assignment-introduction

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Assignment

Introduction

When
venture capitalists are asked what they consider most carefully when deciding
whether or not to fund a new venture, they consistently respond: “We are most
concerned with the quality of the management team and the quality of the
business plan.”

The
business plan is an important component of a business start-up. It forces the
business owner and his/her management team to reflect seriously on the goals of
their venture and the steps necessary to launch and maintain it successfully.
The very act of constructing a business plan offers an important learning
experience to the business owner, because it requires him/her to take a
comprehensive view of all aspects of the new venture: organizational,
financial, marketing/sales, legal, operational, and IT.

Outside
investors find the business plan to be important because it offers them a
revealing picture of how the new venture will be organized and what it will
achieve. Of equal importance, the business plan enables them to determine how
effective the owner and his/her management team will be in launching and
maintaining the venture. If the business plan is poorly written, inconsistent,
and unrealistic, then the investors will not fund the venture, because they
know that it will likely fail. If you cannot write a compelling business plan,
then it is unlikely that you will be able to establish a viable business. On
the other hand, a well-crafted, compelling, and realistic business clan
suggests that the owner and his/her management team know what they are doing.

This
assignment has you put together a short business plan. In constructing it,
follow the outline provided later in this guide. As you organize and write it,
keep reminding yourself that the point of the document is to force you to think
through the most significant issues needed to launch and maintain the business
successfully, and to convince investors to provide you with funds because you
have a good money-making idea and know what you are doing.

Selecting a business
venture

Write
a business plan for one of the two following ventures:

  • Option A. Expanding a one-store
    operation to a two-store operation

Assume you currently run a small
retailing business in the lobby of a large office building. Your store occupies
1000 square feet of space. You spend fifty hours a week at the store and hire
two employees, each of whom spends thirty hours a week at the store. Your
annual revenues are between $150,000 – $300,000 a year. The products you sell
are a mixed bag of items. Basically, you stock up with items that occupants of
the office building will want, including snacks, pre-wrapped sandwiches,
bottled/canned beverages, greeting cards, newspapers, paperback books, and
small gift items that the building’s tenants might find attractive.

A new office building will open two
blocks away from the building you now occupy. You would like to expand your
business to that building. In fact, you begin to dream that you can establish a
chain of such stores in large buildings downtown. You have even cooked up a
name for the potential chain, “Buster’s” (named after your pet Labrador retriever).

At
this point, you are not sure how you want to fund the expansion. You need to
put together a business plan to develop a sense of the financial requirements
of the new operation. You may decide to fund it using your savings and by
taking out a second mortgage on your house. Three other options are to borrow
money from the bank, borrow money from friends and family, or to have
friends/family assume an equity role in your business as investors. In any
event, your business case would be used to borrow the money or to attract
investors.

Write a business plan that describes
this proposed venture.

  • Option B. Establishing Nerd
    Patrol ,a computer services company

John Robbins, Mary Singh, and Nabil
Quresh are best friends in college. John and Mary are computer science majors,
while Nabil receives his degree in business administration. After graduating,
each goes his/her separate way. John and Mary work as systems engineers in
large technology companies, while Nabil joins the sales staff of a software
engineering services company. Both John and Mary become fully certified on
Microsoft and Oracle software products.

Five years after graduating, the three
friends get together and toy with the idea of setting up a company to provide
individuals and small businesses with a full range of computer and networking
services including hardware and software upgrades, hardware repairs, debugging
software problems, dealing with network problems, . They would model their
business after the established franchise, Geek Squad. They would call their
service Nerd Patrol.

In putting together their business
plan, they have a wide range of options they can pursue. For example, they can
start cautiously, with John being the only full-time employee at the outset,
then having Mary and Nabil join the venture later (low start-up costs). Or else
they can try launch Nerd Patrol as a full-fledged operation (high start-up
costs). Identify a strategy that they can pursue, then develop a business plan
that describes their proposed venture.

Outline of the Business
Plan Document

In
the world of real business, business plans can take on a variety of shapes and
sizes. They may range in length from a few pages to hundreds of pages,
depending on the nature of the venture. They can be filled with detailed
financial and marketing data, or simply a brief sketch of financial and
marketing requirements – depending on how much data are available. They can be
highly structured or casual. There is no one best way to structure a business
plan.

In
this assignment, you should keep the business plan short: 10-15 pages of text,
typed single-spaced, using 12-point font. Charts and tables are extra. You
should also employ the following outline, which captures the chief elements of
typical business plans:

1) Introduction
and brief description of the

venture

a) Introduction (e.g., “This business
plan describes a proposed venture to expand Buster’s from a one-store to
two-store operation.”)

b) Description of the business (“Buster’s
is a small store located in the lobby of a large office building …”)

c) Business aspirations (e.g.,
“Ultimately, we hope to expand Buster’s so that it becomes a chain of 10-15
stores situated in downtown office buildings.”)

2) Organization
of the business and key players

(e.g., “Marsha Jones is owner and principal manager of Buster’s. The current
store employs two people, each of whom works at the store 30 hours a week … The
proposed store will be managed by Ms. Jones …”)

a) Owner(s) – role(s) and qualifications

b) Company legal structure (e.g., sole
proprietorship, partnership, LLP, S-Corporation, C-corporation)

c) Management team – roles and
qualifications

d) Employees – roles and qualifications

e) Contractors/vendors (as appropriate) –
roles and qualifications

3) Financials

a) Anticipated operating costs of the new
business (e.g., What are the anticipated expenses of operating the business in
a typical month?)

b) Anticipated investment requirements to
launch the new venture (e.g., furnishing facilities, inventory purchases,
meeting payroll during the first six months of operation)

c) Anticipated revenue

d) Pro-forma cash flow projection for the
first year of operation

REVENUES

Month 1

Month 2

Month 3

Month 4

Etc.

Rev source A

Rev source B

Etc.

TOTAL
REV

COSTS

Rent

Payroll

Materials

Etc.

TOTAL
COST

NETCASH
FLOW

e) Payback point (taken from the pro
forma cash flow statement)

f) Anticipated return on investment from
the perspective of three years into the venture

4) Marketing/Sales

a) Summary of a marketing/sales strategy

b) Marketing/sales requirements for the
business

i) Price of goods/services

ii) Product

iii) Promotion

iv) Place

c) Competition

5) Operations

a) Location of the business

b) How the business will be operated
(e.g., hours of operation, procedures to produce goods/services, special
operations issues)

6) Legal
and sundry issues

a) Legal and related issues that need to
be addressed (e.g., Liability, intellectual property, structuring the business,
commercial law issues, etc.)

b) How legal issues will be handled
(e.g., in-house attorney, use of outside legal services)

7) Major
challenges

a) A realistic assessment of the
challenges facing the new venture

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