Let's Get Down to Business...

What's an "Early-Stage Development Process?"

The Fifth Section (Financial Controls and Management Practices) of the Financial Plan asks you to discuss "prototype and early-stage development processing."  You're probably wondering what that is and where you can find it.

Other (and shorter) terms for describing what's needed could be "trial run" or "dry-lab."  In other words, how are you going to make sure your product or service "works" before you "go live?"

Will you "test-market" the product before distributing it to your market segment?  Will you be doing some training before opening day?  How will you be sure, when you cut the ribbon at the grand opening, that everyone knows (1) what are the things they're supposed to do and (2) how to do them in the way you want them done?

All those questions answer the requirement's first part (what are we going to do to know our product "works).  The key word for the second part is "controls."  The question here is, "How are you going to know you're ready to launch?"  When and how will you know that the product is "right?"  It's probably impossible to get all the "bugs" out of a system, but you'll want to be sure things work pretty well when your first customer comes through the door. 

Distill your ideas down to paragraph or two that answers these questions.  Needless to say, this part is easy to overlook but can make all the difference in the end.  So, think about what you're going to do to be certain your product is right and ready to go and how you're going to know that.

Keep up the good work!    

Final Details and Finishing Touches

As you round the final turn and head for the finish line, here are a few items to check off your list.

Difference between the "Key Concept" and the "Executive Summary"

These two requirements are not the same thing.  There's a difference between them that's important.

First, the "Key Concept" should take no more than one-third of a page.  It will describe, in your best business writing style, what makes your product or service "compelling."  In other words, why will customers want to try your new product or service?  What makes it "better?"  And after they try it, how will your product or service earn the customer's loyalty.  What will bring them back for more?  The requirement here is to answer the "So what?" question:  What makes your product a big deal?

The "Executive Summary" shouldn't take more than two-thirds of a page and will concisely tell your readers everything they need to know about your business:  What's your product and its market?  Who are the people behind it and why will they make it successful?  How does the business work?  Who answers the phone and does the work?  When and how do your customers pay you?  And do the sources and uses of cash end up with a positive balance in your checkbook (that's also called being profitable)?

When you're done with both these requirements, you'll have produced a one-page "blurb" that investors, bankers and customers can copy and use to help your business be a roaring success!

Financial Controls and Management Practices: Two Important Uses of Information

Section 5 of the Financial Plan asks for a description of your business's "financial reporting and performance measurement systems."

The requirement might also be phrased as, "How will you use the information produced by your firm's financial reports?"

You will be interested in your business's performance from two perspectives.

There are Warranties, and then there are Warranties

Remember that Warranties come in at least two flavors.

First, there is what's called an "Express Warranty."  This usually takes the form of a written disclosure (it is "expressed") and is time- or use-specific (36 months or 36,000 miles, whichever comes first, for example).  This form of warranty defines what the Seller (or manufacturer) will repair or replace during the warranty's term.  There usually are also exclusions or conditions that might void the warranty or excuse the seller from having to repair or replace something.

Don't get the "Budget Blues"

Fighting the Budget Battle is one of the Final Plan's bigger challenges.  Here are some weapons to help you emerge victorious. 

The most frequent problem is the Capital Budget's Sources and Uses of Funds don't balance.  The total of each has to be identical, otherwise your budget won't behave. 

Next on the list is understanding the difference between (1) your capital budget's initial inventories and (2) your operating budget's periodic replenishment of those inventories.  Doesn't that sound exciting?

I'll bet you can't wait to read more.

Form and Structure: They're not the same thing

In order to better understand how organizations work (and to make them work more efficiently), it's important to know the difference between an Organization’s Form and its Structure.

The terms “Form” and “Structure” describe completely opposite aspects of a businesses’ organization. They're not interchangeable and are as different as night and day.

Learning to Love Budgeting

A big part of the Business Plan Project's Final Submission is putting together a cash-flow budget for your business. And getting started sooner is better than later.

Doing this requires input from every team member. It will also put your business to the ultimate test: can it operate profitably? Are you ready to find out the answer?

This post appears in two categories: "Week 5" and the "Business Plan Project: Final Submission."

For openers, here are my lecture notes and PowerPoint slides.

• Download Budgets (Week Six)

Note: You'll actually prepare two budgets (twice as much fun): a capital budget (includes every cost from inception through grand opening) and an operating budget (includes everything after grand opening through stabilization and maturity).

You'll also need two more files. They're Excel files that contain a "suggested format" for your budgets. One is a "Sample" that is fully-outfitted so you can see how it all works. The other is a "Blank" for you to use. Here they are:

• Download Capital and Operating Budget (Blank)
• Download Capital and Operating Budget (Sample)

You'll notice the "suggested format" tracks the order of a "Statement of Cash Flows." That's on purpose. At this stage, it doesn't make sense to prepare an Income Statement or a Balance Sheet if your business doesn't have a positive cash flow.

Likewise, you've got to work out your capital structure: what are the sources and uses of funds that you'll be needing and using? What's the "mix" of funding that makes your business perform? The best answers to these questions come from analyzing your cash flows.

The best way to start is to "fool around" with the sample budget. Look at the formulas and relationships. See how they link together.

To start on your budget, plug a few numbers into the blank budget and watch what happens. Don't load in everything at once and expect it to work right the first time out of the box. Take your time and be patient.

Also, don't hesitate to change labels or expand or delete the budget to suit your business's needs. If you do, don't de-link some relationships or formulas.

Finally, there's a post also in the "Business Plan Project: Final Submission" category ("Don't Get the Budget Blues") that is mandatory reading for your team's CFO. It's got some trouble-shooting ideas that might be helpful. Enjoy!

Scoring for Team-based Work

Points earned for the various team assignments are awarded to each team member.  If, for example, a team earns 48 out of 50 possible points for its Strategic Concept submission, then each member of that team is awarded 48 points.

This assumes, however, that every member of that team contributed in some substantial way to the assignment or submission.  If someone didn't, there's a "Free Rider" problem.

To avoid any team member getting more points than they deserve (getting a ride for free), the "Team Contribution" scoring category is used to make any necessary adjustments.

If during the term and based on the Team Member Evaluations, it's found that any team member has not contributed to their team's work, that member's "Team Contribution" score will be adjusted accordingly.  It's possible that this adjustment will cause a student's Team Contribution score to be negative. 

Feedback - Give it early and often

It's important that we communicate with one another about how you're doing in the course.  All too often, evaluations come at the end of a course when it's too late to make mid-course corrections.

How about doing things different and maybe better?

Here's a link to a Confidential Survey where you can give me some feedback on what's working or not working for you:  Click to Give Feedback

Your feedback is confidential.  I'm the only one who will see it.  Access to your feedback is password protected.

Your feedback can also be anonymous if you want.  If you want me to contact you, or know who you are, leave your name and how to contact you.  Otherwise, your feedback will be anonymous if you want it to be.

Let me know early and often how things are going.  Thanks for your help.