Tuesday, June 18, 2013

Global MBA ENMFA 0420119 – Entrepreneurship and Business Plan

Syllabus: Entrepreneurship and Business Plan

Professor: Máximo Errázuriz.

Presentation of the course

Teamwork is a critical business competency, regardless of the industry or organization.

Emerging companies or start-ups are basically small teams of highly motivated people, often
with little prior experience.

For all these reasons, the course offers a significant teamwork experience for students in
pursuit of a common goal with real impact.

In this sense, the development of a Business Plan for a new venture offers unique opportunities
for teamwork and content integration, techniques and skills developed in the MBA program.

A tool of excellence for evaluating the profitability and reducing the risk of a business is to
develop a good business plan.

Academic prerequisites

It is advisable to have previously taken courses in strategy, marketing and finance.

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Course Objectives

The general objectives of this course are:

• To provide an experience of teamwork.

• To provide tools and build skills for students to identify and evaluate a real business
opportunity.
• To develop a Business Plan for the creation of a new company, a new product or a
project evaluation

The specific objectives are:

• To develop skills and competencies of teamwork and leadership.

• Assessment of a new company, a new product or a project assessment of the
challenges and opportunities this presents.
• Build skills to develop solid and realistic business plans, usable as prospects for
investment and entrepreneurship.
• Understand the challenges faced by entrepreneurs.
• Develop the skills necessary to present a business, convince an audience and generate
interest in potential investors.

Methodology

During the course, students will attend expository classes.

Face-to-face or remote tutorial sessions with the professor are also included.

The business plan should be developed based on a real business opportunity, identified by each
group (made up of no more than 2 students), whose value can be captured and exploited
through the creation and launch of a new company. The company must be their own business
and therefore it should be within the reach of the team.

Projects may belong to any industry and, preferably, should be companies that:

• Create or add significant value to customers, solving a major problem or meeting a

specific need for which there is willingness to pay.
• Have a robust market with significant size and growth.
• Are innovative, with sustainable competitive advantages in the product/service and/or
business model.
• Generate solid, early, and free cash flows and attractive returns for investors.
• Have a proper fit between the founders and the management team (skills + know-how)
and good risk-return balance.
• Have potential to become successful, highly profitable and scalable businesses.
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Scheduling and contents of classroom sessions

1) Presentation of business opportunities Timmons, Ch 1, 2, 3 y 4

• Business models and business plan.

• Market Analysis: zoom on the opportunity.
• Characteristics of an entrepreneur and venture types.
• Ideas versus business opportunities.
• Sources of business ideas.
• The market opportunity. Customer needs and their developments.
• Industry analysis (Porter).
• Key Attributes to be assessed in an entrepreneurial idea.
• Market characteristics and demand.
• Target market / segment.

2) Products and services: selling your vision Timmons, Ch 5,6,7 and 8

• Products and Services. Value proposition and competitive advantages.

• Marketing strategy: reaching the customer
• Revenue model. Marketing and sales model. Promotion. Competitive Strategy and
Pricing.
• Operations and work plan: execution.
• Operations Flow. Production technology. Infrastructure and equipment required.
• Production planning and control systems.
• Organization: teamwork.
• Management team, organization chart and duties.
• Legal aspects.
• Procedures to start a new company.

3) Financial projections and risk analysis: Timmons, Ch 9,10

• Sales Projection. Statement of Income and Free Cash Flow.

• Economic Analysis. Business valuation. (NPV) and IRR.
• Sensitivity analysis.
• Analysis and qualitative risk management.

4) Funding for new ventures and venture capital

• Strategies and sources of funding for startups.

• Angel and venture capital in Chile.
• Criteria used by investors to value projects.
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 • Negotiating and closing investment agreements. Shareholders agreements.
• Exit strategies and profit taking.

5) Group Tutoring: Review of business models and feedback

6) Group Tutoring: Review of business models and feedback

7) Exam.

Assessment method

I) Course Assessment; 20%

CourseGrade = Participation and attendance + presentations + class assessment

II) Written Report; 30%

The evaluation of the written report of the Business Plan includes:

Business Idea and Work Plan Assessment 10%

Assessment of Submission(s) AFE (1 and 2), 30%
Assessment of Final Business Plan Delivery: 60%

III) Oral presentation and defense before commission; 50%

N .Defense = Presentation + Development + Handling

IV) Grade of Equivalent Training Activity or Thesis

ND = 0,2 ⋅ NC + 0,3 ⋅ NI + 0,5 ⋅ ND

Note: Failure to attend classes, group presentations, tutorials and delays in partial deliveries,
will involve a significant decrease in the corresponding assessment grade.

The grades to be recorded in the official degree minutes are: Grade the course, Grade of the
defense and Grade of the Equivalent Training Activity.

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Bibliography of the course:

The following references will be used in the course:

• "Business plans that work, a guide for small business" Jeffry A. Timmons, Andrew
Zacharakis, Stephen Spinelli, Mc Graw-Hill, 2004

Articles about Business Plans development that will be delivered in time:

Guide for the development of a business plan
Guide for the creation of companies

Modalities or possible types of work and administrative aspects

There will be 2 alternative work modalities possible to be developed during the course:

Alternative 1. The report or business plan already described:

• Academic Advisor: Max Errázuriz or professor of the faculty

• Size of the workgroups: 2 students per group.
• The final report must contain the points provided in the "Index of a business plan"
(attached)
• The report should be divided into:
- Part 1: content from point I to point VII of the index of a business plan.
- Part 2: content from point VIII to point XII of the index of a business plan.
- The business plan must be submitted in its final version, approved in writing by the
academic advisor, in triplicate and three CD’s, at the Teaching Secretariat of the
graduate school, economics and business.

Alternative 2.

The development of a case study, of the company in which the student works, which will be
published. This requires prior written approval by the company or the development of a
thesis. These modalities require prior written approval by the Faculty.

• Must be developed individually.

• The case must contain the items included in a predetermined syllabus, which will be
delivered to those who choose this option.

• Advisor: Professor of the Faculty.

• The schedule should be agreed with the academic advisors and the program management

• Class attendance and examination are common for all students

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Oral Presentation

• In the 2 modalities there will be an oral presentation before an examining committee using
a PowerPoint presentation.
• Duration of the presentation: 7 to 12 minutes. Both students should present. The
examining committee will make questions about the project to any of the students.

The structure of the presentation should consider the most important aspects of the business
plan, covering at least the following topics:

• Market Opportunity.
• The company and its products/services.
• Marketing and Strategy.
• Operations and implementation plan.
• Organization and human resources.
• Financial projections and risk analysis.
• Funding and offer to investors. If it is relevant, if applicable.

Professor’s Curriculum

Máximo Errázuriz de Solminihac.

Industrial Engineer UC, MBA UC, with course that Harvard University and Stonier School of
Banking USA.

He has been director and general manager of capital market companies, president, CEO and
director of banks.

Professor of courses of capital market, banks, risk management, strategic planning and project
evaluation in the faculties of economics and management at the University of Chile and the
Catholic University for 20 years.

Phone number: 02- 639 23 17 Email: merrazur@fen.uchile.cl

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Contents Business Plan

General structure of the business plan:

I. Executive Summary (one or two pages)

II. Description of the idea / product / service of the company

- Describe the idea / product / service and the distinctive aspects of the
business, what opportunity / need is met and how to attract customers (Is
it a single product, or several? what and whose needs it meets [in general
manner], define what market the product is targeted to, etc.)
- Identify the company and briefly define its mission, vision and goal
III. Industry and competitors Analysis (double weighting)
- Definition of the industry
- Identification of macrosegments (size trends)
- Analysis of the environment (political, social, economic, technological, etc.)
- Analysis of competitive forces in the industry (Porter Analysis)
- dynamic analysis:
- industry lifecycle, trends,
- Analysis of Stakeholders and others for sustainability
- Analysis of competition
o Market share of competitors
o Who are the main competitors?
o What market share does each one have? Sales of competitors
o Are they profitable?
o Compare our offer with the one of the competition
o Analysis of prices of the competition
o What is our competitive advantage versus relevant competitors?
o Analysis of prices of the competition
o strengths and weaknesses of competitors

IV. Description and quantification of the target market, and determining the
demand of your own company (Income x Sales) (Double Weighting)

- Consumers (geographic, demographic description: age, sex, socioeconomic

status, income, psychographic, behavioral, etc.)
- Macro Segments and micro segments
- Size of the target market and its trends

- Estimate the demand of your company (Income x Sales)

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 o Level of annual sales of the market in millions U.S.$ x year?
o How many units are sold per year, and at what price?
o What has been the historical annual average growth of the market?
o Estimate future potential growth, annual growth in %
o What is the market share that we aspire to? (For example: going
from 0% to 5% in 5 years)
o Estimating the market share of your company (Key Assumption)
o Annual sales level in $
o Annual sales level in number of products
o Number of customers
o Unit price level by product

V. Internal Analysis

- Value chain
- Resources, capabilities, competencies
- Competitive Advantages.

VI Choice of Competitive Strategy / Business Model Design

SWOT Analysis
Competitive Strategy (Porter's Generic Strategies, Differentiation, Cost, Focus)
Financial and qualitative targets
Choosing Competitive Positioning,
Necessary Strategic Resources and Major elements, initiatives or strategic
commitments.
Elements of the utility model (revenue model, cost structure, margin model,
and rotation of resources)
Entry and growth strategy

VII Marketing Plan

- Segmentation and Target Markets
- Positioning and Value Proposition
- Marketing Mix:
- Brand and brand elements
- Product: basic or generic product description, extended; warranty
and service policies (making sure they meet what they offer and
what happens if they do not)
- Price: what the pricing strategy will be for the beginning and in the
long term. Criteria and Costs to be considered

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 - Promotion: What promotional mix will be used: to whom it will be
targeted (end customer, wholesalers, retailers) and what tools will
be used (be specific on tools, for example if advertising is used,
identify what type, what media and who will be targeted)
- Market: strategy and distribution channels.

VIII Production and Operations

- Technology, Processes, key Resources and role of people.
- Geographic location. (offices, warehouses, points of sale)
- Operations cycle and basic operational requirements. (Description of the
process from purchase order to after sales service, describe operations
flow according to whether it will line flow, intermittent flow, flow per
project)
- Legal and regulatory matters affecting the business.

IX Organization and People Management

- Organizational Architecture (positions arrangement, vertical or horizontal
organizational structure, functional areas: Marketing, Finance,
Manufacturing, HR, etc., centralization, formalization, standardization,
Information Systems, Incentives and Control)
- Requirements and recruitment of people and talents (fundamental tasks of
each functional manager as well as abilities, advantages, skills, leadership,
experience, etc.).
- Mechanisms of compensation and incentives (salaries and benefits)
- Personnel Development (training, coaching)
- Other items
- Legal form of ownership (sole proprietorship company, registered
partnership, corporation, etc.)

X Funding Plan (Double Weighting)

- Financial valuation,
- Projected Cash Flow, NPV (projected income and expenses)
 Projected income (price x quantity sold)
 Costs projected, break-even

- Feasible forms of funding and how to execute them,

• Own contributions, loans, contributions from new
investors
- Other financial Valuation points

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 o NPV and IRR Calculation for an investor who provides fresh
capital
o Required Initial Investment, Capital contributions (detailing each
item and the distribution in time of the initial investment and
contributions)
o Balance sheet and income statement
o Projected cash flow,
o Reconciliation of the 3 financial statements
o Calculation of the residual value
o Determination of the discount rate to use
o NPV
o IRR
o Payback
o Summary of the main assumptions
o Make assessment only with Capital, without using debt
o Obtaining Capital increases or contributions (own contributions,
contributions from new investors)
o Shareholder agreements
o NPV and IRR Calculation for an investor who provides fresh
capital

XI Risks, issues and critical assumptions

- Difficulties and potential risks, and how to deal with them
- Key Assumptions for business operation
- Strategic and financial scenarios (simulations)
- Final conclusions

XII Appendixes
- Market research supporting Information: surveys, analysis, etc.
- Financial documents:
- Summary of all major assumptions used
- Structure of costs and investments, indicating assumptions behind
each estimate
- Estimated yield (NPV and IRR)
- Projected Balance Sheet
- Income Statement
- Detailed financial statements on a monthly basis
- Sensitivity analysis / detailed risk
- Financial ratios

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 - Important documents: MOU’s (Memorandum of Understanding), NDA’s
(Non Disclosure Agreement), Commercial contracts, Corporate documents
(agreements) and others.
- References to publications or references used in the work
- Glossary (optional)

Importance and Weighting of chapters

Some chapters of the Business Plan such as: Market Size, Industry analysis, Competition
analysis and financial valuation are much more difficult and laborious to develop.

Accordingly, their weight in the final grade of B. P. is higher (double) than the weighting of the
other topics which are simpler to develop

Spend more time on these points and begin to develop them from the beginning.

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