Module 2: Preparation of Business

model/Plan

•Meaning and significance of a business plan

•Components of a business plan,
•Feasibility study, Iterating the MVP, Digital Presence
for Ventures, Clarifying the value proposition,
Guidelines for writing BP, pre- requisites from the
perspective of investor.
 Business Plan

Business Plan Dual-Use Document

A business plan is a written For most new ventures, the
narrative, typically 25 to 35 business plan is a dual-purpose
pages long, that describes what a document used both inside and
new business plans to outside the firm.
accomplish.
Copyright ©2016 Pearson Education, Inc. 6-2
 Business Plan - Significance
There are two primary audiences for a firm’s business
plan
Audience What They are Looking For
A clearly written business plan helps the
A Firm’s employees of a firm operate in sync and
Employees move forward in a consistent &
purposeful manner.

Investors and A firm’s business plan must make the

other external case that the firm is a good use of an
stakeholders investor’s funds or the attention of
others.
 Guidelines for Writing a Business Plan

• Structure of the Business Plan

• To make the best impression a business plan should follow a conventional
structure, such as the outline for the business plan shown in the chapter.
• Although some entrepreneurs want to demonstrate creativity, departing
from the basic structure of the conventional business plan is usually a
mistake.
• Typically, investors are busy people and want a plan where they can easily
find critical information.
 Guidelines for Writing a Business Plan

• Structure of the Business Plan (continued)

• Software Packages
• There are many software packages available that employ an interactive, menu-
driven approach to assist in the writing of a business plan.
• Some of these programs are very helpful. However, entrepreneurs should avoid a
boilerplate plan that looks as though it came from a “canned” source.
• Sense of Excitement
• Along with facts and figures, a business plan needs to project a sense of anticipation
and excitement about the possibilities that surround a new venture.
 Guidelines for Writing a Business Plan

• Content of the Business Plan

• The business plan should give clear and concise information on all the
important aspects of the proposed venture.

• It must be long enough to provide sufficient information yet short enough

to maintain reader interest.

• For most plans, 25 to 35 pages is sufficient.

Guidelines for Writing a Business Plan

Types of Business Plans

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 Guidelines for Writing a Business Plan

• 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

• A suggested outline of a business plan is shown on the
next several slides.

• Most business plans do not include all the elements

introduced in the sample plan; we include them here for
the purpose of completeness.

• Each entrepreneur must decide which elements to

include in his or her plan.
 Section 1: Executive Summary

• Executive Summary
• The executive summary is a short overview of the entire business plan.

• It provides a busy reader with everything that needs to be known about

the new venture’s distinctive nature.

• An executive summary shouldn’t exceed two single-spaced pages.

• Even though the executive summary appears at the beginning of the

business plan, it should be written last.
• The plan itself will evolve as it’s written, so not everything is known at the outset.
 Section 1: Executive Summary

Key Insights
• In many instances an investor
will ask for a copy of a firm’s
Executive Summary executive summary and will ask
for a copy of the entire plan only if
the executive summary is
sufficiently convincing.
The executive summary, then, is
arguably the most important
section of a business plan.
 Industry Analysis

• Industry size, growth

rate, and sales • Promising areas are and
projections. Points of vulnerability
• Industry structure.
• Nature of participants. • The industry that a company
• Key success factors. participates in largely defines
• Industry trends. the playing field that a firm
• Long-term prospects. will participate in.
 Company Description

• Company description.
• Company history.
• Mission statement.
• Products and services.
• Current status.
• Legal status and ownership.
• Key partnerships (if any).
• how to translate an idea into a business.

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 Market Analysis

• Breaks the industry into segments and zeros in on the specific segment (or
target market) to which the firm will try to appeal.

• Most start-ups do not service their entire industry.

• The more a start-up knows about the consumers in its target market, the
more it can tailor its products or services appropriately.

• Items to include in this section:

• Market segmentation and target market selection.
• Buyer behavior.
• Competitor analysis.
 The Economics of the Business

• How profits are earned in the business and how many units of a business’s profits
must be sold for the business to “break even” and then start earning a profit.
• Items to include in this section:
• Revenue drivers and profit margins.
• Fixed and variable costs.
• Operating leverage and its implications.
• Start-up costs.
• Break-even chart and calculations.
Section 5: The Economics of the Business
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Key Insights
• Two companies in the same industry
may make profits in different ways.
The Economics of the One may be a high-margin, low-
Business volume business, while the other
may be a low-margin, high-volume
business. It’s important to check to
make sure the approach you select
is sound.
• Computing a break-even analysis
is an extremely useful exercise for
any proposed or existing business.
Copyright ©2016 Pearson Education, Inc. 6-16
 Marketing Plan

• Marketing Plan
• The marketing plan focuses on how the business will market and sell its
product or service.
• Marketing strategy, positioning, and points of differentiation, and then
talk about how these overall aspects of the plan will be supported by
price, promotional mix, and distribution strategy. It’s also important to
discuss the company sales process.
• Items to include in this section:
• Overall marketing strategy.
• Product, price, promotions, and distribution.
• Sales process (or cycle).
• Sales tactics.
 Design and Development Plan

• Items to include in this section:

• Development status and tasks.
• Challenges and risks.
• Projected development costs.
• Proprietary issues (patents, trademarks, copyrights, licenses, brand names).

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 Section 7: Design and Development Plan
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Key Insights
• Many seemingly promising start-ups
never get off the ground because
Design and Development their product development efforts
Plan stall or the actual development of
the 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.

Copyright ©2016 Pearson Education, Inc. 6-19

 Section 8: Operations Plan
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• Operations Plan
• Outlines how your business will be run and how your product or service will
be produced.
• A useful way to illustrate how your business will be run is to describe it in
terms of “back stage” (unseen to the customer) and “front stage” (seen by the
customer) activities.
• Items to include in this section:
• General approach to operations.
• Business location.
• Facilities and equipment.

Copyright ©2016 Pearson Education, Inc. 6-20

Section 8: Operations Plan
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Key Insights
• You have to strike a careful balance
between adequately describing this
Operations Plan topic and providing too much
detail.
• As a result, it is best to keep this
section short and crisp.

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 Section 9: Management Team and Company
Structure
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• Management Team and Company Structure

• The management team of a new venture typically consists of the founder or
founders and a handful of key management personnel.
• Items to include in this section:
• Management team.
• Board of directors.
• Board of advisers.
• Company structure.

Copyright ©2016 Pearson Education, Inc. 6-22

Section 9: Management Team and Company
Structure
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Key Insights
• This is a critical section of a
business plan.
Management Team and • Many investors and others who
Company Structure 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.

Copyright ©2016 Pearson Education, Inc. 6-23

 Section 10: Overall Schedule
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• Overall Schedule
• A schedule should be prepared that shows the major events required to launch
the business.
• The schedule should be in the format of milestones critical to the business’s
success.
• Examples of milestones:
• Incorporating the venture.
• Completion of prototypes.
• Rental of facilities.
• Obtaining critical financing.
• Starting production.
• Obtaining the first sale.

Copyright ©2016 Pearson Education, Inc. 6-24

Section 10: Overall Schedule
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Key Insight
• An effectively prepared and
presented schedule can be
Overall Schedule 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.

Copyright ©2016 Pearson Education, Inc. 6-25

 Section 11: Financial Projections
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• Financial Projections
• The final section of a business plan presents a firm’s pro forma (or projected)
financial projections.
• Items to include in this section:
• Sources and uses of funds statement.
• Assumptions sheet.
• Pro forma income statements.
• Pro forma balance sheets.
• Pro forma cash flows.
• Ratio analysis.

Copyright ©2016 Pearson Education, Inc. 6-26

Section 11: Financial Projections
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Key Insights
• Having completed the earlier
sections of the plan, it’s easy to see
Financial Projections why the financial projections come
last.
• They take the plans you’ve
developed and express them in
financial terms.

Copyright ©2016 Pearson Education, Inc. 6-27

Presenting the Business Plan to Investors
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• The Oral Presentation

• The first rule in making an oral presentation is to follow
directions. If you’re told you have 15 minutes, don’t talk for
more than the allotted time.
• The presentation should be smooth and well-rehearsed.
• The slides should be sharp and not cluttered.
• Questions and Feedback to Expect from Investors
• The smart entrepreneur has a good idea of the questions
that will be asked, and will be prepared for those queries.

Copyright ©2016 Pearson Education, Inc. 6-28

Presenting the Business Plan to Investors
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Twelve PowerPoint Slides to Include in an Investor Presentation

1. Title Slide 7. Marketing and sales

2. Problem 8. Management team
3. Solution 9. Financial projections
4. Opportunity and target market 10. Current status
5. Technology 11. Financing sought
6. Competition 12. Summary

Copyright ©2016 Pearson Education, Inc. 6-29