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V. Analysis of the Market Potential (Justifying the Business) The
entrepreneur must research, identify, and express his/her findings in the
following:
A. Demographics:
1. The population in the
proposed area (number, age)
2. The income of the population.
B. The firm's Target market:
1. Investigate and evaluate realistically
the needs and wants of the community.
2. Determine who are or will be the firm's
customers.
C. The competition (or possible
competition) in the proposed marketing area.
D. Trends or analysis if the
industry - the firm's product or services.
E. The location and/or
equipment needs of the business and why the owner elected it.
1. Location - buy or lease and
why - including costs.
2. Equipment - buy or lease
and why - including costs.
F. A brief expression of the realistic potential
of the business - based on findings.
Vl. Strategy for Development of the Business (Growth)
The entrepreneur should be able
to identify and briefly state his/her thoughts on the following:
A. The basic operating policy
of the firm. ("Policy" is nothing more than the attitude of owner/
manager - expressed in writing.)
B. Expansion and growth plans
(sites, facilities equipment needs, people needs, and an expression of the
firm's track record thus far).
C: Innovations that may be introduced
to increase customer traffic (or contracts) and profit.
D. Friends of the entrepreneur
(or people in the community) who are real potential centers of
influence.
E. The owner's personal plans
for the next five years.
F. Realistic sales projections
and forecasts based on true investigation and research.
G. Potential sources of money
- list.
VII.
Financial Analysis (Needs and
Costs for Initiating/Buying/Enlarging the Business)
The entrepreneur must research
and be able to list the following information with dollar amounts
shown:
A.
Estimated cash required for the business.
1. Land_lease or buy - how
much?
2. Building_lease or buy - how
much?
3. Parking area improvement -
who pays? How much?
4. Equipment needed - itemized
with costs.
5. Merchandise inventory -
itemized with costs.
6. Advertising costs - grand
opening costs and subsequent budget.
7. Licenses, bonds, other
costs - how much?
8. Operating capital needs -
for 3 to 6 months.
9. Contingency funds - how
much?
B. Source of funds
and application. (Where the Money is Coming From And Where It Will be
applied)
1. List the major areas of
financial application (such as equipment, merchandise inventory, advertising,
and operating capital).
2. Show the amount provided by
personal savings, friends and relatives for each area
3. Show the amount anticipated
to be provided by bank loans (S.B.A. guarantee/other).
4. The total must agree with
the total shown in your financial analysis section.
C. Risk (A
Function of the Firm's Ability to Make A Desirable Profit)
1. How much will be lost if
the firm does not achieve its expectations?
2. Disaster plan - what will
the entrepreneur do if his/her business gets in trouble or fails? (NOTE:
Remember that over 90 percent of business failures are due to poor
management!)
VIII.
Financial Projections (Estimates
of Monthly Income And Expenses)
The entrepreneur (with help, if
needed) must provide the following information:
A.
A pro-forma profit and loss statement (income and expenses) for each month
for the first year.
B. A break-even analysis chart.
C. Loan pay-back information - preferably amortized, identifying:
1. Amount of loan.
2. Rate of interest.
3. Terms of the loan (in
years).
4. The entrepreneur's monthly
payment.
5. The total number of
payments
6. The amount t of principal
paid.
7. The amount of interest
paid.
8. The total pay-back amount.
Appendix Exhibits The
entrepreneur (with help, if needed) should furnish the following
information:
A. Floor plan/plot plan
B. Personal data sheet
(resume)
C Pro-forma profit and loss
statement
D. Break-even analysis
chart
E. Loan pay-back
information
F. Personal financial
statement
G. Letters of intent or
contracts negotiated
Some Prerequisites for Success in Business
Most important to any person in business - particularly people who are
planning to be entrepreneurs - is the development of the following abilities
and activities
A. Know where you are going by
establishing your goals
- write them down_in advance.
B. Develop the ability to
plan. The planning function is the foundation of management.
C. Develop the ability to
communicate. You must be able to express yourself - orally and in writing -
in a relevant, clear, interesting and believable manner.
D. Maintain a positive
attitude toward yourself, and others.
E. Be persistent and determined.
F. Follow through in a timely
manner.
G. Study the functions of
management: planning, organizing, leading, controlling - and
coordinating.
H. Prepare yourself for the
future -- NOW
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