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Lesson 2 the business plan hentreplan
1. HENTREPLAN
From “Entrepreneurship: Starting and Operating a Small
Business” by S. Mariotti & C. Glackin
Presented by: Mervyn Maico D.Aldana, Faculty, SHTM
The Business Plan: Road Map to
Success
2. Great business ideas can grow into great businesses, or they
can wither away from neglect or unfavorable circumstances.
One thing that successful businesses have in common is a
sound idea and an entrepreneur who has a plan for turning
the idea into reality.
3. Feasibility Analysis
Time and energy involved in generating business ideas can be
extensive, for many entrepreneurs, the process can take
years.
It is an advantage to filter out the ideas that are viable from
those that are not.
A feasibility analysis is a study to assist in making the
go/no go decision based on a close examination of
product/service, market, industry, and financial data.
4. Feasibility Analysis
A feasibility analysis (feasib) is an excellent precursor to
committing the time and resources to planning the
implementation of the business and then presenting it for
financing.
A feasib essentially tests a business concept for viability in
three areas:
Product and/or service feasibility
Market and industry feasibility, and
Financial feasibility
6. Analyzing Product and/or Service
Feasibility
Entrepreneurs are often described as committed to their
business idea.
Conducting a product/service feasibility analysis serves the
dual purpose of determining whether realization of the
product of service is possible at a profit and whether
customer demand will be sufficient.
A product or service is only worthwhile pursuing if it can be
produced and delivered at a profit in an ongoing manner.
Sometimes entrepreneurs realize that the product/service would lead
to an unreasonable price, and the volume of production would be too
low to serve the target market.
7. Analyzing Product and/or Service
Feasibility
In order to avoid such unwelcomed surprises, you can create
a production design for your product and create a working
model called a prototype.
8. Analyzing Product and/or Service
Feasibility
Determining whether the product appeals to prospective
customers and whether the appeal would translate into sales
will be vital to assessing feasibility.
It is important to perform this feasibility study in order to
avoid wasting valuable resources.
If the results of the feasibility analysis are negative, it is time
to seriously rethink the product or service and its potential
fit in the marketplace.
10. Analyzing Market Feasibility
This segment of the feasib examines the attractiveness of the
proposed industry and the opportunity to find strategic,
defensible niches.
One tool that is frequently used for industry analysis is the
Five Forces model created by Michael Porter of Harvard
University, which focuses on the competitive intensity of a
market.
12. Existing Competitive Rivalry
The degree of rivalry among existing competitors is generally the
strongest force in an industry and is influenced by all the other
forces.
Key aspects of intense rivalry:
Many firms of approximately the same size
An industry experiencing slow growth
Lack of differentiation
Low switching cost for customers
High fixed costs
Perishable products
The need to create new production capacity in large increments
High barriers to exiting
Diverse rivals
13. Barriers to Entry
In an industry, the threats of new entrants is largely defined
by the strength of the barriers erected to prevent them.
As an entrant, you want the barriers to be low. As an
established firm, you want them to be high.
Barriers to entry include:
Capital requirements
Cost advantages
Economies of scale
Access to distribution channels
Product differentiation
Government policy
14. Threat of Substitutes
The level of threat posed by alternative products and
services to industry customers matters.
Substitutes cap the price a company can charge and affect the
industry as a whole.
Defining factors:
Convenience
Price competitiveness
Supply availability
Switching costs
Public policies
15. Supplier Power
The less bargaining power and control the suppliers of raw
materials, components, and labor have over competitors, the
more attractive the industry.
Where there are a few powerful suppliers, new entrants will have
little flexibility or control, both of which they need.
Suppliers are more powerful if:
There is domination by a few companies
The products are differentiated
Switching costs are high
Substitutes are not readily available
They can threaten to move into business themselves
The industry is not important to the supplier
16. Buyer Power
The larger and more diverse the customer base, the less
dependent competitors are in an industry will be on
particular customers.
Buyers are more powerful if:
They are concentrated
They purchase a lot
Products are undifferentiated or standard
Products are not a big part of the overall cost
Profits are low
Product quality is not important
Products do not save money for the buyer
17. Analyzing Financial Feasibility
You can complete the feasibility analysis by doing a financial
viability of your business idea.
This analysis does not need to be detailed. At this point,
addressing capital requirements, revenues, costs, and earning
should suffice.
18. Business Model
A Business Model is a company’s plan to generate revenue
and make a profit from operations.
20. Business Plan
A Business Plan is a document that thoroughly explains a
business idea and how it will be carried out.
The foremost reason to write a business plan is to organize
your thoughts before starting a business.
Writing a business plan can be daunting and time-consuming
process.
But a well-written plan will guide you every step of the way
as you develop your business.
21. Why Do You Need a Business Plan?
Writing a business plan early will save you time and money
Your business plan can be a front line of defense against a poor
idea. It is less costly to develop the plan and avoid the high cost
of failure.
Your plan is the key to raising capital
Bankers and potential investors will refuse to see an
entrepreneurs who does not have a business plan.
The business plan is an operational guide
Business owners and managers increase the probability of
success by taking the plan in their heads and committing it to
paper.
