Note:  The high failure rate of a new businesses and products indicates that very few ideas actually result in successful business ventures, even when introduced by well established firms. So this is a challenging component.

Each group will be responsible for researching a product/industry that could be successful in the virtual world.

Each planning group is asked to develop a proposal to be submitted to the rest of the class (using PowerPoint).   A list of the required components for the proposal are listed below:

List the products and/or services you want to sell.

Describe who will use your products/services.

Why would someone buy your product/service?

What kind of location do you need in terms of type of neighborhood, etc...?

List your product/service suppliers.

List major competitors (those who sell similar products/services in the virtual world).

List the staff/departments that will be required to run you business.

Does the product/service/business serve a presently unserved need?

Are there local businesses that can be recruited as business partners?

Is the product / service / business  appropriate for the high school, community, etc...?

Preliminary Income Statement

Develop a Preliminary Income Statement

As part of the preliminary analysis, each consulting group will be asked to prepare a Preliminary Income Statement. Students are to project income and expenses for the proposed business (to determine feasibility).

The basic financial statistics are generally available for most businesses from trade and industry associations,  government agencies, universities, and private companies and banks (Dun & Bradstreet, Robert Morris Associates, Accounting Corporation of America, National Cash Register Company, Bank of America, Federal Trade Commission, and Securities and Exchange Commission).

Students are encouraged to rely on available data for comparison, and are required to forecast income statements based on projections for the virtual world. Available data can help to answer some of the following questions while preparing the proposal:

What kind of sales do you project on a monthly basis?

What is the normal markup in this line of business (i.e. the dollar difference between the cost of goods s old and sales)?

What type of expense will you incur on a monthly basis?

What will your monthly payroll expense be?

Do you need to calculate shipping expenses, sales tax, etc...?

Students are to then use this information to prepare a preliminary income statement to determine if the proposed business would be successful in the virtual world.

U.S. Gov’t. Bureau of Labor Statistics   http://stats.bls.gov/ocohome.htm

Career Mosaic   http://www.careermosaic.com/cm.jobs.html

Lycos Career Search Engine   http://www.lycos.com/careers/

Career City   http://www.careercity.com/job/srch

The Monster Board   http://monsterboard.com/

Job Futures   http://www.hrdc_drhc.gc.ca/JobFutures/english/volume1

The Riley Guide to Career Research   http://dbm.com/jobguide/research.html

Job Descriptions   http://jobdescription.com

Monster.com   http://www.occ.com

  Each group will be given up to 20 minutes to present their proposal.

At the end of the presentations, the full class will vote upon which business will be selected for entry into the virtual world. 

Remember that part of the research includes an evaluation of existing virtual businesses to determine feasibility of this business within the VE network. The results of this component must be included in the presentation

I Invest Tech Limited, the developers of PlanWare software, suggest that the preparation of a written business plan is not the end result of the planning process. 

The realization of that plan is the ultimate goal. However, the writing of the plan is an important intermediate stage.  

For an established business it demonstrates that careful consideration has been given to the business’s development, and for a start up it shows that the entrepreneur has done his or her homework.

Just as no two businesses are alike, so also with business plans. 

As some issues in a plan will be more  relevant to some businesses than to others, it is important to tailor a plan’s contents to suit individual circumstances. 

Nonetheless, most plans follow a well tried and tested structure and general advice on preparing a plan is universally applicable.

A business plan should be a realistic view of the expectations and long term objectives for an established business or new venture. Preparing a satisfactory business plan is a painful but essential exercise. 

The planning process forces your students to understand more clearly what they want to achieve, and how and when they can do it. 

Anticipate many weeks of hard work and several drafts of the emerging plan to get the job right. 

It is recommended that not all students engage in this activity. 

A well chosen group of 5 –10 students (perhaps 1 to 2 from each department) will ensure maximum benefit from this exercise.

In preparation for writing a business plan, it is suggested that the teacher consultant or the CEO lead a 1 to 2 hour session on "preparing a strategic plan" (all employees should be included in this session). This will help focus the entire company for the task of preparing the business plan.

A student should be selected to record all responses on the board/overhead/easel as discussion proceeds, and another student should be selected to record all information on paper for later use.

The discussion leader should begin the brainstorming session by having the class develop a vision (a picture of the business in three or more years time in terms of its likely physical appearance, size, activities, etc…). 

Once the vision is in place, the group should focus on developing a Mission (the purpose of the business, for example, "to design, develop, manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of a specified customer group via certain distribution channels n particular geographic areas").

The third key element is to explicitly state the business’s Objectives in terms of the results it needs/wants to achieve in the medium/long term. Objectives should relate to the expectations and requirements of all the major stockholders, including employees, and should reflect the underlying reasons for running the business.

The nest element is to address the Values governing the operation of the business and its conduct or relationships with society, customers, employees, etc…

Next are the Strategies – the rules and guidelines by which the mission, objectives, etc… may be achieved. They can cover the business as a whole including such matters as diversification, growth, acquisition plans – or they can relate to primary matters in key functional areas like "break-even" point, new products, internal cash flow, etc…

Next are Goals. These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company’s objectives, for example, to achieve sales of $3M in three year’s time.

The final elements are the Programs which set out the plans for the key strategies.

The time invested in this task will more than be offset by the focus and clarity that will be achieved prior to starting the business plan. Copies of the notes should be given to all members of the Business Plan writing staff. 

 A business plan:

Is the management & financial "blueprint" for a business.

Is written by the business owner(s)/managers with outside help as needed.

Explains how the business will function and depicts its operational characteristics.

Details how the business will be capitalized and managed.

t is strongly recommended that you list the services of you local business partner(s) to assist you in the preparation of this plan. Enlisting the assistance of you business partner(s) in this endeavor will serve to s trengthen your relationship with your business partner(s) and will make this project more meaningful to your students.

An extensive list of the elements of a business plan developed by Ernst & Young’s Entrepreneurial Services is provided below. Your firm should adapt this list to suit its particular needs.

I.     The outline should contain the following sections:

A.   Executive Summary
B.   Company Description
C.   Market Analysis
D.   Marketing and Sales Activities
E.   Products and Services
F.   Operations
G.   Management and Ownership
H.   Funds Required and Their Uses
I.    Financial Data
J.   Appendixes and Exhibits

 II.   Executive Summary

A.  The Executive Summary should emphasize the key issues presented. The critical points in your
company’s distinctive competence – the factors that will make your business successful in a competitive market.

B.  In total, your Executive Summary should be less than three pages in length and provide the reader with a succinct overview of your entire business plan. The Executive summary should be followed by a brief Table of Contents designed to assist readers in locating specific sections in the plan.

II. Company Description

A.  The description

1.   This section must provide an overview of how all the elements of your company fit together.
2.   Don’t go into detail, since most of the subjects will be covered in depth elsewhere in the plan.
3.   Nature of your Business
      a.   Marketplace needs to be satisfied
      b.   Method(s) to satisfy those needs
      c.   Individuals/organizations with the needs
4.   Your Distinctive Competence (primary factors that will lead to your success)
      a.   Superior satisfaction of customer needs
      b.   Production/Service delivery efficiencies
      c.   Personnel
      d.   Geographic location

III Market Analysis

A.   The Analysis

1.   The Market Analysis section should reflect your knowledge of your industry and present highlights and analysis of your market research.
2.   Detailed market research studies, however, should be presented as appendices to your plan.

B.    Industry Description and Outlook

1.   Description of your primary industry
2.   Size of the industry
       a.   Historically
       b.   Currently
       c.   In three years
3.   Industry characteristics and trends
       a.   Historically
       b.  Currently
       c.    In the future
4.   Major customer groups
       a.   Business
       b.   Government
       b.   Consumers

C.  Target Markets

1.   Characteristics of your primary target market
      a.   Current needs
      b.   Extent to which these needs are being met
      c.   Demographics
      d.   Geographical location of target markets
      e.   Seasonal/cyclical trends
2.   Size of primary target market
      a.   Number of prospective customers
      b.   Projected annual (or monthly) purchases of your product/service
      c.   Anticipated market growth
3.   Market penetration (include the extent to which you anticipate penetrating your market and       demonstrate why you feel that level of penetration is achievable based on your market research).
      a.   Market share
      b.   Number of customers
      c.   Geographic coverage
      d.   Rationale for market penetration estimates
4.   Pricing/gross margin targets
      a.   Price levels
      b.  Gross margin levels
      c.   Discount structure (volume, prompt payment, etc…)
5.   Methods by which you can identify your target market
      a.   Directories
      b.   Web sites
6.   Media through which you plan to communicate with your target market
      a.   Mail
      b.   E-mail
      c.   Fax
      d.   Publications (advertisements, etc…)
      e. Web sites
7.     Market Test Results
      a.   Potential customer contacts
      b.   Reaction of potential customers
      c.   Surveys conducted

D.  Lead Times (amount of time between customer order and delivery)

E . Competition

1.   Identification
     a.   Existing
     b.   Market share
     c,   Potential (growth of competitors)
     d.  Their strengths (competitive advantages)
           i.    Ability to satisfy customer needs
           ii.   Market penetration
           iii.  Track record and reputation
           vi.  Staying power (financial resources)
           v.   Key Personnel
     e.  Their Weaknesses (competitive disadvantages)
           i.    Ability to satisfy customer needs
           ii.   Market penetration
           iii.  Track record and reputation
           iv.  Staying power (financial resources)
           v.   Key Personnel
      f.   Importance of your target market to your competition
     g.   Barriers to enter into your market
           i.   Cost (investment)
           ii.  Time
           iii. Technology
           iv.  Key Personnel
           v.   Customer inertia (brand loyalty, existing relationships, etc…)

IV. Marketing and Sales Activities

A.   Your objective here is to describe activities enabling you to meet the forecasts in your        prospective financial statements.

B.   Overall Marketing Strategy

      1.    Market penetration strategy
      2.    Growth strategy
             i.   Internal
             ii.  Horizontal (providing similar products to different users)
             iii. Vertical (providing the products to different users)
      3.   Communication
             i.   Promotion
             ii.  Advertising
             iii. Public relations
             iv.  Personal selling
             v.   Printed Materials (catalogues, brochures, etc…)

B.   Sales Strategies

     1.   Sales force
            i.   Size
            ii.  Recruitment and training
            iii. Compensation
      2.  Sales activities
            i.   Identifying & Prioritizing prospects
            ii.  Number of sales calls per period
            iii. Method of communicating with customers

V.  Products and Services

A.   Detailed Product/Service Description (from the user’s perspective)

    1.   Specific benefits of the product/service
    2.   Ability to meet needs
    3.   Competitive advantages
    4.   Present stage (idea, prototype, small production runs, etc…)

B.   Product Life Cycle (every product is said to have a "life cycle" – an introduction, a peak, and a transitional phase out. i.e. – "pet rocks")

    1.   Description of product/service’s current position in its life cycle
    2.   Factors that might change the anticipated life cycle
    3.   Copyrights, Patents, and Trade Secrets
          i.   Anticipated copyrights and patent filings
          ii.  Key aspects of your product that cannot be copyrighted
          iii. Existing legal agreements with owners and employees

C.   Research and Development Activities

    1.   Activities in process & Future activities
    2.   Anticipated results of future R&D activities
          i.   New products or services
          ii.  New generations of existing products or services
          iii. Complementary products or services
          iv.  Replacement products or services

VI.   Operations

A.   Here again, too much detail can detract from the rest of your business plan. Be certain that the       level of detail included fits the specific needs of the plan’s users.

B.   Production and Services Delivery Procedures

         1.   Internal
         2.   External (subcontractors and service agreements)

C.   Production and Services Delivery Capability

         1.   Internal
         2.   External
         3.   Anticipated increases in capacity
               i.   Investment needed to increase capacity
               ii.  New costs to increase capacity (direct and indirect
               iii. Timing

D.   Distribution Network

         1.   Internal Sales Force
         2.   Distributors

E.   Competitive Operating Advantages

         1.   Techniques
         2.   Experience
         3.   Economies of Scale
         4.   Lower direct costs

F.   Suppliers

         1.   Suppliers of critical production elements
         2.   Lead time requirements
         3.   Evaluate risks of critical element shortages
         4.   Describe existing and anticipated contractual relationships with suppliers

VII. Management and Ownership

A.   Your management teams’ talents and skills are some of the few truly unique aspects of your    company. If you are going to use your plan to attract investors, this section must emphasize your management’s talents and skills, and indicate why they are part of your company’s distinctive competence that cannot easily be replicated by your competition. Remember that individuals invest in people, not ideas.

B.   Management Staff Structure

          1.   Management staff organization chart
          2.   Narrative description of the chart

C.   Key Managers (complete resumes should be presented in the appendix)

          1.   Name
          2.   Position
          3.   Brief position description, including primary duties
          4.   Primary responsibilities and authority with previous employers
          5.   Unique skills and experience that add to your company’s distinctive competence
          6.   Compensation basis and levels (make them reasonable!)

D.   Planned Additions to Current Management Team

          1.   Position
          2.   Primary responsibilities and authority
          3.   Required skills and experience
          4.   Recruitment process
          5.   Timing of employment
          6.   Anticipated contribution to the company’s success
          7.   Compensation basis and levels (be sure they are in line with the market)

E.   Legal Structure of the Business

          1.   Corporation
          2.   Partnership (General or Limited)
          3.   Sole Proprietorship

F.   Owners

          1.   Names
          2.   Percentage of ownership
          3.   Extent of involvement with the company
          4.   Form of ownership (Common stock, Preferred Stock, Partner)
          5.   Common Stock issues

Note – The California Network has elected to allow each of the company’s officers (CEO and    all VP’s) to invest $10,000 virtual dollars into the company to help offset any start-up costs.    Therefore, each officer has part ownership in the company. All other financing should be done          through long-term debt.

G.   Board of Directors (if applicable)

         1.   Names
         2.   Positions
         3.   Extent of involvement

VIII.   Funds Required and their Uses

A.   Any new or additional funding reflected in your prospective financial statements should be        discussed here.

          1.   Alternative funding scenarios can be presented
          2.   If corresponding prospective financial statements are presented later in your plan.

B.   The California Network has elected to allow each VE to sign an ongoing monthly sales contract     with a "phantom" customer

          1.   In an amount that is equal to that VE’s breakeven point.
          2.   This contract assures that each VE will operate in the black during their first year of 
                 operation.
          3.    This should be taken into consideration when calculating funds required and their
                 uses (Please see the section on "Phantom Contracts")

C.   Current Funding Requirements

          1.   Amount
          2.   Timing
          3.   Type
                 i.   Equity (officer’s share)
                 ii.  Debt (long-term vs. short-term)
                 iii. Terms
          4.   Funding requirements over the next five years
                 i.   Amount
                 ii.   Timing
                 iii.  Type (Equity vs. Debt) % Terms
          5.   Use of Funds
                 i.   Capital expenditures
                 ii.  Working capital
                 iii. Debt retirement
                 iv.  Acquisitions
          6.   Long-range Financial Strategies
                 i.   Going public
                 ii.  Leveraged Buy-out
                 iii. Acquisition by another company
                 iv.  Debt service levels and timing
                 v.   Liquidation of the venture

IX.  Financial Data

A.   This section contains the financial representation of all information presented elsewhere in        the plan. Various scenarios can be included, if appropriate

B.   Historical Financial Data (past three to five years, if applicable)

           1.   Annual statements
                    i.   Income
                    ii.  Balance sheet
                    iii. Cash flows

C.   Prospective Financial Data (next five years)

           1.   Next year (by month or quarter)
                   i.   Income statement
                   ii.  Balance sheet
                   iii. Cash flow statement
                   iv.  Capital expenditure budget
            2.   Final four years (by quarter and/or year)
                   i.   Income statement
                   ii.  Balance sheet
                   iii. Cash flow statement
                   iv.  Capital expenditure budget
            3.   Summary of significant assumptions
            4.   Type of prospective financial data
                    i.   Forecast (management’s best estimate)
                    ii.  Projection ("what if" analysis)

D.   Analysis

            1.   Historical financial statements
                    i.   Ratio analysis
                    ii.  Trend analysis with graphic representation
            2.   Prospective financial statements
                    i.   Ratio analysis
                    ii.  Trend analysis with graphical representation

X.  Appendices or Exhibits

A.   Any additional detailed or confidential information that could be useful to the readers of        the business plan can be presented here.

            1.   Appendices and exhibits should be bound separately from other sections of the
                  plan and provided as needed to readers.
            2.   Examples of items that may be contained in this section are as follows:
                  i.   Resumes of Key Managers
                  ii.  Pictures of Products
                  iii. Professional References
                  iv.  Market Studies (survey results)
                  v.   Pertinent Published Information
                        a.   Magazine articles
                        b.   References to books

G.   Patents

H .  Significant Contracts

            1.   Leases
            2.   Sales contracts
            3.   Purchase contracts (include the phantom contract here)
            4.   Partnership/Ownership agreements
            5.   Stock option agreements
            6.   Employment/compensation agreements
            7.   Non-competition agreements
            8.   Insurance Information
                   i.   Product liability
                   ii.  Officers and directors’ liability
                   iii. General Liability

XI.   Administrative Considerations

A.   Among other things, the business plan will be used to secure financing for starting (or expanding) your virtual enterprise.

           1.   Great care should be taken in the creation of this document.
           2.   All information (and projections) should be as accurate as possible.
           3.   You will be asked to submit a copy of your business plan to the VEC (Virtual Enterprise
                 Center) in order to secure funding for your Virtual Enterprise.

B.   The CEO (and CFO) may be asked to present this plan before a board of investors/bankers in order to secure funding.

           1.   The presentation will be a 30 minute (20 minute presentation/ 10 minute question period)
                  presentation to a panel of investor/banker representatives.
           2.   Your objective will be to outline your business plan for the purpose of obtaining a long-term
                  loan to help finance your virtual enterprise.
           3.   If you are not asked to participate in this event, you should simulate this exercise for your 
                 students by calling upon local business partners to serve as your board of
                  investors/bankers.