Week14 Developing BusinessPlan

7/31/2019 Week14 Developing BusinessPlan

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Part IIIDeveloping theEntrepreneurial Plan

Chapter 7Environmental Assessment:

Preparation for a New VentureChapter 8Marketing Research for

New Ventures

Chapter 9Financial Preparation for

Entrepreneurial VenturesChapter 10Developing an Effective

Business Plan

Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.


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Chapter 10Developing An

Effective BusinessPlan


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Pitfalls to Avoid in Planning

Pitfall 1: No Realistic Goals

Pitfall 2: Failure to Anticipate

Roadblocks

Pitfall 3: No Commitment or Dedication

Pitfall 4: Lack of Demonstrated

Experience(Business or Technical)

Pitfall 5: No Market Niche (Segment)


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What is a Business Plan?

A business plan is the written document that details theproposed venture. It must describe current status,expected needs, and projected results of the new

business. Every aspect of the venture needs to be

covered: the project, marketing, research anddevelopment, manufacturing, management, criticalrisks, financing, and milestones or a timetable. Adescription of all of these facets of the proposed

venture is necessary to demonstrate a clear picture ofwhat that venture is, where it is projected to go, andhow the entrepreneur proposes it will get there. Thebusiness plan is the entrepreneurs roadmap for a

successful enterprise.


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Benefits of a Business Plan

Specifically for the entrepreneur: The time, effort, research, and discipline needed to

put together a formal business plan force the

entrepreneur to view the venture critically and

objectively. The competitive, economic, and financial analysis

included in the business plan subject the

entrepreneur to close scrutiny of his or her

assumptions about the ventures success.


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Benefits of a Business Plan, cont.

Since all aspects of the business venture must beaddressed in the plan, the entrepreneur develops and

examines operating strategies and expected results

for outside evaluators.

The business plan quantifies objectives, providingmeasurable benchmarks for comparing forecasts

with actual results.

The completed business plan provides the

entrepreneur with a communication tool for outsidefinancial sources as well as an operational tool for

guiding the venture towards success.


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Benefits of the Business Plan

Specifically for the financial sources: Details of the market potential and plans for

securing a share of that market.

The ventures ability to service debt or provide an

adequate return on equity.

Identifies critical risks and crucial events with a

discussion of contingency plans.

A clear, concise document that contains thenecessary information for a thorough business and

financial evaluation.


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Developing a Well-

Conceived Business Plan


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The Five-Minute Reading

Step 1: Determine the characteristics of the venture and itsindustry

Step 2: Determine the financial structure of the plan (amount ofdebt or equity investment required)

Step 3: Read the latest balance sheet (to determine liquidity, networth, and debt/equity)

Step 4: Determine the quality of entrepreneurs in the venture

(sometimes the most important step)

Step 5: Establish the unique feature in this venture (find out

what is different)

Step 6: Read the entire plan over lightly (this is when the entire

package is paged through for a casual look at graphs, charts,exhibits, and other plan components)


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Putting the Package Together

Appearance

Length

The cover and title page

The executive summary

The table of contents


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Guidelines to Remember

Keep the Plan Respectably Short

Organize and Package the Plan Appropriately

Orient the Plan Toward the Future

Avoid Exaggeration Highlight Critical Risks

Give Evidence of an Effective Entrepreneurial Team

Do Not Overdiversify Identify the Target Market

Keep the Plan Written in the Third Person

Capture the Readers Interest


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Elements of a

Business Plan


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Complete Outline of a Business Plan, cont.

Section III: MarketingA. Research and analysis

1. Target market (customers) identified

2. Market size and trends3. Competition4. Estimated market share

B. Marketing plan

1. Market strategy

sales anddistribution

2. Pricing

3. Advertising and promotions


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Section IV: OperationsA. Identify location

1. Advantages

2. Zoning

3. Taxes

B. Proximity to supplies

C. Access to transportation


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Section V: ManagementA. Management team key personnel

B. Legal structure stock agreements,

employment agreements, ownership

C. Board of directors, advisors,consultants


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Section VI: FinancialA. Financial forecast

1. Profit and loss

2. Cash flow

3. Break-even analysis

4. Cost controls

5. Budgeting plans


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Section VII: Critical RisksA. Potential Problems

B. Obstacles and risks

C. Alternative courses of action

Section VIII: Harvest Strategy

A. Transfer of asset

B. Continuity of business strategy

C. Identify successor


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Section IX: Milestone ScheduleA. Timing and objectives

B. Deadlines and milestones

C. Relationship of events

Section X: Appendix or Bibliography


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Presentation of the Business Plan

Know the outline thoroughly

Rehearse the presentation

Be familiar with any equipment


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Business Plan Assessment:

Complete Evaluation ofEach Component


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What To Do When a Venture Capitalist

Turns You Down: Ten Points

1. Confirm the decision

2. Sell for the future

3. Find out why you were rejected

4. Ask for advice5. Ask for suggestions

6. Get the name

7. Find out why

8. Work on an introduction

9. Develop a reasonable excuse

10. Know your referral

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Week14 Developing BusinessPlan