What is a Business Plan?

• A business plan is a written document

The Business Plan : prepared by the entrepreneur that
describes all the relevant internal and
Creating and Starting external elements and strategies for
The Venture starting a new venture.
• It is a integration of functional plans such
as marketing, finance, manufacturing, sales
and human resources.

Who should write the plan? Who Reads The Plans?

• The business plan should be prepared • The business plan may be read by
employees, investors, bankers, venture
by the entrepreneur. capitalists, suppliers, customers, advisors,
• The entrepreneur may consult with and consultants.
• There are three perspectives should be
many other sources in its considered in preparing the plan :
preparation, such as lawyers, – Perspective of the entrepreneur
accountants, marketing consultants, – Marketing perspective
– Investor’s perspective
and engineers.

Why Have a Business Plan? What is a Business Plan?

• The business plan is valuable to the entrepreneur, • Business Plan
potential investors, or even new personnel, who – A business plan is a written narrative, typically
are trying to familiarize themselves with the 25 to 35 pages long, that describes what a new
venture, it goals, and objectives. business plans to accomplish.
– It helps determine the viability of the venture in a
designated market • Dual-Use Document
– It provides guidance to the entrepreneur in organizing – For most new ventures, the business plan is a
his or her planning activities dual-purpose document used both inside and
– It serves as an important tool in helping to obtain outside the firm.
financing.
 Who Reads the Business Plan—
And What Are They Looking For?
Presenting The Plan
• There are two primary audiences for a firm’s
business plan • It is often necessary for an entrepreneur
to orally present the business plan before
Audience What They are Looking For
an audience of potential investors.
A Firm’s A clearly written business plan helps the • In this typical forum the entrepreneur
Employees employees of a firm operate in sync and move
forward in a consistent and purposeful manner.
would be expected to provide a short
(perhaps 20-minutes or half-hour)
Investors and A firm’s business plan must make the case that the
presentation of the business plan.
other external firm is a good use of an investor’s funds or the
stakeholders attention of others.

Guidelines for Writing a Business Plan

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Information Needs • Structure of the Business Plan
• Before committing time and energy to – To make the best impression a business plan should
preparing a business plan, the follow a conventional structure, such as the outline
entrepreneur should do a quick for the business plan shown in the chapter.
feasibility study of the business – Although some entrepreneurs want to demonstrate
concept to see whether there a any creativity, departing from the basic structure of the
possible barriers to success. conventional business plan is usually a mistake.
– Typically, investors are busy people and want a plan
• Internet can be a valuable resource.
where they can easily find critical information

Guidelines for Writing a Business Plan Guidelines for Writing a Business Plan
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• Structure of the Business Plan (continued) • Content of the Business Plan
– Software Packages – The business plan should give clear and concise
• There are many software packages available that employ an information on all the important aspects of the
interactive, menu-driven approach to assist in the writing of proposed venture.
a business plan. – It must be long enough to provide sufficient
• Some of these programs are very helpful. However, information yet short enough to maintain reader
entrepreneurs should avoid a boilerplate plan that looks as
interest.
though it came from a ―canned‖ source.
– For most plans, 25 to 35 pages is sufficient.
– Sense of Excitement
• Along with facts and figures, a business plan needs to • Types of Business Plans
project a sense of anticipation and excitement about the – There are three types of business plans, which are
possibilities that surround a new venture.
shown on the next slide.
Guidelines for Writing a Business Plan Guidelines for Writing a Business Plan
4 of 5 5 of 5

Types of Business Plans • Recognizing the Elements of the Plan May

Change
– It’s important to recognize that the plan will usually
change while written.
– New insights invariably emerge when an
entrepreneur or a team of entrepreneurs immerse
themselves in writing the plan and start getting
feedback from others.

Outline of Business Plan

• Outline of Business Plan Outline of a Business Plan
– A suggested outline of a business plan is shown on • Introductory Page
the next several slides.
– Most business plans do not include all the elements – Name and address of business
introduced in the sample plan; but all are include – Name(s) and address(es) of principal(s)
here for the purpose of completeness. – Nature of business
– Each entrepreneur must decide which elements to
include in his or her plan.
– Statement of financing needed
– Statement of confidentially of report

Outline … Outline …
• Executive Summary – Two to four single
Key Insights
spaced pages summarizing the complete
• In many instances an investor
business plan
will ask for a copy of a firm’s
– a short overview of the entire business plan
Executive Summary executive summary and will ask
– What is the business concept or model? for a copy of the entire plan only
– How is this business concept or model unique? if the executive summary is
– Who are the individuals starting this business? sufficiently convincing.
– How will they make money and how much? • The executive summary, then, is
arguably the most important
section of a business plan.
 Outline … Outline …
• Environmental and Industry Analysis
Key Insights
– Future outlook and trends (Industry Structure,
Key success factors, Industry size, growth • Before a business selects a
rate, and sales projections) target market it should have a
– Analysis of competitors good grasp of its industry—
– Market segmentation Industry Analysis including where its promising
– Industry and market forecasts areas are and where its points of
vulnerability are.
• The industry that a company
participates in largely defines
the playing field that a firm will
participate in.

Outline … Outline …
• Description of Venture (Company Description)
– Company Description and history Key Insights
– Mission Statement
– Product(s) • While at first glance this section
– Service(s) may seem less important than the
– Current status others, it is extremely important.
– Size of business Company Description • It demonstrates to your reader
– Office equipment and personnel
that you know how to translate
– Legal status and ownership (Background of entrepreneurs)
– Key Partnerships (if any) an idea into a business.

Outline … Outline …
• The Economics of the Business Key Insights
– This section addresses the basic logic of how • Two companies in the same
profits are earned in the business and how many industry may make profits in
units of a business’s profits must be sold for the different ways. One may be a
business to ―break even‖ and then start earning a
high-margin, low-volume
profit. The Economics of business, while the other may be
– Items to include in this section: the Business a low-margin, high-volume
• Revenue drivers and profit margins
business. It’s important to
• Fixed and variable costs
• Operating leverage and its implications
check to make sure the approach
• Start-up costs you select is sound.
• Break-even chart and calculations • Computing a break-even
analysis is an extremely useful
exercise for any proposed or
existing business.
 Outline … Outline …
Key Insights
• Production Plan • Outlines how your business will be
– Manufacturing process (amount subcontracted) run and how your product or service
will be produced.
– Business location
• A useful way to illustrate how your
– Physical plant business will be run is to describe it
– Machinery and equipment
Operations Plan
in terms of “back stage” (unseen to
– Names of suppliers of raw materials the customer) and “front stage”
• Operational Plan (seen by the customer) activities.
– Description of company’s operations • Your have to strike a careful balance
– Flow of orders for goods and/or services between adequately describing this
– Technology utilization topic and providing too much
detail. As a result, it is best to keep
this section short and crisp.
• .

Outline … Outline …
Key Insights
• Marketing Plan
– Pricing • The best way to describe a start-
– Distribution up’s marketing plan is to start by
– Promotion articulating its marketing
– Product forecasts Marketing Plan
strategy, positioning, and points
– Controls of differentiation, and then talk
• Marketing Analysis about how these overall aspects
of the plan will be supported by
– Market segmentation and target market
selection price, promotional mix, and
– Buyer behavior distribution strategy.
– Competitor analysis • It’s also important to discuss the
company sales process.

Outline … Outline …
• Assessment of Risk
Key Insights – Evaluate weakness of business
• Most start-ups do not service their – New technologies
– Contingency Plans
entire industry. Instead, they
focus on servicing a specific • Design and Development Plan
– Development status and tasks
(target) market within the – Challenges and risks
Market Analysis industry. – Projected development costs
• It’s important to include a section – Proprietary issues (patents, trademarks, copyrights,
licenses, brand names)
in the market analysis that deals
with the behavior of the
consumers in the market. The
more a start-up knows about the
consumers in its target market, the
more it can tailor its products or
services appropriately.
 Outline … Outline …
• Organizational Plan (Management Team and Company
Structure)
Key Insights – Form of ownership
• Many seemingly promising – Identification of partners or principal shareholders
– Authority of principals
start-ups never get off the ground – Management-team background
because their product – Roles and responsibilities of members of organization
development efforts stall or the
Design and actual development of the
Development Plan product or service turns out to be
more difficult than thought.
• As a result, this is a very
important section for businesses
developing a completely new
product or service.

Outline …
Key Insights Outline …
• This is a critical section of a
• Overall Schedule
business plan.
– Incorporating the venture
• The management team of a new – Completion of prototypes
Management Team
venture typically consists of the – Rental of facilities
and Company founder or founders and a handful – Obtaining critical financing
Structure of key management personnel. – Starting production
• Many investors and others who – Obtaining the first sale
read the business plan look first at
the executive summary and then go
directly to the management team
section to assess the strength of
the people starting the firm.

Outline …
Key Insights Outline …
• A schedule should be prepared
that shows the major events • Financial Plan
required to launch the business. – Pro forma income statement
Overall Schedule The schedule should be in the – Assumptions sheet
format of milestones critical to the – Cash flow projections
business’s success. – Pro forma balance sheet
• An effectively prepared and – Break-even analysis and Ration Analysis
– Sources and uses of funds statement
presented schedule can be
extremely helpful in convincing
potential investors that the
management team is aware of
what needs to take place to launch
the venture and has a plan in place
to get there.
 Outline …
Key Insights Outline …
• Having completed the earlier
sections of the plan, its easy to see • Appendix (contains backup material)
Financial why the financial projections come – Letters
last.
Projections • They take the plans you’ve – Market research data
developed and express them in – Leases or contracts
financial terms.
– Price lists from suppliers.

Using and Implementing

The Business Plan Measuring Plan Progress
• The business plan is designed to guide the • Entrepreneur should check the profit and loss
entrepreneur through the first year of statement, cash flow projections, and information
operations. on inventory, production, quality, sales, collection
• Implementation of the strategy contain of accounts receivable, and disbursements for the
control point to ascertain progress and to previous month.
initiate contingency plan if necessary. – Inventory control
– Production control
• Business plan not end up in a drawer – Quality control
somewhere once the financing has been – Sales control
attained and the business launched. – Disbursements

Why Some
Updating the Plan Business Plans Fail
• The most effective business plan can • Goals set by the entrepreneur are unreasonable.
become out-of-date if condition change. • Goals are not measurable
• If the change are likely to affect the • The entrepreneur has not made a total commitment to
business plan, the entrepreneur should the business or to the family.
• The entrepreneur has no experience in the planned
determine what revisions are needed. business.
• In this manner, the entrepreneur can • The entrepreneur has no sense of potential threats or
maintain reasonable targets and goals and weaknesses to the business.
• No customer need was established for the proposed
keep the new venture on a course that will product or service.
increase probability of success.