What Is a Business Plan?

•Business Plan
–A document that sets out the basic idea underlying a business and related startup considerations
ØIdentifies the nature and context of the business opportunity
ØPresents the entrepreneur’s approach to exploiting the opportunity
ØIdentifies factors affecting the venture’s success
ØServes as the entrepreneur’s tool for raising capital

The Need for a Business Plan

•Primary Functions
–To provide a clearly articulated statement of goals and strategies for internal use
ØImposes discipline on the entrepreneur and management team
–To serve as a selling document to be shared with outsiders
ØProvides a credible overview for prospective customers, suppliers, and investors
ØHelps secure favorable credit terms from suppliers
ØOpens approaches to lenders and other sources of financing

Features of Plans that Attract Investors

•Plans that speak the investors’ language:
–Are brief, not extremely long in written length.
–Have an attractive overall appearance.
–Are well-organized with a table of contents and numbered pages.
–Are market-oriented in meeting customer needs; are not product-oriented.
–Show evidence of customer acceptance of the proposed product or service.
–Recognize the investors’ needs for required rates of return on investments.
–Demonstrate evidence of focus on a limited number of products or services
–Have a proprietary market position through patents, copyrights, and/or trademarks

Features of Plans Unattractive to Investors

•Plans that create unfavorable reactions:
–Show an infatuation with the product or service and downplay market needs or acceptance.
–Are based on financial projections at odds with accepted industry norms.
–Have unrealistic growth projections.
–Contain a need for custom or applications engineering, which makes substantial growth difficult.