the business plan: visualizing the dream · 01.07.2018 · the business plan: visualizing the dream...

PowerPoint Presentation by Charlie Cook

The University of West Alabama

Longenecker • Moore • Petty • Palich

© 2008 Cengage Learning.

All rights reserved.

CHAPTER 6

The Business Plan:

Visualizing the

Dream

Developing the New Venture Business PlanPart 3

© 2008 Cengage Learning. All rights reserved. 6–2

Looking AHEAD

1. Explain the purpose and objectives of business plans.

2. Give the rationale for writing (or not writing) a business plan

when starting a new venture.

3. Describe the preferred content and format for a business plan.

4. Offer practical advice on writing a business plan.

5. Explain what investors look for in a business plan.

6. Identify available sources of assistance in preparing a business

plan.

7. Maintain the proper perspective when writing a business plan.

After you have read this chapter, you should be able to:


An Overview of the Business Plan

• Business Plan

A document that sets out the basic idea underlying a

business and related startup considerations

• The Purpose of a Business Plan

Identifies the nature and context of the business

opportunity

Presents the entrepreneur’s approach to exploiting the

opportunity

Identifies factors affecting the venture’s success

Serves as the entrepreneur’s tool for raising capital


Users of Business Plans6-1


The Need for a Business Plan

• Primary Functions

To provide a clearly articulated statement of goals and

strategies for internal use

Imposes discipline on the entrepreneur and

management team

To serve as a selling document to be shared with

outsiders

Provides a credible overview for prospective

customers, suppliers, and investors

Helps secure favorable credit terms from suppliers

Opens approaches to lenders and other sources of

financing


How Much Business Planning is Needed?

• Factors affecting the extent of a business plan:

Cost in time and money to prepare the plan

Management style and ability

Preferences of the management team

Complexity of the business

Competitive environment

Level of uncertainty


Keeping the Right Perspective

• Good business plans don’t ensure success.

Effective implementation is what succeeds.

• Writing a business plan is an ongoing process

and only secondarily the means to an outcome.

The process is just as important as—if not more so

than—the finished product.

The plan represents what is has been anticipated; a

good entrepreneur adapts the plan to fit the

unexpected.


Types of Business Plans

• Dehydrated Plan

A short form of a business plan that presents only the

most important issues and projections.

• Comprehensive Plan

A full business plan that provides

an in-depth analysis of the critical

factors that will determine a firm’s

success or failure, along with all

the underlying assumptions.


Preparing a Business Plan

• Issues critical in preparing a business plan:

1. The content and basic format of the plan

Factual support for the concept in the form of

strong supporting evidence

2. The effectiveness of the written presentation

Clear writing that effectively communicates


Deciding on the Content of a Business Plan

• Factors that help determine the content of a

business plan for a startup:

The entrepreneurial team

The opportunity

The resources

The deal structure

The big picture


Good Opportunities Have Good “Fit”6-2


Abbreviated Business Plan Outline6-3

Section Heading

• Cover Page

• Table of Contents

• Executive Summary

• Industry, Target Customer, and Competitor Analysis

• Company Description

• Product/Service Plan

• Marketing Plan

• Operations and Development Plan

• Management Team

• Critical Risks

• Offering

• Financial Plan

• Appendix of Supporting Documents


The Content of a Business Plan

• Cover Page

Company name, address, phone number, fax number,

and website

Tagline and company logo

Name and contact information of contact person

Date on which the business plan was prepared

Confidentiality disclaimer

Number of the copy

• Table of Contents

Provides a sequential listing of the sections of the

plan, with page numbers


The Content of a Business Plan (cont’d)

• Executive Summary/Synopsis/Narrative

Description of the opportunity

Explanation of the business concept

Industry overview

Target market

Competitive advantage to be achieved in the market

Economics of the opportunity

Management team description

Amount and purpose of the money being requested

(the “offering”) if seeking financing


Benjapon’s Executive Summary6-5

1.1 The Opportunity

1) Thai food is one of the fastest growing food trends in the U.S. and is rapidly moving into the mainstream1.

2) Americans are leading a busier lifestyle and thus rely more on meals outside the home. Restaurants

account for 46% of total food dollars spent2, up from 44.6% in 1990 and 26.3% in 19603. By 2010, 53% of

food dollars will be spent on away-from-home sources4.

3) Americans are demanding better quality food and are willing to pay for that quality. As a result, fast food

establishments have recently added premium items to their menu. For example, Arby’s has a line of

“Market Fresh” items5; Carl’s Jr. offers “The Six Dollar Burger.”6

The fast casual segment emerged to meet the demands for better-quality foods at a slightly higher price than

that of fast food. Despite the immense popularity of Asian food, and Thai food in particular, the fast casual

segment is dominated by cafes/bakeries (Panera Bread, Au Bon Pain) and Mexican food restaurants (Chipotle

Grill, Baja Fresh, Qdoba). In recent years, however, Asian fast casual players have begun to emerge in various

regions in the U.S. Such players include Mama Fu’s, Nothing but Noodles, and Pei Wei Asian Diner, but are still

considered regional competitors.

Therefore, customers are limited in choices:

• Thai food patrons are currently limited to full-service restaurant options, requiring more time and money

than fast food or fast casual options.

• Busy consumers are currently limited to hamburgers, sandwiches, pizzas, and Mexican food, when it

comes to fast-serve options.

1.2 The Company

• Benjapon’s is a fast-casual restaurant serving fresh Thai food, fast, at affordable prices, in a fun and

friendly atmosphere. We will open two company locations, with future plans to grow through franchising.

• The restaurant will be counter-order and table-service with an average ticket price of $8.50. Store hours

are from 11am–10pm, seven days a week. We expect 40% of our business to come from take-out orders.

1 Packaged Facts, Marketresearch.com, 2003; 2 “Restaurant Industry Report”, The Freedonia Group, Inc., 2003; 3 “Restaurant Industry Report;

Standard and Poor’s, 2003. 4 National Restaurant Association; 5 Arby’s website: www.arbys.com; 6 Carl’s Jr. website: www.carlsjr.com.



• Industry Description

Broader industry in which the firm will compete

Industry size, growth rate, trends, and competitors

Different segments of the industry

Niche in which the firm plans to participate

• Target Customers

Demographics and psychological variables—values,

attitudes, and fears

• Competitor Analysis

Product or service attributes that are or are not

provided by competitors



• Company Description

When and where was this business started?

What is the history of the company?

What are the firm’s objectives?

What changes in structure and/or ownership?

In what stage of development is the firm?

What has been achieved to date?

What is the firm’s distinctive competence?

What are the nature and activity of the business?

What is its primary product or service?

What customers will be served?

What is the firm’s form of organization?

What are the projected economic states of the industry?

How is ownership of the firm to be structured?



• Products/Service Plan

Describes the product and/or service to be provided

and explains its merits

• Marketing Plan

Describes the user benefits of the product or service

and the type of market that exists

• Operations and Development Plan

How product will be produced or service provided

• Management Plan

Describes the firm’s organizational structure and the

backgrounds and qualifications of key personnel



• Critical Risks

Identifies the potential risks that may be encountered

by an investor

• Offering

Indicates to an investor how much money is needed

and when, and how the money will be used

• Financial Plan

Projects the company’s financial position based on

well-substantiated assumptions and explains of how

the figures have been determined

Pro forma statements project a firm’s financial

condition for up to five years.



• Appendix of Supporting Documents

Supplementary materials and attachments to expand

the reader’s understanding of the plan:

Résumés of key investors and owners/managers

Professional references

Photographs of products, facilities, and buildings

Marketing research studies

Pertinent published research

Signed contracts of sale


Making an Effective Written Presentation

• Insist on confidentiality

• Use good grammar

• Limit the presentation to a reasonable length

• Go for an attractive, professional appearance

• Provide solid evidence for any claims

• Describe the product in lay terms

• Emphasize the qualifications of the management team

• Analyze the market thoroughly

• Include financial statements that are neither overly

detailed nor incomplete

• Don’t hide weaknesses—identify potential fatal flaws


Presenting the Business Plan to Investors

• Attracting Investors

A business plan must be an effective marketing

document that quickly captures investor interest.

• Understanding the Investor’s Perspective

Entrepreneurs are optimists; investors are skeptics.

Investors focus on break-even and positive cash flow.

Investors have a short attention span.

Bad information and poor preparation cause investors

to lose interest quickly.


Plan Features that Attract Investors

• Plans that speak the investors’ language:

Are market-oriented in meeting customer

needs; are not product-oriented.

Show evidence of target customer acceptance

of the proposed product or service.

Present credible and not overly optimistic

financial projections.

Are not a formal prospectus or

offering memorandum.


Plans Features that Attract Investors (cont’d)

Recognize the investors’ needs for required rates of

return on investments.

Demonstrate evidence of focus on a limited number of

products or services

Have a proprietary market position

through patents, copyrights,

and/or trademarks


Features of Plans Unattractive to Investors

• Plans that create unfavorable reactions:

Show an infatuation with the product or service and

downplay market needs or acceptance.

Are based on financial projections at odds with

accepted industry norms.

Have unrealistic growth projections.

Contain a need for custom or

applications engineering,

which makes substantial

growth difficult.


Resources for Business Plan Preparation

• Computer-Aided Business

Planning

Word-processors

Spreadsheets

Specialized business plan

software packages

• Professional Assistance

Accountants

Marketing specialists

Attorneys

Investment banker

Financial intermediary

• Professional Assistance

(cont’d)

Small business

development centers

(SBDCs)

Incubator organizations

Regional and local

economic development

offices.

Service Corps of Retired

Executives (SCORE)

FastTrac Entrepreneurial

Training Program


Key TERMS

• business plan

• dehydrated plan

• comprehensive plan

• executive summary

• products/services plan

• marketing plan

• operations and development plan

• management team

• offering

• financial plan

• pro forma statements

• prospectus (offering memorandum)


Suggestions for Writing a Business Plan

• Provide table of contents and section tabs.

• Use a loose-leaf binder in case of revisions.

• Use visual aids—graphs, exhibits, and tabular

summaries.

• Indicate that all information is confidential.

• Number copies of the plan and require written receipts.

• Be careful about divulging competitive information or

proprietary designs/technology.

• Ask other entrepreneurs to review the plan.


What Not to Do

• Mistakes to avoid in preparing a business plan:

Failing to provide solid data.

Failing to describe the product in lay terms.

Failing to thoroughly analyze the market.

Including financial statements that are overly detailed

or incomplete.

Hiding weaknesses.

Overlooking the fatal flaw.

Using bad grammar.

Making the overall plan too long.