Entrepreneurship

• Business plan

  • A business plan is a document that describes the various external and internal elements involved in starting a business or in expanding an existing venture, amidst a dynamic business environment.
  • Serves as a guide for short-term and medium-term decision-making and managerial action.
  • Like a road map, it directs the entrepreneur to his desired destination.
• • It integrates different functional plans...

  1. Marketing
  2. Manufacturing
  3. Finance
  4. Human resource management
• Who are the users of a business plan?

  • Entrepreneur
  • Lender
  • Investor
• Importance to the entrepreneur

  • Serves as a roadmap for managing the business.
  • Identifies the resources needed to operate and grow the business.
  • Allows the entrepreneur to anticipate potential business risks.
• Importance to the lender

  • The business plan allows them to assess the entrepreneur using the four Cs of credit:
  • Character
  • Cash flow
  • Collateral
  • Equity contribution
  • Allows the lender to assess whether the entrepreneur will be able to meet the debt and interest of payments.
  • Provides information about the collateral or tangible assets that can be secured for the loan.
• Importance to the investor

  • Allows the investor to gauge whether projected returns are acceptable.
  • Provides information about the character of the entrepreneur and the capability of the venture's management team.
• Sources of Information When Preparing for Business Plan

  • National government agencies
  • City or municipal offices
  • Industry associations
• Information needs for major sections of the business plan

  • Market Information Needs
  • Operation Information Needs
  • Financial Information Needs
• Market information needs

  • General environmental trends
  • Specific industry trends
  • Local market condition
  • Market potential
  • Demographic and psychographic profile of the target market
• Operations information needs

  • Location
  • Manufacturing or service operations
  • Equipment and furniture required.
  • Space requirements
  • Labor requirements
  • The raw material needed and potential suppliers.
  • Utilities
• Financial information needs

  • Rental rates
  • Cost of equipment
  • Cost of utilities
  • Personnel cost
  • Distribution cost
  • Cost of insurance
  • Registration and license fees
• Introductory page

  • Business name and address
  • Names and addresses of business
  • owners/entrepreneurs
  • Nature of the business
  • Statement of financing needed
  • Statement of confidentiality of the report (optional)
• Executive summary

  • Highlights of the business plan summarized in two or three pages
• Environmental and Industry Analysis

  • Conditions of the general environment Sociocultural, technological, economic, politico-legal
  • Conditions of the specific environment Supply and demand, competition
• Description of the business

  • Products and/or services
  • Size of the business
  • Mission statement and core values
  • Location of the business and its major physical assets
  • Background of the business owners/entrepreneurs
• Production plan

  • Manufacturing process
  • Physical plant
  • Machinery and equipment
  • Suppliers of raw materials
  • Future capital equipment needs
• Operations plan

  • Description of the company's operation
  • Flow of the orders for goods and services
• Marketing plan

  • Pricing
  • Distribution
  • Promotion
  • Sales forecasts
• sales forecasts - important component of the marketing plan. indicates when to produce more and when to produce less. 
• Organizational plan

  • Form of the ownership
  • Principal shareholders or partners
  • Organizational chart/lines of authority
  • Background of the management team
  • Roles and responsibilities of management team
• Financial plan

  • Assumption
  • Pro forma balance sheet
  • Pro forma income statement
  • Cash flow projections
  • Sources and uses of funds
  • Breakeven analysis
• Assessment of risk

  • Potential risks - internal or external
  • Strategies for preventing or minimizing risks
  • Response to risks should they occur
  • SWOT Analysis
• Timetable/milestones

  • Formal registration of the business
  • Completion of the product or service design
  • Completion of the prototypes
  • Hiring of initial personnel
  • Reaching agreements with suppliers and distributors
  • Actual production
  • Initial orders, sales, and deliveries
• Appendices

  • Market research data
  • Detailed financial projections
  • Curriculum vitae of the management team
  • Price lists from suppliers
  • Profile of competitors
• Major sections of business plan

  • Introductory page
  • Executive summary
  • Environmental and Industry Analysis
  • Description of the business
  • Production plan
  • Operations plan
  • Marketing plan
  • Organizational plan
  • Financial plan
  • Assessment of risk
  • Timetable/milestones
  • Appendices
• What is opportunity?

  • According to the Cambridge Dictionary, an opportunity is "a situation or occasion that makes it possible to do something that you want to do."
  • From a business perspective, an opportunity is "an exploitable set of circumstances with uncertain outcome requiring a commitment of resources and involving risk exposure."
• • Opportunity recognition often entails phases that potential entrepreneurs take before introducing a product or service to the market.
• • There are five stages according to Hills, Shrader, and Lumpkin.
• Precondition

  • This is the preparatory stage, during which the individual assesses his knowledge of the market.
• Conception

  • This is the gestation phase, during which entrepreneurial intentions and ideas are generated, using logic, creative thinking, or both.
• Visioning

  • This third stage provides the individual a hunch that can serve as an opportunity for business.
• Assessment

  • This stage involves the evaluation of whether the idea can be realized or not.
• Realization

  • The last phase suggests the production of a prototype.
• Factors in Opportunity recognition

  • Market awareness
  • Entrepreneurial readiness
  • Connections
• Market Awareness

  • Prior knowledge of the market
  • Refers to personal exposure to the market and its components including customers and suppliers
• Entrepreneurial Readiness

  • Entrepreneurial alertness
  • Refers to a variety of features of an individual to start a business venture
  • It covers all types of resources that the individual possesses including financial, physical, and human resources.
• Connections

  • Networks
  • Business opportunity recognition is heightened when the individual has a diversity of networks.
• Opportunity Assessment

  • Refers to the process of evaluating the likelihood that the opportunity can be realized.
• Elements In Opportunity Assessment

  • Product or service
  • Market opportunity
  • Costing and pricing
  • Profitability
  • Resource requirements
  • Risks
  • Entrepreneurial commitment
• Rational Approach

  • Also called the "traditional approach"
  • It uses systematic procedures in proceeding with the implementation of a business opportunity.
  • The traditional approach is usually applicable to business ideas that require substantial initial investments or those that are undertaken by what we refer to as Schumpeterian entrepreneurs.