) or service(s) Entry and growth strategy

Business Plan III. MARKET RESEARCH AND ANALYSIS Customers Market size and trends Competition and competitive edge Estimated market share and sales Ongoing market evaluation

Business Plan IV. THE ECONOMICS OF THE BUSINESS Gross and operating margins Profit potential and durability Fixed, variable, and semivariable costs Months to breakeven Months to reach positive cash flow

Business Plan V. MARKETING PLAN Overall marketing strategy Pricing Sales tactics Service and warranty policies Advertising and promotion Distribution

Business Plan VI. DESIGN AND DEVELOPMENT PLAN Development status and tasks Difficulties and risks Product improvement and new products Costs Proprietary issues

Business Plan VII. MANUFACTURING AND OPERATIONS PLAN Operating cycle Geographical location Facilities and improvements Strategy and plans Regulatory and legal issues

Business Plan VIII. MANAGEMENT TEAM Organization and Key management personnel Management compensation and ownership Other investors Employment and other agreements and stock option and bonus plans Board of directors Other shareholders, rights, and restrictions Supporting professional advisors and services

Business Plan IX. OVERALL SCHEDULE X. CRITICAL RISKS, PROBLEMS, AND ASSUMPTIONS XI. THE FINANCIAL PLAN Actual income statements and balance sheets Pro forma income statements / forma balance sheets Pro forma cash flow analysis Breakeven chart and calculations Cost control Highlights

Business Plan XII. PROPOSED COMPANY OFFERING XIII. APPENDICES Desired financing Offering Capitalization Use of funds Investor’s return XIII. APPENDICES