Lecture 3

Introduction to Developing a Business Plan

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BUSINESS PLAN

Writing Business Plan

Chapter Objectives
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1. Explain the purpose of a business plan. 2. Describe the two primary reasons for writing a business plan. 3. Describe who reads a business plan and what theyre looking for. 4. Explain why the executive summary may be the most important section of a business plan. 5. Presentation of Business Plan

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Pitfalls to Avoid in Planning

Pitfall 1: No Realistic Goals Pitfall 2: Failure to Anticipate Roadblocks Pitfall 3: No Commitment or Dedication Pitfall 4: Lack of Demonstrated Experience (Business or Technical) Pitfall 5: No Market Niche (Segment)

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The Seven Pitfalls for a New Venture Business Plans

Source: Baron & Shane (2005)

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What Is a Business Plan?

Business Plan
A business plan is a written narrative, typically 25 to 35 pages long, that describes what a new business plans to accomplish.

Dual-Use Document
For most new ventures, the business plan is a dual-purpose document used both inside and outside the firm. Internal and External users.

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What is a Business Plan?

A business plan is the written document that details the proposed venture. It must describe current status, expected needs, and projected results of the new business. Every aspect of the venture needs to be covered: the project, marketing, research and development, manufacturing, management, critical risks, financing, and milestones or a timetable. A description of all of these facets of the proposed venture is necessary to demonstrate a clear picture of what that venture is, where it is projected to go, and how the entrepreneur proposes it will get there.
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Add Info
Is a written document that serves as a blueprint and guide for a proposed business project that one intends to undertakes. Information in BP to predict variability, forecast success and propose strategies for the project.

Reasons and Purposes

Entrepreneur to view and evaluate the proposed business venture in objective, critical and practical manner. To analyze and evaluate the viability of a proposed venture. Convince relevant parties of the investment potential for the project. Guidelines for managing the business.

Reasons and Purposes (Add Info)

Arrange their thought in a logical and structural order. Business framework by defining activities, responsibilities and objectives to be achieved. Stimulate reality and anticipate pitfalls. Develop strategies to meet objectives. Action plan or guideline. Identify constraints that may face.

Importance of BP
Increase Opportunity for Success Develop Mission Business Determine Main Competitor/s Determine Right Way of Managing Business Increase Stakeholder Confidence Determine Barrier in Business As a performance Tool

Who needs BP?

Management Team Shareholder Banker or Creditor Customer Supplier Employees

Who Reads the Business PlanAnd What Are They Looking For?
There are two primary audiences for a firms business plan
Audience A Firms Employees What They are Looking For A clearly written business plan helps the employees of a firm operate in sync and move forward in a consistent and purposeful manner. A firms business plan must make the case that the firm is a good use of an investors funds or the attention of others.

Investors and other external stakeholders

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Guidelines for Writing a Business Plan

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Structure of the Business Plan

To make the best impression a business plan should follow a conventional structure, such as the outline for the business plan shown in the chapter. Although some entrepreneurs want to demonstrate creativity, departing from the basic structure of the conventional business plan is usually a mistake. Typically, investors are busy people and want a plan where they can easily find critical information.

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Business Plan Template

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Model of Business Planning Used by Many Entrepreneurs

Source: Baron & Shane (2005)

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Section 1: Executive Summary

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Executive Summary
The executive summary is a short overview of the entire business plan It provides a busy reader with everything that needs to be known about the new ventures distinctive nature. An executive summary shouldnt exceed two single-spaced pages.

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Section 1: Executive Summary

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Key Insights

Executive Summary

In many instances an investor will ask for a copy of a firms executive summary and will ask for a copy of the entire plan only if the executive summary is sufficiently convincing. The executive summary, then, is arguably the most important section of a business plan.

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Presenting the Business Plan to Investors

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The Oral Presentation

The first rule in making an oral presentation is to follow directions. If youre told you have 15 minutes, dont talk for more than the allotted time. The presentation should be smooth and well-rehearsed. The slides should be sharp and not cluttered.

Questions and Feedback to Expect from Investors

The smart entrepreneur has a good idea of the questions that will be asked, and will be prepared for those queries.

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Presenting the Business Plan to Investors

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Twelve PowerPoint Slides to Include in an Investor Presentation

1. 2. 3. 4. 5. 6.

Title Slide Problem Solution Opportunity and target market Technology Competition

7. Marketing and sales 8. Management team 9. Financial projections 10. Current status 11. Financing sought 12. Summary

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Tutorial
Using the Business Plan Template, write your business plan assignment and consult your tutor during tutorial.

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