ENTR 452ENTR 452(Business Plan Slides,(Business Plan Slides,

Chapter 7)Chapter 7)

BUSINESS PLAN BASICSBUSINESS PLAN BASICS

The BP is a written summary and explanation of an entrepreneur’s proposed venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities.

Describes tasks/goals for first 3-5 years of operations

Research shows a link between planning and performance.

However, you can be successful without a plan (most businesses are founded without a business plan)

MAJOR PURPOSES OF A MAJOR PURPOSES OF A BUSINESS PLANBUSINESS PLAN

- Opportunity Development

- Strategic Planning and Benchmarking

- Raising Money

- Recruiting

Consider who you are writing for: yourself, investors, customers, suppliers, banks, judges

BUSINESS PLAN COVERAGE BUSINESS PLAN COVERAGE AREASAREAS

1. Key People

2. Promising Opportunity

3. Business Context

4. Risks and rewards

BUSINESS PLAN BASICSBUSINESS PLAN BASICS

Many different outlines/forms of plan. If you are trying to raise money, I recommend having three documents prepared for potential readers:

1. Executive Summary (most important part of a plan)

2. 5-10 Page Short-Form Plan (PowerPoint Presentation)

3. Full Business Plan

INFORMATION NEEDSINFORMATION NEEDS

1. Clearly defined business concept.

2. Market data – support the concept by detailing the market potential

3. Operations – must discuss location, equipment, raw materials, supply needs, labor skills, space

4. Financials – at a minimum need a cash budget (full financials w/cash flow statement, income statement, and balance sheet is preferable)

FORMAT/MAJOR SECTIONSFORMAT/MAJOR SECTIONS

Cover Page (name of company, contact info)

Table of Contents

Executive Summary

Description of Product/Service

Market Data

Analysis of Competition

FORMAT/MAJOR SECTIONSFORMAT/MAJOR SECTIONS

Marketing Plan

Management Plan

Financial Info

Deal Structure/Exit Strategy

Appendices (e.g., financial spreadsheets, resumes, supporting marketing material)

Before you get any financing, investors will conduct “due diligence” (fact checking and background check) on you and your plan

You will also have to present your business plan

Again, know your target- Bankers- Angel Investors- Venture Capitalists- Competition Judges

BUSINESS PLAN EVALUATIONBUSINESS PLAN EVALUATION

ENVIRONMENTAL AND ENVIRONMENTAL AND INDUSTRY ANALYSISINDUSTRY ANALYSIS

Environmental analysis: assessment of external uncontrollable variables that may impact the business plan.

Examples: Economy, culture, technology, legal concerns,

Industry analysis: reviews industry trends and competitive strategies.

Examples: Industry demand, competition

ENVIRONMENTAL AND ENVIRONMENTAL AND INDUSTRY ANALYSISINDUSTRY ANALYSIS

1. What are the major economic, technological, legal, and political trends on a national and an international level?

2. What are total industry sales over the past five years?

3. What is anticipated growth in this industry?

4. How many new firms have entered this industry in the past three years?

5. What new products have been recently introduced in this industry?

6. Who are the nearest competitors?

7. How will your business operation be better than this?

8. Are the sales of each of your major competitors growing, declining, or steady?

9. What are the strengths and weaknesses of each of your competitors?

10. What trends are occurring in your specific market area?

11. What is the profile of your customers?

12. How does your customer profile differ from that of your competition?

APPENDICESAPPENDICESContains any backup material that is not necessary in the text of the document. May include:

• Letters from customers, distributors, or subcontractors.

• Secondary data or primary research data used to support plan decisions.

• Leases, contracts, or other types of agreements.

• Price lists from suppliers and competitors.

Reality Test – is it realistic?

Competitive Test – does the firm have an edge over the competition?

Value Test – does the firm represent a good financial risk/return?

THE THREE TESTS A THE THREE TESTS A BUSINESS PLAN MUST PASSBUSINESS PLAN MUST PASS

WHY BUSINESS PLANS FAILWHY BUSINESS PLANS FAILFactors can be one of many of the following:

• Goals set by the entrepreneur are unreasonable.

• Goals are not measurable.

• Entrepreneur has not made a total commitment to the business or to the family.

• Entrepreneur has no experience in the planned venture.

• Entrepreneur has no sense of potential threats or weaknesses to the business.

• No customer need was established for the proposed product or service.

Again, you will need to present your plan if you expect to receive any funding.

Should cover 5 major areas:

1. Company’s background and its products/services2. Market analysis and description of the opportunities3. Competitive edge and marketing strategies4. Management team (experience and qualifications)5. Financial analysis (projections)

BUSINESS PLAN PRESENTATIONBUSINESS PLAN PRESENTATION

5 C’s OF CREDIT5 C’s OF CREDIT

Lenders/Investors will look at these 5 “C’s”:

Capital – Contribution by entrepreneur(s)

Capacity – ability to repay loan/provide a return (cash flow)

Collateral – assets that back up the loan/investment

Character – of the entrepreneur

Conditions – that surround the business

SCA?????

Quality of management- Hiring agreements w/outsiders if funded- Advisory board

Resources controlled by the entrepreneur(s)

Financials (assumptions and projections)

Exit strategy

LIKELY EVALUATION LIKELY EVALUATION QUESTIONSQUESTIONS

Before you write anything, should know specifically who your first customer is going to be

Business plan software – still a lot of work

Hiring a consultant – must work closely w/the consultant in order to ensure vision is expressed

Plan does not have to be flashy

OTHER THOUGHTS ON OTHER THOUGHTS ON BUSINESS PLANSBUSINESS PLANS

Read and re-read

Avoid “fluff” and overly flattering language

Evidence of good research

Be optimistic, but realistic

Have an advisory board for review purposes

OTHER THOUGHTS ON OTHER THOUGHTS ON BUSINESS PLANSBUSINESS PLANS

Clearly lay out the exit strategy- may be different for different plan readers

How will your competition react?

Be prepared to defend and constantly update your plan as conditions change

OTHER THOUGHTS ON OTHER THOUGHTS ON BUSINESS PLANSBUSINESS PLANS