529 lines
20 KiB
Plaintext
529 lines
20 KiB
Plaintext
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(word processor parameters LM=8, RM=75, TM=2, BM=2)
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Taken from KeelyNet BBS (214) 324-3501
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Sponsored by Vangard Sciences
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PO BOX 1031
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Mesquite, TX 75150
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There are ABSOLUTELY NO RESTRICTIONS
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on duplicating, publishing or distributing the
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files on KeelyNet except where noted!
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October 21, 1992
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BUSPLAN1.ASC
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I don't remember who sent us this file, but it might be useful.
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PRICE WATERHOUSE
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HIGH TECHNOLOGY INDUSTRY SPECIALTY
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OUTLINE FOR PREPARING A BUSINESS PLAN
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It is important to remember that our outline should be treated as a
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guide, and not as a rigid, all-encompassing format:
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each business is unique and its plan should reflect as much.
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It is also important to understand that no reasonable investor will
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look at your plan as indelibly etched in stone. As market
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conditions change, as company strategies evolve, as projections are
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surpassed or not reached, the plan should be updated to reflect
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revised scenarios.
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A FEW GENERALIZATIONS ABOUT BUSINESS PLANS
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o The Executive Summary is critical: This two to three page
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summary of the plan is where most investors turn first; it is
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where they decide to read on or to decline the opportunity.
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o Focus: The plan should be clear as to products to be devel-
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oped and markets to be addressed by the business. Do not say
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the company will develop a widget and sell it to General
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Motors and the grocery store down the street without detailing
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how it's to be done.
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o Avoid unsubstantiated superlatives: The "trust me" school of
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thought doesn't work in business plans -- if your product is
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going to be the best in the market, thoroughly describe why.
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o Quantity does not equal quality: The well written plan is
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succinct and to the point. The typical plan should be able
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to say it all in 30 to 50 pages.
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o First impressions are lasting impressions: Incorrect spelling,
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grammar, punctuation; numbers that don't total; a poorly
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organized plan; all can add up to sink a proposal that might
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Page 1
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otherwise float. Take the time to have the plan proofread by at
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least three other members of your team.
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o "Slick" plans can be a turnoff: Expensively prepared plans
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are often perceived as form over substance and frivolous
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spending. Don't waste scarce financial resources on a too-
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professional document.
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o Avoid the use of non-assertive language: Qualifying words
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such as "might," "probably," "maybe," "perhaps," and the like
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can have a subtly negative effect on readers; be positive or
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don't say it at all.
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------------------------------------------------------------------
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The Business Plan -- An Outline
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I. NON-DISCLOSURE AGREEMENT
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Usually the first page of the document, the non-disclosure
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agreement states that the information in the plan is
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proprietary and is not to be shared, copied, disclosed, or
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otherwise compromised. The agreement can be verbal or can
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take the form of signed documentation.
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Be prepared to negotiate on signed non-disclosures, as many
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investors balk at such agreements.
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II. CONTROL NUMBERING
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Also usually on the first page of the plan, the control
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number is cross-referenced to a journal kept by the
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entrepreneur (i.e., copy 14 issued to Jake Johns on
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September 10, 1984). Control numbering is not critical,
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but does help keep track of issued plans.
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III. THE EXECUTIVE SUMMARY
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Many consider this the most important part of the plan
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because it is what investors read first. It is the
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"tickler" through which an investor will be convinced to
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spend more time on the plan itself.
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The Executive Summary should be as short as possible, but in
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any event, should not exceed three pages. It should be a
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concise and clear highlight of what the company is all about
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and what's in it for the investor. It should include
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descriptions of the following, while at the same time
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remaining to the point:
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o The Company -- When formed
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To pursue what purpose:
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. design a new product
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. manufacturing
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. marketing
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. etc.
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Page 2
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o The Product(s) -- What are you selling
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What makes it unique
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Is it a proprietary product/other entry barriers
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At what stage is its development
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Distinguishing features from competition
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. pricing
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. quality
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. speed
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. etc.
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o The Market -- Current size
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Domestic/international
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Recent growth (cite sources)
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Projected growth (cite sources)
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Estimated company market share
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o Financial -- Financing sought:
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. for what purposes
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. will carry company how far
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Five-year revenue and net income projections
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Projection of when profits will begin
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o Management -- How complete is the team
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Brief past experience
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Highlight strengths
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------------------------------------------------------------------
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IV. TABLE OF CONTENTS
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Suggested sections might include:
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. The Company
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. The Market
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. Marketing Strategy/Plans
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. The Product(s)
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. Development Plan
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. Operations/Manufacturing Plan
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. Management
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. Financial
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V. THE COMPANY
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In this section, a more detailed description of the company
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is made, but it is essentially an expansion of the details
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in the Executive Summary.
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o When founded and by whom?
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o What markets to be pursued?
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Is the company creating demand or is it responding to
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existing demand?
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o What will the products do for buyers? Reduce
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costs; improve efficiency; etc.
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o Who are the buyers (not specifically, but in
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general, i.e., disk drive manufacturers,
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semiconductor manufacturers, etc.)
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Page 3
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o How many people in the company now; how many
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expected in the future?
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o What technologies being used in production?
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Generally, this section will run two to five pages in length
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and will serve to highlight details covered in greater depth
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in later sections.
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VI. THE MARKET
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More often than not, this section proves to be one of the
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major obstacles to entrepreneurs in writing business plans.
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The section should provide an indepth view of how the
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company perceives the market into which it will be selling:
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Market size:
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Recent past
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Current
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Projected (5 to 10 years)
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Market trends:
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Where is the market going and why?
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What are the economic trends?
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Maturity of market -- growth stage or level?
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Products in the market:
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What is available?
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How many suppliers?
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Market players:
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Who is buying? OEMS; end users?
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Why are they buying?
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What are they looking for?
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On what factors are buy decisions made?
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Market segments:
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Natural splits -- geographic, industries, volume
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vs. unit buyers, etc.
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Growth prospects within each segment
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Market distribution:
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How are products delivered to buyers?
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. direct sales
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. manufacturers' representatives
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. distributors
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Competition:
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Who are they?
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Strengths?
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Weaknesses?
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Markets addressed (segments)
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Reputation
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The better your know your competition, the better you'll be
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able to plan around them (and the more you'll impress
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potential investors).
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Page 4
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How well you know the market will be demonstrated in this
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section. The sources for intelligence in any market are
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myriad:
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o Existing manufacturers (competitors)
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. product brochures
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o Interviews with marketing people (which requires a
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degree of brashness, but don't be timid in asking a
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potential competitor to lunch to pick his or her brain).
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o Trade publications: if you don't know what's available,
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ask someone who does; call editors for further
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suggestions on sources.
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o Analysts' reports: available from many securities
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brokers (Merrill, Lynch; Hambrecht & Quist, etc.).
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o Users of existing products:
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. purchasing directors
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. manufacturing directors
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o Potential customers: it is an absolute must that you have
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as many discussions as possible with users before,
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during, and after formation of the company.
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Their feedback should be incorporated into both your
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products and plans.
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VII. MARKETING STRATEGY/IMPLEMENTATION
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After the thorough description of the market, this section
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should cover, in depth, how you plan to get products to your
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buyers and what strategies you'll use to help accomplish
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that task.
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o Target market by segment:
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- geographic
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- industry
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- type of buyer
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Here, you want to specifically identify the market niche you
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will address. What is it about the segment that makes it
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right for your company? Is it a niche ignored by competi-
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tors or ill-served by competitors? If you go into it and
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make a profit, why won't a larger competitor enter it, also;
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(revenue volume in niche too low; buyers in market are unit
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purchasers, etc.).
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o Credibility: company and product, why should customers
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buy a new product from an unproven company?
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o Pricing strategy: high, medium, or low relative to
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market? Why?
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o Warranty policies: standard or non-standard
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o Imaging: quality, reliability, service, response time --
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all are key components in imaging and should fit neatly
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with other strategies (i.e., high quality and low price
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Page 5
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may not appear to make sense -- if they do, in your case,
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explain why).
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o Advertising and public relations: Again, these
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strategies should match with others' (are ads in Modern
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Mechanics compatible with attempting to develop an image
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of quality?)
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o Distribution channels:
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- factory distribution
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- company-owned regional distribution
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- independent remote distribution
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- order lead times
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Here, the idea is to describe the physical means by which product
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will be delivered to buyers.
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o Servicing:
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- factory-only service
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- company field service engineers
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- contracted service
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- service contracts
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. profit centers
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. loss leaders
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When the product breaks down, how are you going to fix it
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with the smallest cost to you and the minimum disruption
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to your customer?
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o Sales
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- direct sales
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- reps
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- distributors
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- hybrid
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How are you going to sell the product? If you use reps,
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what kind of incentives will you use to get them to know
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and push your products. Is it a highly technical product
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requiring skilled sales people? At what level in the buyers'
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organizations will sales be made? Should senior management in
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your company participate directly in the sales effort to establish
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company and product credibility? How will you compensate sales --
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commissions (payable on order of receipt of payment?), bonus?,
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salary?
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VIII. PRODUCTS
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Provide a detailed description of existing products and
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plans for future products. Are products market-ready and,
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if not, how long until they will be?
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Description (illustration, if appropriate)
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o Bill of materials (major components, not too detailed)
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o Potential component supply problems
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o Proprietary protection (trademark, copyright, patent)
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o Advantages/disadvantages to competing products
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o Price and cost
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Page 6
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o Differentiation from competition -- Here, a high level
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matrix comparing your products' capabilities, strengths,
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and characteristics to your competitors' is
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useful. (Be sure your product is more easily visible
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in the matrix -- bold face print at top of matrix is
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appropriate).
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Future Products
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o Innovations to existing line
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o New products
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o Development time lines
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IX. MANUFACTURING/RESEARCH & DEVELOPMENT
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Depending on the nature of your company, these two areas
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might more appropriately be separated.
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o Financial resources to be committed to R & D
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o Facilities requirements
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- leased
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- purchased
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o Labor requirements:
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- local labor pool
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- skilled
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- unskilled
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- full time/part time
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o Subcontracted production
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- sole or multi-sourced
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- quality control
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- supply problems
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o Capital needs
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- equipment list
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- financial requirements
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o Quality control
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o Critical processes
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o Seasonality
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o Inventory control
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X. MANAGEMENT
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Highlight the past experiences of the management team that
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will combine to reduce the risk typically associated with a
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startup venture. Remember the venture capital axiom that a
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mediocre product with great management is always preferred
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to the opposite: the strength of management simply can't be
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overstated in an investment decision.
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o Resumes -- avoid excessive detail, but do hit on
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important past accomplishments and experience;
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include references with phone numbers.
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o Functional responsibilities -- who's charged with what
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in the operations of the company.
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o Management holes -- important functional areas are not
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filled -- what steps are being taken to fill
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them?
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Page 7
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XI. FINANCIAL
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While underlying detail should be available for further
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discussion, financial projections should include high level
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figures, not line item detail, department by department.
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Present five-year projections, monthly for at least the
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first year (but not more than two) and quarterly or annually
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for the remaining years.
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o Profit and loss statement
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- units sold
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- reserves
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- costs of goods sold
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- operating expenses
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- net income (loss)
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o Cash budgets
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- beginning cash
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- cash from operations
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. sales
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. interest
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- cash from other sources
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. investors
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. lenders
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- cash uses
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. capital expenditures
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. cash operating expenses
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. interest expense
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- ending cash
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o Balance sheet
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- current assets
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. cash, investments
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. receivables
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. inventory
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. other
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- fixed assets
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. machinery and equipment
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. accumulated depreciation
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- total assets
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- current liabilities
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. accounts payable
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. notes payable
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. other
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- long-term liabilities
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. notes to officers
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. term debt
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. other
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- equity
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. paid in capital
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. retained earnings (loss)
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- total liabilities and equity
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As supporting documentation to the financial projections,
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notes should be included detailing assumptions, payment
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policies, receivable policies, depreciation utilized, and any
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other information used in generating the figures.
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--------------------------------------------------------------------
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Vangard Sciences/KeelyNet
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Jerry at (214) 324-8741 or Ron at (214) 242-9346
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