Exam 3

A business plan

details major characteristics of a firm – its product/service, industry, market, manner of operating, and financial outcomes emphasizing the firm’s present and future.

vision statement

The is a simple 5- to 10-word sentence.

•Should be inspiring, overarching, and long term.

tagline

is a mantra – brief and memorable.

mission statement,

which is a bit longer and often adds the firm’s competitive advantage.

elevator pitch

is an action-oriented description of your business designed to open the door to a more in-depth dialogue.

get the listener to make a

micro-commitment – contact information so you can build your network.

executive summary

An is what most people read when they receive a plan.

The Business Plan

The full (or classic) business plan runs 18 pages.

•May be longer for new products or shorter for imitative products.

a cover letter

•One page.

•Introduces the plan and owner.

•Indicates why the recipient is asked to read the plan.

•Traditionally done on letterhead, but can be an email if submitted electronically.

•If so, use a signature block for your business.

The Business Plan: Table of Contents and Executive Summary

The table of contents page.

•Lists major section headings in boldface.

•Page numbers for every component, including financials.

•Every page should be numbered.

•Typically the second page of the plan packet.

Many entrepreneurs write the one-page executive summary first.

•Then use it as a guide for the rest of the plan.

•Covering the major sections is the usual strategy.

•It is common to revise the summary.

•Your thinking changes as you write the plan.

•This is the first and also the last item you will edit.

Give pilot test results, sales, or

preselling efforts

The electronic version of the binder is called a

• data room, and is what you share with potential investors as they do their due diligence.

new entrant business

a company or individual that is entering a market or industry for the first time, offering a new or alternative product or service. 

pioneering business

a company that is the first to introduce a new product, service, or technology, or to operate in a previously unexplored market, effectively setting a new standard or path for its industry

Private banks, investment clubs, or VC firms are commonly sent a mini-plan or a

•screening plan.

Use an informational plan

•if you do not wish to share the financials.

An informational plan posted online is a

•proof-of-concept website to solicit customer interest.

A key employee/partner plan

•also lacks financials, also called a summary plan, concept plan, or idea plan.

An invention plan

•focuses on the market and operationalization of a new invention, but typically lacks the marketing strategy.

Operational plans

•include the full business plan but add details on major techniques, methods, recipes, formulas, and sources.

private placement memorandum (PPM) or an offering circular (OC)

is used for equity crowdfunding under the JOBS Act.

The customer development process

focuses specifically on meeting the needs of the customer, hopefully leading to a new product/service.

The product development process

perfects the product or the innovation within the product.

Target market is one of a set of nested terms for the market sizes.

Total available market (TAM).

Serviceable available market (SAM).

Serviceable obtainable market (SOM).

Penetrated market (PM).

Benefit matching

•– the closer customers’ needs/pains/gains align with features of your product/service, the happier they will be.

Long-term value (LTV) or customer lifetime value (CLV)

• – go after the customer who will bring the most revenue and profit to your firm.

Influencer impact

•– word of mouth or social media exposure can lead to sales from customers you did not know to target.

Minimizing churn

•– keeping existing customers is more valuable than finding new ones.

Use outstanding customer service

to convert customers into fans.

market segmentation

•leverage this idea using to identify the best market(s) for their good or service.

Segmenting

divides the total market into manageable pieces.

Your target market

•is the segment(s) you select on which to target your marketing efforts.

predetermined market segments.

Some companies have created specialized customer profiles based on combinations; called

Marketing research

 can verify the size of the potential market.

•It is where and how you get the facts to support your plan.

•And the proof that your plan has a good chance of success.

Primary research

•is gathered to answer a specific marketing question.

Secondary research

•has already been gathered for another reason, but can be just as useful.

•ethnographic research.

One method of obtaining primary research is observation,

a survey

is used when gathering information from large numbers of people.

Scalar questions

•ask for a rating.

Dichotomous questions

offer two choices for an answer.

Categorical questions

offer  predetermined categories

Open-ended questions

•allow interviewees to answer any way they wish.

value proposition.

The relation of product or company capabilities to customer pains and gains is the

A product is anything offered to satisfy consumers

including goods, services, people, and ideas.

A car has tangibility

•, but its warranty and service plans are intangible.

Perishability of services is an issue

•a cab ride is an example of the inseparability of services.

While products are generally consistent,

•– services show heterogeneity.

total product

includes the entire bundle of products and services you offer.

augmented product

•What you describe as your good/service is the and has features that differentiate it from competitors.

core product

, which is a basic description of what your company does.

optimum price.

There are four key factors for determining an optimum price.

•Demand for the product or service.

•Value delivered to the customer.

•Prices set by competing firms.

•Your business strategy and product placement.

elasticity.

If dropping the price increases sales, this is price

Essential products with no substitutes are

•inelastic products.

Elastic products

• have many substitutes.

internal reference pricing

consumer’s own knowledge

external reference pricing

•is gathered from other sources.

Skimming

• charges the highest price the market will bear.

Prestige pricing

•is used for status symbol items, while premium pricing is used for non-status symbol items.

Odd-even pricing

•just means a price ending with a 9, 7, or 5.

Partitioned pricing

charges a base price plus extra for all components,

captive pricing

• and sells a base system at a low cost then sets a high price for expendables.

Price lining

•attempts to appeal to several different markets.

Sales promotions

are a form of communication that encourages the customer to take immediate action.

manufacturer

have the ability to set the manufacturer’s suggested retail price

Direct mail

includes mail orders etc. and may use microinventory or just-in-time (JIT) inventory

A wholesaler, retailer, and an agent

are all intermediaries who get the product to the end consumer for a percentage of the profits.

Direct exporting

•sells to foreign buyers but may get help from freight forwarders.

Indirect exporting

•uses agents, export managers, or trading companies.

letters of credit or documentary drafts

•Use as ways of receiving payment.

Sheltered workshops

are employment settings that offer work opportunities and training for individuals with disabilities