BUS 401 EXAM 1 STUDY GUIDE.
Who are the two primary audiences for a firm's business plan?
1) Firm's Employees
- clearly written business plan, one that articulates a firm's vision and future, is
important for both the management team and the rank-and-file employees.
- clearly written business plan also helps a firm's rank-and-file employees
operate in sync and move forward in a consistent and purposeful manner.
- existence of a business plan is particularly useful for the functional
department heads of a young firm.
- availability of a formal business plan that talks about all aspects of the
business and the business's strategies and goals can help you make sure that
what you are doing is consistent with firm's overall direction.
2) Investors and Other External Stakeholders
- External stakeholders who are being recruited to join a firm, such as
investors, potential business partners, and key employees, are the second
audience for a business plan.
- business plan must be realistic and not reflective of overconfidence on the
firm's part.
- plan must clearly demonstrate that the business idea is viable and offers
potential investors financial returns greater than lower-risk investment
alternatives.
- same is true for potential business partners, customers, and key recruits.
- Investors vary in terms of the reliance they place on formal business plans.
- many investors ask for a PowerPoint deck or the executive summary of a
business plan.
o PowerPoint deck is a short set of PowerPoint slides that describe a business
idea, and an executive summary is a one- to two-page overview of the full
plan.
- some cases investors will ask for a full business plan,
- business plan will be required during the due diligence phase. Due diligence
refers to the process investors go through after they tentatively commit to an
,investment.
- commitment is based on a thorough investigation of the merits of the venture,
whether any l
What are some important considerations for writing a business plan?
- several important guidelines that should influence the writing of a business
plan.
- important to remember that a firm's business plan is typi- cally the first
aspect of a proposed venture that an investor will see.
- If the plan is incomplete or looks sloppy, it is easy for an investor to infer
that the venture itself is incomplete and sloppy.
- important to be sensitive to the structure, content, and style of a business
plan before sending it to an investor or anyone else who may be involved
with the new firm.
What are red flags in a business plan?
Founders with none of their own money at risk - If the founders aren't willing
to put their own money at risk, why should anyone else?
A poorly cited plan - A plan should be built on hard evidence and sound
research, not guesswork or what an entrepreneur "thinks" will happen. The
sources for all primary and secondary research should be cited.
Defining the market size too broadly - Defining the market for a new venture
too broadly shows that the true target market has not been clearly identified.
For example, saying that a new venture will target the music industry isn't
helpful. The market opportunity needs to be better defined. Obviously, the
new venture will target a segment or a specific market within the industry.
Overly aggressive financials - Many investors skip directly to this portion of
the plan. Projections that are poorly reasoned or unrealistically optimistic lose
credibility. In contrast, sober, well-reasoned statements backed by sound
research and judgment gain credibility quickly
,Sloppiness in any area - It is never a good idea to make a reader wade
through typos, balance sheets that don't bal- ance, or sloppiness in any area.
These types of mistakes are seen as inattention to detail and hurt the
entrepreneur's credibility
What is the structure of a business plan?
- business plan should follow a conventional structure,
- investors are very busy people and want a plan where they can easily find
critical information.
- software packages are available that employ an interactive, menu- driven
approach to assist in the writing of a business plan.
- , entrepreneurs should avoid a boilerplate plan that looks as though it came
from a "canned" source.
- information in the plan should still be tailored to the individual business.
- Some businesses hire consultants or outside advisers to write their business
plans.
- needs to project a sense of anticipation and excitement about the
possibilities that surround a new venture—a task best accomplished by those
who created the business.
What is in the content of a business plan?
- business plan should give clear and concise information on all the impor- tant
aspects of the proposed new venture.
- must be long enough to provide sufficient information, yet short enough to
maintain reader interest.
- 25 to 35 pages (and typically closer to 25 than 35 pages) are sufficient.
Supporting information, such as the résumés of the founding entrepreneurs, can
appear in an appendix.
- should be reviewed for spelling, gram- mar, and to make sure that no critical
information has been omitted.
What should the style and format of a business plan be?
- should look sharp but not give the impression that a lot of money was spent
to produce it.
, - Those who read business plans know that entrepreneurs have limited
resources and expect them to act accordingly.
- plastic spiral binder including a transparent cover sheet and a back sheet to
support the plan is a good choice.
- avoid getting carried away with the design elements included in word-
processing programs, such as boldfaced type, italics, different font sizes and
colors, clip art, and so forth.
What is a summary business plan?
- A summary business plan is 10 to 15 pages and works best for companies
that are very early in their development and are not prepared to write a full
plan.
- authors may be asking for funding to conduct the analysis needed to write a
full plan.
- summary busi- ness plans are also used by very experienced entrepreneurs
who may be thinking about a new venture but don't want to take the time to
write a full business plan.
- Works best for new ventures in the early stages of development that want to
"test the waters" to see if investors are interested in their idea
What is a full business plan?
- A full business plan is typically 25 to 35 pages long.
- This type of plan spells out a company's operations and plans in much more
detail than a summary business plan, and it is the format that is usually used to
prepare a business plan for an investor
- Works best for new ventures that are at the point where they need funding
or financing; serves as a "blueprint" for the company's operations
What is a operational business plan?
- operational business plan, which is intended primarily for an internal
audience.
- An operational business plan is a blueprint for a company's operations.
- Commonly running between 40 and 100 pages in length, these plans can
Who are the two primary audiences for a firm's business plan?
1) Firm's Employees
- clearly written business plan, one that articulates a firm's vision and future, is
important for both the management team and the rank-and-file employees.
- clearly written business plan also helps a firm's rank-and-file employees
operate in sync and move forward in a consistent and purposeful manner.
- existence of a business plan is particularly useful for the functional
department heads of a young firm.
- availability of a formal business plan that talks about all aspects of the
business and the business's strategies and goals can help you make sure that
what you are doing is consistent with firm's overall direction.
2) Investors and Other External Stakeholders
- External stakeholders who are being recruited to join a firm, such as
investors, potential business partners, and key employees, are the second
audience for a business plan.
- business plan must be realistic and not reflective of overconfidence on the
firm's part.
- plan must clearly demonstrate that the business idea is viable and offers
potential investors financial returns greater than lower-risk investment
alternatives.
- same is true for potential business partners, customers, and key recruits.
- Investors vary in terms of the reliance they place on formal business plans.
- many investors ask for a PowerPoint deck or the executive summary of a
business plan.
o PowerPoint deck is a short set of PowerPoint slides that describe a business
idea, and an executive summary is a one- to two-page overview of the full
plan.
- some cases investors will ask for a full business plan,
- business plan will be required during the due diligence phase. Due diligence
refers to the process investors go through after they tentatively commit to an
,investment.
- commitment is based on a thorough investigation of the merits of the venture,
whether any l
What are some important considerations for writing a business plan?
- several important guidelines that should influence the writing of a business
plan.
- important to remember that a firm's business plan is typi- cally the first
aspect of a proposed venture that an investor will see.
- If the plan is incomplete or looks sloppy, it is easy for an investor to infer
that the venture itself is incomplete and sloppy.
- important to be sensitive to the structure, content, and style of a business
plan before sending it to an investor or anyone else who may be involved
with the new firm.
What are red flags in a business plan?
Founders with none of their own money at risk - If the founders aren't willing
to put their own money at risk, why should anyone else?
A poorly cited plan - A plan should be built on hard evidence and sound
research, not guesswork or what an entrepreneur "thinks" will happen. The
sources for all primary and secondary research should be cited.
Defining the market size too broadly - Defining the market for a new venture
too broadly shows that the true target market has not been clearly identified.
For example, saying that a new venture will target the music industry isn't
helpful. The market opportunity needs to be better defined. Obviously, the
new venture will target a segment or a specific market within the industry.
Overly aggressive financials - Many investors skip directly to this portion of
the plan. Projections that are poorly reasoned or unrealistically optimistic lose
credibility. In contrast, sober, well-reasoned statements backed by sound
research and judgment gain credibility quickly
,Sloppiness in any area - It is never a good idea to make a reader wade
through typos, balance sheets that don't bal- ance, or sloppiness in any area.
These types of mistakes are seen as inattention to detail and hurt the
entrepreneur's credibility
What is the structure of a business plan?
- business plan should follow a conventional structure,
- investors are very busy people and want a plan where they can easily find
critical information.
- software packages are available that employ an interactive, menu- driven
approach to assist in the writing of a business plan.
- , entrepreneurs should avoid a boilerplate plan that looks as though it came
from a "canned" source.
- information in the plan should still be tailored to the individual business.
- Some businesses hire consultants or outside advisers to write their business
plans.
- needs to project a sense of anticipation and excitement about the
possibilities that surround a new venture—a task best accomplished by those
who created the business.
What is in the content of a business plan?
- business plan should give clear and concise information on all the impor- tant
aspects of the proposed new venture.
- must be long enough to provide sufficient information, yet short enough to
maintain reader interest.
- 25 to 35 pages (and typically closer to 25 than 35 pages) are sufficient.
Supporting information, such as the résumés of the founding entrepreneurs, can
appear in an appendix.
- should be reviewed for spelling, gram- mar, and to make sure that no critical
information has been omitted.
What should the style and format of a business plan be?
- should look sharp but not give the impression that a lot of money was spent
to produce it.
, - Those who read business plans know that entrepreneurs have limited
resources and expect them to act accordingly.
- plastic spiral binder including a transparent cover sheet and a back sheet to
support the plan is a good choice.
- avoid getting carried away with the design elements included in word-
processing programs, such as boldfaced type, italics, different font sizes and
colors, clip art, and so forth.
What is a summary business plan?
- A summary business plan is 10 to 15 pages and works best for companies
that are very early in their development and are not prepared to write a full
plan.
- authors may be asking for funding to conduct the analysis needed to write a
full plan.
- summary busi- ness plans are also used by very experienced entrepreneurs
who may be thinking about a new venture but don't want to take the time to
write a full business plan.
- Works best for new ventures in the early stages of development that want to
"test the waters" to see if investors are interested in their idea
What is a full business plan?
- A full business plan is typically 25 to 35 pages long.
- This type of plan spells out a company's operations and plans in much more
detail than a summary business plan, and it is the format that is usually used to
prepare a business plan for an investor
- Works best for new ventures that are at the point where they need funding
or financing; serves as a "blueprint" for the company's operations
What is a operational business plan?
- operational business plan, which is intended primarily for an internal
audience.
- An operational business plan is a blueprint for a company's operations.
- Commonly running between 40 and 100 pages in length, these plans can
