Question

Go-Figure, Inc.*

The actual company name and product has been disguised.

Go-Figure, a newly formed corporation, has developed a proprietary circuit board inspection system that offers a high-speed way to inspect boards for defects. Data indicate that 10 to 25 percent of circuit boards that leave a manufacturing line have defects such as wrong polarity, missing components, wrong components, etc. Quality control is a serious problem for manufacturers as, in aggregate, they place 2 to 5 million components on circuit boards per day, a number that is increasing rapidly. As circuit boards become smaller and more densely populated with components, the potential for defects increases, as does the difficulty of detecting the defects.

Go-Figure uses a unique technology for circuit board inspections and has applied for a patent on the technology. Product testing shows considerable detection success and the technology is much less costly than alternative mechanical methods of inspection and visual inspection. Visual inspection is prone to error and is very time-consuming. Preliminary market research indicates that, worldwide, there currently are 30,000 manufacturing lines that could be served using the Go-Figure technology.

Go-Figure has developed the technology and a prototype, and has arranged for a host site where it can demonstrate use of the system. The firm is seeking an additional $1 million from outside investors. It proposes to raise equity capital from business angels by issuing them common stock at $1 per share. Minimum investment is $25,000. The entrepreneur and members of the board own existing equity. The management team is looking for additional expertise and is willing to consider board membership for a well-qualified investor.

You are an employee of Go-Figure, and have been deputed with the job of putting together a draft business plan that will be circulated to prospective investors.

1. As a starting point, look at some Internet sites on business plans and develop a brief outline of what you believe the major parts of the Go-Figure business plan should be.

2. Prepare a list of questions you believe any outside investor would want to have answered before investing, e.g., What will be done with the proceeds? What is the exit mechanism that is contemplated? Make this list as complete as possible.

3. After you have developed the outline, explain in which section(s) of the plan each of the following might be addressed.

1. Commitment of the entrepreneur
2. Present and future financial needs
3. Specifics of the opportunity
4. Significant risk
5. Competition
6. Sources of competitive advantage
7. Capabilities of management
8. Harvesting

4. Once you have thought about the outline in more detail, it is certain that you will have a list of questions you will need to have answered, or at least, researched, prior to completing the plan. What are these questions? What are your suggestions for getting them answered?

*Source: Smith, J., Smith, R. L., Smith, R., & Bliss, R. (2011). Entrepreneurial finance: strategy, valuation, and deal structure. Stanford University Press.

Answer 1

SOLUTION:-

Given data

List of questions you believe any outside investor would want to have answered before investing:-

1)What was your marketing model?
2)What is your growth strategy ?
3)ROI(returns on investment)?
4)Dividends?
5)What are the risks involved?
6)What are the opportunities for the business?
7)How the company would get the investment?
8)What is your background and experience in the industry?
9)What was the uniqueness of your sevice?
10)What was your market size?

The basic business plan is :-
1)General company description:-The commitment of the entrepreneur will comes under this section.As the company was being described ,the commitment of the entreprenuer will be quoted.
2)The opportunities:-Specifics of the opportunity are presented in opportunities section .The company oppurtunity and growth.There is a voidness in this industry as far as detecting the defects and it was a great opportunity to GO-FIGURE to grab this.
3)Industry and market:-Significant risk of the business can be specified in the industry and market section.Industry and market analysis will show the risk involved in the market.And a strategy to counter it.Competition would also be discussed in the industry and market section.As it gives a clear idea of competitors.

4)Our strategy :- Harvesting or returns to the company will be quoted in the strategy section.It explains the strategy in bringing returns.
5)The team:-Capabilities of management will be under the team section.Starting from the top level management to the low level empoyess and their capabities are quoted.

6)Marketing plan:-Sources of competitive advantage? would be addressed in the marketing plan.Competitive advantage of the company can be presented here.
7)Financial plan:-Present and future financial needs? would come under the financial plan of the company.Here it was indetail presented ,how many funds are needed for present and future.
8)Conclusion

List of questions you will need to have answered:-

1)How much initial investment should i have to start the business?
2)What is my competitive edge?
3)How many number of shares have to allot to get full investment?
4)From which year onward my returns would start growing?
5)What is number of human resource needed?
6)What are the short-term and long-term gains?

Suggestions to the questions:-

1) $25,000
2)My competitive advantage is that fast detection success with the low cost technology.
3)As the debt-equity ratio is 1 (one) it's better to issue 25,000 shares.
4)As the market potential is large.It would be between 3-5 years to get returns.
5)As it was a service based company. it will be moderate
6)Short term gains are- market expansion and growth, long-term gains are-company value and customer satisfaction.