Question

As a principal consultant, prepare a brief proposal prior to a proper research to a client who will go for new venture (your own suggested venture). Following are instructions for your proposal: (1) The contents must have some explanations of entrepreneurial process, componentts for a successful new business, evaluation of the new opportunity with examples and citations. (2) Proposed headings are: (i) Introduction (ii) Objectives of the Proposal (iii) Statement of Problems (iv) Scope and Limitations (v) Significance of the Study (vi) Literature Review (vii) Proposed Methodology (viii) Schedule and Costing

Answer 1

(1) Introduction:

In today's competitive business environment, your ability to write powerful proposals could mean the life, or death, of your business.

When government agencies and large corporations need to buy products or services from an outside source, they often release what is called a Request for Proposal (RFP), a formal document outlining their needs. To bid for the job, you must submit a proposal, which will explain how your company would meet the client's needs and should convince the client to hire your company, instead of a competitor.

(2) Objectives of Proposal:

1. Go beyond the business plan.
Planning carefully before launching a new business is not limited to preparing a business plan, says Bruce Bachenheimer, clinical professor of management and director of the Entrepreneurship Lab at Pace University in New York City. "While preparing a business plan is generally a valuable exercise, there are other ways to plan carefully," he says. Bachenheimer recommends three planning methods.

• The Apprentice Model: Gaining direct industry experience, as the founders of Tender Greens did.
• The Hired-Gun Approach: Partnering with experts who have in-depth knowledge and experience.
• The Ultra-Lean School of Hard Knocks Tactic: Figuring out a way to rapidly test and refine your model at a very reasonable cost.

While writing a business plan is certainly helpful, the real value is not in having the finished product in hand, but rather in the process of researching and thinking about your business in a systematic way, according to Victor Kwegyir, founder and CEO of Vike Invest, a U.K.-based business consultancy. "The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts and look at your ideas critically," he says.

2. Test your idea.
Sixty percent of new businesses fail within the first three years, according to Victor Green, a serial entrepreneur and author of How to Succeed in Business by Really Trying. "Too often people rush into business without carefully checking out their idea to see if it will work," he says. "Research is essential."

3. Know the market.
Ask questions, conduct research or gain experience to help you learn your market inside and out, including the key suppliers, distributors, competitors and customers, Bachenheimer says. "You also have to really understand the critical metrics of your market, whether it's as simple as sales per square foot and inventory turnover, or an esoteric measure in a highly specialized niche market," he says.

Tender Greens' Oberholtzer and his partners spent many years working in the California restaurant industry before launching their business. That experience allowed them to not only perfect their craft, but also to develop longtime relationships with food purveyors, farmers and other suppliers that they relied on to help Tender Greens succeed. In fact, Scarborough Farms, the restaurant's lettuces and greens supplier, is a partner and investor in the company, thanks to its long relationship with the founders.

4. Understand your future customer.
In most business plans, a description of potential customers and how they make purchasing decisions receives much less attention than operational details such as financing, sourcing and technology. But in the end, it will be the customers who determine your success or failure, Blue Canyon Partners' Brown says.

"You need to know who they are going to be, what drives their purchase decisions, what you can do that will differentiate your offering from that of competitors and how you can convince them of the value of your offer," he says. "And the answers to those questions shouldn't be off-the-cuff guesses. They need to be well-grounded in reality and market testing."

Before launching Tender Greens, Oberholtzer and his partners spent years creating and serving the kinds of dishes they wanted to one day serve at more affordable prices. That experience, says Oberholtzer, is what helped them develop an understanding of the types of farmers-market-inspired dishes that would please local customers.

Understanding your future customers can be the difference between changing a failed aircraft engine on the ground vs. doing so midflight, Brown says. "The former is much simpler and much more likely to be successful. Once you start up the business, it's likely that you will be consumed with operating details, often with little time to think and even less to make adjustments. Implementing the right plan from the start is far more likely to yield success than figuring out a plan on the fly."

(3) Statement of Problems

1. The plan is poorly written. Spelling, punctuation, grammar and style are all important when it comes to getting your business plan down on paper. Although investors don't expect to be investing in a company run by English majors, they are looking for clues about the underlying business and its leaders when they're perusing a plan. When they see one with spelling, punctuation and grammar errors, they immediately wonder what else is wrong with the business. But since there's no shortage of people looking for capital, they don't wonder for long--they just move on to the next plan.

Before you show your plan to a single investor or banker, go through every line of the plan with a fine-tooth comb. Run your spell check--which should catch spelling and punctuation errors, and have someone you know with strong "English teacher" skills review it for grammar problems.

2. The plan presentation is sloppy. Once your writing's perfect, the presentation has to match. Nothing peeves investors more than inconsistent margins, missing page numbers, charts without labels or with incorrect units, tables without headings, technical terminology without definitions or a missing table of contents. Have someone else proofread your plan before you show it to an investor, banker or venture capitalist. Remember that while you'll undoubtedly spend months working on your plan, most investors won't give it more than 10 minutes before they make an initial decision about it. So if they start paging through your plan and can't find the section on "Management," they may decide to move on to the next, more organized plan in the stack.

3. The plan is incomplete. Every business has customers, products and services, operations, marketing and sales, a management team, and competitors. At an absolute minimum, your plan must cover all these areas. A complete plan should also include a discussion of the industry, particularly industry trends, such as if the market is growing or shrinking. Finally, your plan should include detailed financial projections--monthly cash flow and income statements, as well as annual balance sheets--going out at least three years.

(4) Scope and Limitations

Advantages:

1. Freedom of choice in all aspects of the business. Creativity can play a big part in starting and operating the business. The owner is in control of all aspects of the business, including the location and what the operation is to look like.

2. Low-cost entering: If you have limited capital available, you can start on a small scale.

3.Quality of Life: Entrepreneurs usually start businesses doing something they love. Growing a business from a hobby or part-time job gives entrepreneurs a chance to improve their lives because they are working in an environment important to them. Working in a positive business environment may not really seem like work to an entrepreneur.

4.Team solidarity: Smaller teams tend to be closer teams. It’s purely a function of team size divided by time. As a member of a small team, I simply spend more time with each of my team mates than I could with a big team.

5.Freedom to question everything: when engineering teams are allowed to question why they are building something, incorrect or unnecessary features can be changed or scrapped early in the development process. This saves time and results in a better product.

Disadvantages:

1.High commitment: You'll need to spend more time and effort to start up. This will include developing your customer base, establishing lines of credit and supply and finding experienced staff.

2.High risk- Success depends totally on you and your business talents. That's why future of your business remains uncertain and nothing can be taken for granted.

3.Delayed profitability- Where the market may not already be established, it may take longer to become profitable

4.More responsibility: All of the details of starting the business, including licenses, marketing, naming the business, finding product sources, etc. are the responsibility of the owner.

It's impossible to say if the startup is right option for someone. It depends on two things: your attitude to risk and your experience. If you’ve always had an entrepreneurial streak and the idea of climbing the corporate ladder, perhaps a start-up is better suited. If thinking on your feet, sharpening your entrepreneurial skills and flying into uncharted territory sounds exciting to you, then you should work at a start-up. If that sounds totally terrifying, probably not.

(5) Significance of study

Lowers risk factor

Carrying out market research for a business helps measure the risks involved with implementing various decision-based actions. After a detailed research, your business is likely to be more certain on whether to act on those decisions or not. If your market research provides significant evidence of success, you must go for it. However, if your market research doesn’t provide enough data or confidence, you mustn’t take the risk.

If a particular activity requires a big investment, market research will help you analyze if taking this risk is worth taking for the organization.

Increases sales

Carrying out rigorous research enables you to pitch your business products/services in a much effective way that indirectly boosts your sales. If you grab the pulse of your customers, it becomes easy to target them and hence boost sales.

Increasing sales and conversions in a short time span is one of the most common reasons for conducting market research. Businesses are on a constant lookout for methods to increase sales, and familiarize themselves with latest techniques that businesses are using to get more sales. Market research is an effective way to identify the areas of success for a business.

Improve customer relations & management

Market research involves getting a better understanding of your target audience and thus offering them products and services that are aligned with their wants and needs. Asking your audience business-specific questions will help you get valuable and honest feedback directly from your customers. Ask them how they recognize your brand? What is the most that they like about your brand?

These customer-centric questions give provide an insight into how your customers perceive your brand. The primary factor that is effected by a market research is customer relation.

An example of this is Twitter polls!Asking business-specific questions always helps the business to know their customers much better.

Business growth

A thorough market research helps you explore more and different challenging opportunities that will help grow your business.

To increase the stake for your business, you need to deliver something better than promised. This will make your customers extremely happy, paving a way for your business to grow.

Measure brand reputation

How does a business know if the users even like the brand or not? Market research helps businesses measure its brand reputation in the market among its target audience over a period of time. It’s a great way to measure progress for your business as well as compare your status to your competitors in order to see what’s missing or exceptional.

We’re sure you have a better understanding of how important market research is before starting a business! A detailed analysis of the situation, consumer, environment and marketing trends can give you a good understanding of what is required from your business to succeed. Market research helps businesses get a good insight into all the activities that are working well in the market.

To summarize, the importance of marketing research in a business is not just limited to these factors. Start giving research marketing skills its due importance and test what works well for your business.

(6) Literature Review

1. Constitution of business entity involves the constitution to be risky due to lack of professionalism and overdependence on one or two key person in deciding the important part in running the business. The decisions made will affect the success or failure in establishment and advancement of the business.
2. Leverage on financial structure occurs when the business entity limits the funds mobilisation efforts that a small and medium business enterprise can raise capital and borrow.
3. Tough competition and inadequate margin resulted from competition with bigger business, whereby a small and medium business enterprise face the pressure on the margin as they have to absorb according to bigger enterprise price as they cannot raise their price.
4. Low collection in account receivable gives effects to the strain on the liquidity position of the SME sector and may be the result of bank restricted their exposure to the sector.
5. Incapacity to go for technology advancement to help the sector optimized their available resources in the best way is because of little financial resources and poor ability for leveraging the financial structure.
6. High employee turnover in the small and medium business enterprise because of limited of growth prospects includes the possible loss of manpower and additional costs in the form of training and knowledge update that will results the operation continuity and lowering the productivity.
7. Micro finance which provided credits to small enterprise as to improve the standard of living will covered them under social entrepreneurial activities. Doubtfully, the risk of the lenders will be spreading under the sector. The approach of micro enterprise finance is through repayment incentive structure, streamlined administration and market based pricing adopting profit which leads to great transform in a cumulative causation triggered by credit to MSMEs.
8. Collateral Security exists when dealing with lenders and borrower particularly to banks. Banks would not on detailed investigation and analysis of borrower’s business as they already have the protection which will reflect of credit-worthiness to lenders.

(7) Proposed Methodology

The proposed method is a process that provides a check-list of important information that should
be included in a proposal to top management, such as that prepared for the Ford Motor Company
(de Neufville and Neely, 2001).
The process includes an important set of financial calculations, but these are only part of the
process. It features a transparent decision analysis, coupled with a financial options analysis -- to
the extent this may be appropriate. This part of the process is called a “hybrid real options
analysis” – hybrid because it combines methods, applying each one only where it is relevant to do
so.
The process goes through these steps:
1. Verify the technical promise of the proposed start-up – this is crucial as the information
available is often biased or otherwise misleading.
2. Define the Technical Gap this technology fills within the acquiring company, that is,
what are the specific capabilities this technology will provide, which the company does
not have, and anticipates that it will need. This is what will make the acquisition
particularly valuable – and will give the company a reason to pay the winning price to
acquire the target company. [If there is no such gap, then perhaps the company should
not have a special interest in the start-up.]
3. Identify the major scenarios that give value to this option. Investment in a start-up,
as in any other option, should be done with a recognition of the circumstances that will
make the option valuable and worthy of further investment.
4. Quantify the probabilities associated with these scenarios. In other words, how likely is
it that the new technology will succeed technically, and that it will also be economically
worthwhile for the acquiring company? [The main problem being that many technical
successes ultimately have no value, because the economic environment or the
technological context has changed.]
5. Quantify the financial benefits and costs associated with each of the important
scenarios. This consists of the standard financial analysis (Net Present Value or
Discounted Cash Flow) for these situations, calculated according to the standard process
for the company.
6. Include the financial option evaluation if and where appropriate. To the extent that
any of the scenarios results in the production of assets that are traded commercially, it
may be possible to calculate and use a standard financial options analysis for these
portions. However for many technological assets, such circumstances will not arise.

(8) Schedule and Costing

List spending on assets. Your business assets are the things you need to use in your business over the long term. For example, if you're starting a brick-and-mortar store, that might include items such as shelves, tables, a cash register and so on. A graphic artist might need specialized printers and a drafting board, among other things.

If you're either making or selling products, think about the inventory you'll need to have at the start. The easiest example is the books a bookstore needs to stock its shelves or the raw materials a manufacturer might need to start assembling a product. If you're starting a service business -- meaning you don't make or sell products -- then don't worry about inventory. You can skip this step.

All of these items make up your starting assets. While you might also think the money you have in the bank is an asset to list here, we're going to save that for another list later on

For every item on this list, make an educated guess of what the amount of expense will be. If you can't estimate the price for an item off the top of your head then do some research. For instance, call real estate agents to inquire about rental space and prices. Contact insurance brokers to ask about insurance plans and prices.

One important note: Although computers and office equipment should logically be included on this list, the federal tax code allows us to deduct their cost from our taxable income as expenses, so most accountants recommend calling them expenses, not assets. We'll get to these in the next list.

List spending on expenses. Not everything you purchase is an asset. You also spend money on expenses. For example, it costs money to set up a legal corporation, an LLC or a partnership. The money you spend to build your website, the costs of fixing up your office and the salaries you pay employees to help you set up are also examples of expenses.

And, because of the special tax treatment I mentioned earlier, include expenses for computers and other office equipment on this list.

Now, add up your starting assets and your starting expenses to calculate most of your starting costs.

Determine how much money you'll need to get started. The final piece of the puzzle is knowing how much cash you'll need to have in the bank for the early months while your startup is ramping up and not generating enough sales to cover costs and expenses.

There are a number of theories on how to do this. Some people say you need enough to cover six months of expenses. Others say a year. But in my experience, it's usually not that easy.