The Business Plan

Business Plan
• a written document prepared by the
entrepreneur that describes all the relevant
internal and external elements and strategies
for starting a new venture.
• It is an integration of functional plans such as
marketing, finance, manufacturing, sales,
human resources etc.
 Business Plan
• The business plan is valuable to the entrepreneur,
potential investors, or even new personnel, who are
trying to familiarize themselves with the venture, it
goals, and objectives.
• employees, investors, bankers, venture capitalists,
suppliers, customers, advisors, and consultants.
• There are three perspectives which should be
considered in preparing the plan :
– Perspective of the entrepreneur
– Marketing perspective
– Investor’s perspective
 The Business Plan:
Three Essential Functions
1. Guiding the company by charting its future
course and defining its strategy for following
it.
2. Attracting lenders and investors who will
provide needed capital.
3. Demonstrating that the entrepreneur
understands the business venture and what
will make it succeed.
Why Take the Time to Build a Business Plan?

• Although building a plan does not guarantee

success, it does increase your chances of
succeeding in business.
• A plan is like a road map that serves as a guide
on a journey through unfamiliar, harsh, and
dangerous territory. Don’t attempt the trip
without a map!
 WHAT TO WRITE?
• Introductory Page
– Name and address of business
– Name(s) and address(es) of principal(s)
– Nature of business
– Statement of financing needed
– Statement of confidentially of report
 Key Elements
• Title Page and Table of Contents
• Executive Summary
Mission
• Mission Statement, Goals,
Objectives
• Company History Goals
• Business and Industry Profile
• Business Strategy
• Description of
Products/Services
Objectives
 ELEMENTS OF BUSINESS PLAN
• Executive Summary – Three to four pages
summarizing the complete business plan
– What is the business concept or model?
– How is this business concept or model unique?
– Who are the individuals starting this business?
– How will they make money and how much?
 ELEMENTS OF BUSINESS PLAN
• Environmental and Industry Analysis
– Future outlook and trends
– Analysis of competitors
– Market segmentation
– Industry and market forecasts
• Description of Venture
– Product(s)
– Service(s)
– Size of business
– Office equipment and personnel
– Background of entrepreneurs
 ELEMENTS OF BUSINESS PLAN
• Production Plan
– Manufacturing process
– Physical plant
– Machinery and equipment
– Names of suppliers of raw materials
• Operational Plan
– Description of company’s operations
– Flow of orders for goods and/or services
– Technology utilization
o Identify location advantages
o Specific operational procedures
o Personnel needs and uses
o Supply Chain and Proximity to suppliers
 ELEMENTS OF BUSINESS PLAN
• Marketing Plan
– Pricing
– Distribution
– Promotion
– Product forecasts
– Controls
• Organizational Plan
– Form of ownership
– Identification of partners or principal shareholders
– Authority of principals
– Management-team background
– Roles and responsibilities of members of organization
 ELEMENTS OF BUSINESS PLAN
• Assessment of Risk
– Evaluate weakness of business
– New technologies
– Contingency Plans
• Financial Plan
– Pro forma income statement
– Cash flow projections
– Pro forma balance sheet
– Break-even analysis
– Sources and applications of funds
 ELEMENTS OF BUSINESS PLAN
• Appendix (contains backup material)
– Letters
– Market research data
– Leases or contracts
– Price lists from suppliers.
 Guidelines for Preparing
a Business Plan
• Remember: No one can create your plan for you.
• Potential lenders want to see financial
projections, but they are more interested in the
strategies for reaching those projections.
• Show how you plan to set your business apart
from competitors; don’t fall into the “me too”
trap.
• Identify your target market and offer evidence
that customers for your product or service exist.
 Tips on Preparing
a Business Plan
• Make sure your plan has an attractive cover. (First impressions are
crucial.)
• Rid your plan of all spelling and grammatical errors.
• Make your plan visually appealing.
• Include a table of contents to allow readers to navigate your plan easily.
• Make it interesting.
• Your plan must prove that the business will make money (not necessarily
immediately, but eventually).
• Use spreadsheets to generate financial forecasts.
• Always include cash flow projections.
• Keep your plan “crisp” – between 25 and 50 pages long.
• Tell the truth – always.
 SOME CLUES
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 finished your business plan.
II. Business Description Segment
• The name of your business (Eye catching and memorize-able).
• 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.
 SOME CLUES…CONT’
I. 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
 SOME CLUES…CONT’
IV. Operations Segment
• Describe the advantages of your location (zoning, tax laws,
wage rates etc.).
• 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.
 SOME CLUES…CONT’
IV. 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.
V. 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.
 SOME CLUES…CONT’
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.
 SOME CLUES…CONT’
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
 Presenting the Plan
• Demonstrate enthusiasm, but don’t be overemotional.
• Know your audience thoroughly.
• “Hook” investors quickly with an up-front explanation of the
venture, its opportunities, and its benefits to them.
• Hit the highlights; focus on the details later.
• Keep your presentation simple – 2 or 3 major points.
• Avoid overloading your audience with technological jargon.
• Use visual aids.
• Close by reinforcing the nature of the opportunity.
• Be prepared (with details) for potential investors’ questions.
• Follow up with every investor to whom you make your
presentation.
 Y FAILURE?
• Goals set by the entrepreneur are unreasonable.
• Goals are not measurable
• The entrepreneur has not made a total
commitment to the business or to the family.
• The entrepreneur has no experience in the
planned business.
• The entrepreneur has weak sense of potential
threats or weaknesses to the business.
• No customer need was established for the
proposed product or service.