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First Screen From “Preparing Effective Business Plans” by Bruce R. Barringer Part 1: Strength of Business Idea Name or type of business: For each item, circle the most appropriate answer and make note of the (-1), (0), or (+1) score. Low Potential (-1) Moderate Potential (0) High Potential (+1) Weak Moderate Strong 1. Extent to which the idea: • Takes advantage of an environmental trend • Solves a problem • Addresses an unfilled gap in the marketplace 2. Timeliness of entry to Not timely market Moderately timely Very timely 3. Extent to which the idea “adds value” for its buyer or end user Low Medium High 4. Extent to which the customer is satisfied by competing products that are already available Very satisfied Moderately satisfied Not very satisfied or ambivalent 5. Degree to which the idea requires customers to change their basic practices or behaviors Substantial changes required Moderate changes required Small to no changes required Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Part 2: Industry-Related Issues Low Potential (-1) Moderate Potential (0) High Potential (+1) 1. Number of competitors Many Few None 2. Stage of industry life cycle Maturity phase or decline phase Growth phase Emergence phase 3. Growth rate of industry Little or no growth Moderate growth Strong growth 4. Importance of industry’s products and/or services to customers “Ambivalent” “Would like to have” “Must have” 5. Industry operating margins Low Moderate High Part 3: Target Market and Customer-Related Issues Low Potential (-1) Moderate Potential (0) High Potential (+1) 1. Identification of Difficult to identify target market for the proposed new venture May be able to identify Identified 2. Ability to create “barriers to entry” for potential competitors Unable to create May or may not be able Can create to create 3. Purchasing power of customers Low Moderate High 4. Ease of making customers aware of the new product or service Low Moderate High 5. Growth potential of target market Low Moderate High Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Part 4: Founder- (or Founders-) Related Issues Low Potential (-1) Moderate Potential (0) High Potential (+1) 1. Founder or founders experience in the industry Moderate experience Experienced 2. Founder or founders No skills skills as they relate to the proposed new venture’s product or service Extent of the founder None or founders professional and social networks in the relevant industry Extent to which the Weak proposed new venture meets the founder or founders personal goals and aspirations Moderate skills Skilled Moderate Extensive Moderate Strong Likelihood that a team can be put together to launch and grow the new venture Unlikely Moderately likely Very likely Low Potential (-1) Moderate Potential (0) High Potential (+1) 3. 4. 5. No experience Part 5: Financial Issues 1. Initial capital investment High Moderate Low 2. Number of revenue drivers (ways in which the company makes money) Time to break even One Two to three More than three More than two years One to two years Less than one year Financial performance of similar businesses Ability to fund initial product (or service) development and/or initial startup expenses from Weak Modest Strong Low Moderate High 3. 4. 5. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall personal funds or via bootstrapping Overall Potential Each part has five items. Scores will range from -5 to +5 for each part. The score is a guide—there is no established rule-of-thumb for the numerical score that equates to high potential, moderate potential, or low potential for each part. The ranking is a judgment call. Score (-5 to +5) Overall Potential of the Business Idea Based on Each Part Part 1: Strength of Business Idea High potential Moderate potential Low potential    Part 2: Industry-Related Issues High potential Moderate potential Low potential    Part 3: Target Market and Customer-Related Issues High potential Moderate potential Low potential    Part 4: Founder- (or Founders-) Related Issues High potential Moderate potential Low potential    Part 5: Financial Issues High potential Moderate potential Low potential    Overall Assessment High potential Moderate potential Low potential    Suggestions for Improving the Potential Summary—briefly summarize your justification for your overall assessment: Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Full Feasibility Analysis From “Preparing Effective Business Plans” by Bruce R. Barringer Note: All fields can be expanded to provide additional space to respond to the questions. A copy of this template, along with each of the assessment tools, is also available in PDF format at the authors’ Web site at www.prenhall.com/entrepreneurship. Introduction A. Name of the proposed business B. Name of the founder (or founders) C. One paragraph summary of the business Part 1: Product/Service Feasibility Issues Addressed in This Part A. Product/service desirability B. Product/service demand Assessment Tools Concept Statement Test • • • Write a concept statement for your product/service idea. Show the concept statement to 5 to 10 people. Select people who will give you informed and candid feedback. Attached a blank sheet to the concept statement, and ask the people who read the statement to (1) tell you three things they like about your product/service idea, (2) provide three suggestions for making it better, (3) tell you whether they think the product or service idea is feasible (or will be successful), and (4) share any additional comments or suggestions. Summarize the information you obtain from the concept statement into the following three categories: * Strengths of the product or service idea—things people who evaluated your product or service concept said they “liked” about the idea * Suggestions for strengthening the idea—suggestions made by people for strengthening or improving the idea * Overall feasibility of the product or service concept—report the number of people who thing the idea is feasible, the number of people who think it isn’t feasible, and any additional comments that were made Other comments and suggestions * Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Buying Intentions Survey • Distribute the concept statement to 15 to 30 prospective customers (do not include any of the people who completed the concept statement test) with the following buying intentions survey attached. Ask each participant to read the concept statement and complete the buying intentions survey. Record the number of people who participated in the survey and the results of the survey here. • Along with the raw data recorded here, report the percentage of the total number of people you surveyed that said they would probably buy or definitely would buy your product or service if offered. This percentage is the most important figure in gauging potential customer interest. • One caveat is that people who say that they intend to purchase a product do not always follow through, so the numbers resulting from this activity are almost always optimistic. Still, the numbers provide you with a preliminary indication of how your most likely customers will respond to your potential product or service offering. How likely would you be to buy the product or service described above? ______ Definitely would buy ______ Probably would buy ______ Might or might not buy ______ Probably would not buy ______ Definitely would not buy Additional questions may be added to the buying intentions survey. Conclusion (expand fields and report findings, in discussion form, for each area) A. Product/service desirability B. Product/service demand C. Product/service feasibility (circle the correct response) Not Feasible Unsure Feasible D. Suggestions for improving product/service feasibility. Part 2: Industry/Market Feasibility Issues Addressed in This Part A. Industry attractiveness B. Target market attractiveness C. Timeliness of entry into the target market Assessment Tools Industry Attractiveness • To the extent possible, assess the industry at the five-digit NAICS code level your potential business will be entering. Use a broader industry category (less NCICS digits) if appropriate (http://www.census.gov/epcd/www/naicstab.htm). • Assess the attractiveness of the industry the potential business plans to enter on each of the following dimensions. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Industry Attractiveness Assessment Tool (used to assess the broad industry, rather than the specific target market, you plan to enter) Low Potential Moderate Potential High Potential 1. Number of competitors Many Few None 2. Age of industry Old Middle aged Young 3. Growth rate of industry Little or no Moderate growth Strong growth growth 4. Average net income for Low Medium High firms in the industry 5. Degree of industry Concentrated Neither Fragmented concentration concentrated nor fragmented 6. Stage of industry life cycle Maturity phase or decline phase “Ambivalent” Importance of industry’s products and/or services to customers 8. Extent to which business Low and environmental trends are moving in favor of the industry 9. Number of exciting new Low product and services emerging from the industry 10. Long-term prospects Weak 7. Growth phase Emergence phase “Would like to have” “Must have” Medium High Medium High Neutral Strong Target Market Attractiveness • Identify the portion or specific market within your broader industry that you plan to target. • Assess the attractiveness of the target market on each of the following dimensions. Target Market Attractiveness Assessment Tool (used to assess the specific target market, rather than the broader industry, you plan to enter) Low Potential Moderate Potential High Potential 1. Number of competitors Many Few None in target market 2. Growth rate of firms in Little to no Slow growth Rapid growth the target market growth 3. Average net income for Low Medium High firms in the target market Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall 4. 5. 6. 7. 8. Methods for generating revenue in the industry Ability to create “barriers to entry” for potential competitors Degree to which customers feel satisfied by the current offerings in the target market Potential to employ low cost guerrilla and/or buzz marketing techniques to promote the firm’s product or services Excitement surrounding new product/service offerings in the target market Low Potential Unclear Moderate Potential Somewhat clear High Potential Clear Unable to create May or may not be able to create Can create Satisfied Neither satisfied or dissatisfied Unsatisfied Low Moderate High Low Medium High Market Timeliness • Determine the extent to which the “window of opportunity” for the proposed business is open or closed based on the following criteria. • Determine the timeliness of entering a specific target market based on other criteria. Market Timeliness Assessment Tool Low Potential 1. Buying mood of Customers are customers not in a buying mood 2. Momentum of the market Stable to losing momentum 3. Need for a new firm in the Low market with your offerings or geographic location 4. Extent to which business Low and environmental trends are moving in favor of the target market 5. Recent or planned Large firms entrance of large firms entering the into the market market Moderate Potential Customers are in a moderate buying mood Slowly gaining momentum Moderate High Potential Customers are in an aggressive buying mood Rapidly gaining momentum High Medium High Rumors that large firms may be entering the market No larger firms entered the market or are rumored to be entering the market Conclusion (expand fields and report findings, in discussion form, for each area) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall A. B. C. D. E. Industry attractiveness Target market attractiveness Market timeliness Industry/market feasibility (circle the correct response) Not Feasible Unsure Suggestions for improving industry/market feasibility. Feasible Part 3: Organizational Feasibility Issues Addressed in This Part A. Management prowess B. Resource sufficiency Assessment Tools Management Prowess • Use the following table to candidly and objectively rate the “prowess” of the founder or group of founders who will be starting the proposed venture. Management Prowess Assessment Tool Low Potential 1. Passion for the business Low idea 2. Relevant industry None experience 3. Prior entrepreneurial None experience 4. Depth of professional Weak and social networks 5. Creativity among Low management team members 6. Experience and expertise None in cash flow management 7. College graduate No college education Moderate Potential Moderate High Potential High Moderate Extensive Moderate Extensive Moderate Strong Moderate High Moderate High Some college education but not currently in college Graduated or are currently in college Resource Sufficiency Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • • The focus in this section is on nonfinancial resources. Use the following table to rate your “resource sufficiency” in each category. The list of resources is not meant to be exhaustive. A list of the 6 to 12 most critical nonfinancial resources for your proposed business is sufficient. An explanation of the rating system used in the first portion of the table is as follows: 1 Available 2 Likely to be available: will probably be available and will be within my budget 3 Unlikely to be available: will probably be hard to find or gain access to, and may exceed my budget 4 Unavailable 5 NA: not applicable for my business Resource Sufficiency Assessment Tool Ratings Resource Sufficiency 1 2 3 4 5 Office space 1 2 3 4 5 Lab space, manufacturing space, or space to launch a service business 1 2 3 4 5 Contract manufacturers or outsource providers 1 2 3 4 5 Key management employees (now and in the future) 1 2 3 4 5 Key support personnel (now and in the future) 1 2 3 4 5 Key equipment needed to operate the business (computers, machinery, delivery vehicles) 1 2 3 4 5 Ability to obtain intellectual property protection on key aspects of the business 1 2 3 4 5 Support of local and state government if applicable for business launch 1 2 3 4 5 Ability to form favorable business partnerships Ratings: Strong, Neutral, or Weak Proximity to similar firms (for the purpose of knowledge sharing) Proximity to suppliers Proximity to customers Proximity to a major research university (if applicable) Conclusion (expand fields and report findings, in discussion form, for each area) Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall A. B. C. D. Management prowess Resource sufficiency Organizational feasibility (circle the correct response) Not Feasible Unsure Suggestions for improving organizational feasibility Feasible Part 4: Financial Feasibility Issues Addressed in This Part A. Total startup cash needed B. Financial performance of similar businesses C. Overall financial attractiveness of the proposed venture Assessment Tools Total Start-Up Cash Needed • • • The startup costs (which include capital investments and operating expenses) should include all the costs necessary for the business to make its first sale. New firms typically need money for a host of purposes, including the hiring of personnel, office or manufacturing space, equipment, training, research and development, marketing, and the initial product rollout. At the feasibility analysis stage, it is not necessary for the number to be exact. However, the number should be fairly accurate to give an entrepreneur an idea of the dollar amount that will be needed to launch the firm. After the approximate dollar amount is known, the entrepreneur should determine specifically where the money will come from to cover the startup costs. The total startup cash needed can be estimate using the following table. Total Startup Cash Needed (to Make First Sale) Capital Investments Amount Property Furniture and fixtures Computer equipment Other equipment Vehicles Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Operating Expenses Legal, accounting, and professional services Advertising and promotions Deposits for utilities Licenses and permits Prepaid insurance Lease payments Salary and wages Payroll taxes Travel Signs Tools and supplies Starting inventory Cash (working capital) Other expense 1 Other expense 2 Amount Total Startup Cash Needed = Comparison of the Financial Performance of Proposed Venture to Similar Firms • Use the following tables to compare the proposed new venture to similar firms in regard to annual sales (Year 1 and Year 2) and profitability (Year 1 and Year 2). Comparison of the Financial Performance of Proposed Venture to Similar Firms Assessment Tool Annual Sales Estimate of Proposed Venture’s Annual Sales—Year 1 Estimate of Year 1 Sales __________ Explanation of How the Estimate Was Computed Summary: How proposed annual sales, on average, compares to similar firms (circle one) Below Average Average Above Average Estimate of Year 2 Sales __________ Summary: How proposed annual sales, on average, compares to similar firms (circle one) Below Average Average Above Average Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Net Income Estimate of Proposed Venture’s Net Income—Year 1 Estimate of Year 1 Net Income __________ Explanation of How the Estimate was Computed Summary: How proposed net income, on average, compares to similar firms (circle one) Below Average Average Above Average Estimate of Year 2 Net Income __________ Summary: How proposed net income, on average, compares to similar firms (circle one) Below Average Average Above Average Overall Financial Attractiveness of the Proposed Venture • The following factors are important in regard to the overall financial attractiveness of the proposed business. • Assess the strength of each factor in the following table. Overall Financial Attractiveness of Proposed Venture Assessment Tool Low Potential Moderate Potential High Potential 1. Steady and rapid growth in Unlikely Moderately likely Highly likely sales during the first one to three years in a clearly defined target market 2. High percentage of Low Moderate Strong recurring income—meaning that once you win a client, the client will provide recurring sources of revenue 3. Ability to forecast income Weak Moderate Strong and expenses with a reasonable degree of certainty 4. Likelihood that internally Unlikely Moderately likely Highly likely generated funds will be available within two years to finance growth 5. Availability of exit Unlikely to be May be available Likely to be opportunity for investor if unavailable available applicable Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Conclusion (report finding for each area) A. Total startup cash needed B. Financial performance of similar businesses C. Financial feasibility (circle the correct response) Not Feasible Unsure D. Suggestions for improving financial feasibility Overall Feasibility: Summary and Conclusion Overall Feasibility of the Business Idea Based on Each Part Product/Market Feasibility Not feasible  Unsure  Feasible  Industry/Market Feasibility Not feasible  Unsure  Feasible  Organizational Feasibility Not feasible  Unsure  Feasible  Financial Feasibility Not feasible  Unsure  Feasible  Overall Assessment Not feasible  Unsure  Feasible  Feasible Suggestions for Improving the Feasibility Conclusion—briefly summarize your justification for your overall assessment. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
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