Procedure of preparation business-plan

%20understand%20what%20motivates%20people:%20"You%20have%20to%20find%20out%20how%20to%20press%20the%20"hot%20buttons"%20that%20turn%20consumers%20on,%20and%20this%20reality%20means%20gaining%20an%20understanding%20of%20what%20motivates%20<>%20them%20in%20real-life%20situations.%20To%20turn%20people%20on,%20you%20must,%20first,%20find%20out%20what%20they%20really%20want,%20and%20then,%20show%20them%20how%20to%20get%20it.the%20dynamics%20of%20customer%20needs:%20understanding%20customer%20needs%20will%20help%20you%20define%20new%20market%20opportunities%20<>%20and%20drive%20innovation%20and%20revenue%20growth%20in%20every%20aspect%20of%20your%20organization.the%20new%20rapidly%20changing%20economy%20<>,%20however,%20customer%20predictability%20is%20dead.%20Whatever%20a%20customer%20wants%20today%20may%20not%20be%20what%20he%20or%20she%20wants%20tomorrow.%20Or%20he%20or%20she%20may%20want%20more%20of%20it.%20If%20you're%20offering%20low%20prices,%20customers%20want%20those%20prices%20slashed%20further.%20If%20you're%20offering%20state-of-the%20art%20products,%20they%20want%20them%20newer%20still.%20In%20meeting%20ever-increasing%20customer%20demands%20for%20lower,%20faster,%20better,%20and%20newer,%20companies%20are%20driving%20themselves%20and%20their%20competitors%20to%20the%20brink.can't%20predict%20the%20future,%20but%20by%20establishing%20effective%20change%20management%20<>%20practices%20you%20can%20be%20ready%20for%20whatever%20it%20brings.different%20types%20of%20interaction:%20you%20don't%20need%20a%20degree%20in%20psychology%20to%20compete%20successfully%20in%20the%20marketplace,%20but%20you%20do%20need%20some%20way%20to%20figure%20out%20the%20different%20styles%20of%20interaction%20different%20people%20prefer%20to%20use.%20People%20tend%20to%20lead%20their%20decision-making%20process%20with%20one%20of%20the%20four%20functions:%20intuition,%20thinking,%20feeling,%20and%20sensing.%20Vividly%20differentiated%20differences%20that%20are%20anchored%20to%20a%20product%20and%20engage%20the%20above%20functions%20can%20enhance%20memory%20of%20your%20current%20and%20prospective%20customers.continuous%20customer%20research:%20if%20you%20want%20to%20develop%20a%20new%20product%20or%20service,%20exploratory%20market%20and%20customer%20research%20should%20be%20an%20essential%20and%20continuous%20component%20of%20the%20process.%20It%20provides%20the%20foundation%20and%20platform%20for%20effective%20idea%20generation%20and%20creativity%20management.%20"It%20describes%20customer%20or%20consumer%20needs,%20wants,%20gripes,%20complaints,%20and%20problems%20that%20each%20have%20about%20the%20performance%20of%20a%20certain%20activity,%20function,%20process,%20life%20event,%20or%20product.%20This%20research,%20prior%20to%20idea%20generation,%20provides%20the%20basis%20for%20setting%20up%20a%20problem%20-%20solving%20mindset%20towards%20idea%20generation".explore%20customer%20needs%20and%20wants,%20examine%20external%20market%20and%20competitive%20trends,%20ascertain%20potential%20needs%20and%20wants%20of%20each%20customer%20segment%20and%20character%20type,%20identify%20problems%20that%20customer%20cite,%20observe%20people%20to%20discover%20their%20unrealized%20needs.>Know your customer <> understand what motivates people: "You have to find out how to press the "hot buttons" that

Procedure of preparation business-plan



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20business%20plan%20form%20the%20basis%20for,%20and%20should%20flow%20into,%20your%20financial%20statements%20and%20projections%20in%20some%20manner.%20When%20it%20gets%20down%20to%20it,%20your%20reader%20wants%20to%20know%20if%20and%20when%20you%20will%20make%20money%20and%20become%20profitable.%20Bankers%20and%20investors%20are%20familiar%20with%20the%20correct%20content,%20organization%20and%20presentation%20of%20financial%20statements,%20and%20expect%20to%20see%20them%20in%20your%20business%20plan.%20Don't%20cut%20corners%20or%20attempt%20to%20devise%20your%20own%20method%20of%20financial%20and%20pro%20forma%20statement%20presentation.">Provide in Appendix a full set of cohesive financial statements: startup costs, break-even analysis, balance sheet <>, income statement <> and cash flow forecast <>, for a period of 3 to 5 years, including loan amortization schedule, and detailed assumptions for each line item, breakeven analysis, personal financial statement for all owners, co-signers.plan will be highly scrutinized by your business plan reader. All the ideas, concepts and strategies discussed throughout your entire business plan form the basis for, and should flow into, your financial statements and projections in some manner. When it gets down to it, your reader wants to know if and when you will make money and become profitable. Bankers and investors are familiar with the correct content, organization and presentation of financial statements, and expect to see them in your business plan. Don't cut corners or attempt to devise your own method of financial and pro forma statement presentation.

Cash Flow Analysis & Forecast.

Companies submitting their business plans to venture capitalist investors must prepare financial forecasts, usually for a period of three to five years. Monthly statements are to be shown until the breakeven point or profitability is reached. Thereafter, quarterly statements should be prepared for two years, followed by yearly data for the remaining timeframe. It is also imperative that the forecasts include a footnote section that explains the major assumptions used to develop revenue and expense use in forecasts:plan should state an average selling price per unit along with the projected number of units to be sold each reporting period. Sales prices should be competitive with similar offerings in the market and should take into consideration the cost to produce and distribute the product.forecast should provide accurate unit cost data over the reporting period, taking into consideration the labor, material, and overhead costs to produce each unit. A good grasp on initial product costing is recommended so it is protected against price pressure from competitors.should include enough of cash cushion for a major rework of the first major product of the company, at least six month' worth of burn rate. Product development expenses should be closely tied to product introduction timetables elsewhere in the plan. Investors will focus on these assumptions because further rounds of financing may be needed if major products are not introduced on time.other expense categories such as headcount, selling and administrative costs, space, and major promotions should be taken into consideration.

">Balance sheet <>

The balance sheet should agree with the income and cash flows statement. Consideration should be given to the level of inventory and capital expenditures required to support the projected sales level. Capital expenditures should be limited at the outset to current requirements. It is generally better to rent or lease capital equipment in the first few years in order to conserve cash for marketing and selling expenses that will generate sales.

Income Statement

The income statement is where a planner makes a case for the business potential to generate cash. This document is where the writer records revenue, expenses, capital, and cost of goods. The outcome of the combination of these elements demonstrates how much money a business made or will make, or lost or will lose, during the year. An income statement and a cash flow statement differ in that an income statement does not include details of when revenue was collected or expenses paid. Accrual accounting and cash basis accounting methods will influence the bottom line shown. While the legal implications for these methods are most pertinent to the IRS, an astute investor will detect any "slight of hand" that may be used to show the figures in the best light. For this reason a business planner should employ the skills of a CPA who is also a business oriented consultant.income statement projected for a business plan should be broken out by month the first year. The second year can be broken down quarterly, and annually for each year after. Analyze the results of the income statement briefly and include this analysis in the business plan. If the business already exists, include income statements for up to five previous years. As with all financial documents, having the income statement prepared or at least reviewed by a reputable accountant is money well spent. Any exceptional data should be explained.


5.2 Sources of Capital


%20you%20need,%20explain%20clearly%20the%20">If the business plan is aimed to attract investors, define type of capital <> you need, explain clearly the %20and%20how%20you%20expect%20to%20provide%20them%20with%20a%20return%20on%20their%20investment%20<>;%20note%20additional%20expected%20rounds%20of%20financing%20needed.">investors exit strategy <> and how you expect to provide them with a return on their investment <>; note additional expected rounds of financing needed.

Types of Venture Finance

The funding package may contain various forms of finance. The three main types are ordinary shares (equity), preference shares, and loans.shares are proprietor's capital, and they normally carry full voting rights. They also carry the greatest risk and potentially the greatest reward, for two reasons. The first is that they are rewarded in the form of dividends after all other costs have been met. The second is that they are entitled to any surplus that remains after all other claims to capital have been met if the company is wound up. Certain classes of ordinary shares may carry deferred or preferred rights in certain respects.shares give their holders certain rights in priority to the ordinary shareholders, especially as regards entitlement to dividends and entitlement to repayment of capital if the company is wound up. They are normally rewarded at a fixed rate or dividend but may have rights to participate in profits by way of further dividend. Except in special circumstances, they do not normally carry voting rights. Sometimes, preference shares carry conversion and/or redemption rights enabling the holders either to convert their investment into ordinary shares or to realize it at a some future date.may be secured on the company's assets. In addition, they may be converted later into ordinary shares. They rank ahead of shares for the repayment of capital. The interest is at a fixed rate irrespective of the company's profits or losses and may be subject to periodic review.are variations within each of these classes, and there may also be other elements in the financing package.

Timing your Financing

Most popular strategy is staged financing. This is a process of timing each stage of financing to coincide with the achievement of a significant milestone.investor wants to have a clear understanding of how you expect to provide them with a return on their investment. This may involve a public offering or other innovative mechanisms. Since the rate of return is their most important consideration and a public offering is sometime not an option, investors will be looking for a variety of exit strategies. The following are examples of some traditional ways for investors to realize a return on their investment.


6. Risk Management


In business, you can never allow yourself to get comfortable with the status quo, because it is always changing. Surprises may be fatal to your inevitable, avoiding risk impossible. Risk management is the key, always tilting the venture in favor of reward and away from risk.all opportunities are associated with risk, the biggest risk is to miss them. Risk results usually not from unpredictability but from ignorance. The more you know about what you are doing, the less risk you run. If you can define risks, you can limit them. Look back on any opportunities you missed and use your past mistakes to learn how to recognize opportunities.any its development stage, the company faces the five major risks that change in nature as company evolves:risk;risk;risk;risk;and management risk.cannot avoid these risks, but you can manage them.

7. Technology / System Summary


Companies build up their portfolio by applying for more patents. In addition, they are licensing and cross-licensing technology

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