Entrepreneurship:

Theory, Process,
Practice, 12e
Chapter 12: Developing an
Effective Business Plan

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1
 Chapter Objectives
1. List the planning pitfalls that plague many new ventures.
2. Explain the business model canvas as an initial step in the planning process.
3. Describe a business plan and demonstrate its value.
4. Describe the benefits of a business plan.
5. Explain the different viewpoints of those who read a business plan.
6. Outline the importance of coordinating the business plan segments.
7. Describe the key recommendations by venture capital experts regarding a
plan.
8. Highlight a complete outline of an effective business plan.
9. Describe some helpful hints for writing an effective business plan.
10. Explain the key points to remember in the presentation of a business plan –
the pitch.
Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
 Pitfalls to Avoid in the Venture Planning
Process
• Pitfall 1: No realistic goals
• Pitfall 2: Failure to anticipate roadblocks
• Pitfall 3: No commitment or dedication
• Pitfall 4: Lack of demonstrated experience (business or
technical)
• Pitfall 5: No market niche (market segment)

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
 Business Model Canvas
• Business Model Canvas: Structured brainstorming tool for
entrepreneurs to use to define and understand the strategic focus
and the questions that need to be answered for each of the nine
building blocks.
• Value Proposition
• Key Activities
• Customer Segments
• Key Resources
• Channels
• Key Partners
• Customer Relationships
• Cost Structure
• Revenue Streams

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4
 Business Model
Business model

• A description of how a venture will create and deliver value

• Has evolved over the years with higher sophistication levels

• Working through this can help the entrepreneur gain a deeper

understanding of their customers, distribution channels,
partners, revenue streams, costs, and core value proposition.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5
 What is a Business Plan
• Provides a more specific and detailed exploration of the
venture’s goals and operations with a clear path on how the
venture will succeed.
• Business Plan: A written document that details the proposed
venture:
− Describes the current status, expected needs, and projected results
of the new business.
− Demonstrates a clear picture of what the venture is, where it is
projected to go, and how the entrepreneur proposes it will get there.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6
 Benefits of a Business Plan (1 of 2)
• For the Entrepreneur:
− Time, effort, research, and discipline to create a formal plan forces
the entrepreneur to view the venture critically and objectively.
− Competitive, economic, and financial analyses subject the venture to
close scrutiny.
• For Outside Evaluators:
− Develops and examines operating strategies and expected results.
− Provides a tool for use in communications with outside financial
sources.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7
 Benefits of a Business Plan (2 of 2)
• Specifically for the Financial Sources:
− Details the market potential and plans for securing a share of that
market.
− Shows the venture’s ability to service debt or provide an adequate
return on equity.
− Identifies critical risks and crucial events with a discussion of
contingency plans.
− Contains the necessary information for a thorough business and
financial evaluation.
− Assesses the entrepreneur’s managerial ability.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8
 Audience of a Business Plan
Viewpoint for those reading a business plan
• Entrepreneur: need to have the most clear, in-depth
knowledge
• Marketplace: determine who will purchase the product or use
the service and document the anticipated percentage of the
market is appropriate for success
• Investor: concentrated on the financial forecast.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9
Developing a Well-Conceived Business Plan
• The Five-Minute Reading:
1. Determine the characteristics of the venture and its industry.
2. Determine the financial structure of the plan (amount of debt or equity
investment required).
3. Read the latest balance sheet (to determine liquidity, net worth, and
debt/equity).
4. Determine the quality of entrepreneurs in the venture (sometimes the
most important step).
5. Establish the unique feature in this venture (find out what is different).
6. Read the entire plan lightly (this is when the entire package is paged
through for a casual look at graphs, charts, exhibits, and other plan
components).
Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
 Putting the Package Together
Key Format Issues:
• Appearance
• Length
• The cover and title page
• The executive summary
• The table of contents

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11
 Guidelines to Remember
• Keep the plan respectably short.
• Organize and package the plan appropriately.
• Orient the plan toward the future.
• Avoid exaggeration.
• Highlight critical risks.
• Give evidence of an effective entrepreneurial team.
• Do not over-diversify.
• Identify the target market.
• Keep the plan written in the third person.
• Capture the reader’s interest.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12
 Common Business Plan Phrases:
Statement versus Reality
Statement Reality
We conservatively project . . . We read a book that said we had to be a $50 million company in five years, and we reverse-engineered the numbers.
We took our best guess and divided by 2. We accidentally divided by 0.5.
We project a 10 percent margin. We did not modify any of the assumptions in the business plan template that we downloaded from the Internet.
The project is 98 percent complete. To complete the remaining 2 percent will take as long as it took to create the initial 98 percent but will cost twice as much.
Our business model is proven . . . . . . if you take the evidence from the past week for the best of our 50 locations and extrapolate it for all the others.
We have a six-month lead. We tried not to find out how many other people have a six-month lead.
We need only a 10 percent market share. So do the other 50 entrants getting funded.
Customers are clamoring for our product. We have not yet asked them to pay for it. Also, all of our current customers are relatives.
We are the low-cost producer. We have not produced anything yet, but we are confident that we will be able to.
We have no competition. Only IBM, Microsoft, Netscape, and Sun have announced plans to enter the business.
Our management team has a great deal . . . consuming the product or service.
of experience . . .
A select group of investors is considering the plan. We mailed a copy of the plan to everyone in Pratt’s Guide.
We seek a value-added investor. We are looking for a passive, dumb-as-rocks investor.
If you invest on our terms, you will earn a 68 percent internal rate of If everything that could ever conceivably go right does go right, you might get your money back.
return.

Source: Adapted from William A. Sahlman, “How to Write a Great Business Plan” (July/August 1997): 106. Copyright © 1997 by the Harvard Business
School Publishing. All rights reserved.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13
 Questions to Be Answered
• Is your plan organized so key facts leap out at the reader?
• Is your product/service and business mission clear and simple?
• Are you focused on the right things?
• Who is your customer?
• Why will customers buy? How much better is your product/service?
• Do you have a competitive advantage?
• Do you have a favorable cost structure?
• Can the management team build a business?
• How much money do you need?
• How does your investor get a cash return?

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14
 Elements of a Business Plan (1 of 5)
• Section I: Executive Summary
• Section II: Venture Concept; Value Proposition
− General description of business
− Industry background
− Goals and potential of the business and milestones (if any)
− Uniqueness of product or service
• Section III: Marketing Segment
− Projected sales

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15
Elements of a Business Plan (2 of 5)
• Section III: Market Niche and Market Share
− Target market (customers) identified
− Market size and trends
− Competition
− Marketing strategy
− Market strategy—sales and distribution
− Pricing
− Advertising and promotions

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
Elements of a Business Plan (3 of 5)
• Section V: Research, Design, and Development
− Product prototypes; design
• Section VI: Operations Segment
A. Facilities and logistics
B. Local taxes and zoning
C. Personnel needs and uses
D. Equipment needs

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
Elements of a Business Plan (4 of 5)
• Section VII: Management
A. Management team—key personnel
B. Legal structure—stock agreements, employment
agreements, ownership
C. Board of directors, advisors, consultants
• Section VIII: Financial
A. Pro forma balance sheet
B. Income statement
C. Cash-flow statement

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18
Elements of a Business Plan (5 of 5)
• Section IX: Critical Risks
A. Potential problems
B. Obstacles and risks
C. Alternative courses of action
• Section X: Harvest Strategy
A. Liquidity event (IPO or sale)
B. Continuity of business strategy
C. Identify successor
• Section XI: Milestone Schedule
A. Timing and objectives
B. Deadlines and milestones
C. Relationship of events
• Section XII: Appendix or Bibliography
Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19
 Milestone Schedule Segment
• Timetable for the activities to be accomplished:
− Incorporation of the venture
− Completion of design and development and prototypes
− Hiring of sales representatives, product display at trade shows
− Signing up distributors and dealers
− Ordering production quantities of materials, receipt of first orders
− First sales and first deliveries (dates of maximum interest because
they relate directly to the venture’s credibility and need for capital)
− Payment of first accounts receivable (cash in)

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20
 Helpful Hints for Developing the
Business Plan (1 of 3)
I. Executive Summary
• No more than three pages. This is the most crucial part of your plan because you must capture the reader’s interest.
• What, how, why, where, and so on must be summarized.
• Complete this part after you have a finished business plan.
II. Business Description Segment
• The name of your business.
• A background of the industry with history of your company (if any) should be covered here.
• The potential of the new venture should be described clearly.
• Any uniqueness or distinctive features of this venture should be described clearly.
III. Marketing Segment
• Convince investors that sales projections and competition can be met.
• Use and disclose market studies.
• Identify target market, market position, and market share.
• Evaluate all competition and specifically cover why and how you will be better than your competitors. Identify all
market sources and assistance used for this segment.
• Demonstrate pricing strategy. Your price must penetrate and maintain a market share to produce profits; thus, the
lowest price is not necessarily the best price.
• Identify your advertising plans with cost estimates to validate proposed strategy.
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21
 Helpful Hints for Developing the
Business Plan (2 of 3)
IV. Operations Segment
• Describe the advantages of your location (zoning, tax laws, wage rates). List the production needs in terms of
facilities (plant, storage, office space) and equipment (machinery, furnishings, supplies).
• Describe the specific operations of the venture.
• Indicate proximity to your suppliers.
• Mention the need and use of personnel in the operation.
• Provide estimates of operation costs—but be careful: Too many entrepreneurs underestimate their costs.
V. Management Segment
• Supply résumés of all key people in the management of your venture.
• Carefully describe the legal structure of your venture (sole proprietorship, partnership, or corporation).
• Cover the added assistance (if any) of advisors, consultants, and directors.
• Give information on how and how much everyone is to be compensated.
VI. Financial Segment
• Give actual estimated statements.
• Describe the needed sources for your funds and the uses you intend for the money.
• Develop and present a budget.
• Create stages of financing for purposes of allowing evaluation by investors at various points.
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22
 Helpful Hints for Developing the
Business Plan (3 of 3)
VII. Critical-Risks Segment
• Discuss potential risks before investors point them out—e.g.,
• Price cutting by competitors
• Any potentially unfavorable industry-wide trends
• Design or manufacturing costs in excess of estimates
• Sales projections not achieved
• Product development schedule not met
• Difficulties or long lead times encountered in the procurement of parts or raw materials
• Greater than expected innovation and development costs to stay competitive
• Provide some alternative courses of action.
VIII. Harvest Strategy Segment
• Outline a plan for a liquidity event—IPO or sale.
• Describe the plan for transition of leadership.
• Mention the preparations (insurance, trusts, and so on) needed for continuity of the business.
IX. Milestone Schedule Segment
• Develop a timetable or chart to demonstrate when each phase of the venture is to be completed. This shows the
relationship of events and provides a deadline for accomplishment.
X. Appendix or Bibliography
Source: Donald F. Kuratko, The Complete Entrepreneurial Planning Guide (Bloomington, IN: Kelley School of Business, Indiana University, 2015).

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23
 Updating the Business Plan
• Reasons to Update the Plan:
− Financial Changes
− Additional Financing
− Changes in the Market
− Launch of a New Product or Service
− New Management Team
− Reflect the New Reality

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
 Presentation of the Business Plan:
The “Pitch” (1 of 2)
Oral presentation, known as elevator pitch
• Know the outline thoroughly.
• Use keywords in the outline that help recall examples,
visual aids, or other details.
• Rehearse the presentation to get a feel for its length.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25
 Presentation of the Business Plan:
The “Pitch” (2 of 2)
• Be familiar with any equipment to be used in the presentation—
use your own laptop.
• The day before, practice the complete presentation
by moving through each slide.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26
 Suggestions for Presentation
• Focus on the pain for which your venture will be the solution.
• Demonstrate the reachable market, rather than potential market
• Explain the business model.
• Tout the management team.
• Explain your metrics.
• Motivate the audience.
• Emphasize your character and trustworthiness.
• Listen clearly and intently to any suggestions/questions; coachability
of the founder
• Why you and why now?

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27
 TABLE 12.5 What to Do When a Venture
Capitalist Turns You Down: Ten Questions
(1 of 2)
1. Confirm the decision: “That means you do not wish to participate at
this time?”
2. Sell for the future: “Can we count you in for a second round of
financing, after we’ve completed the first?”
3. Find out why you were rejected: “Why do you choose not to participate
in this deal?” (Timing? Fit? All filled up?)
4. Ask for advice: “If you were in my position, how would you proceed?”
5. Ask for suggestions: “Can you suggest a source who invests in this kind
of deal?”
Source: Joseph R. Mancuso, How to Write a Winning Business Plan (Englewood Cliffs, NJ: Prentice Hall, 1985), 37. Reprinted with the permission of Simon & Schuster Adult
Publishing Group. Copyright © 1985 by Prentice Hall, Inc.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28
 TABLE 12.5 What to Do When a Venture
Capitalist Turns You Down: Ten Questions
(2 of 2)
6. Get the name: “Whom should I speak to when I’m there?”
7. Find out why: “Why do you suggest this firm, and why do you think this
is the best person to speak to there?”
8. Work on an introduction: “Who would be the best person to introduce
me?”
9. Develop a reasonable excuse: “Can I tell him that your decision to turn
us down was based on ____________ ?”
10.Know your referral: “What will you tell him when he calls?”
Source: Joseph R. Mancuso, How to Write a Winning Business Plan (Englewood Cliffs, NJ: Prentice Hall, 1985), 37. Reprinted with the permission of Simon & Schuster Adult
Publishing Group. Copyright © 1985 by Prentice Hall, Inc.

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29
 Summary
Click the link to review the objectives for this presentation.

Link to Objectives

Donald F. Kuratko, Entrepreneurship: Theory, Process, Practice, 12th Edition. © 2024 Cengage. All Rights Reserved. May not be
scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30