Preparing the Proper Ethical and Legal Foundation - Slide 1

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					Ethical and Legal Foundation



     Chapter 7

     Business 3215
Legal Issues Affecting Entrepreneurial
Firms
   Form of business organization choice and associated legal filings and other
    requirements
   Incorporation
   Choice name, registered trade mark and other intellectual property issues
    (patents, copyright)
   Partnership agreements (general and limited partnership arrangements)
   Shareholder agreements
   Noncompete agreements
   Nondisclosure agreements
   Contract law
   Taxation issues
       Corporate tax
       Corporate returns
       At source deductions and remittances
       Sales taxes (PST and GST)
BizPal Thunder Bay

   This is a useful resource
   It helps to ensure that you are fully cognizant
    of the licenses and regulations that may
    impact your intended business.
   This should be consulted before you start the
    business.
   http://www.thunderbay.ca/Doing_Business/Bi
    zPaL.htm
Useful Resources

   How to incorporate – SBinfo Canada
   BDC Canada – incorporation services
   Service Ontario site for Businesses
   Primary Electronic incorporation service
    providers for Ontario
       OnCorp
       Cyberbahn
       Teranet Enterprises Inc.
   NUANs search
Chapter Objectives
(1 of 2)



1.    Identify the two most important issues to consider when
      leaving an employer.
2.    Discuss the importance of nondisclosure and
      noncompete agreements.
3.    Explain the criteria important in selecting an attorney
      for a new firm.
4.    Discuss the importance of a founders’ agreement.
5.    Provide several suggestions for how new firms can
      avoid litigation.
Chapter Objectives
(2 of 2)



6.    Discuss techniques entrepreneurs use to promote
      high standards of business ethics in their firms.
7.    Discuss the differences between sole
      proprietorships, partnerships, corporations, and
      limited liability companies.
8.    Explain why most fast-growth entrepreneurial firms
      organize as corporations or limited liability
      companies rather than sole proprietorships or
      partnerships.
9.    Explain double taxation.
Initial Ethical and Legal Issues Facing a New
Firm


          Ethically departing a
                                           Choosing a lawyer
            former employer




Drafting a founders’                                    Choosing a form of
                             Avoiding litigation        business ownership
    agreement
Ethically Departing a Former Employer
(1 of 2)



   Ethically Departing from an Employer
       Behave in a Professional Manner
           First, it is important that an employee give proper notice of an
            intention to quit and that the employee perform all assigned duties
            until the day of departure.
           If an employee is leaving a job to start a firm in the same industry, it
            is vital that he or she not take information that belongs to the current
            employer.
       Honour all Employment Agreements
           Honor all nondisclosure and noncompete agreements entered into at
            the time of employment. (see next slide)
Ethically Departing a Former Employer
(2 of 2)




       Nondisclosure Agreement         Noncompete Agreement

           Is a promise made by an      Prevents an individual
             employee or another       from competing against
           party to not disclose the   a former employer for a
           company’s trade secrets     specified period of time
Choosing an Attorney for the New Firm
                         Table 8.2
          How to Select An Attorney for a New Firm
Drafting a Founders’ Agreement
(1 of 2)



   Founders’ Agreement
       A founders’ agreement (or shareholders’ agreement) is a written
        document that deals with issues such as the relative split of the
        equity among the founders of the firm, how individual founders
        will be compensated for the cash or the ―sweat equity‖ they put
        into the firm, and how long the founders will have to remain with
        the firm for their shares to fully vest.
       The items to include in the founders agreement are shown on the
        following slide.
Drafting a Founders’ Agreement
(2 of 2)

                                   Table 8.3
           Items Included in a Founders’ (or shareholders’) Agreement
Avoiding Legal Disputes


   Avoiding Legal Disputes
       Most legal disputes are the result of misunderstandings,
        sloppiness, or a simple lack of knowledge of the law.
        Getting bogged down in legal disputes is something an
        entrepreneur should work hard to avoid.
       There are several steps that an entrepreneur can take to
        avoid legal disputes:
           Meet all contractual obligations
           Avoid undercapitalization
           Get everything in writing
           Promote business ethics
Promoting Business Ethics
(1 of 3)



   Promoting Business Ethics in a New Venture
       Code of Ethics
           A code of ethics describes the firm’s general value system, moral
            principles, and specific ethical rules that apply.
           The advantage of having a code of ethics is that it provides specific
            guidance to managers and employees regarding what is expected of
            them in terms of ethical behavior.
       Ethics Training Programs
           Many organizations have formal ethics training programs that teach
            employees how to respond to the types of ethical dilemmas that
            might arise on their jobs.
Promoting Business Ethics
(2 of 3)

           Most common types of ethical problems to guard against

 Type of ethical problem                        Description

                              These problems relate to the equitable and just
     Human resource          treatment of current and prospective employees.
     ethical problems       Unethical behavior here can range from asking an
                           inappropriate question in a job interview to treating
                              people unfairly because of their gender, ethnic
                                     background, religion, and so on.

                             These problems relate to situations that divide the
                               loyalty of employees. For example, it would be
   Conflicts of interest   inappropriate for an employee of a company to award
                              a business contract to a friend or family member
                            because of their personal relationship rather than for
                                          legitimate business reasons.
Promoting Business Ethics
(3 of 3)

      Most common types of ethical problems to guard against (continued)

 Type of ethical problem                        Description

                              Problems in this area flare up when a company
                             behaves in a way that shows a lack of respect for
  Customer confidence       customers or a lack of concern with public safety.
                           Examples include misleading advertising and the sale
                               of a product that a company knows is unsafe.


                           Problems in this area typically arise when a employees
                             uses corporate resources for personal gain beyond
  Inappropriate use of      what is customary and reasonable. For example, an
  corporate resources       employees who spends two hours of every eight-hour
                            workday surfing the Internet is guilty of excessive or
                                 inappropriate use of corporate resources.
Choosing a Form of Business Ownership

 When a business is launched, a form of legal entity must be chosen.
              The most common legal entities are…



  Sole Proprietorship                           Partnership




      Corporation
Issues to Consider in Choosing a Legal Form
of Business Ownership


   The cost of setting up and maintaining the legal form of
    ownership.
   The extent to which an entrepreneur can shield his or her
    personal assets from the liabilities of the business.
   Tax considerations
   The ease of raising capital
Sole Proprietorship
(1 of 2)



   Sole Proprietorship
       The simplest form of business entity is the sole proprietorship.
       A sole proprietorship is a form of business organization involving
        one person, and the person and the business are essentially the
        same.
       A sole proprietorship is not a separate legal entity. The sole
        proprietor is responsible for all the liabilities of the business, and
        this is a significant drawback.
Sole Proprietorship
(2 of 2)


           Advantages and disadvantages of sole proprietorship
Partnerships
(1 of 2)


   Partnerships
     If two or more people start a business, they must organize as a

       partnership, corporation, or limited liability company.
     Partnerships are organized as either general or limited partnerships.

          A general partnership is a form of business organization where two or more
           people pool their skills, abilities, and resources to run a business.
          A limited partnership is a modified form of general partnership. The major
           difference between the two is that a limited partnership includes two classes
           of owners: general partners and limited partners. The general partners are
           liable for the debts and obligations of the partnership, but the limited
           partners are liable only up to the amount of their investment.
Partnerships
(2 of 2)


           Advantages and disadvantages of a general partnership
Corporation


   Corporation
       A corporation is a separate legal entity organized under the
        authority of either a province (ie. Ontario Business Corporations
        Act) or the federal government (Canada Business Corporations
        Act)
The Legal Environment of the Internet



   Legal Environment of the Internet
       Most new businesses will utilize the Internet in their business
        operations.
       When the Internet was introduced in the early 1990s, many
        businesses approached it with an ―anything goes‖ attitude,
        believing it was alright to do almost anything online.
       As time goes on, however, the legal system is getting a better grip
        on the Internet, and more laws and regulations are being passed.
The World Wide Web
(1 of 3)

                             Three Types of Web Sites

   Type of Web Site        Description                Primary Legal Issues Involved

                        This type of Web site     • All content placed on the Web site
   Shop-Window
     Web Site          provides information        should be original, unless permission
                      about a company and its      has been obtained.
                      products but encourages
                                                  • Pricing information should be updated
                       very little interaction.
                                                   frequently.
                                                  • Misleading product descriptions can
                                                   cause repercussions.
                                                  • Misleading advertising should be
                                                   avoided.
The World Wide Web
(2 of 3)

                      Three Types of Web Sites (continued)

   Type of Web Site       Description                Primary Legal Issues Involved


    Contributed             Web sites that         The most common problem in this
    Content Web         encourage visitors to       area arises when sites encourage
       Sites           interact are exposed to        visitors to interact by making
                          several additional         discussion boards or chat rooms
                         forms of legal risks.       available. Reasonable measures
                                                 should be taken to control the material
                                                  that appears on the Web site. These
                                                   measures need to be addressed in a
                                                  Web site’s “terms and conditions” so
                                                   that anyone viewing the Web site is
                                                   aware of the steps taken to prevent
                                                        problems from occurring.
The World Wide Web
(3 of 3)

                      Three Types of Web Sites (continued)

   Type of Web Site       Description              Primary Legal Issues Involved


 Full E-Commerce       Full E-Commerce Web          New businesses that plan to sell
      Web Site           sites sell goods and       products or services via the Web
                        services via the Web.    should consult with an attorney to be
                                                  sure they know all the current laws
                                                     and regulations that apply. An
                                                important caveat of selling online is to
                                                  make sure to form a legally binding
                                                  contract with the purchaser. To do
                                                      this, many sites require their
                                                  customers to scroll through a list of
                                                 terms and conditions and click on an
                                                  “I accept” button before a purchase
                                                            can be completed.
Trademarks and Domain Names
(1 of 3)



   Trademarks
       The emergence of the Internet has led to a variety of issues in
        trademark law and practice.
       Because it is so easy to find a company with the same name as
        your company’s name on the Internet, trademark disputes often
        arise.
           For example, in the past, a consulting firm in Michigan operating
            under the name Ivey Consulting may have never known that a
            similar firm in California operated under the same name. Now, its
            easy for the firms to stumble across one another surfing the Internet,
            which could result in a trademark infringement suit by the company
            that first registered the name.
Trademarks and Domain Names
(2 of 3)



   Domain Names
       A domain name is a company’s Internet address (e.g.,
        www.intel.com).
       Most companies want their domain name to be the same as their
        company’s name.
       It is easy to register a domain name through an online registration
        service (www.networksolutions.com).
           Until recently, some people, called cybersquatters, registered the
            domain names of companies and people for the sole purpose of
            trying to resell the names (for a substantial profit) to those
            companies or individuals. (Next slide)
Trademarks and Domain Names
(3 of 3)



   Domain Names
       To stop the practice of cybersquatting, Congress passed the
        Anticybersquatting Consumer Protection Act in 1999.
           Probably the most famous domain name dispute in the history of the
            Internet involved the actress Julia Roberts. In June 2000, an
            international arbitration panel ruled that an accused cybersquatter
            who registered the domain name (www.juliaroberts.com) had no
            legitimate interest in the name and registered it in bad faith. The
            panel awarded the name to Julia Roberts. In finding bad-faith intent,
            the arbitration panel cited evidence that the defendant had registered
            the names of several famous movie and sports figures and even tried
            to auction off the name Julia Robert’s domain name on eBay’s Web
            site.
Electronic Contracts and Digital Signatures


   Legally Binding Contracts Online
       As a result of the Electronic Signatures in Global and
        International Commerce Act, contracts negotiated online have the
        same legal standing as traditional legal contracts signed in ink.
       Online contracts are often signed with digital signatures.
           A digital signature is a computer-generated block of text that
            accurately identifies both the signer and the content, helping to
            ensure the authenticity and integrity of electronic documents.
Review Question 7 - 1

    When should your friend, who is
    considering launching a consulting firm
    to provide tax advice to small businesses,
    think about the ethical climate she wants
    to establish in her venture?


   Answer:
   Before the firm is launched.
Review Question 7 - 2

  In general, do entrepreneurs tend to overestimate or
  underestimate their knowledge of the laws that pertain
  to starting a new firm? What does the answer to this
  question suggest that entrepreneurs do before they
  start a firm?

Answer:

  In general, entrepreneurs tend to overestimate their knowledge
  of the law. As a result, entrepreneurs should seek legal advice
  before they start a firm, and also read books and study Web sites
  to acquaint themselves with the most pertinent legal issues they
  will confront.
Review Question 7 - 3

  Why is it important for an entrepreneur to
  build a strong ethical culture for the firm?
  What are some of the specific steps that
  an entrepreneurial venture can take to
  build a strong ethical culture?
Answer:
  Ethical errors early on can be extremely costly for a new firm, in terms
  of its reputation and its ability to forge favorable business partnerships.
  Some specific steps an entrepreneurial venture can take to build a
  strong ethical culture are: lead by example, establish a code of conduct,
  and implement an ethics training program.
Review Question 7 - 4
  Describe what is meant by the terms code of conduct and
  ethics training programs. What is their purpose?

Answer:
 A code of ethics describes the firm’s general value system, moral
  principles, and specific ethical rules that apply.
  Ethics training programs are programs that teach employees
  how to respond to the types of ethical dilemmas that might arise
  on their jobs.
 The purpose of both of these techniques is to promote a healthy
  climate of business ethics in a firm.
 They can also help a firm avoid litigation.
Review Question 7 - 5

   What are some of the more important
   criteria to consider when selecting an
   attorney for a new firm?
Answer:


   Table 7.3 in the textbook provides guidelines
   to consider when selecting an attorney. It is
   critically important that the attorney be
   familiar with start-up issues and that he or
   she has successfully shepherded
   entrepreneurs through the start-up process
   before.
Review Question 7 - 6

   Describe what a founders’ agreement is
   and why it’s important for a team of
   entrepreneurs to have one in place when
   launching a venture.

Answer:


   A founder’s agreement is a written document that deals with issues such as the
   relative split of the equity among the founders of the firm, how individual
   founders will be compensated for the cash or the “sweat equity” they put into the
   firm, and how long the founders will have to remain with the firm for their shares
   to fully vest.
Review Question 7 - 7

Describe the purpose of a nondisclosure
 agreement and the purpose of a
 noncompete agreement.
Answer:

A nondisclosure agreement is a promise made
  by an employee or another party (such as a
  supplier) to not disclose a company’s trade
  secrets. A noncompete agreement prevents
  an individual from competing against a former
  employer for a specific period of time.
Review Question 7 - 8

Describe several ways entrepreneurial firms
 can avoid legal disputes.

Answer:


Meet all contractual obligations on time, avoid undercapitalization, get
  everything in writing, and promote business ethics.
Review Question 7 - 9

Explain what mediation is and how mediation is
 used to resolve disputes.

Answer:

Mediation is a process in which an impartial
 third party (usually a professional mediator)
 helps those involved in a dispute reach an
 agreement.
   Note: Wikipedia has an excellent page on mediation
Review Question 7 - 10

At what point, during the process of starting a firm, does a
   business need to focus on the business licenses and
   permits that it needs? Are business licenses and permits
   the same in all cities and states or do they vary?


Answer:
   Almost all licenses and permits must be in place before a business
    launches. Business licenses and permits vary by city, so it’s important to
    check local rules and ordnances.
   For example, some cities (and even neighborhoods within cities) have very
    strict rules about putting up signs, while other cities have lax rules.
Review Question 7 - 11

Why is it important for the founders of a firm to
 think carefully about the name they pick for
 their company?

Answer:
   A company’s name is one of the first things people associate with a
    business, and it is a word or phrase that will be said thousands or
    hundreds of thousands of times during the life of a firm.

   A company’s name is also a critical part of its branding strategy.
Review Question 7 - 12

The following statement appears in this chapter: “Choosing
  a legal entity (for an entrepreneurial venture) is not a
  one-time event.” Why isn’t choosing a legal entity a one-
  time event? What might trigger a firm’s decision to
  change how it is legally organized?


Answer:
   As a business grows and matures, it is necessary to periodically review
    whether the current form of business organization remains appropriate.
   A firm’s decision to change how it is legally organized might be triggered by
    a shift in strategy, or by tax or legal issues.
Review Question 7 - 13

What are the advantages and disadvantages of organizing
 a new firm as a sole proprietorship? Is a sole
 proprietorship an appropriate form of ownership for an
 aggressive entrepreneurial firm? Why or why not?
Answer:
   Advantages of organizing as a sole proprietorship:
   (1) creating one is easy and inexpensive,
   (2) the owner maintains complete control of the business and retains all the
    profits,
   (3) business losses can be deducted against the sole proprietor’s other
    sources of income, and
   (4) the business is not subject to double taxation,
   (5) the business is easy to dissolve.
Review Question 7 – 13 …

Answer:     …
    Disadvantages of a sole proprietorship: (1) liability on the owner’s part is
    unlimited, (2) the business relies on the skills and abilities of a single owner,
    (3) raising capital can be difficult, (4) the business ends at the owner’s death
    or loss of interest in the business, (5) the liquidity of the owner’s investment
    is low.
   A sole proprietorship is not an appropriate form of ownership for an
    aggressive entrepreneurial firm. An aggressive firm will probably need to
    raise capital early in its life, which is not possible under the sole
    proprietorship form of ownership (i.e., equity can’t be shared with others). A
    sole proprietorship also needlessly exposes an entrepreneur to personal
    liability for the actions of the firm.
Application Question 7 - 6

   There are at least four techniques that Nancy could
    use.
   Put in place a set of procedures to help avoid legal
    complications. These procedures are explained in
    the textbook, and include avoid undercapitalization,
    getting everything in writing, and promoting business
    ethics.
   Develop a code of ethics and stick to it.
   Provide employees ethics training on an ongoing
    basis.
   Consult with an attorney on any ethics-related
    issues that are worrisome or unclear.
The Business Plan


    Chapter 4
    Business 3215
Chapter Objectives
(1 of 2)


1.    Explain the purpose of a business plan.
2.    Discuss how a business plan can be a dual-use
      document.
3.    Explain how the process of writing a business plan can
      be as important as the plan itself.
4.    Identify the advantages and disadvantages of using
      software packages to assist in the preparation of a
      business plan.
5.    Explain the difference between a summary business
      plan, a full business plan, and an operational business
      plan.
Chapter Objectives
(2 of 2)



6.    Explain why the executive summary may be the most
      important section of a business plan.
7.    Describe a milestone and how milestones are used in business
      plans.
8.    Explain the purpose of a ―sources and uses of funds‖
      statement.
9.    Describe a liquidity event.
10.   Detail the parts of an oral presentation of a business plan.
What is a Business Plan?


   Business Plan
       A business plan is a written narrative, typically 25 to 35 pages
        long, that describes what a new business plans to accomplish.
   Dual-Use Document
       For most new ventures, the business plan is a dual-purpose
        document used both inside and outside the firm.
            Inside the firm, the plan helps the company develop a ―road map‖
             to follow in executing its strategies and plans.
            Outside the firm, it introduces potential investors and other
             stakeholders with the business opportunity the firm is pursuing and
             how it plans to pursue it.
Why Read the Business Plan—and What Are
They Looking For?
       There are two primary audience for a firm’s business plan.


    Audience                       What They are Looking For

                        A clearly written business plan, which articulates the
    A Firm’s         vision and future plans of the firm, helps the employees of
   Employees          a firm operate in sync and move forward in a consistent
                                       and purposeful manner.

                    A firm’s business plan must make the case that the firm is a
  Investors and       good use of an investor’s funds or the attention of other
  other external    external stakeholders. The key is to include facts generated
   stakeholders         through a properly conducted feasibility analysis. A
                     business plan rings hollow if it is based strictly on what an
                      entrepreneur or team of founders “thinks” will happen.
Guidelines for Writing a Business Plan
(1 of 4)



   Structure of the Business Plan
          To make the best impression, a business plan should follow a
           conventional structure, such as the outline for the business plan
           shown in the chapter.
          Although some entrepreneurs want to demonstrate creativity in
           everything they do, departing from the basic structure of the
           conventional business plan format is usually a mistake.
          Typically, investors are very busy people and want a plan where
           they can easily find critical information.
Guidelines for Writing a Business Plan
(2 of 4)



   Structure of the Business Plan (continued)
          Software Packages
               There are many software packages available that employ an
                interactive, menu-driven approach to assist in the writing of a
                business plan.
               Some of these programs are very helpful. However, entrepreneurs
                should avoid a boilerplate plan that looks as though it came from a
                ―canned‖ source.
          Sense of Excitement
               Along with facts and figures, a business plan needs to project a
                sense of anticipation and excitement about the possibilities that
                surround a new venture.
Guidelines for Writing a Business Plan
(3 of 4)



   Content of the Business Plan
          The business plan should give clear and concise information on
           all the important aspects of the proposed venture.
          It must be long enough to provide sufficient information yet
           short enough to maintain reader interest.
          For most plans, 25 to 35 pages is sufficient.
   Types of Business Plans
          There are three types of business plans, which are shown on the
           next slide.
Guidelines for Writing a Business Plan
(4 of 4)

                     Figure 9.1
               Types of Business Plans
Outline of Business Plan
(1 of 6)



   Outline of Business Plan
          A suggested outline of a business plan is shown on the next
           several slides.
          Most business plans do not include all the elements introduced in
           the sample plan; we include them here for the purpose of
           completeness.
          Each entrepreneur must decide which elements to include in his
           or her plan.
Outline of Business Plan
(2 of 6)

                          Table 9.2
           Business Plan Outline (Sections I and II)
Outline of Business Plan
(3 of 6)

                     Table 9.2 (continued)
           Business Plan Outline (Sections III and IV)
Outline of Business Plan
(4 of 6)

                     Table 9.2 (continued)
           Business Plan Outline (Sections V and VI)
Outline of Business Plan
(5 of 6)

                       Table 9.2 (continued)
           Business Plan Outline (Sections VII and VIII)
Outline of Business Plan
(6 of 6)

                     Table 9.2 (continued)
           Business Plan Outline (Sections IX and X)
Exploring Each Section of the Plan
(1 of 10)



   Cover Page and Table of Contents
       The cover page should include the name of the company, its
        address, its phone number, the data, and contact information for
        the lead entrepreneur.
   The Executive Summary
       The executive summary is a short overview of the entire
        business plan; it provides a busy reader with everything that
        needs to be known about the new venture’s distinctive nature.
               In many instances, an investor will first ask for a copy of the
                executive summary and will request a copy of the full business plan
                only if the executive summary is sufficiently convincing.
Exploring Each Section of the Plan
(2 of 10)



   The Business
       The most effective way to introduce the business is to describe
        the opportunity the entrepreneur has identified– that is, the
        problem to solve or the need to be filled–and then describe how
        the business plans to address the issue.
       The description of the opportunity should be followed by a brief
        history of the company, along with the company’s mission
        statement and objectives.
       An explanation of the company’s competitive advantage and a
        brief description of the business model follow.
Exploring Each Section of the Plan
(3 of 10)



   Management Team
       As mentioned earlier, one of the most important things investors
        want to see when reviewing the viability of new ventures is the
        strength of its management team.
       If the team doesn’t ―pass muster,‖ most investors won’t read
        further.
       The material in this section should include a brief summary of
        the qualifications of each member of the management team,
        including his or her relevant employment and professional
        experiences, significant accomplishments, and educational
        background.
Exploring Each Section of the Plan
(4 of 10)



   Company Structure, Ownership, and Intellectual Property
      This section should begin by describing the structure of the new

       venture, including the reporting relationships among the top
       management team members.
      The next part of the section should explain how the firm is legally
       structured.
      The third part of this section should discuss the intellectual property the

       firm owns, including patents, trademarks, and copyrights.
               This is a very important issue. Intellectual property forms the foundation
                for the valuation and competitive advantage of many entrepreneurial
                companies.
Exploring Each Section of the Plan
(5 of 10)



   Industry Analysis
       This section should begin by discussing the major trends in the
        industry in which the firm intends to compete along with
        important characteristics of the industry, such as its size,
        attractiveness, and profit potential.
       This section should also discuss how the firm will diminish or
        sidestep the forces that suppress its industry’s profitability.
       The firm’s target market should be discussed next, along with an
        analysis of how it will compete in that market.
Exploring Each Section of the Plan
(6 of 10)



   Marketing Plan
       This marketing plan should immediately follow the industry
        analysis and should provide details about the new firm’s
        products or services.
       After reading this section of the plan, an investor should be
        confident that the firm’s overall approach to its target market and
        its product strategy, pricing strategy, channels of distribution,
        and promotional strategy are in sync with one another and make
        sense.
Exploring Each Section of the Plan
(7 of 10)



   Operations Plan
       This section of the plan deals with the day-to-day operations of
        the company.
       An overview of the manufacturing plan (or service delivery
        plan) should be followed by a description of the network of
        suppliers, business partners, and service providers that will be
        necessary to build the product or produce the service the firm
        will sell.
       Any risks or regulations pertaining to the operations of the firm
        should be disclosed, such as nonroutine regulations regarding
        waste disposal and worker safety.
Exploring Each Section of the Plan
(8 of 10)



   Financial Plan
       The financial section of the plan must demonstrate the financial
        viability of the business. A careful reader of the plan will
        scrutinize this section.
       The financial plan should begin with an explanation of the
        funding that will be needed by the business during the next three
        to five years along with an explanation of how the funds will be
        used.
               This information is called a sources and uses of funds statement.
       The next portion of this section includes financial projections,
        which are intended to further demonstrate the financial viability
        of the business.
Exploring Each Section of the Plan
(9 of 10)



   Financial Plan (continued)
       The financial projections should include three to five years of
        pro forma income statements, balance sheets, and statements of
        cash flows, as described in Chapter 7.
       It is important to remember that the business plan should be
        based on realistic projections.
               If it is not and the company gets funding or financing, there will
                most certainly be a day of reckoning. Investors and bankers hold
                entrepreneurs accountable for the numbers in their projections.
Exploring Each Section of the Plan
(10 of 10)



   Critical Risk Factors
       Although a variety of potential critical risks may exist, a
        business should tailor this section to depict its truly critical risks.
   Appendix
       Any material that does not easily fit into the body of a business
        plan should appear in an appendix. Examples of materials that
        might appear in the Appendix include:
            Resumes of the top management team members, photos or
             diagrams of product or product prototypes, certain financial data,
             and market research projections.
Putting It All Together

                           Table 9.3
  The 10 Most Important Questions a Business Plan Should Answer
Presenting the Business Plan to Investors
(1 of 3)



   Making a Presentation to Investors
          If the business plan successfully elicits the interest of potential
           investors, the next step is to meet with the investor and present
           the plan in person.
          The first meeting with an investor is generally very short, about
           one hour. The investor will typically ask the firm to make a 20-
           to 30- minute presentation using PowerPoint slides and use the
           rest of the time to respond to questions.
          If the investor is impressed and wants to learn more about the
           venture, the firm will be asked back for a second meeting.
Presenting the Business Plan to Investors
(2 of 3)



   Tips on Making an Oral Presentation to Investors
          When asked to meet with an investor, the founders or a new
           venture should prepare a set of PowerPoint slides that will fill
           the time slot permitted.
          The presentation should be smooth and well rehearsed. The
           slides should be sharp and not cluttered with material.
               The first rule in making an oral presentation is to follow
                instructions. If an investor tells an entrepreneur that he or she has
                one hour and that the hour will consist of a 30-minute presentation
                and a 30-minute question-and-answer period, the presentation
                shouldn’t last more than 30 minutes.
Presenting the Business Plan to Investors
(3 of 3)

    The most important issues to cover in a PowerPoint presentation to investors
     (including recommendations for the number of slides to use for each topic)

				
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