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.

How Much Business Planning is Needed?

•Factors affecting the extent of a business plan:
–Cost in time and money to prepare the plan
–Management style and ability
–Preferences of the management team
–Complexity of the business
–Competitive environmentLevel of uncertainty

Preparing a Business Plan

•Two issues critical in preparing a business plan:
–The basic format and effectiveness of the written presentation.
ØClear writing that effectively communicates
–The content of the plan.
ØFactual support for the concept in the form of strong supporting evidence

Factors Affecting Business Plan Content

•The People
–Those involved in starting and running the venture
•The Opportunity
–The business’ profile—products, customers, expected growth, profitability, and anticipated challenges and problems
•The Context
–The big picture—the firm’s competitive environment
•Risk and Reward
–Assessment of potential problems and responses

Business Plan Outline

•Title Page
•Table of Contents
•Executive Summary
–Synopsis
–Narrative
•Vision and Mission Statement
•Company Overview
•Products and/or Services Plan
•Marketing Plan
•Operating Plan
•Financial Plan
•Appendix of Supporting Documents

Specialized Plans within the Business Plan

•Products and/or Services Plan
–Describes the product and/or service to be provided and explains its merits
•Marketing Plan
–Describes the user benefits of the product or service and the type of market that exists
•Management Plan
–Describes the new firm’s organizational structure and the backgrounds of its key players
•Operating Plan
–Offers information on how the product will be produced or a service provided, including descriptions of the new firm’s facilities, labor, raw materials, and processing requirements
•Financial Plan
–Provides an account of the new firm’s financial needs and sources of financing and a projection of its revenues, costs, and profits
ØPro forma statements—Reports that project a firm’s financial condition

Resources for Business Plan Preparation

•Computer-aided Planning
–Word-processing
–Spreadsheets
•Specialized Business Plan Software Packages
•Professional Assistance
–Attorneys
–Marketing specialists
–Engineering and production experts
–Accounting firms
–Incubator organizationsSmall business development agencies