Entrepreneurship

Writing an Effective Business Plan: Crafting a Roadmap

to Success

7-2

Small Small BusinessBusiness

High-Growth High-Growth VentureVenture

Preferred Preferred Funding SourceFunding Source

Owner’s Own Owner’s Own MoneyMoney

Other Other People’s People’s MoneyMoney

When Firm’s In When Firm’s In TroubleTrouble

Cut CostsCut Costs Sell MoreSell More

What’s More What’s More ImportantImportant

SalesSales MarketingMarketing

Personal Control Personal Control PreferencePreference

Retain Retain AutonomyAutonomy

Involve Key Involve Key OthersOthers

FocusFocus EfficiencyEfficiency EffectivenessEffectiveness

MetastrategyMetastrategy ImitationImitation NoveltyNovelty

Small Business Small Business vs. High-Growth Ventures High-Growth Ventures

7-3 The BRIE ModelThe BRIE Model

IntentionIntentionThe desire to start a business

BoundaryBoundaryCreating a place for your business –

in location and in people’s minds

ResourcesResourcesThe money, product knowledge, etc,

that make up the business

ExchangeExchangeMoving resources/products/

services in exchange for money

Your Small BusinessYour Small Business

7-4

“There is real magic in enthusiasm. It spells the difference between

mediocrity and accomplishment.”

--Norman Vincent Peale, 1961

7-5

Business Plan

• A formal, written expression of the entrepreneur’s vision for converting ideas into a profitable, going business

• It is a document describing all relevant internal and external elements and strategies for starting a new venture.

• The entry card for serious consideration by venture capitalists, banks, and other sources of funding

7-6

A Living Document

• A business plan changes often as a new business develops.

• Do just enough business planning to get the new company started.

• Refine the plan with information gathered from running the new venture.

7-7

Prepare a relatively

simple plan

Start thebusiness

Refine the business plan

Continue to grow the business

Model of SuccessfulBusiness Planning

7-8

Business Plan Components

• What is the basic idea?• Why is the new product appealing—

and to whom?• How will the idea be realized?• Who are the entrepreneurs?• How much funding is needed? What

type of funding? How will it be used? How will you realize a return?

7-9

Who reads it???

7-10

A Successful Plan

• A serious document prepared by serious people

• Orderly

• Succinct

• Persuasive

7-11

Executive Summary

• Your elevator pitch

• Provides a brief, clear, and persuasive overview of the new venture

• Target 2 to 3 pages

7-12

Business Plan Sections

• Background and purpose

• Marketing• Competition• Development,

production, and location

• Management

• Financial information

• Risk factors• Harvest or exit• Scheduling and

milestones• Appendices

7-13

Background, Product, and Purpose

• What is the nature of the idea driving your company and how did it arise?

• What does the product have to offer?

• What is the basic nature of the company?

• What is the company’s mission?

7-14

Market Analysis

• What have you done to identify the market?

• How large is the market?• How will products or services be

promoted?• What do you know about competing

products and companies?• How will the product or service be

priced?

7-15

Market information

7-16

Development, Production, and Location

• Location

• Manufacturing operations

• Raw materials

• Equipments

• Labour skills

• Overhead

7-17

Management Team

• Do team members have the experience, expertise, skills, and personal characteristics needed?

• Do team members having good working relationships?

7-18

Financial Plans and Projections

• Proforma balance sheet

• Proforma income statement

• Cash flow statement

• Break-even analysis

7-19

Critical Risks

• Price cutting by competitors

• Unforeseen industry trends

• Sales projections not achieved

• Costs exceed estimates

• Schedules not met

• Difficulties raising financing

• Unforeseen trends

7-20

Harvest and Exit

• Management succession

• Exit strategies

7-21

Scheduling and Milestones

• Formal incorporation

• Completion of design

• Completion of prototypes

• Hiring of initial personnel

• Product displays• Agreements • Moving into

production• Receipt of orders• First sales • Profitability

7-22

The Intangibles

• The extra “something”• Pay attention to organization, clarity,

word choice, and style• Have good writers read your plan• Revise according to their suggestions

7-23

Seven Deadly Sins

• Plan is poorly prepared• Plan looks too slick• Executive summary is too long• Development stage of product is unclear• Fails to answer “Why would anyone ever

want to buy one?”• Doesn’t state management qualifications• Financial projections are wishful thinking

7-24

The Presentation

• Remember: This is important!• Prepare, prepare, prepare• Choose content carefully• Persuade, don’t overwhelm• Show enthusiasm tempered with reality• Rehearse• Don’t overlook the basics• Respond positively to questions