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Chapter 2 FROM THE IDEA TO THE BUSINESS PLAN FOCUS In this chapter we examine how one can move from an idea to a determination of the feasibility of the related business opportunity. We present an opportunity screening system to aid in determining whether an idea should be discarded or pursued. We conclude the chapter with an overview of a business plan. LEARNING OBJECTIVES 1. Describe the process of moving from an idea to a business plan 2. Understand the components of a sound business model 3. Identify some of the best practices for high growth, high performance firms 4. Understand the importance of timing in venture success 5. Describe the use of a SWOT analysis as an initial “litmus test” 6. Identify the types of questions that a reasonable feasibility assessment addresses 7. Identify quantitative criteria that assist in assessing a new venture’s feasibility and its ability to attract external financing 8. Describe the primary components of a typical business plan CHAPTER OUTLINE 2.1 PROCESS FOR INDENTIFYING BUSINESS OPPORTUNITIES 2.2 TO BE SUCCESSFUL YOU MUST HAVE A SOUND BUSINESS MODEL A. Component1: The Plan must Generate Revenues B. Component 2: The Plan must Make Profits C. Component 3: The Plan must Produce Free Cash Flows 2.3 LEARN FROM THE BEST PRACTICES OF SUCCESSFUL ENTREPRENEURIAL VENTURES A. Best Marketing Practices B. Best Financial Practices C. Best Management Practices D. Best Production or Operations Practices are also Important 2.4 TIME-TO-MARKET AND OTHER TIMING IMPLICATIONS 2.5 INITIAL “LITMUS TEST” FOR EVALUATING THE BUSINESS FEASIBILITY OF AN IDEA 2.6 SCREENING VENTURE OPPORTUNITIES A. An Interview with the Founder (Entrepreneur) and Management Team: Qualitative Screening B. Scoring a Prospective New Venture: Quantitative Screening C. Industry/Market Considerations D. Pricing/Profitability Considerations E. Financial/Harvest Considerations 17
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Chapter 2: From the Idea to the Business Plan F. Management Team Considerations G. Opportunity-Screening Caveats 2.7 KEY ELEMENTS OF A BUSINESS PLAN A. Cover Page, Confidentiality Statement, and Table of Contents B. Executive Summary C. Business Description D. Marketing Plan and Strategy E. Operations and Support F. Management Team G. Financial Plans and Projections H. Risks and Opportunities I. Business Plan Appendix SUMMARY APPENDIX: APPLYING THE VOS INDICATOR TM : AN EXAMPLE Companion Systems Profile Market Opportunity Products Management Team Companion Systems Assessment DISCUSSION QUESTIONS AND ANSWERS 1. Identify three types of startup firms. Salary-replacement firms are firms that provide their owners with income levels comparable to what they could have earned working for much larger firms. Lifestyle firms
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This note was uploaded on 12/05/2009 for the course FIN Fin 595 taught by Professor Shabbir during the Spring '09 term at CSU Dominguez Hills.

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