Due Diligence for an Entrepreneur - NewCo - Case Study Example

Due Diligence for an Entrepreneur By: Professor: Class: University: City: State: Date of submission: Due Diligence for an Entrepreneur Statement of entrepreneurship With increasing number of Kenyan population accessing mobile phones and limited electrical coverage within the rural areas, many entrepreneurs are focusing on provision of various charging options to help reduce the gap. Such gap, as entrepreneurs, will form the foundation for consideration on whether to provide the services or not. As highlighted in the business plan, NEWCO is a solar powered mobile charger with the ability of charging up to six phones simultaneously throughout the day. This is an advantage as the programme will enable the entrepreneurs to maximize on the duration of charging, number of phones charged, and reliability considering easy available of solar energy. Moreover, the entrepreneurs will not have to pay for the solar energy while offering phone-charging services as in the electricity use. The major objective of the entrepreneurs is profitability which involves maintaining the level of profits while ensure the generated revenue from the business stays ahead of the costs. Therefore, an effective plan needs to integrate the methods of controlling costs within both the production and operations while ensuring maintenance of the profit margin on the services offered (Pinson, 2005, 115). However, to realize these objectives, it is significant to focus on the customers services. Good services habitually assist in retaining the potential customers and generation of repeat revenue. To invest effectively in NEWCO program, it is significant that the business incorporates various mechanisms of keeping the customers happy. Strengths and Weaknesses of NewCo Business Plan A strong business plan needs to provide a road map that turns small businesses such as NEWCO into profitable enterprises. In a business plan, weaknesses reflect that either the plan was not written well and researched or the business concept is not clear. After identification of the strengths and weaknesses of the plan, the entrepreneur then decides on the amount of time and money to use in setting it into endeavor. Weaknesses within a business plan used in securing a fund always suggest that the plan does deserve an infusion of the cash, which could be a negative if that forms the basis of the plan. Strengths of the Plan While considering investing in any market, it is important to undertake a though market analysis to establish whether the products and services for investment will fill the market gap. The NEWCO business plan has undertaken a thorough analysis of the potential market, which is the Kenyan rural market, forms the strength of the plan. Moreover, the plan examined and explained different features of the market and suggested the extent to which the program will capture. Any strong market analysis needs to reflect on the reason why the customers will require the services that the entrepreneur will be offering. From the analysis, it is clear that the plan revealed the services the program offers to the potential clients rather than what the major players in the market offer. Additionally, the plan adequately addresses the plans of expanding to the regions including Sub-Saharan African countries if the program registers successful outcome in Kenya. In the Sub-Saharan regions, there have been increasing numbers of people without accessibility to electricity, which forms the market base for the products and services. An effective business plan needs to deliver full details regarding the major program competitors. Each business experiences competition irrespective of the business size. In the advent of increasing development and electricity becoming an important part of reducing the market gap, many investors are using electricity to provide mobile charging that most consumers prefer in Kenya. However, with proper outline of the program competitors, it will be easy to establish mechanism of acquiring the desired competitive advantage. A plan that suggests that the business has no competitors could be forming a weakness in its activities. Provision of detailed information regarding the major competitors is vital, especially in regards to their market position, offerings to the customers, and strategies used by the competitors in achieving their competitive advantage. The plan also addressed issues regarding manufacturing and quality to ensure that the project attain the required quality standards and specifications. There are established specifications and bargains between the manufacturer and distributors, which assist in the identification of the working terms to prevent the occurrence of disputes. The products are uniform considering the packaging used is similar which makes it easy to identify. Moreover, the plan adequate addressed the manner in which the potential clients would receive the products. The method is easy and encourages the customers to ask the agents questions on issues of their concern. Besides adequate presentation of the human resources required for the accomplishment of the entrepreneurial objectives, the plan also covered issues associated finances. Any strong business plan requires sufficient credentials and financial analysis. The plan addressed these issues through documentation, calculation, and analysis of the cash flows and projection of both the incomes and expenses. Moreover, the plan presented a realistic financial statement. Weaknesses of the plan Mobile charging sector is becoming highly competitive with the current rural electrification projects in Kenya and manufacturing of the power banks. To succeed within such competitive marketplace, the entrepreneur will have to offer products and services in which the potential customers have strong and immediate demand. The plan failed to express clearly the compelling reasons that the potential clients will view the products and services offered as something they need greatly or the top priority from them. In any weak plan, the products seem to merely thing to posses. The plan also expressed incomplete analysis of the competition since it failed to account for the strengths and weaknesses of the players. Proper understanding of the competitors is important as it allows the entrepreneurs to develop strategies of taking advantage of the weakness uncovered about the competitor (Hil, 2013). The plan also overstated the market. The major weaknesses of the upcoming business entities are the assumption that they have wider market cover than it is actually. The most important number in the business plan is the addressable market reflecting the number of customers the business can really reach. The business plan has unrealistic sales projections. According to the plan, based on its market size and opportunities in Kenya, in the first year the cash sales projections is 1000 units that will generate US$150,000 and expects a cumulative net income of US$3.5m within five years. These forecasts are also based on the sold two functional prototypes that received highly positive feedback. The projection could be unrealistic due to continued changes in the tastes and preferences and advancement in technology. Besides, it is unrealistic to use the outcomes for the sale of two products and a thousand similar products. Most entrepreneurs are optimistic in nature, which should not be translated within their outlandish sales projections. In addition, the entrepreneur failed to recognize the number of potential customers required to reach the required lofty number of sales, how difficult it would be to reach them, and convince them to purchase the product from the business. The plan lacks the details regarding the implementation of the program. The marketing strategies outlined in the plan failed to outline the activities that will facilitate the required growth including the expansion to the Sub-Saharan regions. The business plan could be viewed as weak considering the fact that it has bold and visionary but does not adequate give the explanations of the various tasks required in accomplishing these tasks and whether the business has the necessary human resources, finances, and skills to accomplish the task. Recommendations to improve the plan In the company and project overview, there is need to include the mission statement, goals, objectives, and strategies, the distribution system, production capacity and percentage in use, and description of the complexities and logistics required in the manufacturing process. Moreover, there is need for a thumbnail sketch of the roles and qualifications of the stakeholders involved in carrying out the project. The attachments required are the charts that depict the ownership and relationships between different investors, licensing agreements, protocols, and joint venture agreements. In the financial plan, there is need for inclusion of the sources and uses of the statement, cash flow statement, and pro forma statements, and the narrative explanation of the assumption on matters associated with depreciation, financing costs, taxes, revenues, operational cost, and capital costs (Shawwa, 2016).). The plan needs to entail the management capacity statement for the human resources, which describes their records of accomplishment in delivering the objectives of the project in effective and quality manner. Marketing analysis needs to involve basic elements considered vital while analyzing the market for the product: value chain analysis, situation analysis, sectoral analysis, and competitor analysis. The market plan needs to build on the industrial trends and profit potentials identified within the marketing analysis. Risk mitigation plan is also important as it outlines the potential risks that could lead to failure of the project and develop various strategies of mitigating the risk. Important aspects of risks that require adequate consideration are currency devaluation risk, inconvertibility of the risks, regulatory risks, market risks, operational risk, and competitive risk. References Hil, B. (2013). Weaknesses of a Marketing Plan | Business & Entrepreneurship - azcentral.com. Retrieved October 18, 2016, from http://yourbusiness.azcentral.com/weaknesses-marketing-plan-4848.html Pinson, L. (2005). Anatomy of a business plan: A step-by-step guide to building a business and securing your company's future. Chicago, IL: Dearborn Trade Pub. Shawwa, N. (2016). 14 Tips For A Great Business Plan – Expert Enough. Retrieved October 18, 2016, from http://expertenough.com/2915/business-plan-tips Read More