chapter one why plan? copyright © 2009 pearson education, inc. publishing as prentice hall 1-1 dr....
TRANSCRIPT
Chapter One
Why Plan?
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 1-1
Dr. Bruce BarringerUniversity of Central Florida
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 1-2
Chapter One
Why plan?
Reasons for writing a business plan
Who reads the business plan—and what are they looking for?
Guidelines for writing a business plan
Types of business
The plan for the book
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 1-3
Introduction
Increased interest in the study of entrepreneurship
2,100 colleges and universities offer entrepreneurship coursework
About 400,000 students took at least one entrepreneurship course in 2005
72% of American adults have considered starting a business
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The Business Plan
A written document that carefully explains every aspect of a new business venture
Inside the firm, the business plan is used to develop a road map
Outside the firm, the business plan introduces potential investors and other stakeholders to the business opportunities
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Reasons for Writing a Business Plan
Two main reasons to write a business plan:
Internal—Forces the founders of the firm to think through every aspect of their new venture
External—Communicates the merits of a new venture to outsiders, such as investors and bankers
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External Support
Business incubator
An organization that provides physical space and other resources to new firms
in hopes of promoting economic development in a specific area
Investors rely on the business plan to make decisions on initial investment
Many investors ask for an executive summary—a short overview of the business plan—describing the merits of a new venture
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Who reads the business plan and what are they looking for?
Two primary audiences
Firm’s employees Looking for the vision and
future of the firm
Investors and other stakeholders
Investors, potential business partners, potential customers, grant awarding agencies who are being recruited
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Guidelines Structure and style of the business
plan
Content of the business plan
Measuring the business plan against your personal goals and aspirations
Recognizing that elements of the plan may change
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Structure and Style
Conventional structure
25 to 35 pages in length
Look sharp but not too expensive or flashy
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Structure and Style
Elevator speech
A brief, carefully constructed statement, usually 45
seconds to 2 minutes long that outlines the merits of
a business venture or business plan insight
feature
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Elevator Speech Four steps in an elevator speech
(from business plan insight feature)
1. Describe the opportunity2. Describe how your product or service
meets the opportunity3. Describe your qualifications4. Describe your market
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Red Flags
Founders with none of their own money at risk
A poorly cited plan
Defining the market size too broadly
Overly aggressive financials
Hiding or avoiding weakness
Sloppiness in any area
Too long of a plan
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Content of the Business Plan Sections Convince the
reader that the opportunity is exciting, feasible, defensible and within the capabilities of the people who will be launching the firm
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Measuring the Business Plan Against Your Personal Goals and Aspirations
Venture capital
Venture capitalists aim for 30 to 40% annual
return and total return of 5 to 20 times their
original investment over the life of the investment
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Venture Capital
Using venture capital involves surrendering equity in the firm to outsiders in exchange for their investment and accepting heavy scrutiny
Some entrepreneurs find it better to launch a firm in a target market and solicit funds from friends, family, or a lender
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Recognizing that Elements of the Business Plan May Change
Corridor principle
Academic principle that states once an entrepreneur starts a business, he or she begins a journey down a path where corridors leading to new venture opportunities become apparent
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The business plan is a living,
breathing document, rather than
something set in stone
Recognizing that Elements of the Business Plan May Change
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Write deliberate (but) act emergent
Create a deliberate plan that is a specific blueprint to follow
Think emergent with a mindset that is open to change and influenced by the realities of the marketplace
Recognizing that Elements of the Business Plan May Change
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Types of Business
Four distinct types of businesses
SurvivalLifestyleManaged growthAggressive growth
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Survival
Provides its ownerjust enough money toput food on the tableand pay bills
Types of Business
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Lifestyle
Provides its owner the opportunity to pursue a certain lifestyle and make a living at it (clothing boutique, personal trainer)
Types of Business
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Managed growth
Employs 10 or more people, may have several outlets, and may be introducing new products or services to the market
(regional restaurant chain, multi-unit franchise)
Types of Business
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Aggressive growth
Bringing new products and services to the market and has aggressive growth plans (computer software, medical equipment, national restaurant chain)
Types of Business
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The Plan for the Book
Section One: Starting the process Section Two: What to do before the
business plan is written Section Three: Preparing a business
plan Section Four: Presenting the
business plan
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Section One
Starting the process
A business plan is an essential document for a firm to have at its disposal, particularly if it plans to reach out to others to try to gain access to resources
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Section Two
What to do before the business plan is written
Comprehensive process Four steps of the comprehensive
feasibility analysis/business planning process
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Comprehensive Feasibility Analysis
1. Identifying a business idea2. Screening the idea to determine
its initial feasibility3. Conducting a full feasibility
analysis to determine if proceeding with a business plan is warranted
4. Writing the plan
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Section ThreePreparing a business plan
How to complete each section of a business plan
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Section Four
Presenting the business plan to investors and others
Suggestions for how to make effective presentations using PowerPoint slides and how to field questions from an audience effectively
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Key Words
Business plan A written document that carefully explains
every aspect of a new business venture
Business incubator An organization that provides physical space
and other resources to new firms in hopes of promoting economic development in a specific area
Executive summary A short overview of a business plan or a set
of PowerPoint slides describing the merits of a new venture
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Key Words
Stealth mode Companies that formulate their business
plans in secret, to avoid tipping off potential competitors as to what they're planning
Corridor principle An academic principle which states that
once an entrepreneur starts a business, he or she begins a journey down a path where corridors leading to new venture opportunities become apparent
Chapter One
Why Plan?
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