The Business PlanThe Business PlanThe Business PlanThe Business Plan

• A business plan is a document that sets out the basic idea underlying a business and describes related startup considerations.

• It should:–present the basic idea for a venture–describe where the entrepreneur is presently –indicate where she or he wants to go–outline how she or he proposes to get there

The Business Plan (cont’d.)The Business Plan (cont’d.)The Business Plan (cont’d.)The Business Plan (cont’d.)

• A business plan has three basic objectives:

–to identify the nature and the context of a business opportunity

–to present the approach the entrepreneur plans to take to exploit the opportunity

–to recognize factors that will determine whether the venture will be successful

The Business Plan (cont’d.)The Business Plan (cont’d.)The Business Plan (cont’d.)The Business Plan (cont’d.)

• A business plan may be of secondary importance if the environment is turbulent or if timing is such that the company needs to start operations as quickly as possible rather than slow down to write a business plan.

• The summary plan is a short form of a business plan that presents only the most important issues and projections for the business. This may be ideal if the entrepreneur is short on time or is facing a great deal of uncertainty about the future of the company.

The Business Plan (cont’d.)The Business Plan (cont’d.)The Business Plan (cont’d.)The Business Plan (cont’d.)

• A comprehensive plan is beneficial when:

–(1) describing a new opportunity (startup)

–(2) facing significant change in the business or the external environment (changing demographics, new legislation, or developing industry trends)

–(3) explaining complex business situations

Purposes of the Business PlanPurposes of the Business PlanPurposes of the Business PlanPurposes of the Business Plan

• The business plan can serve as an effective selling tool with prospective customers, suppliers, and investors.–In seeking financing, an entrepreneur must first use

the business plan to create interest in the startup and then follow up with a formal offering memorandum to those investors who seem genuinely interested.

• When writing the business plan, remember that:–(1) investors have a short attention span–(2) certain features appeal to investors, while others

are distinctly unappealing

Writing the Business PlanWriting the Business PlanWriting the Business PlanWriting the Business Plan

• To maximize the effectiveness of a business plan, write clearly and provide factual support for any claims made.

• The entrepreneurial team, the opportunity, the resources, the deal structure, and the “big picture” are all interdependent factors that should be given consideration when thinking about the content of a business plan.

Writing the Business Plan (cont’d.)Writing the Business Plan (cont’d.)Writing the Business Plan (cont’d.)Writing the Business Plan (cont’d.)

• Key sections of a business plan are:

– (1) title page

– (2) table of contents

– (3) executive summary

– (4) vision and mission statement

– (5) company overview

– (6) products and/or services plan

– (7) marketing plan

– (8) management plan

– (9) operating plan

– (10) financial plan

– (11) appendix of supporting documents

Writing the Business Plan (cont’d.)Writing the Business Plan (cont’d.)Writing the Business Plan (cont’d.)Writing the Business Plan (cont’d.)

• Common mistakes often made by entrepreneurs when preparing a business plan include:–(1) failing to provide solid data–(2) failing to describe the product in lay terms –(3) failing to thoroughly analyze the market–(4) including financial statements that are overly

detailed or incomplete–(5) hiding weaknesses –(6) overlooking the fatal flaw–(7) using bad grammar –(8) making the plan overly long

Assistance with Business PlansAssistance with Business PlansAssistance with Business PlansAssistance with Business Plans

• A variety of books, Web sites, and computer software packages are available to assist in the preparation of a business plan.

• Professionals with planning expertise, such as attorneys, accountants, and marketing specialists, can provide useful suggestions and assistance in the preparation of a business plan.

• The Small Business Administration (SBA), the Service Corps of Retired Executives (SCORE), and the FastTrac Entrepreneurial Training Program can also be helpful.

Beyond the Business Plan (cont’d.)Beyond the Business Plan (cont’d.)Beyond the Business Plan (cont’d.)Beyond the Business Plan (cont’d.)

• Despite the potential benefits of a well-drafted plan, good judgment should be used in deciding how much to plan in view of the specific circumstances.

• The business plan, no matter how beneficial, is not the business. A good business plan leads to a successful company only when it is effectively executed by the entrepreneur and the management team.

Beyond the Business Plan (cont’d.)Beyond the Business Plan (cont’d.)Beyond the Business Plan (cont’d.)Beyond the Business Plan (cont’d.)

• A business plan can be viewed as an opportunity for the entrepreneur and the management team to think about the potential key drivers of a venture’s success or failure.

Organization for help with Business PlansOrganization for help with Business PlansOrganization for help with Business PlansOrganization for help with Business Plans

When writing a business plan, you can get help from the following :

• Small Business Administration (SBA) – is an independent agency of the federal government that was created to help Americans start, build, and grow businesses. SBA also provides aid, counsel, and assistance to protect the interests of small business concerns, to preserve free competitive enterprise, and to maintain and strengthen the overall economy of our nation.

• Small Business Development Centers (SBDC) – provides management assistance to current and prospective small business owners. Counselors from the SBDC provide free one-on-one assistance in developing a business plan. They also provide inexpensive workshops on tropics that may help you develop your plan.

• SBDC have many resources in one place to assist individuals and small businesses. SBDCs were formed as a cooperative effort of the private sector, the educational community, and federal, state, and local governments. SBDC is available to anyone who cannot afford the services of a private consultant and who is interested in beginning a small business for the first time or improving or expanding an existing small business.

• Service Corps of Retired Executives (SCORE) – is made up of over 10,500 retired executives who volunteer their time to provide entrepreneurs with real-world advice and know-how. They provide free confidential advice that could be helpful to you as you prepare your business plan. They set up meetings face-to-face or work over the internet with you.

• Chamber of Commerce – Can provide information on local resources, zoning, and licensing as well as trends affecting local business

• Trade Associations – Organizations made up of professionals in a specific industry are called trade associations. They provide information, education, and networking opportunities for individuals in their industry. These association can be valuable sources of information to entrepreneurs.

• Professional Consultants –some entrepreneurs hire experts to help them. Professional business consultants can be found in directories available in your library or on the Internet.

• Financial Institutions – When writing the financial section of your business plan, it may be helpful to talk with a banker and an accountant. They can help answer your questions about loans and financial statements.

Executive SummaryExecutive SummaryExecutive SummaryExecutive Summary

• Is a brief recounting of the key points contained in a business plan. Investors and lenders may read many business plans every day.

• If the executive summary creates excitement for the concept, they’ll go ahead and read the entire plan. Should be no longer than 2 pages. Include the most important information from each section of the plan.

• Persuade the reader that this business is going to be a success.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–16

Product/Service PlanProduct/Service PlanProduct/Service PlanProduct/Service Plan

• Present the product or service you’re offering.• The nature of your business should be clear to

the reader.• Important to note the unique features of the

product/service and any possible spin-offs.• Spin-offs are additional products or services that

you might do later when the business is more established.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–17

Management Team PlanManagement Team PlanManagement Team PlanManagement Team Plan

• Present your qualification and those of any partners you’ll have.

• Analyze the expertise you’re missing and how you will solve that problem.

• Describe the advisory board that will help you get started.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–18

Industry/Market AnalysisIndustry/Market AnalysisIndustry/Market AnalysisIndustry/Market Analysis

• Presents your research into the industry and market.

• Analyze your customers, competition, and industry.

• Contain information about prospective location’s geographic, economic, and demographid data.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–19

Operational PlanOperational PlanOperational PlanOperational Plan

• Includes all the processes that take place in the business so that the product or service is produced and delivered to the customer.

• Manufacturing a product you’ll want to discuss the status of your product development.

• Distribution channel – means for supplying the product to the customer. Either direct or indirect.

• Direct channel – delivering the service directly to the customer.

• Indirect channel – through a wholesaler or retail stores .

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–20

Organizational PlanOrganizational PlanOrganizational PlanOrganizational Plan

• Looks at the people aspects of the business. • Discusses such things as the management

philosophy, the legal form of the company, key management personnel, and key employment policies.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–21

Marketing PlanMarketing PlanMarketing PlanMarketing Plan

• Involves how a company makes its customers aware of its products or services.

• Includes such features as the market niche that is being served, the pricing policy, the company image, the marketing tactics used to reach the customer, a media plan, and a marketing budget.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–22

Financial PlanFinancial PlanFinancial PlanFinancial Plan

• Presents the forecasts for the future of the business.

• Explains the assumptions made when calculating your forecast figures.

• This part of the business plan shows that the new business will be financially healthy.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–23

Growth PlanGrowth PlanGrowth PlanGrowth Plan

• Looks at how the business will expand in the future.

• Investors and lenders like to know that a business has the potential and the plans to grow over its life.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. Student 6–24

Key TermsKey TermsKey TermsKey Terms

business plan

summary plan

comprehensive plan

prospectus

executive summary

mission statement

products and/or services plan

marketing plan

management plan

operating plan

financial plan

pro forma statements