Due Diligence structure
In the process of evaluation of a business one will be required be an investor or an entrepreneur (Baron, 2004). One has to examine the benefits that will be brought about by viability of the business plan. Both investors and entrepreneurs are risk takers and they aid in the development of the economy by making it grow by supporting enterprises in the business sector. According to Chen, (2009) the differences and dissimilarities between an investor and an entrepreneur include the following; an entrepreneur focuses on a new business idea, while an investor focuses on the existing business ideas in the business environment. In most cases the entrepreneur approaches an investor to be given finance his or her business while on the other hand an investor in most cases approaches an entrepreneur to invest in his or her business which must be profitable (Der Foo, 2004).
An entrepreneur contributes idea and passion (but may also invest money), while an investor primarily invests money on the business. For an entrepreneur to be able to gain finances he or she should be passionate about his work, dedicated about his or her idea, optimistic and very ambitious in his or undertakings. While an investor is reasonable to an idea by evaluating its viability and examining it if it is reasonable and will bring returns. An investor needs to make sure his or her finances invested well in the business (Stutely, 2012). In this case of New co limited we will evaluate the business plan as entrepreneurs who are willing to invest.
Q1 Every company before its adoption needs to have an elaborate business plan which will help source for finances. In this case, New co business possess both strengths and weaknesses trying to source for finances. The business plan has both strengths and weaknesses as it tries to source finance from investors. The company deals with solar powered mobile charger designed to charge up to six mobile phones. Charging in rural areas has been a challenge because of limited access to electricity. One of the strengths of the business plan is that it addresses the issue of availability of market. The market is large with 39.4 million population which are un electrified and most of the people use mobile phones .This product will address charging problem, mostly to kiosk and shop owners to increase revenue.
Another strength of the business plan is that the set location of the business is vital since it targets most of the customers. The location will allow easy direct sales and distribution channels who will be able to sell directly to the shop or kiosk owners or to individuals in need of the product leading to high projection of the sales. The market is also expected to grow and capture a significant market to generate income. The product is environmentally friendly with use of clean energy, encourages the growth of enterprises and helps to alleviate poverty especially in rural areas who have no or limited electricity supply and low income. Another strength of the business plan is that the business can be able to beat competition in the market .This is because of distinguished products through innovation ,the product focuses on unique segment and market is growing very fast and has no market leader. Also the suppliers are not selling directed to customers and this serves as a strategy of curbing competition. Strength of the business plan is that the business will be able to easily access inputs of the product. Lastly there are no threats of new entrants in the market because it is not easy to penetrate.
Strengths of the Business Plan
The business plan also possesses some weakness that my hinder its operations in the future. One of the weaknesses is there is difficulty in conducting marketing. Marketing is a very important tool for a business to proper. The product needs to be advertised to the customers in order for the business to grow. The business plan does not address marketing issues. The business plan shows that the business does not have a brand name. a brand name is important because it will help the product to be identified by the customers and will act as a marketing tool. The business will require high startup costs and the market represents small enterprises and not large enterprises. The business plan will require large amount of capital for expansion purposes.
Q2. The business plan needs to be improved based on a number of factors which includes the following; based on the preposition and value chain of the business, the business plan should show how the value proposition will help the company impact positively on the environment, society and will help source for funds and reduce poverty levels. The business plan should include how the company can adopt a system that can connect the customers, retailers and distribution channel that will make distribution easy and be able to meet demand of the customers.
Q3.The pricing model employed by the company should be fair to all the stakeholders using the product. The price of the product should be set at an affordable price by conducting a cost benefit analysis. The skimming model applied by the company is important in penetrating the market. Since the product is new in the market the price of the product should be set at a lower price to penetrate the market. Within duration of time the prices should be increased to cater for the capital invested in the business. The company gets money from selling the product to kiosk and shop owners to expand more.
For the company to grow it needs to diversify its product through market penetration and product development. The company should move its product to customers in the urban areas nt only the rural areas. Growth of company needs marketing to be incorporated in the direct sales conducted by the employees in the market. Personal selling is important for the company as it will bring the customers close to the business and will be able to understand the business well in the market. The distribution channel of the business plan should be used to reduce competition by the other competitors in the market. Based on the products and services offered , the product should not only target the kiosk owners but all homes which do not have electricity to conduct their operations .The products should be made affordable reliable , easy to repair and being portable to any place. Based on the design of the product, it should be simple and can be transformed into more attractive design. Also the photos showing the design of the product should be visible to the investors. The product should be durable in the market to curb competition. The business plan should also address intellectual property since the product should be protected from being patented by other businesses .It should show the procedure of manufacturing, the packaging of the products to be sold in the market and lastly the products should be good quality and be preferred by customers (Drucker,2014).
Weaknesses of the Business Plan
Q4.The market dimensions of the business is important because it helps provide customers for the given product in the business environment. The market segmentation used by the company is appropriate since it target groups of shop owners who operate in the rural area and do not have electricity. The position and timing of the market is appropriate since the customers need the services of the product. The kiosk owners are first given priority as the ideal customers since they provide the charging services to individuals. The company should also target individual who live far from the kiosks and shops so that they can be able to access the product.
Q5.I think the team in the business do not have the necessary skill to help run the business. The level of technology is advanced and it will take a duration of time for the employees to adapt. In this case the employees will have to be trained to use the technology. It will also be hard for the employees to make management decisions because of the little skills that they possess. The will be grouped on the lower level of the organization structure.
Q6. Based on the finances, the business should try to reduce the costs mostly the variable costs and fixed costs. According to Reichheld ,(2006) with a good business plan one is able to source finances from investors for prosperity. The costs provided by the plan is realistic since the business requires high startup capital and the costs involved in running the business will be high due to adoption of new technology. The company has to make more investments related to the energy industry .It can form partners with other businesses. This will help increase the revenue f the business.
Q7. The shares of the company will be distributed according to the memorandum of association created. The sharing of shares will be determined by the level of capital contribution by the shareholders. The technology and management shares will be distributed to the investors on the level of financial investment into the business. The company will need about $ 0.8 million for growth and product development. The money can be obtained from investors with a formal agreement from shareholders through board room voting powers.In conclusion a good and effective business plan is vital for sourcing finance.
References
Baron, S. G. (2004). Developing Power Business Plan: Empowering the Bottom of the Pyramid: a Thesis Submitted in Partial Fulfillment… Master of Science in Natural Resources and Environment… University of Michigan.
Chen, X. P., Yao, X., & Kotha, S. (2009). Entrepreneur passion and preparedness in business plan presentations: a persuasion analysis of venture capitalists’ funding decisions. Academy of Management journal, 52(1), 199-214.
Christensen, C. M., & Christensen, C. M. (2003). The innovator’s dilemma: The revolutionary book that will change the way you do business (p. 320). New York, NY: HarperBusiness Essentials.
Der Foo, M., Wong, P. K., & Ong, A. (2005). Do others think you have a viable business idea? Team diversity and judges’ evaluation of ideas in a business plan competition. Journal of Business Venturing, 20(3), 385-402.
Drucker, P. (2014). Innovation and entrepreneurship. Routledge.
Macaulay, S. (1963). Non-contractual relations in business: A preliminary study. American sociological review, 55-67.
McKeever, M. P. (2001). How to write a business plan. Nolo.
Stutely, R. (2012). The definitive business plan: the fast track to intelligent planning for executives and entrepreneurs. Pearson UK.
Saaty, T. L., & Vargas, L. G. (2013). The logic of priorities: applications of business, energy, health and transportation. Springer Science & Business Media.
Stevenson, H. H., & Jarillo, J. C. (2007). A paradigm of entrepreneurship: Entrepreneurial management. In Entrepreneurship (pp. 155-170). Springer Berlin Heidelberg.
Sharma, P., & Chrisman, S. J. J. (2007). Toward a reconciliation of the definitional issues in the field of corporate entrepreneurship. In Entrepreneurship (pp. 83-103). Springer Berlin Heidelberg.
Reichheld, F. F., & Covey, S. R. (2006). The ultimate question: Driving good profits and true growth. Boston, MA: Harvard Business School Press.
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