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BU121 midterm review (helpful)

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Laura Allan

BU121 Lecture 1 Business Planning Key Concepts  Why Write a Business Plan? – a formal written document that explains the entrepreneur’s vision and how it will be converted into a profitable, viable business  model of business planning  Components of a Business Plan  key questions answered  characteristics of a well-prepared plan  the executive summary  critical risks  price cutting by competitor, who refuse to roll over and play dead for the new venture  unforeseen industry trends that make the new venture’s product/service less desirable – or less marketable  sales projections that are not achieved for a variety of reasons, thus reducing cash flow  design, manufacturing, or shipping costs that exceed estimates. Product development or production schedules that are not met  milestones  seven deadly sins (avoid) 1. The plan is poorly prepared and has an unprofessional look 2. The plan is far too slick (uses flashy graphics) 3. The executive summary is too long and rambling – it doesn’t get right to the point 4. It’s not clear where the product is in terms of development – does it exist or not? Can it be readily manufactured? 5. No clear answer is provided to the question: Why would anyone ever want to buy one? 6. There is no clear statement of the qualifications of the management team 7. Financial projections are largely an exercise in wishful thinking  Useful for the project/not for exam purposes…  other sections of a business plan  intangibles  Making an Effective Business Plan Presentation The most important things an entrepreneur must accomplish are: 1. Make meaning 2. Make mantra 3. Get going 4. Define a business model 5. Weave a MAT ( a. milestones, b. assumptions, c. tasks (day to day tasks ie. buying furniture) The Art of Writing the Business Plan Write for the right reasons  Due-diligence stage of courting an investor  Forces the founding team to work together  Makes the team consider issues it glossed over in the euphoria  Uncovers holes in the founding team The process is more important than the destination Write deliberate, act emergent (act as if experienced) Pitch then Plan  10/20/30 rule (10 slides, 20 minutes, 30 pt font) o Title o Problem o Solution o Business Model o Underlying Magic o Marketing and Sales o Competition o Management Team o Financial projections and key metrics o Current status, accomplishments to date, timeline and use of funds 1. Try it out on people – do it 10x 2. Fix the pitch 3. Write the Plan Report  Presentation  Elevator Pitch Elevator Pitch  Presentation  Report Executive Summary 1. Background, product and purpose – describing your idea and the current state of business 2. Marketing – describing the market for the new venture’s product/service, why there is a need for the product and why anyone would want to buy it, plus info on the existing competition and how it will be overcome, and pricing 3. Competition – info on the existing competition and how it will be overcome, pricing, and related issues 4. Development, production, and location – where the product is, in terms of development, how it will be produced, and info on where the business will be located 5. Management team – describing the experience skills, and knowledge of the new venture’s management team 6. Financial section – provides info on the company’s current financial state, and offers projections for future needs, revenues, and other financial measures, as well as a breakeven analysis (an analysis indicating the level of sales and production required to cover all costs) 7. Risk factors – discusses various risks the new venture will face, and the steps the management team is taking to protect against these threats 8. Harvest or exit – how will they gain if company is successful 9. Scheduling, milestones – info on when each phase of new venture will be completed, so that potential investors will know just when key tasks will be completed (start of production, time to first sales, projected breakeven point) 10.Appendices – detailed financial info & detailed resumes of top management team should be presented  Focus on the Executive Summary  the 10 slides provide the framework for the business plan  The exec summary takes the place of the title slide  Clear, concise description of the problem, solution, business model and underlying magic  Don’t explain the entire business plan – convey it’s essence and it’s energy  2-3 pages max  Most important part of business plan  80% of the effort  Job is to sell, not to describe – first impression Business Plan 20 pages MAX BUSINESS COMMUNICATION Key concepts o 4 principles of business writing o 3x3 Writing Process o Adapting to the Task and Audience…  audience focus, “you” view, conversation but professional, positive vs negative, courteous, bias-free language, plain language and familiar words, precise and vigorous words  (Creating cluster diagrams – not tested but useful for writing and studying)  (Organizing Ideas – direct vs indirect pattern – not tested but useful for writing)  Creating Effective Sentences o (common sentence faults), preferring short sentences, emphasizing Important ideas, active and passive voice, (dangling and misplaced modifiers)  Drafting Powerful Paragraphs o Different paragraph plans, paragraph coherence  Revising for Conciseness o Flabby expressions, long lead-ins, unnecessary fillers, redundancies, empty words  Revising for Clarity o Short and simple, trite phrases, clichés and slang, buried verbs, excessive exuberance (enthusiasm)  Designing Documents for Readability o (White space, margins and text alignment, typeface, capitalizing), numbering and bulleting, headings o (Proofreading) o (Evaluating) Made to Stick o “Sticky = understandable, memorable, and effective in changing thought or behaviour” o Urban legends  Are ideas born interesting or made interesting? o CSPI and movie popcorn  Interesting but not sensational, truthful but not mind-blowing, and important but not ‘life or death’ SUCCESs MODEL SIMPLICITY  Simple = core +compact  Find the “core” of the message o “Command’s Interest” o Matter of forced prioritization  Don’t ‘bury the lead’  Communicate the core  Use proverbs o Simple but profound o Use existing schema (leverage; using your knowledge)  The way you ALREADY think o Use analogies o Use generative metaphors – Disney world called cast members, and at subway they call them sandwich artists UNEXPECTEDNESS  Get audience to pay attention  Need surprise and interest  Violate expectations  Be counterintuitive – uncommon sense o Nordstorm’s – example o Generate interest and curiosity o Open gaps in knowledge  Give context  Fill those gaps  Football – gave people context CONCRETENESS o Make ideas clear o Fill with concrete images o “Sour grapes” o Brown eyes, blue eyes (discrimination) – predigest to children said brown eyes are better than blue eyes then the next day she changed it o Hamburger helper – took toys to homes and identified based on what they saw CREDIBILITY o Make them believe o External credibility – Authorities o Experts o Celebrities o ‘Anti-authorities (inferior, regular human being) o Internal credibility  Vivid details  Statistics  Relationship, human terms  Testable credential  NBA EMOTIONS o Get people to care o Make them feel something o For ppl vs. abstrations or statistics  Mother Theresa  Power of association Appeal to self-interest o Emphasize benfits vs features “imagine”  Appeal to identity STORIES  Get ppl to act o Need simulation and inspiration o Mental flight simulators o Inspiration  Subway o Spotting a story  Challenge plot  Connection plot  Creativity plot Jared vs “7 under 6”  Simple  Eat subs and lose weight – “subway saved my life  Unexpected  Lose weight by eating fast food  Concrete  Oversized pants  Credible  Anti-authority  Emotional  Individual vs mass, reaching potential  Story  Inspiring Lecture 2 Business models made easy GEL Factor Analysis o G= great customers o Characteristics –  number (high) – businesses need a large enough customer base to cover their cost of running the business  ease of finding (easy) -  spending patterns(prolific/high) o Value to you –  $ value of sale(high),  repeat sales(many),  ongoing sales support(low) - On going sales support should be low because you don’t want to spend a lot of money on advertising for new customers o Large population o Easy to find o Willing to spend o E= easy sales o Value to customer –  how important(important),  competitive advantage(high),  price/value relationship(low) o Customer acquisition cost –  entry points(many), - ways you can buy products (ex. Internet, catalogue, at the market)  sales support required(little) - depends on product  promotional activities(low) - how do you get your customers to buy your products o High value of sales because sales create revenue o Customers keep coming back – repeat sales o Promotional activity –Value to the customer – what makes your product better o L= long life o Profit per sale – margins(high), up-selling and cross-selling(much), ongoing product costs(low) – production cost to be low, and margin (difference between cost and value price) to be high  Up selling – enhancing that one product (extended warranty on a product)  Cross selling – aldo work hours o Investment required –  to enter business 10x sales(low),  to keep market share(low),  to stay on the cutting edge(low) Why its important/ when it’s a key concern/ how to compensate What is a Business Model? - Describes the rationale of how an organization creates, delivers, and captures value o how a company intends to make money o how your idea actually becomes a business that makes money Different companies can have similar offerings but different business models Model affects strategy/ways of operating CUSTOMER SEGMENTS  Mass market  Niche market  Segmented  Diversified  Multi-sided o Which customers and users are you serving? o Which jobs do they really want to get done? VALUE PROPOSITIONS  Newness  Performance  Customization  “Getting the job done”  Design  Brand/status  Convenience/usability  Accessibility  Price  Risk reduction  Cost reduction o What are you offering them? o What is that getting done for them? o Do they care? CHANNELS  Awareness – do people know you exist?  Evaluation – evaluate you against competitors  Purchase – how do you purchase  Delivery - (ex. Internet, delivery etc.)  After sales o How does each customer segment want to be reached? o Through which interaction point? CUSTOMER RELATIONSHIPS  Personal assistance  Dedicated personal assistance – ex. Wedding planner  Self service  Automated services  Communities – bring customers together  Co-creation o What relationships are you establishing with each segment? o Personal? o Automated? o Acquisitive? o Retentive? REVENUE STREAM  Asset Sale  Usage fee  Subscription fee  Lending/renting/leasing  Licensing  Brokerage fees - banks  Advertising o What are customers really willing to pay for? o How? o Are you generating transactional or recurring revenues? Pricing Mechanisms  Fixed “Menu” Pricing  Dynamic Pricing KEY RESOURCES  Physical  Intellectual  Human - people  Financial - bank? o Which resources underpin your b.model? o Which assets are essential? KEY ACTIVITIES  Production  Problem solving  Platform/network – ebay o Which activities do you need to perform well in your b.model? o What is crucial? KEY PARTNERS  Optimization and economy of scale – cost effective as possible  Reduction of risk and uncertainty  Acquisition of resources and activities – specific activities – human, financial o Which partners and suppliers leverage your model? o Who do you need to rely on? COST STRUCTURE  Cost driven  Value driven – value of what your providing to your customers, balance with cost  Fixed costs – costs you can’t change (mortgage, car payments)  Variable costs – flexible costs (shopping)  Economies of scale  Economies of scope o What is the resulting cost structure? o Which key elements drive your costs? LECTURE 3 EI (Emotional Intelligence) - is a set of emotional and social skills that influence the way we perceive and express ourselves, develop and maintain social relationships, cope with challenges, and use emotional information in an effective and meaningful way. IQ (Intelligence Quotient) - a score derived from one of several standardized tests designed to assess intelligence Personality – a way of organizing and grouping how an individual reacts to situations EQi Model of Emotional Intelligence  Intra-personal – Self awareness + Self expression  Inter-personal – Social awareness and interaction  Stress Management – emotional management and control  Adaptability – change management  General Mood – self motivation = Effective Performance Human Potential = (IQ + TQ) * EQ  IQ – Innate intelligence  TQ – Technical skills  EQ – Emotional intelligence Impact of EI on Human Resources Two Decades of research show that emotional intelligence contributes to bottom line performance because it leads to: • More successful hiring • Decreased attrition rates • Reduced training costs • Higher levels of productivity and success • Greater individual performance • Better leaders and managers • Stronger relationships with employees and customers Case 1  American Express o Purpose – predict key characteristics associated with top performance in order to develop selection criteria o Impact – EQi predictive model accounted for 48% of the difference between high and low performing sales reps = almost half of the skill set required for success  US Air Force o Purpose – to determine the differences between successful and unsuccessful recruiters to increase retention o Impact – developed a pre-employment screening system = 92% reduction in 1 year turnover, $2.7 million in training cost savings in st 1 year alone, Air Force recruiters twice as productive than in other branches of armed forces  CIBC o Purpose – to determine key EI characteristics that define successful sales representatives o Impact – found that EI scores accounted for 32% of booked sales and 71% of pipeline sales– now used for selection and leadership development o Elevator pitch: Term used for 2 min presentation  2 key elements o PAIN statement o VALUE PROPOSITION Characteristics of a good pitch:  Succinct  Easy to understand  Greed inducing (Profitable)  Irrefutable Trust Model  Arena o Open communication o I know, you know  Mask o Hidden o I know, you don’t know  Potential o The unknown o I don’t know, you don’t know  Blind spots o What other people see in yourself that you don’t see o Self discovery o I don’t know, you know TEAMS Styles  Theorist – Visionary, idea person  Executer – Makes it happen, doer  Analyzer – Refines, finds problems and solutions  Manager – Ties it all together, balances needs of team  Strategist – Sets goals, moves team forward LECTURE 4 CRITICAL THINKING Claims • “the major conclusion of a piece of writing that the author is trying to persuade you to accept” – Look for cues/indicator words • Uncontested vs Contestable claims – Uncontested: Conditions in which people may accept a claim without challenge – Contestable: Examine and evaluate the evidence given to justify the claim • Application – Present ideas with clarity and emphasis; use visuals – Put your claim up front and use cue words – Use headings and subheadings to make your logic transparent Evidence • “a statement in response to the question: Why is this true?” – Examples of evidence – Cue/indicator words • Argument = claim + evidence • Quality of evidence – Accuracy, precision, sufficiency, representativeness, authority, clarity • Application – Clearly state the meaning/significance of the evidence – Present arguments in form of claim and supporting evidence – Treat evidence as claims – provide evidence to show soundness • Read the passage and state the major claim that is being made. Identify and evaluate the evidence presented on the basis of: – Accuracy – make sure its accurate (quality of evidence) – Precision - precision of information – Sufficiency – of evidence – Representativeness – how representative is information? – Authority – Clarity of expression – Credibility of source • Your claim comes from your own thinking about a topic BUT evidence comes from the outside • Readers should accept your evidence as factual or true • Must locate the evidence before you can evaluate an argument – “because” “as a result” …. Etc. Underlying Assumptions • “a logical link that fills the gap between the evidence and the claim” – Underlying assumptions are implicit, unstated – Need to be examined explicitly • What the writer must believe to have written that • What must be true for the claim to follow from the evidence? • Reality assumptions vs Value assumptions – Reality assumption: Assume that just because it may have happened it its true – Value assumption: Assume the argument is valid because “everyone” agrees with, or values it • Application – Make it clear that each piece of evidence is relevant by articulating your underlying assumptions and reasoning explicitly – Question your assumptions – Ask yourself: • What did the writer believe to draw this conclusion? • What must be true for the claim to follow from the evidence? • What beliefs might I expect from this type of person? (the missing link ‘x’) Casual Claims • arguing “that certain events or factors (causes) are responsible for bring about other events or situations (effects)” – Cause and effect relationships are an important aspect of understanding – basis of cases • May be multiple or Rival causal explanations due to: – differences between groups, correlation between characteristics, post hoc ergo propter hoc fallacy (after this therefore because of this) • Application – Think through all possible causes – address them explicitly – Examine soundness of causal argument Identifying Casual Claims • Use your creativity to suggest several possible causes for the given effects in the following statements: – You’ve overslept three times in the past week. – Although overall industry sales are down, your product is exceeding projected sales figures. Techniques of Persuasion • Factors that affect persuasiveness: – Quality of evidence presented + evidence omitted – Soundness of causal argument – Extent to which reader/listener agrees with underlying assumption(s) – Language and writing style • Rhetoric - use of language to convince • Must know and consider your audience – Anticipate and counter objections • Negative evidence, rival causes, debatable assumptions – Limit your claims when you have no rebuttal Use of Rhetoric – “the use of language to persuade” – Be complete • Present your reasoning in full and clear detail – Use an appropriate tone for the audience – Use vivid and precise language – “The intelligent use of rhetoric… goes hand-in-hand with the development of a sound, logical argument.” – “You must expose and criticize the bare bones of the argument – the claims, evidence, and assumptions, independent of the rhetorical devices… added for impact and readability.” – Replace each of the italicized words with a precise number that seems appropriate: – “A middle-aged acquaintance of mine recently decided to leave a high- paying job in a large city to take instead a low-paying job in a small town.” • Middle-aged = ___ years • High-paying = _____ as an annual salary • Large city = ______ residents (or examples) • Low-paying = _____ as an annual salary • Small town = _____ residents (or examples) MARKETING  The integrated system of activities, filling the need and finding the need, want satisfying Crit
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