Writing A Business Plan (Session 7-8) [Week 4]

What Is a Business Plan?

·         Business Plan

A business plan is a written narrative, typically 25 to 35 pages long, that describe 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

Why Reads the Business Plan --- And What Are They Looking For?

There are two primary audience for a firm’s business plan

Guidelines for Writing a Business Plan

·         Structure of the Business Plan

-          To make the best impression a business plan should follow a conventional structure, such as the outline for the business plan shows in the chapter.

-          Although some entrepreneurs want to demonstrate creativity, departing from the basic structure of the conventional business plan is usually a mistake

-          Typically, investors are busy people and want a plan where they can easily find critical information

-          Software Packages

o   There are many software packages available that employ an interactive menu-driven approach to assist in the writing of a business plan

o   Some of these programs are very helpful. However, entrepreneurs should avoid a boilerplate plan that looks as though it came from a “canned” source

-          Sense of Excitement

o   Along with facts and figures, a business plan needs to project a sense of anticipation and excitement about the possibilities that surround a new venture

-          Content of the Business Plan

o   The business plan should give clear and concise information on all the important aspects of the proposed venture

o   It must be long enough to provide sufficient information yet short enough to maintain reader interest

o   For most plans, 25 to 35 pages is sufficient

-          Types of Business Plans

o   There are three types of business plans

-       Recognizing the Elements of the Plan May Change

o   It’s important to recognize that the plan will usually change while written.

o   New insights invariably emerge when an entrepreneur or a team of entrepreneurs immerse themselves in writing the plan and start getting feedback from others.

Outline of Business Plan

-          Outline of Business Plan

o   A suggested outline of a business plan is shown on the next several slides. 

o   Most business plans do not include all the elements introduced in the sample plan; we include them here for the purpose of completeness. 

o   Each entrepreneur must decided which elements to include in his or her plan.

Section 1: Executive Summary

-          Executive Summary

o   The executive summary is a short overview of the entire business plan

o   It provides a busy reader with everything that needs to be known about the new venture’s distinctive nature.

o   An executive summary shouldn’t exceed two single-space pages.

Section 2: Company Description

-       Company Description

o   The main body of the business plan beings with a general description of the company.

o   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)

Section 3: Industry Analysis

-          Industry Analysis

o   This section should being by describing the industry the business will enter in terms of its size, growth rate, and sales projections

o   Item 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.

Section 4: Market Analysis

-          Market Analysis

o   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.

o   Items to include in this section:

§  Market segmentation and target market selection

§  Buyer behavior

§  Competitor analysis

Section 5: Marketing Plan

-          Marketing Plan

o   The marketing plan focuses on how the business will market and sell its product or service.

o   Items to include in this section:

§  Overall marketing strategy.

§  Product, price, promotions, and distribution.

Section 6: Management Team and Company Structure

-          Management Team and Company Structure

o   The management team of a new venture typically consists of the founder or founders and a handful of key management personnel.

o   Items to include in this section:

§  Management team.

§  Board of directors.

§  Board of advisers.

§  Company structure.

Section 7: Operations Plan

-          Operations Plan

o   Outlines how your business will be run and how your product or service will be produced.

o   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.

o   Items to include in this section:

§  General approach to operations

§  Business location

§  Facilities and equipment

Section 8: Product (or Service) Design and Development Plan

-          Product (or Service) Design and Development Plan

o   If you’re developing a completely new product or service, you need to include a section that focuses on the status of your development efforts.

o   Items to include in this section:

§  Development status and tasks.

§  Challenges and risks.

§  Intellectual property.

Section 9: Financial Projection

-          Financial Projections

o   The final section of a business plan presents a firm’s pro forma (or projected) financial projections.

o   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.

Presenting the Business Plan to Investors

-          The Oral Presentation

o   The first rule in making an oral presentation is to follow directions. If you’re told you have 15 minutes, don’t talk for more than the allotted time.

o   The presentation should be smooth and well-rehearsed.

o   The slides should be sharp and not cluttered.

-          Questions and Feedback to Expect from Investors

o   The smart entrepreneur has a good idea of the questions that will be asked, and will be prepared for those queries.

-          Twelve PowerPoint Slides to Include in a Investor Presentation

1.       Title Slide                                                            7.   Marketing and sales

2.       Problem                                                               8.   Management team

3.       Solution                                                               9.   Financial projection

4.       Opportunity and target market                  10. Current Status

5.       Technology                                                         11. Financing sought

6.       Competition                                                       12. Summary

Presenting the Business Plan to Investor

-          It’s also important to look sharp when presenting a business plan.

 This new venture team is going over its PowerPoint slides one last time before an investor presentation.