ENTREPRENEURSHIP

Lecture No: 15

Resource Person:

Malik Jawad SaboorAssistant Professor

Department of Management SciencesCOMSATS Institute of Information Technology

Islamabad.

Previous Lecture Review

• Conducting a Feasibility Analysis• The Feasibility Study• Five Forces Model• Product or Service Feasibility Analysis• Financial Feasibility Analysis

Objectives

• Why Develop a Business Plan? • The Elements of a Business Plan • What Lenders and Investors Look for in a

Business Plan • Making the Business Plan Presentation

Concluding remarks• Business Plan Format

The Business Plan

• A written summary of:• an entrepreneur’s proposed business venture

• its operational and financial details

• its marketing opportunities and strategy

• its managers’ skills and abilities.

A Plan Must Pass Three Tests• The Reality Test - proving that :• a market really does exist for your product or service. • you can actually build or provide it for the cost estimates in

the plan.• The Competitive Test - evaluates: • a company’s position relative to its customers.• management’s ability to create a company that will gain an

edge over its rivals.• The Value Test – proving that:• a venture offers investors or lenders an attractive rate of

return or a high probability of repayment.

Why Take the Time to Build a Business Plan?

• Although building a plan does not guarantee success, it does increase your chances of succeeding in business.

• A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t attempt the trip without a map!

Strategic Guide

• Where Do You Want To Go?

• How Are You Going to Get There?

• What Market Niches?

• How Much is it Going to Cost?

• Greatest Profit Opportunity?

Lender Expectations

• Good Business Track Record

• Ability to Repay

• Collateral

Investor Expectations

• Competitive Advantage• Huge Market• Strong Management Team• Strong Marketing and Sales Plan• Obscene Return• Exit Strategy

Entrepreneurs Start Businesses:

• To Capitalize on an Invention

• To Pursue a Passion

• To Be Their Own Boss

• To Get Rich

Exit Strategies

• Selling the Business• Transferring the Business to a Family Member• Taking the Company Public• Being Acquired by a Larger Company

Funding Sources:

• Savings• Friends and Family• Financial Institutions / Banks• Angel Investors• Venture Capital

Business Plan Content

• The Cover• Executive Summary• Company Description• Product/Services Description• Industry Overview• Market Analysis• Competitors

Business Plan Content

• Customers• Marketing and Sales Plans• Development• Operations• Management

Business Plan Content

• Personnel• Financial Summary• Financials• Offering• Appendices

Cover Page

• Should contain

• COMPANY NAME• TAG LINE• CONTACT PERSON• ADDRESS • PHONE• DISCLAIMER• COPY #

Executive Summary

• A mini-business plan in one or two pages• Highlights the most important points of your

business plan• It is NOT an introduction to the plan• It must grab your reader, and entice him/her to

read further

Executive Summary

• Identify the company, its background, structure and location

• Describe what the company does, and the market it serves

• Describe the market potential for the company’s products and services, market trends, etc.

Executive Summary

• Outline the backgrounds and experience of the top management team

• Describe the funding required, the purposes for which it will be used, the collateral available (if for a lender), and the expected outcomes

Company Overview

• Brief Company Introduction– Mission statement– Location, size, history– Market and products– Overview of company capabilities– Objectives

Products/Services• Products / Services– What does it do?– Uniqueness– Competitive Advantage

• Technology– Brief description– Applications

• Commercialization Status– Brief overview

Industry Overview

• Set The Stage• Industry Definition and Description– Major players within the industry– Factors driving dynamics– New products and developments

• Legislation and Policies Driving the Industry• Historical and Future Trends

Market Analysis

• Market Definition– Primary Market– Secondary Markets

• Market Size and Trends– Current total revenues– Predicted annual growth rate

Competitors

• Direct Competitors– Who are they?– Size and product breadth– Revenues and profitability– Strengths and weaknesses– Market shares

• Indirect Competitors

Customers

• Customer Characteristics– Who are they?– Why do they buy?– Need satisfied by the product/service– How is the need currently filled?– What are the alternatives?– Who makes the decision to buy?– How frequently do they purchase?

Marketing and Sales Plans

• Statement of Opportunity

• Marketing and Sales Objectives

• Existing Customers

• Potential Customers

Marketing Strategies• Product/Service Strategy

• Pricing Strategy

• Distribution Strategy

• Advertising and Promotion Strategy

• Sales Strategy

• Marketing and Sales Forecasts

Marketing and Sales Plans

• Marketing Programs– Direct Mail– Trade Shows– Advertising– Internet– Publicity/Public Relations– Marketing Budget

• Pricing– Basis for targeted price point– Margins and profitability by volume levels

Marketing and Sales Plans• Sales Plan

– Sales force structure – (direct or reps)

– Sales expectations/quotas

– Margins given to intermediaries

– Service and warranties

– Sales Budget

– Organizational chart indicating planned growth

Development• R & D Plan– Objectives

– Milestones and current status

– Difficulties and risks

– Staffing

– R & D Budget and assumptions

Operations• Manufacturing/Production Plan– Objectives

– Facilities

– Staffing

– Subcontractors

– Quality Control

– Budget / Operating Expenses

Management

• Company Organization

• Management Team

• Administrative Expenses

Management Team

• President• VP Finance• VP Sales• VP Marketing• VP Manufacturing• Board of Advisors

Personnel

• Human Resource Plan– Staffing Objectives

– Organizational Structure

– 3-5 year growth plan

– Budget

Summary of Financials

• Financial Objectives– Time to Cash Flow Positive– Time to profitability

• Financial Assumptions

• Capital Requirements

• Exit Scenario

Financials

• Pro-forma Cash Flow Projections

• Pro-forma Profit & Loss Statements

• Pro-forma Balance Sheet

Offering

• Investment Requirements

• Pro-forma Valuation of Business

• Offer

Appendices

• Resumes of Key Management• Patent Information• Customer List• Testimonials• Supplemental Financial Spreadsheets• References

Lecture Review

• Why Develop a Business Plan? • The Elements of a Business Plan • What Lenders and Investors Look for in a Business

Plan • Business Plan Format