The Business Plan Midterm

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A business plan is a written document that carefully explains every aspect of a new business venture. The advantages to preparing a business plan are that

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(a) Inside the firm, it acts as a “road map” for the execution of strategies and
plans.
(b) Outside the firm, it introduces the business opportunity to potential investors and other stakeholders. Many investors won’t even consider a firm that does not have a business plan.
(c) The process of writing the plan forces the entrepreneur to examine the merits of the business idea and test its feasibility.

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The industry trends portion of an industry analysis is arguably the most important section because it often lays the foundation for a new business idea in an industry and it typically provides the

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Justification for claims made earlier in the industry analysis.

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It is important for the founders of a firm to continually measure whether the type of company they are envisioning, as described by their business plan, is consistent with their personal goals and aspirations. This is because

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If an entrepreneur wants to ensure a significant amount of leisure or family time, this should be taken into consideration before moving forward with an aggressive growth business.

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Software packages and outside consultants are useful in providing a conventional format for the business plan, but over-reliance on these sources can

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Produce a business plan that looks “canned” or fails to convey the enthusiasm and excitement of the entrepreneur’s vision.

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It is important for a firm to test the feasibility of its business idea prior to writing a business plan. The results of a full feasibility analysis will help the entrepreneur to

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Decide whether it is worthwhile to go forward with the business plan.

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Four environmental trends provide the richest sources of new business ideas. Which of the following environmental trend below matches the resulting business opportunities?

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Political action and regulatory changes—consulting companies, software to monitor compliance, and software vendors

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Gaps in the marketplace can often be targeted by niche companies. Large, mainstream companies can compete on price but often lack the ability to sell products or services to those who don’t fit into the mainstream model due to

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Geographic location, personal style, or comparatively small market size.

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Existing markets, new markets, existing products, and new products are the four categories of new business ideas. The most realistic categories for new firms are

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New products in existing markets or existing products in new markets.

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A feasibility analysis is the process of determining if a business idea is viable. The feasibility analysis step, along with the idea screening step, is

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Investigative in nature and is designed to critically assess the merits of a business idea before producing a business plan.

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A focus group is a gathering of 5 to 10 people who are selected because they have some relationship to an issue being discussed. Focus groups generally work best

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As a follow-up to an initial brainstorming session, when the general premise for a business has been established.

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A concept test involves showing

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A preliminary description of a product or service idea, called a concept statement, to industry experts and prospective customers to solicit their feedback.

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The First Screen is a tool that contains 25 items for an entrepreneur to assess about a business idea. The process should take less than an hour and examines the business idea in terms of:

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Strength of business idea, industry-related issues, market and customer-related issues, founder-related issues, and financial issues.

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Primary and secondary research is needed for a complete feasibility analysis.

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Primary research is collected by the individual conducting the analysis, whereas secondary research probes data that has already been collected.

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The two components of organizational feasibility are management prowess and (non-financial) resource sufficiency. Organizational feasibility analysis is conducted to determine whether a proposed business has

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Sufficient management expertise, organizational competence, and resources to successfully launch its business.

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The executive summary is the first item that appears in a business plan. It is a short overview of the entire plan, and it provides a busy reader with everything that needs to be known about the new venture’s distinctive nature. The executive summary is arguably the most important part of the plan because

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Many investors will ask to review an executive summary before deciding whether to request a full business plan.

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It is important that the industry analysis focus strictly on a firm’s industry rather than its industry and its target market simultaneously. This is because it is

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Premature for a new firm to select, or even talk about, a specific target market until an understanding of the broader industry is obtained.

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It is often argued that the process of writing a business plan is as important as the plan itself. The process of working together on a business plan can

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Help to develop a strong, cohesive team and identify potential problem members on the team.

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An industry “cluster” arises because of the increase of productivity of the firms participating in them. A semiconductor start-up, for example, might decide to launch in a geographic area where there are other semiconductor firms, rather than another area. It is easier for the employees of these firms to network with one another and for the firms to gain access to

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Specialized suppliers, scientific knowledge, and technological expertise native to the area.

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A Mission Statement defines why a company exists and what it aspires to become. In the business plan it shows

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That your business is focused and that you can articulate its purpose clearly.

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Industry/target market feasibility is an assessment of the overall appeal of the industry and market for the product or service being proposed. Its three components are

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Industry attractiveness, target market attractiveness, and market timeliness.

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The industry analysis should appear early in the plan because

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It logically precedes the analysis of a firm’s target market and marketing strategy.

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If your firm operates in two or more industries, you should identify all the industries that it participates in and recognize that it will be necessary to conduct an industry analysis for each of the industries. Some discretion is allowed regarding the weight placed on the individual analyses. In some instances, when a firm operates in more than one industry, it may be appropriate to conduct

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A full analysis on the primary industry that firm operates in and an abbreviated analysis on the other.

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Understanding which segments of your industry are growing fastest or are most profitable can help you establish credibility in your business plan. Some industries are also clearly bifurcated, that is, the most successful companies serve the top end of the industry or the bottom end. The worst place to be in a bifurcated industry is

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Right in the middle.

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Some investors ask for a short PowerPoint (10 to 15 slides) overview rather than a traditional Executive Summary because

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It is quicker for a busy potential investor to click through a few slides than to read the Executive Summary.

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The topic of industry structure is particularly important. Structure refers to how concentrated or fragmented an industry is and whether the industry’s competitive landscape is generally attractive or unattractive. An industry’s size and its growth rate, regardless of how positive they are, are basically moot points

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If an industry isn’t structurally attractive for a start-up.