Chapter-2 New Ventures and Business Plan
Chapter-2 New Ventures and Business Plan
Chapter-2 New Ventures and Business Plan
a).Product or Service-
If your products/services are not unique, you must find a
way to position your products/services in the mind of
your customer and to differentiate them from the
competition. Positioning is the process of
establishing your image with prospects or customers.
(Examples include: highest quality, lowest price, wider
selection, Best customer service, faster delivery, etc.)
eg- Dell distinctive from others they are assembled
from off shelf components & are marketed with direct
marketing & internet techniques promising quick
delivery & low prices. It also provides extensive
customer service with e-mail & telephone available to
ask technical & non technical questions. Packaging
,price ,warranty, style service etc
b). Pricing – Pricing Strategies
1) What will be your pricing strategies? (For example: Premium, Every
Day Low Price, Frequent Sale Prices, Meet Competitor Price, etc.)
2) How will you compare with competition and how will they respond?
3) Why will customers pay your price?
4) What will be your credit policies?
5) Is there anything about your business which insulates you from price
competition?
6) Can you add value and compete on issues other than price
Cost
Mark-ups or margins-A standard mark-up for cosmetics is 100% on cost
expected to cover overhead cost & some profit. Standard mark-ups can
be ascertained from trade publications or by asking suppliers
Competition-
"Who is your competition?" is one of the first questions a
banker or investor will ask. Business by nature is
competitive, and few businesses are completely new. If
there are no competitors, be careful; there may be no
market for your products.
Expand your concept of competition. If you plan to open
the first roller skating rink in town, your competition
includes movie theaters, malls, bowling alleys, etc.
Basic Questions:
1) Which products cannot be easily differentiated
entrepreneur charges the same price
Higher price if the product or service has unique
benefits, ( innovations such as technology products,
plasma televisions to recover high development cost
In a non differentiated product higher price would be
charged if the entrepreneur would provide additional
services to the customer in case of T- Shirt such as money
back guarantee, a warranty against fading or free delivery.
Although these services would increase the cost of the
entrepreneur they would establish a distinctive image
c). Distribution-
- Provides utility to the consumers
- A high quality product will be distribute in outlets that
have a high image
- If the mkt is concentrated is concentrated ,the
entrepreneur may consider direct sales .if it is
dispersed the cost of direct sales would be more
- Attributes such as perishables, expensive, bulky would
require direct channel
- Middlemen add impt value to the product
- Multiple channels such as retail stores, websites,
catalogs
d). Promotion
- Inform & educate the consumers
- For a local service or retail company Television would
be expensive unless the entrepreneur considers a cable
television a viable outlet
- Larger markets can be reached using the internet
direct mail, trade magazine or newspapers
- Professionally written news releases releases about the
venture & its products & services are often of interest
to media.
e). Marketing strategy – Consumer/ business markets-
- In marketing to consumers direct mail & the internet
& to business it uses its own sales force.
- The sales force calls on business with a intention of
selling a large volume at one transaction
- For a start up venture the attendance at a trade show
can be one of the effective means to reach many
potential buyers in one location.
f). Budgeting the marketing strategy
- Effective planning decisions must also consider the
costs involved in the implementations of these
decisions
g). Implementation of the mktg plan- It is not a
formality that serves as a superficial document to
outside financial supporters or suppliers. It should be
coordinated & implemented
8. Organizational Plan –
-It describes the ventures form of ownership i.e
proprietorship, partnership or corporation.
- If the venture is partnership , the terms of the
partnership should be included. If the venture is a
corporation , it is important to detail the names
addresses & resumes of the directors & offices of the
corporation.
- Provide an organization chart indicating the line of
authority & responsibility of the organization.
Organization structure
- What is the form of ownership
- If a partnership, who are he partners & what are the terms of
agreement
- If incorporated who are the principal shareholder & how much stock
do they own
- How many shares of voting & non voting have been issued & of what
type
- Who are the members of the board of directors
- Who has cheque signing authority & control
- Who are the members of the management team & what are their
backgrounds
- What are the roles & responsibilities of each member of the mgt team
- What are the salaries bonuses or other forms of payt for each member
of the mgt team
9. Assessment of risk-
- The entrepreneur should indicate the potential risks to
the new venture
- What happens if these risk become reality
- Discuss the strategy that will be employed to either
prevent minimize or respond to the risks if they occur
- Risk may arise from competitors reaction, weakness in
production or mgt team, new advance in technology
10. Financial Plan-
- It determines the potential investment commitment related to
the new venture & indicates whether the business plan is
economically feasible.
- The entrepreneur should summarize the forecasted sales &
expenses for at least first 3 years ,projections provided monthly
-It includes forecasted sales, general & administrative expenses.
- Cash flow figures for 3 years , since bills have to be paid at
different times of the year determine cash on a monthly basis
- Sales may be irregular & receipts from customers may also be
spread out necessitating borrowing of short tern funds to meet
fixed expenses such as salaries & utilities
- The projected balance sheet which shows the financial condition
of the business at a specific time.
11.Appendix-
- Any back up material that is not necessary in the text
of the document
- Letters from customers, distributors, subcontractors
- Leases, contracts agreements
- Price list from suppliers
Sources of business idea
Consumers
Existing products and services
Distribution channels
Government
Research and development
Methods of generating ideas
Focus groups
Brainstorming
Problem inventory analysis