Writing a … Entrepreneurship (MGT-271) Week 13

Lecture Outline Purpose and essential components of a business model Business model canvas What is a business plan Purpose of a business plan Benefits of a business plan Essential components of a business plan SWOT Analysis

Questions? How do we assess that our business idea is workable? How do we determine if it is worth spending our time and effort on executing the idea? How can we tell if the business will be successful? How can we make it successful?

Feasibility Analysis and Successful Business Idea New Business Idea Considering the time and resources required Product/ Service Feasibility Industry/ Market Feasibility Organizational Feasibility Financial Feasibility Yes in all No in at least one Go Ahead Rethink

Pathway to success? Feasibility Analysis Business Model Business Plan

Value Proposition “Value for Money” Value Proposition is “a promise of value to be delivered” The main reason(s) why they should buy from you – Relevancy – Quantified value (specific benefits) – Unique Differentiation Strategy, resources, partnerships

What is Business Model “Does the business idea make sense?” “…assumptions about what the company gets paid for…?” “Who are the customers” “Assumptions about markets: identification of competitors and customers, their values and behaviors” “What makes us better?” Value Proposition!

What is Business Model Different elements of a business coming together and their interactions Partnerships – Their significance – how they will benefit the business – Value? Business’s logic – Different stakeholders, including customers Major Activities – Define major operations – Who will do what ? Key Resources – Assets, core competencies

Value Chain Analysis Value Chain Specific set of activities through which a business can attain competitive advantage How can we make changes at any of these stages to gain more profits and competitive advantage Cost leadership ; Differentiation Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Independent Review Does the strategy seem logical? Partner’s willingness Motivation of partners (are we expecting them to work against their self interest) Willingness of customers? – Would they want to do business with us? Will we make profits? Distinction, uniqueness, competitive advantage

Components of Business Model Statement; scope; uniqueness Differentiation; competitive advantage Core Strategy Assets Core competencies Strategic Resources Joint venture Outsourcing (delivery, supply, processing etc) Partnerships Target market, satisfaction, specific needs Pricing structure Customers

Business Model Canvas

BUSINESS PLAN

What is Planning? Essential for success of any undertaking Goal formulation, objectives and directions How to achieve the goals and objectives by following directions

Critical Factors in Planning Sub-goals Continual and timely progress evaluation Obstacles predicted Alternative strategy Emotional, moral, financial support of all involved Specific, measurable, set within time parameters Realistic goals Commitment MilestonesFlexibility

Why Plan??

Common pitfalls in planning Lack of practicality; time frame; action steps No Realistic goals Failure to foresee future problems; possible flaws or weaknesses; no contingency plans Failure to anticipate roadblocks Lack of professionalism, procrastination; wanting to make fast buck without much input No commitment/ dedication Ignorance to business specifics; failure to convince investors; no skills or “team” concept Lack of experience No customers; no market No market niche

What is a Business Plan? Written document Contains details of the proposed venture Describes current status, expected needs and projected results The details entail project; marketing; R&D; manufacturing; management; risks; financing; milestones

Business Plan Demonstrates a clear picture of the venture! Different names of business plan --> – venture plan – loan proposal – investment prospectus Mainly meant for investors and finance sources Also provides guidelines for taking the venture forward

“…it is far cheaper not to begin an ill-fated business than to learn by experience what your business plan could have taught you at a cost of several hours of concentrated work.”

Benefits of a business plan  Analysis of all aspects of venture  Preparation of effective strategy to deal with uncertainties Failure can be avoided by taking necessary steps and precaution Saves time, cost and effort Enables the evaluation of business venture

Benefits of a business plan Benefits to Entrepreneur Evaluate venture critically and objectively Competitive, economic and financial analyses Examining operational strategies and expected results Quantifies goals and objectives; provide measurable benchmarks Communication tool for outside financial sources Benefits to Financial Source Detailed market potential and plan for securing market share Demonstrates venture’s ability to provide adequate return on equity Identifies crucial risks Clear concise document for thorough business evaluation Guide to assessing individual entrepreneur’s abilities

Who is it for? Understand the audience!! Investor’s viewpoint Marketplace viewpoint Entrepreneur’s viewpoint Financial forecastMarketability of ventureTechnologies and creativity

Business plan for venture capitalists Well-conceived, well developed business plan 5 minute reading plan for venture capitalists 6 steps in the 5 minute reading plan – Characteristics of venture and industry – Financial structure of the plan (amount of debt or equity) – Read latest balance sheet – Determine quality of entrepreneurs in the venture – Establish unique feature in this venture (entire package)

“The men who manage men manage men who manage things, but the men who manage money manage the men who manage men”

Tips for putting it together First impression of the company (must be presentable) Must be the right length Explain all aspects of the venture clearly and concisely No grammatical, typographical or spelling errors

Formatting tips Appearance: neat appearance, spiral binding Length: should be no more than 40 pages Cover and title page: name of the company, contact details, dates The executive summary: two pages, written at the end, must contain all essential information The table of contents: all the business plan section, properly marked

ESSENTIAL COMPONENTS OF A BUSINESS PLAN (SECTIONS)

SWOT Analysis