(BUS511) Opportunities and the Business Plan Writing

Introduction

The ability to quickly and efficiently reject ideas is a very important entrepreneurial skill. The text provides two methodologies to evaluate ideas. The first, QuickScreen should enable you to conduct a preliminary review and evaluation of an idea in about an hour. The second, Venture Opportunity Screening Exercises (VOSE) segment the screening of opportunities in more detail into manageable pieces. These exercises provide a map of how to think about the tough legwork of good due diligence. If an opportunity is identified, they provide the foundation for development of the complete business plan.

Superior businesses have four anchors:

1. They create or add significant value to a customer or end user.
2. They do so by solving a significant problem, or meeting a significant want or need, for which someone is willing to pay a premium.
3. They have robust market, margin, and moneymaking characteristics: large enough, high growth, high margins, strong and early free cash flow, high profit potential, and offer attractive realizable returns for investors.
4. They are a good fit with the founders and management team at the time and marketplace and with the risk-reward balance.

Next, we will examine opportunities for social entrepreneurship. Social entrepreneurship encompasses for-profit and not-for-profit ventures and has become a global movement – a movement with a goal to effect positive social change. On the surface, we know social entrepreneurship is a good thing, but on further study it becomes quite apparent that social entrepreneurship is a complicated phenomenon and difficult to define. A single, definite view of social entrepreneurship is not necessarily important. What is most important is to understand the key differentiating factors between social entrepreneurship and traditional entrepreneurship while also realizing that there is not just one type of social entrepreneurship. The primary difference between traditional entrepreneurship and social entrepreneurship is the intended mission. Social entrepreneurs develop ventures with a mission to solve a pressing social problem.

Finally, this lesson explores the business plan. The business plan is a great way for you and your current and/or prospective partners to learn about the business and to gain critical insights into each other’s style, strengths and weaknesses, and how you will work together. It will give you intimate knowledge of the “four anchors” noted earlier, including key ingredients such as the opportunity, the buyer and user, the market and competition, the economic and financial characteristics of the business, and the likely entry strategy. It is a great tool with which to communicate and to persuade stakeholders, including potential backers, team members, key new hires, directors, brain trust prospects, and strategic partners.

The business plan will prevent (or at least minimize) any temptation to jump ahead prematurely, as well as limit sloppiness with regard to the hard thinking, the necessary research, and creative problem solving. It will test your commitment and prevent your heart from getting too far ahead of your head (falling in love with your idea and losing your objectivity). It will save you time, help you avoid common mistakes, and help create order out of what is fundamentally a chaotic and, in many respects, unpredictable and unplannable event – a core paradox of the entrepreneurial process – as suggested in the opening quotation by George Burns. It will help you create the best – but not perfect – road map and blueprint for you and your team to move ahead. And it can be changed.

When is a Business Plan Not Needed? Legendary exceptions are from either genius-type entrepreneurs (such as Bill Gates or the Google founders) or very experienced ones. Entrepreneurs who have previously made investors wealthy with their last ventures typically can raise capital for their next ventures without exhaustive start-up plans.

There is an enormous difference between screening an opportunity and developing a business plan. A business plan can have two uses:

1. Inducing someone to part with the money.
2. Guiding the policies and actions of the firm over a number of years.

The business plan itself is the end result of a usually lengthy, arduous, creative, and iterative process. The plan will carefully articulate the merits, requirements, risks, and potential rewards of the opportunity.

The business plan for a high potential venture shows four anchors:

1. Create or add significant value to a customer or end user.
2. Solve a significant problem or meet a significant want or need for which someone will pay a premium.
3. Have robust market, margin, and money-making characteristics.
4. Fit well with the founder(s) and management team at the time, in the marketspace, and with the risk-reward balance.

The plan begins the investor’s due diligence process to ascertain potential and identify risks of the venture including:

• Technology risks.
• Market risks.
• Management risks.
• Competitive and strategic risks.
• Financial risks.

Establishing relationships between the founder and the investor is a crucial part of the evaluation process. Investors evaluate the founders’ attitudes and abilities. The entrepreneur evaluates the value potential investors can bring to the venture.

Today the business plan is obsolete before it even goes to the printer. Technology and the global marketplace have shortened the already brief life expectancy of any business plan. Flexibility and responsiveness become critical survival skills. The business plan is a work in progress—it can never be finished. The entrepreneur must be prepared to continually adjust course to minimize risk and ensure success.

Lesson Learning Objectives

By the conclusion of this lesson you should be able to:

• Effectively utilize two screening methodologies—QuickScreen and Venture Opportunity Screening Exercises (VOSE)—that can help you to determine whether your ideas are potential opportunities.
• Apply opportunity criteria to your ideas and begin to assess the probable fit with you, your team, and resources, and the balance of risk and reward.
• Articulate with more creativity and depth what you need to do to improve both the fit and the risk and reward relationship.
• Determine whether an idea has sufficient potential to pursue the development of a thorough business plan.
• Assess whether you believe you can sufficiently alter the idea and your strategy to create a good fit and an attractive risk-reward balance for you and your investors.
• Utilize a model business plan; determine what needs to be included in the plan, why, and for whom. Identify some of the pitfalls in the business plan preparation process and how to avoid these.

Reading

Study Chapters 6, 7, and 8 of the text.

View the Power Points for Chapters 6, 7, and 8.

Research the Shad Business Planning Model - This template is available through Barry Bisson at Shad International. As an interactive financial tool, the model can teach you a great deal about the finances of a new venture. As a tool for developing financial projections for your income, balance sheet and cash flow statements -- this template can save you dozens, if not hundreds, of hours. The model is fully integrated so that any change in, for example, revenue, margins, or capital raised (both debt and equity) will immediately be calculated and shown on each of the three statements.

Web Resources

Chapter 6

www.start-a-business.com – Use the site tabs to explore tools for starting a business; how-to guides including tax guides, incorporation services; and domain name registrations.

Chapter 7

http://www.echoinggreen.org - Since 1987, Echoing Green has provided seed funding and support to nearly 450 social entrepreneurs with bold ideas for social change in order to launch groundbreaking organizations around the world.

http://www.netimpact.org - Net Impact is a global network of leaders who are changing the world through business.

http://www.se-alliance.org - An increasing number of organizations are working toward sustainable social innovation by applying the power of market-based strategies to advance social change. The Social Enterprise Alliance serves as a single point of reference and support and a source of education and networking lenders, investors, grant makers, consultants, researchers, and educators who recognize the increasing impact of social enterprise.

http://www.svn.org - Founded in 1987 by Josh Mailman and Wayne Silby, Social Venture Network (SVN) is a nonprofit network committed to building a just and sustainable world through business.

www.skollfoundation.org - The Skoll Foundation’s mission is to advance systemic change to benefit communities around the world by investing in, connecting, and celebrating social entrepreneurs. Social entrepreneurs are proven leaders whose approaches and solutions to social problems are helping to better the lives and circumstances of countless underserved or disadvantaged individuals.

Chapter 8

http://www.businessplans.org - Helpful business plan resources, software, & strategy.

http://www.sba.gov/starting_business - Features a “Business Plan Road Map of Success” tutorial and information on how to plan, launch, manage, and grow your business.

Assignments

The following should be completed and submitted to the course faculty via the following Assignments should be completed and submitted to the course faculty via the learning platform for evaluation and grading. Submit your responses to these questions in one WORD document. List the question first, and then your response.

Your response must adequately cover the question without being wordy or relying on “yes” or “no” responses.

Short Answer Questions

1. What are the differences between socially responsible ventures, social ventures, and enterprising nonprofits?
2. What is an example of a wicked problem facing humanity, and what types of opportunities might arise for social entrepreneurs in that space?
3. What is a business plan, for whom is it prepared, and why?
4. Who should prepare the business plan and what should a complete business plan include?
5. How is the plan used by potential investors, and what are the four anchors they are attempting to validate?
6. What is a dehydrated business plan, and when and why can it be an effective tool?
7. Please explain the expression: The numbers in the plan don’t matter.
8. How can entrepreneurs use the business plan process to identify the best team members, directors, and value-added investors?
9. Prepare an outline of a business plan tailored to a specific venture you have in mind.

Related Link: Assignment Help