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Business Plans

Business Plans. by Professor Ron Fournier. Developing the Business Plan. The culmination of a lengthy, arduous, creative, and iterative process Transforms the caterpillar of a raw idea into the magnificent butterfly of opportunity

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Business Plans

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  1. Business Plans by Professor Ron Fournier

  2. Developing the Business Plan • The culmination of a lengthy, arduous, creative, and iterative process • Transforms the caterpillar of a raw idea into the magnificent butterfly of opportunity • Articulates the merits, requirements, risks, potential rewards, and execution • The point of departure for investors to begin their due diligence • i.e. Balance risks and potential of the opportunity • The risks involve technology, market, management, competition & strategy, financial

  3. Developing the Business Plan • The blog will have a PDF file on THE BUSINESS PLAN • Use this as your guide • There is a sample plan for the PC Build venture that we will discuss in today in class and you can use this as a guide • Also there is an outline and discussion of what to include

  4. The Opportunity - PC Build • Manufacture and sale of PC computer kits • target the home hobbyist & educational institutions, target folks “that want to get their hands dirty” • unique opportunity to provide PC kits at affordable prices • target those who love to experiment and learn, not necessarily saving money • big guys like Apple and Dell switched to providing finished products rather than kits • little or no competition in this area

  5. Opportunity Rationale • 3 main reasons for the opportunity • technological standardization • PC clones the standard for hardware and OS • free engineering, kits lag leader by one generation • changing consumer attitudes • PC’s are everywhere • consumers not brand loyal • PC’s no longer a mystery • consumers adding peripherals themselves • market opportunity • kit segment not being served with quality

  6. The Product • PC clones in a kit form • 30 day money-back guarantee • 3 main products (see pp54 and 55) • priced 10-15 % below comparable fully assembled PC’s • lag leading edge by 1 generation • proven hardware • easy access to suppliers • recognized standard • lower cost components • customer buys to learn about computers, not to buy the leading edge technology

  7. Market Entry Strategy • First educational institutions • computer education camps • Next the home hobbyist via mail order • Finally retail market using stores • Expansion would include add-in boards for sound cards, modems, etc.

  8. Market Analysis Exhbiti A

  9. Economics of the Business • Kits to sell for • $699 basic kit • $899 super kit • $1500 deluxe kit • Exhibit D p69 shows price sensitivity • Exhibit C p59 shows competitor comparison • Microsoft Corp license for MS-DOS, $32 per machine

  10. Basic Assumptions for Cash Flow Ananlysis

  11. Sales Units Purchases AR collections AR payable

  12. Cash needed to make A/R payments and pay for startup costs, sum of 1 to 2 (AR collections + rest are expenses so -) Startup funds in checking book Check book balance as ending cash = carryover – cash needs Cash flow = cumulative total of cash needs

  13. Usually the basis for royalties Cost of Goods Sold Net sales - COGS Fixed costs = $228,809 Earning Before Taxes @30% tax rate

  14. PC Build Business Plan • A good opportunity or just another crazy idea? • Should this business be started? • 1992 versus 2009, has the environment changed? • Would you invest in the business? • What should the founders do?

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