2–1

The Business Plan - Visualizing the

Dream

The Business Plan - Visualizing the

Dream

PART 3: Developing the New Venture

Business Plan

PART 3: Developing the New Venture

Business Plan

MGMT 397ENTREPRENEURSHIP &

SMALL BUSINESS MANAGEMENTSpring, 2014

Ellis

6–2

An Overview of the Business Plan

• Business PlanBusiness Plan A document that sets out the basic idea underlying a A document that sets out the basic idea underlying a

business and related startup considerationsbusiness and related startup considerations Started once the idea passes the “feasibility test”Started once the idea passes the “feasibility test”

• The Purpose of a Business PlanThe Purpose of a Business Plan Identifies the nature and context of the business Identifies the nature and context of the business

opportunityopportunity Presents the entrepreneur’s approach to exploiting Presents the entrepreneur’s approach to exploiting

the opportunitythe opportunity Identifies factors affecting the venture’s successIdentifies factors affecting the venture’s success Serves as the entrepreneur’s tool for raising capitalServes as the entrepreneur’s tool for raising capital

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Users of Business Plans

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The Need for a Business Plan

• Primary FunctionsPrimary Functions To provide a clearly-articulated statement of To provide a clearly-articulated statement of

goals and strategies for internal usegoals and strategies for internal use Imposes discipline on the entrepreneur and Imposes discipline on the entrepreneur and

management teammanagement team How so?How so?

To serve as a selling document to be shared with To serve as a selling document to be shared with outsidersoutsiders Provides a credible overview for prospective Provides a credible overview for prospective

customers, suppliers, and investorscustomers, suppliers, and investors Opens approaches to lenders and other sources of Opens approaches to lenders and other sources of

financingfinancing

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How Much Business Planning is Needed?

• Factors affecting the extent or detail level of a Factors affecting the extent or detail level of a business plan – would you want a more or less-business plan – would you want a more or less-detailed plan based on:detailed plan based on: Cost in time and money to prepare the planCost in time and money to prepare the plan Management style and abilityManagement style and ability Preferences of the management teamPreferences of the management team Complexity of the businessComplexity of the business Competitive environmentCompetitive environment Level of uncertaintyLevel of uncertainty

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Types of Business Plans

• Comprehensive PlanComprehensive Plan A full business plan that provides an in-depth A full business plan that provides an in-depth

analysis of the critical factors that will determine a analysis of the critical factors that will determine a firm’s success or failurefirm’s success or failure Includes all the underlying assumptionsIncludes all the underlying assumptions

• Mini-PlanMini-Plan A short form of a business plan that presents only A short form of a business plan that presents only

the most important issues and projectionsthe most important issues and projections Can use the Executive Summary from the Can use the Executive Summary from the

comprehensive plancomprehensive plan

• Always make the plan clear & professionalAlways make the plan clear & professional

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Content of a Business Plan

• Factors that help determine the content of a Factors that help determine the content of a business plan for a startup:business plan for a startup: The opportunityThe opportunity

Product or serviceProduct or service Market sizeMarket size

Critical or unique resourcesCritical or unique resources The entrepreneurial teamThe entrepreneurial team The financing structureThe financing structure The context or external factors that make the The context or external factors that make the

opportunity relevantopportunity relevant

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Abbreviated Business Plan Outline

Section Heading• Cover Page

• Table of Contents

• Executive Summary

• Industry, Target Customer, and Competitor Analysis

• Company Description

• Product/Service Plan

• Marketing Plan

• Operations and Development Plan

• Management Team

• Critical Risks

• Offering

• Financial Plan

• Appendix of Supporting Documents

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The Content of a Business Plan

• Cover PageCover Page Company name, address, phone number, fax Company name, address, phone number, fax

number, and websitenumber, and website Tagline and company logoTagline and company logo Name and contact information of contact personName and contact information of contact person Date on which the business plan was preparedDate on which the business plan was prepared Confidentiality disclaimer – better on second Confidentiality disclaimer – better on second

pagepage Number of the copy – so who know who leaked!Number of the copy – so who know who leaked!

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The Content of a Business Plan (cont.)

• Executive Summary/Synopsis/Narrative (Mini-plan)Executive Summary/Synopsis/Narrative (Mini-plan) Description of the opportunity – Why this is the greatest Description of the opportunity – Why this is the greatest

idea since the light bulb or sliced bread or the internet?idea since the light bulb or sliced bread or the internet? Explanation of the business conceptExplanation of the business concept Target market and size of market Target market and size of market – the most important – the most important

datadata Industry overviewIndustry overview Competitive advantage to be achieved in the marketCompetitive advantage to be achieved in the market Basic economics of the opportunityBasic economics of the opportunity Brief management team descriptionBrief management team description Amount and purpose of the money being requested/ Amount and purpose of the money being requested/

needed (the “offering”) if seeking financingneeded (the “offering”) if seeking financing

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The Content of a Business Plan (cont.)

• Industry DescriptionIndustry Description Broader industry in which the firm will competeBroader industry in which the firm will compete

Industry size, growth rate, trends, and competitorsIndustry size, growth rate, trends, and competitors Different segments of the industry & niche targetedDifferent segments of the industry & niche targeted

• Target CustomersTarget Customers The value proposition The value proposition – the most important – the most important

conceptconcept Demographics and psychological variables - Demographics and psychological variables -

values, attitudes, and fearsvalues, attitudes, and fearsSize: 2 billion armpits, or will you really get

100% share?

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The Content of a Business Plan (cont.)

• Company Description (current and planned)Company Description (current and planned) When and where was this business started?When and where was this business started? What is the history of the company?What is the history of the company? What are the firm’s objectives?What are the firm’s objectives? What changes in structure and/or ownership?What changes in structure and/or ownership? In what stage of development is the firm?In what stage of development is the firm? What has been achieved to date?What has been achieved to date? What is the firm’s distinctive competence?What is the firm’s distinctive competence? What are the nature and activity of the business?What are the nature and activity of the business? What is its primary product or service?What is its primary product or service? What customers will be served?What customers will be served? What is the firm’s form of organization?What is the firm’s form of organization? What are the projected economic state and drivers of the industry?What are the projected economic state and drivers of the industry? How is ownership of the firm to be structured?How is ownership of the firm to be structured?

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The Content of a Business Plan (cont.)

• SWOT AnalysisSWOT Analysis Internal & External to companyInternal & External to company Plusses and Minuses carefully consideredPlusses and Minuses carefully considered

• Competitor AnalysisCompetitor Analysis Product or service attributes that are or are not provided by Product or service attributes that are or are not provided by

competitorscompetitors Why is there “no competition?”Why is there “no competition?”

• Financial PlanFinancial Plan Projects the company’s financial position based on well-Projects the company’s financial position based on well-

substantiated assumptions and explanationssubstantiated assumptions and explanations Pro forma statements project a firm’s financial condition Pro forma statements project a firm’s financial condition

for up to five years - for up to five years - Emphasis on the cashEmphasis on the cash

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The Content of a Business Plan (cont.)

• Product/Service PlanProduct/Service Plan Describes the product and/or service to be provided Describes the product and/or service to be provided

and explains its meritsand explains its merits

• Marketing PlanMarketing Plan Describes the user benefits of the product or service Describes the user benefits of the product or service

and the type of market that existsand the type of market that exists

• Operations and Development PlanOperations and Development Plan How product will be produced or service providedHow product will be produced or service provided

• Management TeamManagement Team Describes the firm’s organizational structure and the Describes the firm’s organizational structure and the

backgrounds and qualifications of key personnelbackgrounds and qualifications of key personnel

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The Content of a Business Plan (cont.)

• Critical RisksCritical Risks Identifies the potential risks that may be Identifies the potential risks that may be

encountered by the company and/or investors encountered by the company and/or investors Investors and lenders will be checking to ensure Investors and lenders will be checking to ensure

you have thought this throughyou have thought this through

• OfferingOffering Indicates to an investor how much money is Indicates to an investor how much money is

needed and when, and how the money will be needed and when, and how the money will be usedused

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The Content of a Business Plan (cont.)

• Appendix of Supporting DocumentsAppendix of Supporting Documents Supplementary materials and attachments to Supplementary materials and attachments to

expand the reader’s understanding of the plan:expand the reader’s understanding of the plan: Résumés of key investors and owners/managersRésumés of key investors and owners/managers

Professional referencesProfessional references

Photographs of products, facilities, and buildingsPhotographs of products, facilities, and buildings

Marketing research studiesMarketing research studies

Pertinent published researchPertinent published research

Signed contracts of saleSigned contracts of sale