however, demands certain expertise.

The idea itself will not be enough without the right

skills and knowledge.

At the same time, having a good analytical business plan for your idea could help you with
potential funding. If the idea and the business plan are both solid then, getting some sort of
funding for it could be a real possibility. Fundings are usually based on business plans and
the number of details they contain. The business plan is usually the first step in taking an
entrepreneurial idea and turning it into a startup.

If you have a good and solid entrepreneurial idea, try to bring it to life!

CHAPTER 3. IDEAS EVALUATION

Introduction

The new company, as we have seen, came from an idea, from an intuition: the
discovery of a new technology, the expansion of the demand for a product / service, the
modification of consumer’s tastes and propensities purchase, the success of other
companies, the identification of a need and market failure. An organized verification process
of the idea must start from this intuition. This analysis process is a production plan that
consists of various components, the most important of which is the business plan. At the end
of the analysis process, the company will be able to face the market with a reasonable
confidence level regarding the project viability and the main action that should be taken in
the first three years of the company's life.

Topic structure:

1. Main objectives of a business plan

2. Project set up

3. The supply of financial resources

4. The sources of capital

5. The economic feasibility and susteinability of the project

Methods of learning and teaching:

Case study, Teamwork, Learning in a flexible, informal environment, E-learning, Team

training, Lectures, Practical tasks, Discussion, Role play, Brainstorming

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The topic content:

1. Main objectives of a business plan

You need to understand if your business idea has a real market, if consumers would
purchase the product / service and which could be the selling price.

The viability plan will show:

- The technical features of the product / service

- Key technologies / equipment

- The type of market to be served

- The image you want to give to your business

- The promotional policies you want to activate

- Price policies

- The capital you need to grow and manage your business

- The members / collaborators you have to involve

- The most appropriate legal form

- The bureaucratic requirements to be fulfilled.

The new company needs a track indicating where to direct its activity.

The business plan is fundamental for all types of activities: an entrepreneur must always be
able to know what he wants to do and how to do it, he needs a tool that can help him
evaluate the idea.

The text of the business plan must be clear and concise but contain as much information as
possible.

It has to highlight the business sector and its developers; it must specify the data sources
and has to go hand by hand with effective tables and illustrative charts.

The business plan is as the launching pad for the company and it is useful to plan the whole
activity. Not only that, it must follow the events of the company itself and be constantly
updated.

A business plan has the following objectives:

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 1. To provide fundamental information for the start-up of the activity, (how many
economic, financial and human resources you need, the characteristics of the
product and the market, etc. ...);

2. To allow the entrepreneur an overview of the company characterizing factors,

providing a basis on which to plan strategies and actions;

3. To illustrate the entrepreneurial formula (product system, market, organizational

structure) and not just the description of the product / service;

4. To emphasize the originality of the business idea;

5. To verify the potential customers interests;

6. To be a useful indicator of what are the objectives to be achieved and how to reach
them;

7. To verify the consistency between the individual actions indicated, and between the
description of the activity and the consequent investment and management costs;

8. To define the legal form in relation to the characteristics of the company described;

9. To allow reliable forecasts by simulating the various hypotheses for the development
of the company's activity;

10. To serve as a "business card" to present the company externally (potential members,
financiers, banks, customers and suppliers).

Project setup

If the first verification of the business idea has had a positive outcome, it is therefore
necessary, as anticipated, to begin to set up the actual business project.

A well-done business project:

• Allows to verify the practical feasibility of the initiative under its different profiles
(technical, commercial, economic, financial);

• Constitutes an «operational guide» for the first management periods;

• Represents an irreplaceable «business card» for any contact with potential financiers
(it is also provided by many financing laws for new businesses).

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The business project allows determining, with reasonable approximation, the convenience
and risk level of the initiative, and gives a rational answer to two basic questions:

1) Should it give life to the company?

2) What is the best way to achieve it?

The basic rules for how to build a business project

A business plan is composed of three basic parts:

• The first part: an introductory section;

• The second part, of a technical-operational nature;

• The third part, of a quantitative-monetary nature.

The first part of the project

The introductory section:

• Briefly describes the idea of the business, how it was born and developed;

• Refers to factors of a subjective nature: it must highlight, the personal characteristics

(attitudes, aspirations, motivations) and professional ones (studies carried out, work
experience, technical skills, etc.) of the promoters.

The credibility of the entrepreneur-to-be is extremely important: therefore, the business

project must provide, in its first part, a significant profile of the owners.

You have to highlight those personal qualities that can be real "tricks" for the success of the
initiative: expertise, leadership skills, organizational skills and creativity, teamwork ability, to
deal with people, etc.

The second part of the project

The second part gets to the heart of the project: you need to offer a clear and convincing
picture of what you want to do and how and where you want to do it.

The second part, therefore, refers to objective factors and must specify the technical
feasibility and operational aspects of the project.

In this part, you must describe in detail:

• The product or service;

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 • The production tools (technologies, plants, machinery, etc.) and the production
process of the products or services;

• The environment in which you plan to operate (competitors, suppliers, commercial

intermediaries, etc.) and the market in which you think we sell (customers);

• The corporate structure (legal form, number of employees, organization, location,

etc.).

• It is not enough to have clear ideas about what you want to do and how. You must
know also, how much money it takes to achieve your goals and what profits can
guarantee you your future business.

• It is therefore necessary to highlight:

• The financial resources for investments (own resources, possible benefits, any bank
or external investor loans, etc.).

• The expected profits and starting from when

• The reliability of the information and data reported in this part is very important in
the project.

The third part of the project

The third part turns the planned and imagined activity into numbers

Any new company, indeed, always starts at a loss and starts earning only after a certain
period, when it reaches the "break-even point".

In this third part, you have to prove the data set out in the technical-operational part of the
business plan.

To do this, your project must be "translated" in quantitative-monetary terms, through a

series of balance sheets.

These must identify, over a period of at least three years, the amount of:

• Investments: «assets» or «outflows of resources»;

• Loans: «liabilities» or «sources of resources»;

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 • Income: result of the financial statements, which can be positive («useful», when
revenues exceed costs) or negative («loss», otherwise);

• Cash flows: difference between revenue and monetary outflows recorded in a given
period.

Therefore, you need your Company’s financial records before your activity has actually
started.

At this point, the path becomes difficult: budget drafting is a process characterized by an
intrinsic technical complexity and requires in-depth knowledge of accounting and it would
be better to rely on experts in the sector.

For now, we limit ourselves to say that the construction of the budget includes the drawing
up of:

• Partial quotations: they are related to every company function (productive,

commercial, administrative, etc. Production estimate, marketing estimate,
investment budget, etc.);

• The global budget (that is, related to the company as a whole).

Once the partial estimates have been drawn up, these go into in the summary estimates (an
economic estimate, a financial estimate, an asset budget) which formally represent long-
term estimates and which constitute, overall, the global budget.

The supply of financial resources

The start-up capital of the business

The company, in its early life, will not be financially independent.

At the beginning, it is necessary to invest in plant or machinery and this involves anticipating
large money amounts.

Raw materials, goods and various materials must also be purchased: this is also, why money
will be needed.

At this situation, the management will not be able, on its own, to cover all these issues with
its income. In fact, sales will only develop over time, slowly and gradually and, in any case,
always after the initial cost of setting up and starting up the company.

These simple observations are enough to show how important it is to establish:

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 • How much liquidity you need to start quantifying the initial financial requirement in
relation to the investments you have to make;

• Where to find the money: identify the right sources of financing for your needs.

The first step is the identification of the financial needs.

A misunderstanding of it, indeed, it will be necessary to renegotiate the missing sums, which
often are more expensive, modifying all the financial and economic forecasts.

The financial requirement is essentially of two types.

- The structural requirement concerns those investments such as plants, buildings,

vehicles, etc., which contribute defining the structure, i.e the permanent structure of
the company. In this regard, we also speak of fixed capital.

- The current requirement concerns the activities of daily purchase, production and
sales.

It must cover mainly:

- Stocks (of raw materials, semi-finished products, products ...);

- Credits to be granted to customers;

- A minimum of cash reserves that allow us to face any financial difficulties.

This is what we meant speaking about working capital.

Therefore, every company needs a capital fund in order to:

• Create and keep its permanent structure (structural management);

• Start and feed its operating activities (current management).

The amount of this fund is substantially linked to the size of the company and it is subject to
periodical changes, in relation to the amount of daily purchases, production and sales
transactions.

The financial critical issues in the start-up phase of the company

In the early stages of its life, company’s financial situation usually has the following
characteristics:

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 • Turnover tends to grow, but too slowly to cover quickly initial costs;

• Investments in fixed assets are initially quite high (especially as regards tangible fixed
assets: plants, equipment, etc.), even though they tend to go down over time;

• Investments in working capital are also generally substantial: in the start-up phase, it
is often necessary to grant significant deferment of payment and have sufficient
liquidity to meet every need;

• The self-financing capacity is generally limited, especially if the company is forced, for
competitive reasons, to apply lower prices than the average of competitors.
Production costs are also high because limited production volumes negatively affect
them.

All this determines a situation of significant financial need; this financial need grows up with
the turnover growth rate.

The financial evolution of a start-up

Each new company usually starts at a loss and begins to earn only starting from a certain
time (called "break-even point").

In technical terms, the financial development model of a new company has the following
fundamental characteristics:

• Negative annual cash flows up to the time of production start-up;

• Negative cumulative cash flow up to the activity consolidation phase;

• Progressive growth of dependence on external financial resources for a rather long

period (4/5 years);

• Achievement of the capacity to repay loans in an even more delayed phase.

The break-even point represents the minimum quantity of goods produced and sold, above
which the company begins to earn.

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The sources of capital

The main "sources of funding" that the entrepreneur can draw from, are the following:

• Internal financial sources («own capital»).

• External financial sources ("third-party capital" or credit).

Internal financial sources

The loans with own capital (also called "full risk capital") come from the entrepreneur and
from the shareholders: they are, in other words, initial contributions directly from the
owners at the time of the constitution (initial conferment capital) and / or at times
subsequent (own capital increases).

These loans have the following features:

• They must not be repaid on a fixed date: they are destined to be invested in the
business in a lasting manner, generally until its liquidation (i.e. upon termination of
the activity);

• They do not involve the payment of a real interest: indeed, the own capital is
remunerated with any profit produced by the management;

• They are totally subject to the business risk: a bad management trend can lead to
their "erosion" or even their total loss.

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Due to a lack of a specific maturity, the loans with own capital are usually destined to the
acquisition of fixed assets (fixed capital).

In addition, profits earned and reinvested within the company can be identified as internal
financial sources, because they are not shared by the owners, but remain into reserve funds.

Self-financing as an incentive to produce

In this case, we speak of self-financing; it is the most precious financial source for small and
medium-sized enterprises.

It is functional in all subsequent phases of development and consolidation of the company.

Undoubtedly, the failure to withdraw profits represents a sacrifice for the entrepreneur,
which however allows the small business to grow and at the same time become, at least in
part, independent from banks and other external financiers.

This allows it to be:

• Less subject to conditioning and pressure;

• Freer, consequently, in defining one's own business choices;

• Less subject to possible negative behaviors of banks (which can suddenly close the
"credit taps") and suppliers.

External financial sources

On the other hand, loans with third-party capital (or "credit") originate from parties outside
the company: these are loans granted by banks, financial companies or private investors.

These loans have the following characteristics:

• They are not subject to the business risk or, to be more precise, they are limited, in
the sense that they are subject to the risk of a possible insolvency of the
entrepreneur;

• Must be reimbursed at a fixed date, except in special cases;

• Involve the payment of an interest, which can be explicit (clearly highlighted with a
percentage rate) or implicit (already included in the sum to be returned at maturity).

The relationship between own capital and third-party capital

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Equity and third-party capital should be in a balanced relationship, but there are no general
rules in this regard. We can say that if the equity is far lower than the third-party capital put
in the company, the entrepreneurial risk increases considerably.

However, the use of external sources may still be useful or indispensable in some cases.

Obviously, the capitals "lent" by third parties have a "right of precedence" to repayment in
relation to the repayment of the own capital.

In the event of company closure, third party capital is repaid first and then the company's
own capital.

For a healthy optimal management, we can say that our capital should be equivalent to third
party capital. When this is not the case (it happens), so we talk about undercapitalization.

The duration of the loans.

The loans must be distinguished according to their duration. You have:

• Short-term loans, whose duration generally does not exceed one year and a half (18
months);

• Medium-long term loans, which can be further divided into:

- Medium-term loans: between 18 months and 5 years;

- Long-term loans: over 5 years.

Short-term financing

Short-term loans are mostly obtained from ordinary credit institutions, banks properly
called.

The technical forms with which these loans can be granted are many, but they fall into two
groups:

• Cash credits;

• Facility credits.

Cash credits

With a cash credit, the bank makes a set amount of money available to the customer.

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The main cash credits are:

• Current account overdraft;

• The discount on the commercial portfolio;

• Invoices discount and bank receipts.

With the current account overdraft, the bank makes available a certain amount of money on
a current account to the customer; in general, you can use the credit on several occasions, as
long as it maintains a certain balance between the withdrawals and the remittances.

This kind of credit can be:

• Uncovered, that is without guarantee: obviously it is granted only to customers with

a certain amount of assets;

• Guaranteed: it is granted by the bank against a personal guarantee or real guarantee

(pledge, mortgage).

The current account overdraft is the most used credit line and the most expensive for the
customer. It consists in the possibility of using at any time and in any way, the amounts
made available by the bank, normally without prior notice and without any particular time
obligation. This is certainly a convenient credit line for the company. However, the banks
prefer a moderate and infrequent use: otherwise, they tend to reduce it or withdraw it.

The discount on the commercial portfolio consists of the «disinvestment» (that is, the
conversion into cash) of the credits linked to the performance of the activity, as long as they
are incorporated in promissory notes that are credit instruments.

With the commercial portfolio discount the bank anticipates the customer the amount of a
credit not yet expired to third parties, 16 in turn the customer assigns the credit to the bank
subject to collection (i.e. with the obligation to return the sum to the bank in the event of
the debtor's insolvency).

The use of bills of exchange in commercial transactions has progressively slowed down over
the years, for both commercial and fiscal reasons. Instead of bills of exchange, companies
have increasingly preferred to use bank receipts.

Advances on invoices and bank receipts are granted by the bank upon presentation, like bills
of exchange, of the related documents. However, unlike bills of exchange, they are not credit

66
instruments but simply documents that attest to the existence of a credit and, therefore, of
a right to collect a specific sum.

Facility credits

With facility credits, the bank undertakes to pay any debts of the customer to third parties.
The customer who has a facility credit is facilitated in the purchase of goods or services, as
the third party knows that he can still turn to the bank for payment.

Facility credits are mainly:

• The endorsement;

• The bank guarantee;

• Documentary credit

With the endorsement, the bank guarantees for its client. The bank's signature guarantees
the successful completion of the payment, facilitating commercial exchanges and the
beneficiary's access to the bank discount.

The bank guarantee consists of a guarantee that the bank issues "at its own signature" in the
interest of a customer and in favor of third parties. The creditor thus has the certainty that
his credit will be paid, if not by the principal debtor, by the bank that has subscribed the
guarantee.

The documentary credit mainly concerns foreign trade. It can be defined as the written and
irrevocable commitment of a bank (issuer) issued by order of a buyer (payer) in favor of a
seller (beneficiary) to make a payment following the presentation of certain documents.

Payment extensions

In addition to the loan, you may find a form of financing, also in payment extensions (for
example, 30, 60, 90 days, etc.) granted by suppliers when goods or services are purchased.

In these cases, the interest is generally implicit, that is given by an increase in the price of
the goods purchased on credit.

Leasing and factoring

For some time now, the more "traditional" financing operations have been joined by others,
dictated by the evolution of economic relations: leasing and factoring.

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Financial companies generally implement such transactions.

Leasing (or "financial leasing") provides, with variable methods and clauses, the possibility
for the company to "rent" capital goods, paying periodic fees and reserving the right to
acquire ownership by paying a "redemption" upon the expiry of the contract.

Factoring consists in the assignment of one's own commercial credits, represented by

invoices, to a specialized intermediary - the «factor» -, which anticipates the amount,
discounting it and retaining a percentage as a guarantee. The factor then proceeds to collect
the credit and all the related operations, thus relieving the company from the entire credit
management. A service is added to the actual financing.

Medium and long-term financing

For the reasons previously clarified, the ultimate medium and long-term financing is
represented by the own capital. Among the external durable loans, however, the most
important and best known is the loan or mortgage.

Credit institutions against the provision of suitable guarantees generally provide the loan.

Repayment generally takes place through the payment of periodic installments (monthly,
half-yearly), including both repayment of a principal and accrued interest.

The external durable loans also include some types of subsidized loans, mainly provided by
the European Union, the State, as well as by various public bodies.

Obtaining a loan

In granting loans, banks have always protected themselves against the risk that the debtor
does not pay and, consequently, against the possibility of losing money. This is why the bank
requires guarantees from the entrepreneur, which vary according to the type of loan.

The most important guarantee generally required by banks is the so-called «real» guarantee,
in which the debtor's assets (in movable and immovable assets) are set by law to guarantee
credits.

A second type of much requested guarantee, which is part of the facility credits we
mentioned above, is the "personal" one, of which the surety is the most typical case.

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Secondly, the new entrepreneur is evaluated by the bank for the type of activity he intends
to start and for the risk profile associated with the project. You have to prove the
seriousness of your own initiative and to demonstrate - numbers in hand - good
management forecasts at least for the first three years of life of the new company: in other
words, you have to present a detailed and accurate business plan, with the related economic
budgets, balance sheet and financial statement.

Thirdly, the chances of obtaining a credit can increase significantly if the company also has
the following requirements:

• Vocation to internationalization, or rather the ability to export and to oversee foreign

markets (in the presence of a stagnant domestic economy, in fact, the potential for
development can only be directed beyond the borders);

• Ability to aggregate and innovate through the possibilities offered by export consortia
(which make it possible to reach the size of the company necessary to operate successfully
on foreign markets) and by the new "network contracts", which make it possible to optimize
competitiveness and innovative capacity.

Debt management

It is useful to underline some general rules for debt management.

As regard the duration of the loans, the main rule is to use homogeneous capitals with
respect to the needs to be covered.

Therefore:

• Current needs must be covered by short-term loans;

• Structural needs, on the other hand, from longer-term loans.

In the initial phase of the business, it may be useful to avoid too large recourse to external
sources. Especially in the early days, it is good to act with caution, always leaving a "credit
reserve" to which resort to face unexpected needs. To do this, you need to cover as much as
possible the structural needs with your own capital, which over time will have to be
constantly increased with self-financing.

The economic feasibility and sustainability of the project

Set up the project

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As mentioned above, the pre-feasibility analysis allows us to measure the degree of risk to
which we are approaching. Obviously, a well-done business project is much more precise
and indicates in an almost infallible way the "dark sides" of our idea. Moreover, this allows
us to "adjust the shot" before having fired the first shot, that is before the "start-up" of the
new business.

The business project is changeable. On the contrary, it constitutes a sort of starting point,
from which to move towards the expected results, through the need for constant
verification, revision and adaptation of the starting hypotheses.

Creating a business is therefore a gradual process, to be followed gradually. First at project

level, then with everyday work.

As will be seen better in the following chapters, the Business Plan therefore represents a
"global" document that encompasses all the main aspects that an entrepreneur must
evaluate in advance and that an investor wants to see before making an investment.

The "skeleton" of the Business Plan

Below is a possible trace that can represent the structure of a Business Plan.

It is just an example of the contents that you will see better in chapter 5 of this volume.

It is about developing the macro sections that have the following topics as object.

The mission of the idea and the entrepreneurial formula

What is the company mission? How did the idea was born and under what conditions? What
do you want to sell, to whom and in what way?

This is an introductory section where it must be made explicit:

- The mission (the function and role of the company in the market and the reason for
its existence),

- The entrepreneurial formula that is the coherence between what is sold (product /
service) and how it is sold and produced (organizational structure and method) and
to whom it sells (customers),

- The professional and personal journey of the aspiring entrepreneurs after which they
decided to start a business activity.

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It is a moment of reflection in which the motivations for entrepreneurship must be explained
because starting any business activity entails risks and certainly the emergence of problems
of various kinds

It is therefore important to pause and reason about the context in which the idea was
generated.

The Mission

a) Definition of the corporate mission

Entrepreneurial idea

a) Origin of the business idea

b) Progress of the project

c) Motivation for entrepreneurship

d) Distinctive features and possible elements of innovation

The entrepreneurial formula

a) Description in summary terms of the entrepreneurial formula based on:

- Product / service system offered

- Customers

- Organizational structure (resources, organization of the activity, form of

management, etc.)

The promoters

a) Professional characteristics of the promoters

b) Previous work experience

Business areas of the Company

In this section, you can describe the following topics:

What is the reference market?

Who are the competitors and customers?

Market description: in order to start up your own business it is essential to know your target
market. This means doing in-depth analyzes on potential direct competitors (those who
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produce my own good or deliver my own service) and indirect (those who produce a good or
provide a service that can easily replace mine), and on potential customers (their needs,
their characteristics, their purchasing processes, etc. ...). It is the reference market dictating
the "game’s rules": knowing them and making them yours is an advantage over the
competition.

A fair market research, an in-depth analysis of the actors acting within it offers a series of
information, which prices to apply, such as promotional and distribution policies (where, to
whom, how to entrust the sale and distribution of the goods produced or services provided),
which can be used to make the idea successful.

The product/service

a) Technical description of the product / service: description of the main lines of

activity, advantages for the customer, technical characteristics, production
technologies, raw materials;

b) Description of the innovative elements of the product / service compared to the

current market;

c) State of progress of product development (idea, project, prototype ...);

Customers

a) Identification of the main types of customers: customers who purchase (final and
intermediate) and user customers.

b) Description of their characteristics: functions / aims, needs and advantages looked

for, compared to the type of offer of the company, geographical location, spending
capacity or income, socio-economic variables, factors that influence the purchase

c) Quantitative estimate of market value (number of potential customers, value of

expenditure)

d) Geographical extension of the market you want to serve

e) Medium-long term prospects depending on the data collected

f) Market research already carried out

Competition

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 a) Analysis of operating competition and potential competition: types of main
competitors and relative offers of products / services that are competitive with
respect to the company's offer;

b) any critical competitors;

c) Barriers to entry;

d) Potential substitute products / services;

Construction and analysis of the matrix products/customers

a) Identification of product / service lines and customer segments;

b) Matrix Analysis based on critical factors of market success, demand behavior,

distribution, production synergies, market synergies, and main competitors.

Activity organization

It is useful, preventively, to establish well the activity organizational processes, the roles and
responsibilities of those who work within the company to have the right person to refer to
for the specific tasks for production and management; know what the technical resources
are, or those tangible and intangible assets necessary for starting the business.

From here can emerge some critical points; bureaucratic constraints (for example licenses or
patents); problems with of products or machinery suppliers (possibility of delivery delays);
problems with customers (not having the product or service at the right moment, above all
in phase of start, it can be harmful for the image and the credibility of the enterprise), etc ...

All this is likely to delay the start times.

Checking these aspects serves to coordinate and be ready and efficient when the company
"opens its doors".

Human resources

Summary indication of the resources needed to carry out the activity: technical and
managerial skills.

a) Members and owners (curriculum and role in the business project).

b) Number and characteristics (age, sex, qualifications, duties, etc.) of employees and
collaborators.

Material and intangible technical resources

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Technological skills, knowledge, patents and licenses, logistics, financial, current level of
introduction of the technologies described above.

Organization of the various areas and related criticality

a) Production (description of the production process, make or buy, plant and

equipment, main critical aspects) and service delivery (from the identification of the
need to the implementation of the service - ability to customize the service);

b) Purchases: main external purchases, main suppliers and related behavioral logics,
financial aspects connected to purchases, critical issues;

c) Sales: direct or through intermediaries, the company's sales force - internal and / or
external -, any commission system ...;

d) Accounting, fiscal aspects, economic-managerial control (outsourcing and / or

internalization, tools and control methods);

e) Entrepreneurial coordination (any foreseen functions).

Roles and responsibilities

Illustration of an organization chart

Promotion policies

For your newborn activity, you absolutely need to make yourself known in the right way.

Wrong promotional activities or indiscriminately addressed to everyone is a way to waste

time and money.

In the light of the definition of the market type in which you intend operate, it is
consequently easier to launch a right promotional policy.

You need to provide the tools to make yourselves known and identify the right promotion
channels:

a) Pricing policy for each product / service

b) Expected promotional policies

c) Expected distribution policies

d) Advertising and communication

e) Possible forms of promotion

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Investments

Description of what you need and how much it costs: this section must indicate the costs
that you must support as investments in machinery, equipment, and any restructuring.

You need to illustrate what and how many material and economic resources you need to
start your activity.

a) Description of the investments (made and expected) and related depreciation;

b) Production capacity compared to the competition.

Forecast report

You need also a preventive cost / benefit analysis to understand at what prices sell products
and / or services in order to reach a good income level, to understand when in future the
entrepreneurs will receive compensation for the work they have done and the amounts to
be requested for financing.

The previous part of the business plan serves to provide all the information concerning the
professionalism necessary for the development of the idea, the market, the people involved,
the means and the necessary equipment, etc...

In the section you have to calculate and draw up, based on this information, a forecast
budget.

This part must be both technical and numerical to verify the profitability of the business
project

a) Budget for start-up and start-up costs

b) Esteem of the labor costs of the entrepreneurs who work in the company

c) Fixed cost budget

d) Evaluation of variable and total cost per product unit

e) Break-even point

f) Sales budget

g) Income Statement Budget

h) Estimate of income and expenses. Short, medium and long-term financial

requirements and relative sources of coverage

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Recommended additional literature:

9. Blackwell, Edward. How to Prepare a Business Plan. London: Kogan Page,

2002.

10. Business Plans Handbook: A Compilation of Actual Business Plans Developed

By Small Businesses throughout North America. Detroit, M.I.: Gale Research,
2002.

11. Coke, Al. Seven Steps to a Successful Business Plan. New York: American
Management Association, 2002.

12. DeThomas, Art. Writing a Convincing Business Plan. Hauppauge, N.Y.: Barron's
Educational Series, 2001.

13. Stutely, Richard. The Definitive Business Plan: The Fast-Track to Intelligent
Business Planning for Executives and Entrepreneurs. London: Financial Times
Prentice Hall, 2002.

14. Matthews, Jana B., Lessons from the Edge: survival skills for starting and
growing a company. New York: Oxford University Press, 2003.

15. Townsley, Maria. Small Business: Essentials for the Successful Professional.
Ohio: Thomson, 2003.

16. Csordos, Mark D. Business Lesson For Young Entrepreneurs: 35 Things I

Learned Before The Age Of Thirty. Ohio: Thomson, 2003.

Key words:

Forecast

Leasing

Factoring

Break-even point

Outflows

Structural and Current requirement

Facility credits

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Debt management

Matrix products

Questions for discussions and self-test:

1. What will the viability plan show?

2. What are the objesctives of a business plan?

3. What does a well-done business project involve?

4. What are the basic rules for building a business project?

5. How is a company financed?

6. What are the financial critical ussues in the start-up phase of the company?

7. What are the main sources of funding that an entrepreneur can draw from?

8. What types of loans can a company obtain?

9. What is leasing?

10. What is factoring?

11. What are the general rules for debt management?

Summary:

In this topic the main objectives and rules for developing a business plan are described.
Moreover, the supply of financial resources is clarified considering the company’s structural
and current management. The topic also focuses on the sources of capital and the loans
according to their duration.

This module is designed to describe just how the business functions on a continuing basis.
The topic highlights the logistics of the organization such as the various responsibilities of
the management team, the tasks assigned to each department within the company, and
capital and expense requirements related to the operations of the business. Preparing a
business plan requires a wide range of knowledge: finance, human resource
management, intellectual property management, supply chain management, operations
management, and marketing.

CHAPTER 4. BUISNESS PLAN FOR THE ENTREPRENEUR

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