THE BUSINESS PLAN
FOR VENTURE CAPITAL AND PRIVATE INVESTORS
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FOR STUDENTS - WHAT IS A BUSINESS PLAN:
A business plan is a summary of how a business owner, manager, or entrepreneur intends to organize an entrepreneurial endeavor and implement activities necessary and sufficient for the venture to succeed. It is a written explanation of the company's business model.
Business plans are used internally for management and planning and are also used to convince outsiders such as banks or venture capitalists to invest money into a venture.
Business plans are noted for often quickly becoming out of date. One common belief within business circles is that the actual plan may have little value, but what is more important is the process of planning, through which the manager gains a greater understanding of the business and of the options available.
Example of the Content of a business plan
A business plan can be seen as a collection of sub-plans including a marketing plan, financial plan, production plan, and human resource plan.
The business plan has many forms. There is however a format that is typical:
Specialized sections such as product research and development, legal strategies, marketing research, or inter-company collaborations, are added to deal with unique features or characteristics of the business or its markets.
THE MARKETING PLAN
A Marketing Plan is a written document that details the actions necessary to achieve a specified marketing objective(s). It can be for a product or service, a brand, or a product line. It can cover one year (referred to as an annual marketing plan), or cover up to 5 years.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.
Content and presentation
There are many formats for marketing plans and every company does it a little differently, but the outline that follows is a very complete format. Using this format will produce a 30 to 40 page plan. Many companies prefer an abridged format that would yield a 10 to 20 page plan.
Strategic management is the process of specifying an organization's objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. It is the highest level of managerial activity, usually performed by the company's Chief Executive Officer (CEO) and executive team. It provides overall direction to the whole enterprise. An organization’s strategy must be appropriate for its resources, circumstances, and objectives. The process involves matching the company's strategic advantages to the business environment the organization faces. One objective of an overall corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently. A good corporate strategy should integrate an organization’s goals, policies, and action sequences (tactics) into a cohesive whole. To see how strategic management relates to other forms of management, see management.
Strategic management can be seen as a combination of strategy formulation and strategy implementation.
Strategy formulation involves:
This three-step strategy formation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. SWOT Analysis: I/O Economics for the external factors and RBV for the internal factors.
Strategy implementation involves:
Strategy formation and implementation is an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is dynamic. See Strategy dynamics. It involves a complex pattern of actions and reactions. It is partially planned and partially unplanned. Strategy is both planned and emergent, dynamic, and interactive. Some people (such as Andy Grove at Intel) feel that there are critical points at which a strategy must take a new direction in order to be in step with a changing business environment. These critical points of change are called strategic inflection points.
Strategic management operates on several time scales. Short term strategies involve planning and managing for the present. Long term strategies involve preparing for and preempting the future. Marketing strategist Derek Abell (1993), has suggested that understanding this dual nature of strategic management is the least understood part of the process. He claims that balancing the temporal aspects of strategic planning requires the use of dual strategies simultaneously.
In general terms, there are two main approaches, which are opposite but complement each other in some ways, to strategic management:
Strategic management theories can also be divided into those that concentrate mainly on efficiency and those that concentrate mainly on effectiveness. Efficiency is about doing things the right way. It involves eliminating waste and optimizing processes. Effectiveness is about doing the right things. There is no point in acting efficiently if what you are doing will not have the desired effect. A good strategy will blend both efficiency and effectiveness. This distinction is linked to the formulation/implementation distinction made above.
Strategic management techniques can be viewed as either bottom-up, top-down, or collaborative processes. In the bottom-up approach, employees submit proposals to their managers who, in turn, funnel the best ideas further up the organization. This is often accomplished by a capital budgeting process. Proposals are assessed using financial criteria such as return on investment or cost-benefit analysis. The proposals that are approved form the substance of a new strategy, all of which is done without a grand strategic design or a strategic architect. The top-down approach is the most common by far. In it, the CEO, possibly with the assistance of a strategic planning team, decides on the overall direction the company should take. Some organizations are starting to experiment with collaborative strategic planning techniques that recognize the emergent nature of strategic decisions.
THE BUSINESS MODEL
A business model (also called a business design) is the instrument by which a business intends to generate revenue and profits. It is a summary of how a company means to serve its employees and customers, and involves both strategy (what an business intends to do) as well as an implementation (how the business will carry out its plans).
A business model describes how a business:
Types of business models
Generally, the business models of service firms are more complex than those of manufacturers and resellers. The oldest and most basic business model is the shop keeper model. This involves setting up a store in a location where potential customers are likely to be and displaying a product or service.
A business model is a description of how an organization functions, a general template that describes its major activities. It identifies the firm’s customers and the products and services it offers. A model also provides information about how a firm is organized and how it generates revenues and profits. Business models combine with strategy to guide major decisions at a firm. The model also describes products and services, customer markets and business process.
Currently, most of the business models depend on technology. Entrepreneurs on the internet have also created entirely new models that depend entirely on exiting or emergent technology. Using technology, businesses can reach a large number of customers with minimal costs.
Over the years, business models have become much more sophisticated. The bait and hook business model (also referred to as the "razor and blades business model" or the "tied products business model") was introduced in the early 20th century. This involves offering a basic product at a very low cost, often at a loss (the "bait"), then charging excessive amounts for refills or associated products or services (the "hook"). Examples include: razor (bait) and blades (hook); cell phones (bait) and air time (hook); computer printers (bait) and ink cartridge refills (hook); and cameras (bait) and prints (hook). An interesting variant of this model is a software developer that gives away its word processor reader for free but charges several hundred dollars for its word processor writer.
In the 1950s new business models came from McDonald's Restaurants and Toyota. In the 1960s the innovators were Wal-Mart and Hypermarkets. The 1970s saw new business models from Federal Express and Toys R Us; the 1980s from Blockbuster, Home Depot, Intel, and Dell Computer; the 1990s from Southwest Airlines, eBay, Amazon.com, and Starbucks. Poorly thought out business models were a problem with many dot-coms.
Each of these business model innovations can give the firm a sustainable competitive advantage. But times are changing and companies must continuously rethink their business design. Companies must change their business models as value migrates from industry to industry. Ultimately the success or failure of a company depends first on how well its business design matches their customers' priorities.
Thank you for your time in coming this far. Solar Cola is currently investigating the market for the best launch opportunity. The company owns an impressive portfolio of Intellectual property, trademarks, designs and formulas. In addition raw materials suppliers have been sourced and a manufacturing facility arranged for Europe and the USA. Other distribution agreements are to follow.
A small production unit costing under $50,000 is capable of generating profits of $500,000 a year. Running more than one line, increases output, hence profitability. Fully automatic production lines offer several times the capacity and profitability. All this and fair trade too.
The company will work with Franchisee associates to help them develop the market in their area, using a web based marketing strategy intended to make the product a household name, details of which are contained in their Business Plan.
Read about the healthier alternative to ordinary colas, by clicking on the can at the foot of this page.
SOLAR COLA LIMITED
SOLAR HOUSE, BN27 1RF
UK HOTLINES: +44 (0) 7842 607865
+44 (0) 1323 831727
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