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Chapter 4

Writing a Business Plan

What Is a Business Plan?Business Plan

A written document that describes in detail how a new business is going to achieve its goals…A business plan layout a written plan from a marketing, financial and operational viewpoint..

A business plan is a written description, typically 25 to 35 pages long, that describes what a new business idea/plan to accomplish.

Dual-Use DocumentFor most new ventures, the business plan is a dual-purpose

document used both inside and outside the firm.

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Why Reads the Business Plan—And What Are They Looking For?

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There are two primary audience for a firm’s business plan

Audience What They are Looking For

A Firm’s Employees

Investors and other external stakeholders

A clearly written business plan helps the employees of a firm to operate and move forward

in a consistent and purposeful manner.

A firm’s business plan must make the case that the firm is a good use of an investor’s funds or the

attention of others.

What are the forms of a Business Plan?DocumentSampleSlidesFilmDemonstration

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Benefits/Reasons for Writing a Business Plan

Initial planning document for a new business.Serves as a tool to communicate the idea of the new venture to potential investors, bankers, key employees.Serves as a record to monitor and compare results. To obtain bank financing. To obtain investment funds. To establish strategic alliances. To obtain initial contracts. To attract key employees.To motivate and focus your management team

Questions a start-up business plan should answer

The plan is meant to be read by potential finance providers (banks etc) or business owners /shareholders. So it ought to provide convincing and realistic answers to questions such as:

•What is the business idea or opportunity?•What is the product and how is it different or unique?•What is the target market segment and who are the potential competitors?•How large is the target market and is it growing?•Who are the customers; how much will they buy and at what price?•What will it cost to produce and sell the product?•Can the product be made and/or sold profitably?•At what stage will the business break-even and what are the likely profits?•What investment is required to launch and establish the business?•Where will the money come from?•What are the main risks facing the business and how to handle them?

Types/ level of Business Plans

What Should a Business Plan Contain?

1.Title Page2.Table of Contents3.Executive Summary and Fact Sheet4.Body of the Plan

The Company descriptionThe Product/Service OfferingIndustry AnalysisMarket AnalysisThe Marketing PlanThe Production/Operations PlanThe Management TeamImplementation Schedule and Risks Associated with the VentureThe Financial Plan

5.Appendices

Section 1: Executive Summary

Executive SummaryThe 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 venture’s distinctive nature.An executive summary shouldn’t exceed two single-space

pages.

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Section 2: Company Description

Company DescriptionThe main body of the business plan beings with a general

description of the company.Items to include in this section:

Company description. Company history. Mission statement. Products and services. Current status. Legal status and ownership. Key partnerships (if any).

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Section 3: Industry Analysis

Industry AnalysisThis section should being by describing the industry the

business will enter in terms of its size, growth rate, and sales projections.

Items to include in this section: Industry size, growth rate, and sales projections. Industry structure. Key success factors. Long-term prospects.

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Section 4: Market Analysis

Market AnalysisThe market analysis breaks the industry into segments and

zeros in on the specific segment (or target market) to which the firm will try to appeal.

Items to include in this section: Market segmentation and target market selection. Buyer behavior. Competitor analysis.

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Section 5: Marketing Plan

Marketing PlanThe marketing plan focuses on how the business will

market and sell its product or service.Items to include in this section:

Overall marketing strategy. Product, price, promotions, and distribution.

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Section 6: Management Team and Company Structure

Management Team and Company StructureThe management team of a new venture typically consists

of the founder or founders and a handful of key management personnel.

Items to include in this section: Management team. Board of directors. Board of advisers. Company structure.

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Section 7: Operations Plan

Operations PlanOutlines how your business will be run and how your

product or service will be produced.Items to include in this section:

Business location. Facilities and equipment etc.

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Section 8: Product (or Service) Design and Development Plan

Product (or Service) Design and Development PlanIf you’re developing a completely new product or service,

you need to include a section that focuses on the status of your development efforts.

Items to include in this section: Development status and tasks. Challenges and risks. Intellectual property.

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Section 9: Financial Projections

Financial ProjectionsThe final section of a business plan presents a firm’s pro

forma (or projected) financial projections. Items to include in this section:

Sources and uses of funds statement. Assumptions sheet. Pro forma income statements. Pro forma balance sheets. Pro forma cash flows.

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Presenting the Business Plan to Investors

The Oral PresentationThe first rule in making an oral presentation is to follow

directions. If you’re told you have 15 minutes, don’t 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 InvestorsThe 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. Title Slide

2. Problem

3. Solution

4. Opportunity and target market

5. Technology

6. Competition

7. Marketing and sales

8. Management team

9. Financial projections

10. Current status

11. Financing sought

12. Summary

Presenting the Business Plan to Investors3 of 3

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• It’s also important to look sharp when presenting a business plan.• This new venture team is going over its PowerPoint slides one last time before an investor presentation.