Establishing a New Business Unit

A complete guide for helping you to establish and setup your new business unit. In this article we will discuss about the steps, procedure and stages involved in setting up a new business unit. Learn about:- 1. Steps in the Process of Entrepreneurship and Setting up a Business Unit 2. Generation of Business Ideas 3. Techniques to Generate Ideas-Creativity and Innovation 4. Selection of Project Idea 5. Assessing the New Venture – Feasibility Study.

Establishing a New Business Unit # Steps involved in the Process of Entrepreneurship and Setting up a Business Unit:

Entrepreneurship is a process of turning market gaps into concrete results by putting the following things in place:

Step # 1. Idea Generation:

To kick start operations, entrepreneurs must be imbued with rich ideas that can work. In order to generate ideas, entrepreneurs need to have an eye for detail. They should keep a close watch over changing trends in the market place and identify gaps that can be prof­itably exploited.

Step # 2. Nature of Business:

The entrepreneur should be clear about the nature of type of business that he wants to be in:

I. What type of business- Wholesale or retail, independent or fran­chise business or simply a trading business.

II. What to offer- Products or services or a mix of both; he wants to trade in these or wants to produce and distribute.

III. In Which sector- Entertainment, construction, software, hardware, fashion, etc.

IV. Is it a profitable business or a risky one -Carefully studying the prospects of chosen business. He needs to calculate the gains, the challenges ahead and the type of risks that exist and the viability of business in the long run.

V. Whether inputs, resources and requisite manpower available- It is better to carry out a feasibility study of everything beforehand.

VI. Whether the idea will actually work or not- To this end, he has to conduct a feasibility study examining the pros and cons of everything.

VII. Prepare the business plan and move ahead with other steps that follow the decision.

Step # 3. Determine the Size and Scale of Operations:

The entrepreneur should be clear about what kind of sales could be generated at different price points. He should plan for a volume that recovers his costs fully and generates enough profits for survival initially. Then he can think of expanding volumes, size and scale of operations. A gradual step by step, trial and error process is what most market experts suggest. Rushing into catch a temporary wave of demand created by artificial mismatch between demand and supply might eventually put a very good business also on the stretcher.

For a budding small business venture, size should not be a fascinating option unless the market is totally ignored, unexplored or underserved (like it happened in the case of iodized salt, vegetarian tooth paste, low priced but reasonable quality detergents; multigrain wheat flour, etc.) The size and scale of operations chosen must be in sync with what the entrepreneur has in terms of available capital and other resources at his command.

Step # 4. Select a Place for Business:

The entrepreneur must pick up a location that is closer to all the inputs, resources and materials that the business would require. Availability of manpower and transport links also need to be looked into. Other services like banking, telecommunications, and power supply need closer attention of course, different organisations in the same industry may have different facilities requirements.

For example Benetton uses only one distribution centre for the entire world, whereas Wal-Mart has several distribution centres in the United States alone. In any case, a small business owner of retail business must pay close attention to the convenience factor especially from the customers’ point of view.

Step # 5. Choose the Form of Ownership:

The entrepreneur must be clear about the form of ownership that is closer to his heart. He could think of a small business owned by him exclusive or start the venture in partnership with someone or create a company with diversified shareholding. To start with, he can pick up the entity that is easy to form, simple to operate, allows freedom to implement his ideas without any legal or taxation problems and gives him enough room to expand further, whenever the opportunity turns out to be big.

Step # 6. Determine Financial Requirements:

Here it is a question of calculating the fixed capital and working capital needs of the firm, keeping the present and future plans of the business in mind. The entrepreneur should be clear about the type of expenses that are going to eat up resources at different points of time. Requisite funds for emergency use need to be put in place. The sources of funds also need to be calculated well in advance. How much through bank financing, how much from the long term lending institutions, how much from the general public—if equity is a preferred option—how much from own sources etc.?

Step # 7. Plan for Physical Facilities:

This is a question of giving a concrete shape to the business plan by arranging the physical infrastructure required. It includes decisions regarding machines, equipment, factory and of­fice design, choosing furniture, space planning, providing for repair and maintenance, availability of spare parts, degree of sophistication required in terms of modernizing the plant in every way—keeping the availability of skilled hands in the chosen location etc. An appropriate organisation structure must also be designed keeping the space needs of various departments, divisions and plants in mind.

Step # 8. Select an Appropriate Plant Layout:

The choice of physical configuration or the layout of facilities is closed related to other operation decisions. A product layout is appropriate when large quantities of a single product are needed. It makes sense to custom design a straight line flow of work for a product when a specific task is performed at each work station as each unit flows past. Most assembly lines use this format.

For example, Dell’s personal computer factories use a product layout. The type of layout depends on the expected volume of production, space available, type of equipment, etc. The chosen layout, in any case, must be in sync with space available and must permit easy flow of production without posing any danger to human life.

Step # 9. Determine Human Resource Requirements:

Here it is a question of finding human resource requirements in terms of physical numbers and also in terms of quality such as technical skill sets, managerial competencies, degree of expertise, necessity for people possessing latest knowledge in a high-tech area etc. The necessity for hiring people with qualities of head and heart must be recognized and the small business owner must keep plans ready for this purpose.

Step # 10. Keep an Eye on Legal and Procedural Requirements:

All approvals, sanc­tions must be obtained well in advance. The needed paper work must be entrusted to experienced people hired for this purpose. Help from external consultants could also be obtained to avoid surprises of various kinds hitting the budding venture at a later stage. All taxation matters be carefully looked into at this stage. If required, the owner must carry out a drill looking into each and every detail personally.

Step # 11. Launch the Business:

The owner should get ready to launch the business formally after acquiring physical and financial resources, providing for infrastructural facilities and hiring the people needed.

Establishing a New Business Unit # Generation of Business Ideas:

Business ideas are not visible to the naked eye. They do not surface on their own. You need to have a critical eye for detail. The recent ideas such as selling books, music, electronic items on line (Flipkart) and groceries using the power of internet (Big basket) existed already in the developed markets and only required intelligent adaptation to suit Indian consumers.

Once that happened, they grew into multi-million dollar businesses. Business ideas, therefore, need not always be original. They can sprout up from nowhere and surprise us when they begin to grow by leaps and bounds right in front of us. It can be as simple as offering entertainment in a better way, putting existing channels on track (PVR cinemas). There are, therefore, many ways to skin a cat.

Let us examine three such instances before examining the topic in greater detail:

1. ‘Ja raa saa’ Advertisement Fails?

A toothpaste manufacturer wanted to beat rivals through an ingenious advertising strategy. Use very little toothpaste (the tag line was ‘ja raa saa toothpaste’ applied on tooth brush will yield excellent results and you do not have to put lot of toothpaste on the brush) and you get your teeth sparkling. The manufacturer ex­pected phenomenal sales after the release of the Ad.

Instead, sales took a hit and they actually started falling. Unable to understand why the idea did not produce results, the top executives of the company started brain storming. Someone suggested that people actually started using very, very little toothpaste—instead of using the normal quantity. As a result, the toothpaste in the tube lasted longer.

To arrest the trend and to boost up sales they had to generate another idea. Someone suggested that the circumference of the toothpaste tube should be made bigger so that even if one touches the tube, lot of toothpaste would come out— unknowingly of course. The sales started picking up—thereafter.

2. Black Lipstick?

A lipstick manufacturer tried every trick in the book to boost up sales. He changed various alternatives but was not able to move closer to the hearts of house wives, working women and college girls. After lot of brain storming, someone suggested that they must come out with a black lipstick which is not available in India. They came out with a black lipstick, brown one and several crazy combinations followed. Sales improved significantly thereafter

3. Black-Brown Biscuits, Sweet and Sour Biscuits:

Yes black and even red colour sells in India. This has been proved right by none other than ITC. When it wanted to enter the biscuit market, it had to play on the colour which is not being used by established rivals like Britannia, Parle etc. They picked up a celebrity—Shah Rukh Khan-to do this and the rest is history. Within a short span of time, ITC garnered a respectable ten per cent market share in India.

Not Every Business Idea Would Sell?

i. A U.S. airline found lack of demand for its “rendezvous lounges” on its Boeing 747s they later found that “rendezvous” in Portuguese refers to a room that is rented for prostitution!

ii. The Chevrolet Nova car had trouble selling in Puerto Rico because it sounded like nova meaning “it doesn’t go”. Ford’s European Model the “Ka” had trouble in Japan when it was introduced. In Japanese, Ka means mosquito and the model named after a disease-carrying pest did not sell well.

iii. The soft drink Fresca was marketed in Mexico without a change in brand name. The company later discovered that fresca is slang for ‘lesbian’ in Mexico. Tiffany sells glassware in sets of five in Japan because the word four translated to shi, which means ‘death’ in Japanese.

iv. A detergent manufacturer went on advertising in one of the Gulf countries showing three pictures on the local television; the first one showed a housewife holding dirty clothes; the second one showed a bucket full of water, containing the branded detergent powder wherein the clothes are being soaked for a while; and the final one showed the housewife holding sparkling, shining, clean clothes.

The manufacturer expected the sales to shoot up after a series of advertisements, but, unfortunately the sales have fallen to unusually low levels immediate­ly thereafter? The only missing link here was that the manufacturer failed to realize that in the Arabic world they read from right to left. The audience got the message that the sparkling, clean, white clothes when soaked in the detergent powder would turn dirty.

As the above examples illustrate, not every idea would work. An entrepreneur should carefully evaluate whether the idea is feasible or not—whether it is sound and workable, whether it is liked by customers or not, whether it would generate a reasonable amount of return or not. He need to look at the sources that offer valuable clues or insights that could be translated into commercial ventures.

Source of Profitable Ideas:

And there are many sources that would help the process of choosing a com­mercially viable idea:

Source of Profitable Idea # i. Observe the Local Market:

The environment would offer vital clues for starting rewarding ventures. For example, it can be retirement homes for ageing population. It could be a holiday resort to entice people earning good salaries. It could be developing a religious spot -emphasizing peace, tranquility, rejuvenation of mind and soul etc.

Source of Profitable Idea # ii. Look at the Customer:

The changing tastes and preferences of customers would be ready made source of valuable ideas. The need to look good is making many young boys and girls to spend heavily on hair dressing, personal grooming, beauty salons, fitness, power dressing, perfumes, burgers, pizzas, gourmet coffee, designer pens, etc. One needs to have a critical eye for detail in order to exploit the oppor­tunities that present themselves from time to time.

Source of Profitable Idea # iii. Observe Markets All Over the Globe:

Global market changes could be pointers to a change in trends in local markets as well. When global markets are crazy about latest cell phones, trendy watches, designer clothes, IPads and I-phones, Tablets etc. you can be sure of customers in local markets getting impacted sooner than later. Many entrepreneurs have picked up these trends and made a huge fortune in recent times— especially by joining hands with producers from markets such as South Korea, Taiwan, Singapore, China etc. (known for cheaper varieties of cell phones, tablets etc.)

Source of Profitable Idea # iv. Look at Existing Products/Services Closely:

The entrepreneur can look at existing products and services offered by Indian as well as foreign companies to find out the ‘gaps’ that could be exploited profitably. You have the famous examples of Chik shampoo in sachets, use and throw kind of perfumes, cheaper detergents in the form of Ghadi, Nirma etc. Think back 30 years ago.

Did you find anyone in the field of anti-virus software, internet service providers, laptops, domestic fire protection devices etc.? One can think of converting raw wood into finished lumber. It can be fine-tuned to get designer beds and almirahs, dining tables, sofas of various kinds and put them all in a Furniture Mall! An existing service can be improved -such as getting fresh vegetables straight from farmers to city population through a home delivery service.

Source of Profitable Idea # v. Mass Media:

The mass media is a great source of information, ideas and often opportunity. Newspapers, magazines, television, and nowadays the Internet are all examples of mass media. Take a careful look, for example, at the commercial advertisements in newspaper or magazine and you may well find businesses for sale. Well, one way to become an entrepreneur is to respond to such an offer.

Exhibitions another way to find the ideas for a business is to attend ex­hibitions and trade fairs. These are usually advertised on the radio or in newspapers; by visiting such events regularly, you will not only discover new products and services, but you will also meet sales representatives, manufacturers, wholesalers, distributors and franchisers. These are of­ten excellent sources of business ideas, information and help in getting started. Some of them may also be looking for someone just like you.

Source of Profitable Idea # vi. Surveys:

Surveys conducted by reputed organisation on changing hab­its, tastes, preferences of customers could prove to be valuable sources of business ideas. Sometimes the age profiles of customers living in a locality might prompt an entrepreneur to start a fast food centre near a College, a designer watch show room in a posh locality, a beauty salon near a school etc.

Source of Profitable Idea # vii. Complaints:

Complaints and frustrations on the part of customers have led to many a new product or service. Whenever consumers complain bitterly about a product or service, or when you hear someone say ‘I wish there was … “or” If only there were a product/service that could …” you have the potential for a business idea. The idea could be to set up a rival firm offering a better product or service, or it might be a new product or service which could be sold to the firm in question and/or to others.

Source of Profitable Idea # viii. Brainstorming:

Brainstorming is a technique or creative problem-solving as well as for generating ideas. The object is to come up with as many ideas as possible. It usually starts with a question or problem statement. For example, you may ask “What are the products and services needed in the home today which are not available?” Each idea leads to one or more additional ideas, resulting in a good number.

Establishing a New Business Unit # Techniques to Generate Ideas-Creativity and Innovation:

The following techniques help in generating profitable, commercially viable and feasible ideas:

Techniques to Generate Idea # i. Brainstorming:

Brainstorming, a technique that permits people to interact in a free and uninhibited atmosphere. Under this technique a group is assembled, presented with the problem and encouraged to produce as many ideas and solutions as they can. The discussion is free; criticism is prohibited; members are allowed to generate as many alternatives as they can; they are even permitted to suggest how ideas of others can be improved or combined into still another idea; the climate is supportive and encouraging.

Brainstorming is based on the idea that people should be allowed to generate as many ideas as possible. The greater the number of ideas, the greater the chance of an outstanding solution.

Techniques to Generate Idea # ii. Innovation:

Creativity is the ability to create something new, a kind of a breakthrough, and a totally different way of solving a problem. It may refer to a revolutionary idea or a unique solution coming out of a brilliant brain. Disney’s theme parks or animated movies, Apple’s IPod and Macintosh computer may come in this category of revolutionary thinking changing the course of history.

Of course, creativity is not the ability to create out of nothing but the ability to generate new ideas by combining, changing or reapplying existing ideas. Some creative ideas are astonishingly different, refreshingly fresh and absolutely brilliant while others are just simple, good and practical ideas that no one seems to have even imagined as yet. The vegetarian toothpaste, the one rupee sachets fall in this category. Radically different solutions and revolu­tionary approaches generally emerge when people begin to think ‘out of the box’.

For example, the evolutionary technology in fighting termites eating away at houses has been to develop safer and faster pesticides and gasses to kill them. A somewhat revolutionary change has been to abandon gasses altogether in favour of liquid nitrogen, which freezes them to death or microwaves, which bake them. Truly revolutionary creative idea would be to ask, “How can we prevent them from eating houses in the first place?” A new termite bait that is placed in the ground in a perimeter around a house provides one answer to this question.

Techniques to Generate Idea # iii. Improvement:

Improving the existing process­es or functions, one might be able to come out with a new idea that might change the course of history. Many a time, new ideas stem from other ideas, new solutions from previous ones, the new ones slightly improved over the old ones. For example, someone noticed that a lot of people on dates went first to dinner and then to the theatre. Why not combine these two events into one? Thus, the dinner theatre, where people go first to eat and then to see a play or other entertainment.

Ray Kroc bought out a restaurant in San Bernardino, California from the McDonald brothers and by creatively changing the way hamburgers were made and served, he created the largest food service company in the world. He did not invent fast food—while Castle and Dairy Queen had long been established—but he changed the processes.

By creating a limited menu, following standardized and uniform cooking procedures, ensuring consistent quality and cleanliness of facilities irrespective of location and by offering food in an inexpensive way Ray Kroc brought a major revolution in the fast food industry through the McDonald’s brand. The evolutionary or incremental method of creativity also reminds us of that important principle.

Every problem that has been solved can be solved again in a better way. Creative thinkers do not subscribe to the idea that once a problem has been solved, it can be forgotten, or to the notion that “if it isn’t broke, don’t fix it.” A creative thinker’s philosophy is that “there is no such thing as an insignificant improvement.”

Techniques to Generate Idea # iv. Investment:

Creativity, many a time, could mean meeting the problems head on, adopt a competitive posture and focus on getting things done in a faster and much better way. Putting the critical resources to best advantage—in a disciplined manner consistently in order to stay ahead of competition may bring in unbeatable competitive advantage to some firms in this economic jungle. The classic fight between Honda and Yama­ha illustrate this point very clearly.

The industry leader in motor cycles, Honda, decided to step out of Japan in 1970s with a view to conquer the world. Yamaha saw an opportunity to hit back the market leader and began attacking the Honda’s space through aggressive marketing cam­paigns. Honda retaliated almost instantaneously. The punch line was-” Yamaha wo tubusu” meaning we will smash, break, annihilate, and destroy Yamaha.

Honda introduced more than 100 new models to outsmart Yamaha and won the war of words, wits and nerves in a battle span­ning over 10 years. Yamaha, consequently, had to retrace its steps and settle for the second position. Honda’s approach to win over customers typically reflects the approach to creativity through investment—that is rapid response, competitive maneuvering and being the first mover.

Techniques to Generate Idea # v. Incubation:

According to this approach, creativity is the result of team­work, involvement and coordination among individuals. When people work together, when they understand each other and work toward a common goal and when they are fully empowered, they are in a better position to come out with something radically different, novel and even exciting. Creativity is nothing but ‘common men doing uncommon things’.

Like Mahatma Gandhi waging a relentless war against the mighty British empire single handedly by mobilizing networks of people to pursue a clear set of goals where everyone had a stake. Quit-India, Salt March, and other non-violent protests excited millions to join the network cre­ated by Gandhi, pass through the impregnable walls built by the British and achieve a miracle in modern history. When human interactions are facilitated and encouraged, the result would be something that the world has never witnessed before!

Selection of Project Idea:

The ideas that look interesting and exciting need to be listed and prioritized. They must be subjected to close scrutiny by tossing the following questions and see whether they meet the criteria chosen by the entrepreneur.

Possible Criteria for Choosing a Project Idea:

1. Are you familiar with the operations of this type of business? (Famili­arity)

2. Does the business meet your investment goals? (Investment goals)

3. Does the business meet your income goals? (Income goals)

4. Does the business generate sufficient profits? (Profit goals)

5. Do you feel comfortable with the business? (Ease of working)

6. Does your family feel comfortable with the business? (Family approval)

7. Does the business satisfy your sense of status? (Status in society- for example can you set up a hair cutting salon when the society does not seem to approve it?)

8. Is the business compatible with your people skills? (Skills, Competencies required to run the show)

9. Is there good growth projected for the overall industry of the business? (Growth potential)

10. Is the risk factor acceptable? (Amount of risk involved)

11. Does the business require long hours? (Working hours to be put in)

12. Does the business fit your professional skills, personal goals and objec­tives? (Individual goals)

Assessing the New Venture – Feasibility Study:

Before undertaking a risky journey, entrepreneurs must undertake a feasibility study examining the pros and cons of everything:

i. Technology Feasibility:

The assessment is based on an outline design of system requirements in terms of Input, Processes, Output, Fields, Programs and Procedures. This can be quantified in terms of volumes of data, trends, frequency of updating, etc. in order to estimate whether the new system will perform adequately or not. Technological feasibility is carried out to determine whether the company has the capability, in terms of software, hardware, personnel and expertise, to handle the completion of the project.

When writing a feasibility report the following should be taken into consideration:

a. A brief description of the business

b. The part of the business being examined

c. The human and economic factor

d. The possible solutions to the problems

At this level, the concern is whether the proposal is both technical­ly and legally feasible (assuming moderate cost).

ii. Economic Feasibility:

Economic analysis is the most frequently used method for evaluating the effectiveness of a new system. More com­monly known as cost/benefit analysis, the procedure is to determine the benefits and savings that are expected from a candidate system and compare them with costs. If benefits outweigh costs, then the decision is made to design and implement the system. An entrepreneur must accurately weigh the cost versus benefits before taking an action.

iii. Legal Feasibility:

All legal formalities must be fulfilled. A detailed point by point study of all requirements of law must be made before moving further.

iv. Operational Feasibility:

Operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development.

v. Schedule Feasibility:

A project will fail if it takes too long to be completed before it is useful. Typically this means estimating how long the system will take to develop, and if it can be completed in a given time period using some methods like payback period. Schedule feasibility is a measure of how reasonable the project timetable is. Given our technical expertise, are the project deadlines reasonable? Some projects are initiated with specific deadlines. You need to determine whether the deadlines are mandatory or desirable.

vi. Market Feasibility:

Market Feasibility Study typically involves testing geographic locations for a real estate development project, and usually involves parcels of real estate land. Developers often conduct market studies to determine the best location within a jurisdiction, and to test alternative land uses for given parcels.

Jurisdictions often require devel­opers to complete feasibility studies before they will approve a permit application for retail, commercial, industrial, manufacturing, housing, office or mixed-use project. Market Feasibility takes into account the importance of the business in the selected area.

vii. Resource Feasibility:

This involves questions such as how much time is available to build the new system, when it can be built, whether it inter­feres with normal business operations, type and amount of resources required, dependencies.

viii. Cultural Feasibility:

In this stage, the project’s alternatives are evaluated for their impact on the local and general culture. For example, environ­mental factors need to be considered and these factors are to be well known. Further an enterprise’s own culture can clash with the results of the project.

ix. Financial Feasibility:

In case of a new project, financial viability can be judged on the following parameters:

I. Total estimated cost of the project.

II. Financing of the project in terms of its capital structure, debt equity ratio and promoter’s share of total cost.

III. Existing investment by the promoter in any other business.

IV. Projected cash flow and profitability.

Project Report:

The business idea, in almost all cases, is to be put to a critical analysis and close examination—along the lines suggested. Once the job is over, a project report needs to be prepared. The project report summarizes all details regarding a business idea/plan. It throws light on the nuts and bolts of the game. The project’s feasibility, production and marketing aspects are high­lighted. The cost estimates are furnished. The people required to handle the project and the possible time of commencement of production would also be mentioned on paper.

In short, every possible detail surrounding the project would be explained in greater detail. The project report, in short, is a blueprint of a projected course of action. It is a clear expression of what the entrepreneur wants to do in the immediate future. All the details furnished there would help in getting the project cleared through various funding agencies, banks, financial institutions etc.

Some of the important details that find a place of importance in a project report may be listed thus:

1. Details about the business plan

2. Entrepreneur’s profile, background, experience etc.

3. Potential of the product/service and details regarding location

4. Land and buildings, plant and machinery

5. All details regarding product to be manufactured/service to be offered

6. Marketing details

7. Personnel required to handle the project

8. Financing requirements

9. Commencement of production, and

10. Other details that are essential to obtain finance.

Business Plan:

A business plan represents all aspects of business planning process; declaring vision and strategy alongside sub-plans to cover marketing, finance, operations, human resources as well as a legal plan, when required. A business plan is a bind summary of those disciplinary plans. Preparing a business plan draws on a wide range of knowledge from many different business disciplines- finance, human resource management, supply chain management, operations manage­ment, marketing etc.

It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.”… A good business plan can help to make a good business credible, understandable, and attractive to someone who is unfamiliar with the business. Writing a good business plan can’t guarantee success, but it can go a long way toward reducing the odds of failure.”

Outline of a Business Plan:

1. Executive Summary:

I. Description of business

II. The opportunity and strategy

III. The target market and projections

IV. The economics, profitability and harvest potential

V. The team, and

VI. The offering.

2. The Industry and the Company:

I. The industry

II. The company and the concept

III. The products and services

IV. Entry and growth strategies.

3. Market Research and Analysis:

I. Customers

II. Market size and trends

III. Competition and competitive edges

IV. Estimated market share

V. Ongoing market evaluation.

4. The Economics of the Business:

I. Gross and operating margins

II. Profit potential and durability

III. Fixed, variable and semi variable costs

IV. Months to breakeven

V. Months to reach positive cash flow.

5. Marketing Plan:

I. Overall marketing strategy

II. Pricing

III. Sales tactics

IV. Services and warranty policies

V. Advertising and promotion

VI. Distribution.

6. Design and Development Plans:

I. Development status and tasks

II. Difficulties and risks

III. Product improvement and new products

IV. Costs

V. Proprietary issues.

7. Manufacturing and Operations Plan:

I. Operating cycle

II. Geographical location

III. Facilities and improvements

IV. Strategy and plans

V. Regulatory and legal issues.

8. Management Team:

I. Organisation

II. Key management personnel

III. Management compensation and ownership

IV. Other investors

V. Employment and other agreements and stock option and bonus plans

VI. Board of directors

VII. Other shareholders, rights and restrictions

VIII. Supporting professional advisors and services.

9. Overall Schedule.

10. Critical Risks, Problems and Assumptions.

11. The Financial Plan:

I. Income statements and balance sheets

II. Proforma income statements and balance sheet

III. Proforma cash flow analysis

IV. Breakeven chart and calculations

V. Cost control

VI. Highlights.

12. Proposed Company Offering:

I. Desired financing

II. Offering

III. Capitalization

IV. Use of funds

V. Investor’s return.

13. Appendixes:

There are no substitutes for a well-prepared business plan, and there are no short cuts to creating one. Each business plan is unique and must be tailor made because each business is unique. So the plans are not cast in stone.

En­trepreneurs may want to make alterations to suit the specifics of their business. The elements of a business plan may be standard, but how entrepreneurs tell their story should be unique and reflect their personal excitement about the new venture. Although building a business plan doesn’t guarantee success, it does raise an entrepreneur’s chance of succeeding in business.