MODULE 8

Business Plan Preparation for New

Ventures
April 5 - 10, 2021

ENTREPM
Entrepreneurial Mind

1
 ENTREPM – ENTREPRENEURIAL MIND

MODULE 8: Business Plan Preparation for New Ventures

I. LEARNING OBJECTIVES:
1. To define a business plan and demonstrate its value.
2. To explore the planning pitfalls that plagues many new ventures.
3. To describe the benefits of a business plan.
4. To emphasize the importance of coordinating the business plan segments
5. To present a complete outline of an effective business plan.

II. TOPIC OUTLINE:

 Importance of Planning
 What is a Business Plan?
 Pitfalls to avoid in Planning
 Benefits of a Business Plan
 Putting the Package Together
 Elements of a Business Plan
 Helpful Hints for Developing the Business Plan
 Updating the Business Plan

III. LESSON PROPER

IMPORTANCE OF PLANNING
Planning is essential to the success of any undertaking. Critical factors that must be addressed when
planning are:

 Realistic goals. These must be specific, measurable, and set within time parameters.
 Commitment. The venture must be supported by all involved—family, partners, employees, team
members.
 Milestones. Sub goals must be set for continual and timely evaluation of progress.
 Flexibility. Obstacles must be anticipated, and alternative strategies must be formulated.

WHAT IS A BUSINESS PLAN?

A business plan is a written document that details the proposed venture:
 Describes the current status, expected needs, and projected results of the new business.
 Covers the project, marketing, research and development, manufacturing, management, critical
risks,financing, and milestones or a timetable.
 Demonstrates a clear picture of what that venture is, where it is projected to go, and how the
entrepreneur proposes it will get there—a road map for a successful enterprise.

A good business plan follows generally accepted guidelines for both form and content. There are
three primary parts to a business plan:

 The first is the business concept, where you discuss the industry, your business structure, your
particular product or service, and how you plan to make your business a success.

 The second is the marketplace section, in which you describe and analyze potential customers:
who and where they are, what makes them buy and so on. Here, you also describe the
competition and how you'll position yourself to beat it.

 Finally, the financial section contains your income and cash flow statement, balance sheet and
other financial ratios, such as break-even analyses.

PITFALLS TO AVOID IN PLANNING

2
 Pitfall 1: No Realistic Goals
- Lack of attainable goals
- Lack of a time frame to accomplish things
- Lack of priorities
- Lack of action steps

 Pitfall 2: Failure to Anticipate Roadblocks

- No recognition of future problems
- No admission of possible flaws or weaknesses in the plan
- No contingency or alternative plans

 Pitfall 3: No Commitment or Dedication

- Excessive procrastination
- Missed appointments
- No desire to invest personal money
- The appearance of making a “fast buck” from a hobby or a “whim.”

 Pitfall 4: Lack of Demonstrated Experience (Business or Technical)

- No experience in business
- Lack of understanding of the industry in which the venture fits
- Failure to convey a clear picture of how and why the venture will work and who will accept
it

 Pitfall 5: No Market Niche (Segment)

- Uncertainty about who will buy the basic idea(s) behind the venture
- No proof of a need or desire for the good or product proposal
- Assumption that customers or clients will purchase just because the entrepreneur thinks so.

BENEFITS OF A BUSINESS PLAN

 For the Entrepreneur:

The time, effort, research, and discipline required to create a formal business plan forces the
entrepreneur to view operating strategies and expected results critically and objectively.

 For Outside Evaluators:

The business plan provides a tool for use in communications with outside financial sources.

 Specifically for the Financial Sources:

 Details the market potential and plans for securing a share of that market.
 Shows how the venture’s intends 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.

PUTTING THE PACKAGE TOGETHER

When presenting a business plan to potential investors, the entrepreneur must realize that the entire
package is important. A business plan gives financiers their first impressions of a company and its
principals.

In other words, form as well as content is important; investors know that good form reflects good
content, and vice versa. Among the format issues we think most important are the following:

 Appearance
The binding and printing must not be sloppy; neither should the presentation be too lavish.

 Length
A business plan should not be more than 50 pages long.

3
 The Cover and Title Page
The cover should bear the name of the company, its address and phone number, and the month and
year in which the plan is issued.

 The Executive Summary

The two to three pages immediately following the title page should concisely explain the company’s
current status, its products or services, the benefits to customers, the financial forecasts, the ventures
objectives in 3 to 7 years, the amount of financing needed, and how the investors will benefit.

 The Table of Contents

After the executive summary, include a well-designed table of contents. List each of the business
plan’s sections and mark the pages for each section.

ELEMENTS OF A BUSINESS PLAN

Section I: Executive Summary

Section II: Business Description

A. General description of business
B. Industry background
C. Goals and potential of the business and milestones (if any)
D. Uniqueness of product or service

Section III: Marketing

A. Research and analysis
1. Target market (customers) identified
2. Market size and trends
3. Competition
4. Estimated market share

Section III: Marketing (cont’d)

B. Marketing plan
1. Market strategy—sales and distribution
2. Pricing
3. Advertising and promotions

Section IV: Operations

A. Identify location advantages
B. Specific operational procedures
C. Personnel needs and uses
D. Proximity to suppliers

Section V: Management
A. Management team—key personnel
B. Legal structure—stock and employment agreements, and ownership
C. Board of directors, advisors, and consultants

Section VI: Financial

A. Financial forecast (pro forma financial statements)
1. Profit and loss
2. Cash flow
3. Break-even analysis
4. Cost controls
5. Budgeting plans

Section VII: Critical Risks

A. Potential problems
B. Obstacles and risks
C. Alternative courses of action
4
 Section VIII: Harvest Strategy
A. Liquidity event (IPO or sale)
B. Continuity of business strategy
C. Identify successor

Section IX: Milestone Schedule

A. Timing and objectives
B. Deadlines and milestones
C. Relationship of events

Section X: Appendix or Bibliography

HELPFUL HINTS FOR DEVELOPING THE BUSINESS PLAN

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

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: Entrepreneurs underestimate their costs.

V. Management Segment
 Supply resumés 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.
5
 Create stages of financing for purposes of allowing evaluation by investors at various points.

VII. Critical-Risks Segment

 Discuss potential risks before investors point them out—for example:
 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

UPDATING THE BUSINESS PLAN

The business plan should be serve as a planning tool to help guide the start-up and execution of a new
venture.

Once the venture is started, the business plan is still a vital tool for planning continued growth and/or
profitability.

Reasons to update the plan:

 Financial changes
 Additional financing
 Changes in the market
 Launch of a new product or service
 New management team

6
 WORKSHEET#8
INSTRUCTIONS:
1. Prepare a Business Plan (please see template below)
2. Deadline of submission is on or before April 9, 2021 thru FB Page or Hub Center.

7
REFERENCES:
BOOKS/REFERENCES:
Kuratko, Donald F. (2015). Entrepreneurship: An Introduction. Cenage Learning Asia Pte Ltd.
Philippine
Edition
Timmons, Jeffry A., Gillin, L. M., Burshtein, S., and Spinelli, Stephen Jr. (2011). New Venture
Creation:
Entrepreneurship for the 21st Century – A Pacific Rim Perspective, 1st Edition. McGraw-Hill Irwin.
Hisrich, R.D., Peters, M.P., and Shepherd, D. (2013) Entrepreneurship, McGraw-Hill Irwin, Boston.

8
Kuratko, D. (2013)
Entrepreneurship: Theory, Process, and Practice, 9th Edition, Wiley online library
Online Resources:
https://www.entrepreneur.com/article/38290

9
0