Welcome to MT209 Seminar 2

Unit 1

Any questions regarding Unit 1 assignments or material?

Course Project

Did you load BPP software and run tutorials? Graphs and spreadsheets you create in BPP are

supporting info for your plan Project is a written analysis and commentary based

on data you input into BPP Several templates can be found in BPP as a guide,

but create your own details and write-up APA format

Unit 2 Assignments

Read Chapter 4 – Feasibility Analysis and Creating a Winning Business Plan

Chapter 2 and 3 not required, but recommended Supplemental reading not required, but

recommended Activity p 133-134 Ruined Shirt case study answer

questions 1-3 on p 134, post response to at least 2 classmates’ answers

Assignments Unit 2 Continued

Discussion Questions – Answer and post response to at least 2 classmates’ answers for each question

Assignment – respond to just one of the three activities (APA format, grammar, spelling, Word doc) save to drop box using naming convention

What is the difference between a feasibility study and a business plan?

What is a Feasibility Study? 

An overview of the primary issues related to a business idea.

provides a lot of information necessary for the business plan. For example, a good market analysis is necessary in order to determine the project’s feasibility

A feasibility study looks at three major areas

What do you think they are?

Market issues 

Organizational/technical issues 

Financial issues 

Feasibility study is meant to be a “first cut” look at these issues. For example, a feasibility study should not do in-depth long-term financial projections, but it should do a basic break-even analysis to see how much revenue would be necessary to meet your operating expenses. 

purpose of the business plan is to What???

The minimize the risk associated with a new business and maximize the chances of success through research and maximize the chances for success through research and planning

If the feasibility study indicates that your business idea is sound, the next step is a business plan. The business plan continues the analysis at a deeper and more complex level, building on the foundation created by the feasibility study

A business plan gives you an opportunity to find any weaknesses and reveal any hidden problems ahead of time. It serves two purposes: first, it is an analysis of how well the business will work; and second, it is a written document necessary to obtain a loan. 

Although business plans are often submitted to a bank as part of a loan request, that’s not the most important thing about them. The really important thing about this process is What?????

It forces you to think!!!!

A business plan is sometimes described as a document of your thought processes as you analyze your competition, the market, your operating expenses, management and staffing needs, manufacturing process, etc. It forces you to clarify your goals and objectives. 

Therefore, the feasibility study and business plan are more important for the company’s owners than for anyone else, including loan officers

Planning, however, won’t guarantee success in business. The plan must be realistic and based on valid assumptions. Most people have to work at retaining their objectivity if they are doing the feasibility study and/or business plan themselves.

After all, if you are closely involved in organizing this business, you probably have some emotional investment in it. It is easy for people in this position to overlook or minimize potential problems or hazards. Remember that planning, no matter how good it is, will never make a bad business idea feasible

the feasibility study is organized into three major sections (market analysis, organizational/technical analysis, and financial analysis

Market analysis begins by asking: 

What, precisely is the market? The more specific you can be, the better. Is the market growing, shrinking, or staying the same? Is it worth your while? Is the market you’ve identified big enough to make it worth the time? 

1. Market Analysis Research 

The purpose of market analysis is to thoroughly acquaint yourself with all aspects of your market so that you canformulate a plan to capture a share of it. 

One...major reason for business failure is incompatibility of goals among owners. This often leads to a breakdown ofcommunication and conflict about use of resources. 

2. Key Organizational and Technological Issues 

The cost and availability of technology may be of critical importance to the feasibility of a project, or it may not be an issue at all. 

For example, a service organization, such as a child care center, will have a few equipment and other technology- related issues to address.   A manufacturing enterprise, on the other hand, may have a number of complex technology questions to analyze in order to determine whether or not the business is feasible. 

Key questions to answer include: 

What???

a. What are the technology needs for the proposed business? b. What other equipment does your proposed business need? c. Where will you obtain this technology and equipment? 

d. When can you get the necessary equipment? How does your ability to obtain this technology and equipment affect your start-up timeline? e. How much will the equipment and technology cost? 

Keep in mind that technology doesn’t necessarily mean complex machinery; if your business simply needs a personal computer, printer, and fax machine, those are your technological needs. 

Naturally, the more complex the technology you need, the more research that will be required to make good decisions about it. Don’t skimp on this foot work; you may regret it. 

3. Financial Issues 

Once your analyses of marketing, organizational and technology issues have been completed, the third and final step of a feasibility analysis is to take a look at key financial issues

a. Start-Up Costs: These are the costs incurred in starting up a new business, including “capital goods” such as land, buildings, equipment, etc. The business may have to borrow money from a lending institution to cover these costs. 

b. Operating Costs: These are the ongoing costs, such as rent, utilities, and wages that are incurred in the everyday operation of a business.   The total should include interest and principle payments on any debt for start-up costs. 

c. Revenue Projections: How will you price your goods or services? Assess what the estimated monthly revenue will be. 

d. Sources of Financing: If your proposed business will need to borrow money from a bank or other lending institution, you may need to research potential lending sources. 

e. Profitability Analysis: This is the “bottom line” for the proposed business. Given the costs and revenue analyses above, will your business bring in enough revenue to cover operating expenses? Will it break even, lose money or make a profit? Is there anything you can do to improve the bottom line? 

Your feasibility study should give you a clear idea whether the proposed idea is a sound business idea.

Porter's Five Forces

Porter's Five Forces Analysis is an important tool for assessing the potential for profitability in an industry.

Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation. These are:

Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are.

Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, they are often able to dictate terms to you.

Competitive Rivalry: What is important here is the number and capability of your competitors – if you have many competitors, and they offer equally attractive products and services, then you’ll most likely have little power in the situation. If suppliers and buyers don’t get a good deal from you, they’ll go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength.

Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power.

Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.

By thinking through how each force affects you, and by identifying the strength and direction of each force, you can quickly assess the strength of the position and your ability to make a sustained profit in the industry

Questions?? Wrap-up