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Final Chapter 6 Entr

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32 views19 pages

Final Chapter 6 Entr

Uploaded by

kehkashankhan.sohail
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Introduction to Entrepreneurship

SESSION 10
The Business Plan:
Creating and Starting the
Venture
What Is a Business Plan?

 Business Plan
 A business plan is a written narrative, typically 25 to 35 pages long, that describes what a new business plans to
accomplish.
 Dual-Use Document
 For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm.
Who Reads the Business Plan—And What
Are They Looking For?

Audience What They are Looking For


There are
two primary
A Firm’s A clearly written business plan helps the
audiences employees of a firm operate in sync and move
Employees
for a firm’s forward in a consistent and purposeful manner.
business
plan Investors and A firm’s business plan must make the case that the
other external firm is a good use of an investor’s funds or the
stakeholders attention of others.
What Lenders and Investors
Look for in a Business Plan
 The “5 Cs” of Credit

1. Capital
2. Capacity
3. Collateral
4. Character
5. Conditions
A Plan Must Pass Three Tests

1. The Reality Test: proving that:


 A market really does exist for your product or service.
 You can actually build or provide it for the cost estimates in the plan.

2. The Competitive Test: evaluates:


 A company’s position relative to its competitors.
 Management’s ability to create a company that will gain an edge over its rivals.

3. The Value Test: proving that:


 A venture offers investors or lenders an attractive rate of return or a high probability of repayment.
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.
 Even though the executive summary appears at the beginning of the business plan, it
should be written last.
 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?
Industry Analysis

 This section should begin by describing the industry the business will enter in terms of its size,
growth rate, and sales projections.
 Items to include in this section:
 Industry size, growth rate, and sales projections.
 Industry structure.
 Nature of participants.
 Key success factors.
 Industry trends.
 Long-term prospects.
Company Description

 Company Description
 This section begins with a general description of the company.
 Items to include in this section:
 Company description.
 Company history.
 Mission statement.
 Products and services.
 Current status.
 Legal status and ownership.
 Key partnerships (if any).
Market Analysis

 Market Analysis
 The 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.
 Items to include in this section:
 Market segmentation and target market selection.
 Buyer behavior.
 Competitor analysis.
The Economics of the Business

 The Economics of the Business


 This section addresses the basic logic of 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.
The Economics of the Business

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.
Marketing Plan

 Marketing Plan
 The marketing plan focuses on how the business will market and sell its product or service.
 Items to include in this section:
 Overall marketing strategy.
 Product, price, promotions, and distribution.
 Sales process (or cycle).
 Sales tactics.
Design and Development Plan

 Design and Development Plan


 If you’re developing a completely new product or service, you need to include a section in your
business plan that focuses on the status of your development efforts.
 Items to include in this section:
 Development status and tasks.
 Challenges and risks.
 Projected development costs.
 Proprietary issues (patents, trademarks, copyrights, licenses, brand names).
Operations Plan

 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.
Management Team and Company Structure

 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.
Overall Schedule

 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.
Financial Projections

 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.
THANK
YOU

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