Business Plan

At this session the prof talk much about failure of a small business. Mainly about what causes failure of a small business and what can be done to avoid that failure.

What is small business? Small business is usually privately owned and has less than 100 employees. Characteristic of small business:
1. The owner usually is the manager of the company, unlike big company which pay a manager to deal with daily events.
2. The liability of the owner is unlimited. This means if the business fail and has debt, the private property of the owner has to be used to pay the debt (e.g. car, house)

Survey proofs that the survival rates of small business is not very good. The reasons for poor survival rates are:
1. Lack of experience (most of the people who start a small business is the retired people who have extra money)
2. Insufficient capital (Since their business is small, it is difficult for them to get credit from the bank)
3. Their business is not located at strategic place.
4. Unexpected growth (When their business expands, they have to hire people. Lack of managerial skill, they can't deal with the subordinates)

How to avoid business failure? Develop Business Plan.
Derive accurate financial information about the business. Estimate the overhead and operational expenses. Predict sales so that the time for break even can be estimated. Make sure the time requirement is not underestimated. Then carry out TOWS(threat, opportunity, weakness, strength) analysis to identify the position of the business in market.
The next thing is to determine the product, place, price and how to promote our new business.

Besides for our self guide(allocate resources, timeline), business plan must also explain why should investor give us the money.
Below are some tips for writing up business plan:
The executive is a very important part, the investor will first read this part, if it is unattractive, he won't go through the rest of the business plan. A good executive summary must contain the business' value proposition, the main objectives, revenue model and briefly describe what is needed(how much fund). The competitve advantage and the member strengths. It must also include the projected income and when the company will break even.