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Chapter 12
Developing a sustainable business plan
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Objectives1. To define a sustainable business plan and demonstrate its value 2. To explore the business planning pitfalls that plague many new ventures 3. To describe the benefits of a business plan 4. To set forth the viewpoints of those who read a business plan 5. To emphasise the importance of coordinating the business plan segments 6. To review key recommendations by venture capital experts regarding a
business plan 7. To present a complete outline of an effective business plan
8. To present some helpful hints for writing an effective business plan 9. To highlight points to remember in the presentation of a business
plan 10. To underline some of the contrarian viewpoints on the
importance of a business plan. 3
What is a business plan?• A document in which you:
– Make your business case– Describe your operations– Identify your management team– Project the future financial situation
• A tool for determining the essential operations• A primary document for managing the venture and
raising funds• The entrepreneur’s roadmap
5
What about sustainability• Consider ‘impact’, in terms of:
– Greenhouse gases– Energy use– Product life-cycle• Industrial systems (including firms) are not
separate from the biosphere
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Business plan pitfalls1. Green theming2. No realistic goals3. Failure to anticipate roadblocks4. No commitment or dedication
5. Lack of demonstrated experience6. No market niche
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Benefits of a business plan • For the entrepreneur
– Analyses all aspects of the venture
– Strategy for uncertainties– Critical and objective view– Scrutinises assumptions – Examines operating strategies
and expected results – Measurable benchmarks –A communication tool for
sources of funding– A tool for guiding the
venture
• For the investor– Details of market potential
and securing market share– Ability to service debt and
provide adequate returns– Critical risks and crucial
events – A comprehensive overview
of the entire operation– A useful guide for assessing
planning and managerial ability
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Who reads the plan?Q. Who might be interested in
reading your plan? (Identify all of the potential audiences)
?10
Who reads the plan?• Venture capitalists• Bankers• Investors• Potential large customers• Lawyers• Consultants• Suppliers
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Who reads the plan?• Bankers
Stress financial aspects of the proposal• Equity investors and venture capital fund managers
Emphasise market and finance issues • Business angels
Look at the entrepreneur and ‘investor fit’
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Three viewpoints
1. The entrepreneur’s viewpoint2. The potential customers’ viewpoint3. The investors’ viewpoint
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The five minute reading• The venture capitalists’ approach:
1. What are the characteristics of the venture and its industry?2. What is the financial structure of the plan?3. What does the balance sheet say about liquidity, net worth
and debt/equity?4. What is the quality of the entrepreneur(s)?
5. What is the unique feature of this venture? 6. Then, they skim read the entire plan
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Putting the package together• Appearance – middle ground (plastic spiral bound,
mostly single colour)• Length – no more than 50 pages• Cover and title page – company name, address and
issue date• The executive summary – two to three pages• Table of contents
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Ten guidelines1. Keep the plan respectably short2. Organise and package the plan appropriately3. Orient the plan towards the future4. Avoid exaggeration5. Highlight critical risks6. Give evidence of an effective entrepreneurial team7. Do not over-diversify
8. Identify the target market 9. Write in the third person
10. Capture the reader’s interest
… and be able to confidently answer the ten questions under the heading ‘Questions to be answered’
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Business plan outline (cont.)
20Adapted from: Donald F. Kuratko and Robert C. McDonald, The Entrepreneurial Planning Guide,Bloomington: Kelley School of Business, Indiana University, 2007
Business plan elements (1)I. Executive summary
– Write this after the rest of the business plan– A clever snapshot of the complete plan
II. Business description– Industry background, status and future trends – Thoroughly describe the venture
III. Sustainability– Define sustainability relevant to the business
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Business plan elements (2)IV. Marketing
– (As per Chapter 10)V. Operations
– Location, labour availability, wage rate, proximity to suppliers, customers and community support, taxes and zoning, plant and equipment
VI. Sustainable development measures of performance– Describe how sustainability can be demonstrated
(including triple bottom line indicators)
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Business plan elements (3)VII. Management
– Key personnel, advisers, consultants, or members of the board; structure of payment and ownership
VIII. Financial– (As per Chapter 11)– Viability of the undertaking, pro forma balance sheet, income
statement and cash–flow statementIX. Critical risks
– Unfavourable trends and difficulties
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Business plan elements (4)IX. Harvest strategy
– Management succession and investor exit strategiesX. Milestone schedule
– Provide a timetable for the various activitiesXI. Appendix and/or bibliography
– Additional documentation
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A practical example
Refer to Appendix 1 for an example business plan – ‘Red River Optical: Affordable reading glasses for Vietnam’
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The pitch• Presenting the plan to stakeholders –
especially funding providers• This is also known as ‘the elevator pitch’• Be organised, well-prepared, interesting and
flexible
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The pitch• Focus on the plan• Demonstrate a reachable market• Explain the business model• Tout the management team• Explain the metrics• Motivate the audience• Answer: ‘Why you?’ and ‘why now?’
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Key concepts(close your books)Q. Who will read your business
plan?Q. What are the main sections
in a business plan?
?29
Key concepts• Business plan audiences
– Venture capitalists, bankers, investors, potential large customers, lawyers, consultants and suppliers
• The business plan outline:I. Executive summaryII. Business descriptionIII. Sustainability IV. Marketing V. Operations
VI. Sustainable development measures of performance
VII. Management VIII. Financial IX. Critical risksX. Harvest strategyXI. Milestone scheduleXII. Appendix and/or bibliography
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