1. Unit 2 The Feasibility Study
Testing an Opportunity

2. Unit 2 Vocabulary Benefit Business Concept Business Model
Business Plan
Competitive Grid
Corporation
C-corporation
Direct Channel
Distribution Channel
Executive Summary
Feature
Feasibility Analysis
Indirect Channel
Industry
Liability Protection
Limited Liability
Limited Liability Company (LLC)
Limited Partner
Mission Statement
Nonprofit Corporation
Partnership
Prototype

3. Unit 2 Vocabulary Small Business Administration (SBA) Shareholders
Sole Proprietorship
Subchapter S Corporation
Trade Association
Target Customers
Unlimited Liability
Value Chain
Vision Statement

4. Unit 2 Essential Question 1
What are the concepts, systems, and strategies needed to implement and obtain support for an entrepreneurial entity?

5. Essential Question 1A
What are the elements in a formal written prospectus (i.e. executive summary, introduction, analysis of the business situation, planned operation of the proposed business/product/service, planned financing and request for financing?

6. The Business Plan

7. Business Plan A document that describes a new business.
It is used to help obtain financing.
It serves as a living guide to the business.
It provides a start-up blueprint.
It conveys the vision: main concept of the business; what the business is, what it will become, and how it should be run.

8. Parts of the Business Plan
Executive Summary
First two sentences of the first paragraph is the business concept statement
Proposed Organization
Legal form of organization and rationale
Managerial organization – roles, relationships, job descriptions – organization chart
Key management personnel (management, finance, marketing, legal, production, etc.)

9. Parts of the Business Plan
Executive Summary
A description of the project/service being offered
Description, quality, breadth and width of product line
Proprietary features, patent or copyright protection, manufacturing plans

10. Parts of the Business Plan
Executive Summary
General statement of purpose and objectives
One to three pages, single spaced
Generally written last

11. Parts of the Business Plan
Problem
Description of the problems, a minimum of three, your product is designed to solve.
What is the customers pain?
Use the five why’s method to determine the root problems.

12. Parts of the Business Plan
Customer Segments
Who is the customer not the user. Customers pay, users do not.
Dog food
Customer – owner
User - dog
Facebook
Customer – advertisers
User - people
Baby Clothes
Customer – parents
User - babies

13. Parts of the Business Plan
Customer Segments
Description of the target market(s)
Age
Income level
Population estimate
Other specific demographic, geographic, psychographic or economic information
Customer buying behavior related to the proposed business

14. Parts of the Business Plan
Unique Value Proposition
Description of the single, clear, compelling message that states why your product/service is different and worth buying
Who are you serving? What are you doing? Why are you serving them? Why are you doing it?

15. Parts of the Business Plan
Solution
Solutions should relate to the problems and describe how they solve the problems
What is the minimum viable product
Absolute minimum that can be done to get a paying customer

16. Parts of the Business Plan
Solution
Description of the top three features of the product/service

17. Parts of the Business Plan
Channels
Description of the pathways to the customer
What are all the different methods you will use to reach your customer

18. Parts of the Business Plan
Revenue Streams
How are you going to make money?
Description of the business model
Direct sales, catalog sales, internet sales, any other sales channel used
Descriptions of the lifetime values
Measure of each product/service’s total profit over the lifetime of a single customer

19. Parts of the Business Plan
Revenue Streams
Description of the revenue model
Proposed pricing policy (costs, markups, markdowns, relation to competition, etc.)
Explanation of the revenue
Estimated revenue generated from each product/service

20. Parts of the Business Plan
Revenue Streams
Explanation of the gross margin
The percent of total sales revenue retained after incurring the direct costs associated with producing the goods and services

21. Parts of the Business Plan
Cost Structure
Explanation of the customer acquisition costs
Proposed promotional programs
Personal promotional activities (Personal selling, Publicity)
Non-personal promotional activities (Advertising, Sales Promotions)
Promotional media
Costs (Marketing budget)
One-year promotional plan

22. Parts of the Business Plan
Cost Structure
Explanation of the distribution costs
Analysis of potential location(s)
Availability of location
Cost (rent or buy)
Traffic patterns
Proximity of competitors
Any other relevant information concerning the location
Potential suppliers
Inventory policies
Supplies

23. Parts of the Business Plan
Cost Structure
Explanation of the human resources costs
Management compensation and ownership
Employee compensation
Outside professional services
Employment policies
Explanation of any additional costs

24. Parts of the Business Plan
Detailed Financials
Projected income statement for the first year’s operation (sales, expenses, profit/loss)
Projected cash-flow by month for the first year’s operation
Projected balance sheet, end of first year

25. Parts of the Business Plan
Detailed Financials
Brief narrative description of the planned growth of the proposed business, including financial resources and needs
Proposed plan to meet capital needs
Initial financial requirements
Personal and internal sources of capital
Earnings
External sources of capital
Short-term and long-term borrowing
Long-term equity funds

26. Parts of the Business Plan
Detailed Financials
Proposed plan to meet capital needs
Repayment plans
Repay borrowed funds
Provide return on investment for equity funds

27. Parts of the Business Plan
Key Metrics
Explanation of the key activities that must be measured
How will you know your business is successful?
What thresholds need to be met to be successful?

28. Parts of the Business Plan
Competitive Advantage
Explanation of why the product/service cannot be easily copied or bought
List and describe competitors
Competitive advantage(s) of the proposed business
Competitive disadvantage(s) of the proposed business

29. Parts of the Business Plan
Conclusion
Specific request for financing
Summary of key points supporting the financial request
Appendix
Additional supporting information not included in the body (questionnaires, letters, etc.)

30. How to Make a Business Plan
Gather Data
Organize the data
Set-up a notebook
Write a draft

31. How to Make a Business Plan
Packaging and Presenting the Business Plan
Should appear attractive and professional.
Should be put together like a book:
Table of Contents.
Sections labeled and tabbed.
All supporting documentation available in appendices.

32. How to Make a Business Plan
Packaging and Presenting the Business Plan
Cover page should contain:
The name of the company
Address and phone number of the company
The words Business Plan
The names of the people in the group
Attention getting

33. Sources of Information
Small Business Administration (
Service Corps of Retired Executives (SCORE) (
Trade Associations

34. Unit 2 Essential Question 2
What are the concepts and processes associated with successful entrepreneurial performance?

35. Essential Question 2A
What is a feasibility analysis?

36. The Business Concept
An idea for a new business that can be tested.

37. The Business Concept The Business Concept Statement
What is the product being offered?
Who is the customer?
What is the benefit being provided?
How will the product get to the customer?

38. Sample Business Concept Statement
Eastside Sports offers sporting equipment and apparel to local teams and to people who play sports. It provides the convenience of one-stop shopping at a retail outlet in the customer’s own neighborhood.

39. Feasibility Analysis
Feasibility Analysis: Determines if an idea for a business (Business Concept) is practical.

40. Feasibility Analysis Conduct testing
Test the industry: a group of businesses with a common interest. Look at the health of the industry, trends and patterns of change, and major players.
Test the market. Talk to your target customers: those most likely to buy your product. Determine their needs and wants.

41. Feasibility Analysis Conduct testing
Test the product. Create a prototype: a working model of a new product.
Prototypes are not limited to physical models. They can also be flow charts, blueprints, and other intellectual property.

42. Feasibility Analysis
Create a competitive grid: a tool for organizing important information about the competition.
Competitor
Customer
Benefits
Distribution
Strengths / Weaknesses

43. Feasibility Analysis
Used to compare your proposed business to your competitors’ businesses and identify your competitive advantage.

44. Feasibility Analysis Look at start-up resources needed.
Purchase or lease equipment, furnishings, and a facility.
Buy starting inventory and supplies.
Pay employees.
Finish product development.
How long do you have to carry the company expenses until you have a positive cash flow?

45. Essential Question 2B
What are the major reasons for business failure?

46. Reasons for Business Failure
1. Poor Management
Poor management is the number one reason for failure.
Neglect of the business. You must regularly study, organize, plan and control all activities of its operations, including continuing market research.
A successful manager creates a work climate that encourages productivity and has a skill at hiring competent people, training them.
A good leader is skilled at strategic thinking, able to make a vision a reality, confront change, make transitions, and envision new possibilities for the future.

47. Reasons for Business Failure
2. You start your business for the wrong reasons.
You want to make a lot of money.
You think you would have more time with your family.
You wouldn't have to answer to anyone else.
On the other hand, if you start your business for these reasons, you'll have a better chance at entrepreneurial success:

48. Reasons for Business Failure
3. Insufficient Capital
Business owners tend to underestimate how much money is needed for operation.
They may have an unrealistic expectation of incoming revenues from sales.
You must know how much money your business will require; not only the costs of starting, but the costs of staying in business.

49. Reasons for Business Failure
4. Location, Location, Location
Location is critical to the success of your business; a bad location is disaster to even the best-managed enterprise.
Some factors to consider:
Where your customers are
Traffic, accessibility, parking and lighting
Location of competitors
Condition and safety of building
Local incentive programs for business start-ups in specific targeted areas
The history, community flavor and receptiveness to a new business at a prospective site

50. Reasons for Business Failure
5. Lack of Planning
All successful major event were a result of careful, methodical, strategic planning, and hard work.
It is critical for all businesses to have a business plan. It must be realistic and based on accurate, current information and educated projections for the future.

51. Reasons for Business Failure
6. Overexpansion
Overexpansion often happens when business owners confuse success with how fast they can expand their business. A focus on slow and steady growth is optimum.
Indications that an expansion may be warranted include the inability to fill customer needs in a timely basis, and employees having difficulty keeping up with production demands.

52. Reasons for Business Failure
7. No Website
Simply put, if you have a business today, you need a website. Period.
70 percent of the U.S. population use the internet.
E-commerce sales was 70 billion dollars in 2004 and continues to rise.
If you don't have a website, you are most likely losing business to those that do.

53. Reasons for Business Failure
The website should be professional looking and well-designed enabling users to easily find out about the business and how to avail themselves to its products and services.

54. Reasons for Business Failure
What will improve your success?
You have a passion and love for what you'll be doing, and strongly believe that your product or service would fulfill a real need in the marketplace.
You are physically fit and possess the needed mental stamina to withstand potential challenges.
You have drive, determination, patience and a positive attitude.
Failures don't defeat you. You learn from your mistakes, and use these lessons to succeed the next time around.

55. Reasons for Business Failure
You thrive on independence, and are skilled at taking charge when a creative or intelligent solution is needed.
You like -- if not love -- your fellow man, and show this in your honesty, integrity, and interactions with others. You get along with and can deal with all different types of individuals.

56. Reasons for Business Failure
When it comes to the success of any new business, you are ultimately the "secret" to your success. For many successful business owners, failure was never an option. Armed with drive, determination, and a positive mindset, these individuals view any setback as only an opportunity to learn and grow. Most self-made millionaires possess average intelligence. What sets them apart is their openness to new knowledge and their willingness to learn whatever it takes to succeed.

57. Unit 2 Essential Question 3
What are the fundamental concepts of business ownership?

58. Essential Question 3A
What are the common types of business ownership?

59. Sole Proprietorship
Sole Proprietorship: The owner is the only one responsible for the business’s activities.
Easiest and most popular form of business to create.
Accounts for 76% of all businesses.

60. Partnerships
Partnership: More than one person shares the business decisions and outcomes.
General Partners: All partners have unlimited personal liability and take full responsibility for the management of the business.
Law requires that at least one partner is a general partner.

61. Partnerships
More than one person shares the business decisions and outcomes.
Limited Partners: Partners whose liability is limited to their investment.
Cannot be actively involved in managing the business.
If a limited partner becomes involved in the business, they lose their limited liability status.

62. Corporation
Corporation: A business that is chartered or registered by the state.
Legally operates apart from its owner(s).
Continues to operate regardless of the status of the owners.

63. Corporation C-Corporation
Most common corporate form. It protects the entrepreneur from being sued.
Requires a lawyer to setup.
Required to issue stock. This shows the amount of equity or ownership.
Required to have a board of directors.

64. Other Corporation Types
Subchapter S Corporation: Avoids double taxation by being taxed like a sole proprietorship or partnership.
Nonprofit Corporations: Legal entities that make money for reasons other than the owners’ profit.
Limited Liability Companies: Receives the limited liability advantages of corporations and the passthrough tax advantages of a partnership.

65. Essential Question 3B
How do the advantages and disadvantages of the different types of business ownership compare and contrast?

66. Sole Proprietorship Advantages Easy and inexpensive to create.
Owner has complete control over business activities.
Owner receives all the profits.
Least regulated.
Business pays no taxes. Profits are considered personal income and the owner is taxed at the personal rate.

67. Sole Proprietorship Disadvantages
The owner has unlimited liability: Debts incurred by the business have to be paid from the owner’s personal assets (car, house, bank accounts, etc.).
More difficult to raise capital.
Limited by the total reliance of the abilities and skills of the owner.
Death of the owner automatically dissolves the business.

68. Partnerships Advantages Inexpensive to create.
General partners have complete control.
Partners can share ideas.
Easier to get capital and in greater amounts.

69. Partnerships Disadvantages
Cannot dissolve one partnership without dissolving the other partnerships, which dissolves the business.
If one partner dies the business dissolves.
Personality conflicts.
Partners are bound by the laws of agency: All partners can be held liable for the actions of each other.

70. Corporation Advantages Can raise money by issuing stock.
Common Stock: Shareholders have voting rights.
Preferred Stock: First to receive their money back in case of business failure.
Owners and shareholders have limited liability: Owners are only liable to the amount of their investment.
Can offer more benefits to its employees; pension, retirement, and profit sharing plans.

71. Corporation Disadvantages
Expensive to setup. Can cost between $2,500 and $5000 in fees.
Business income is more heavily taxed.
Owners (stockholders) are double taxed.
Corporations pay taxes on its profits.
From the profits, it pays stockholders earnings, or dividends.
The stockholders must now pay income taxes on their dividends.