The Business Plan: Creating & Starting the Venture

Entrepreneurship

Business Plan

“is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture.”

It is a road map that integrated functional plans and answers questions such as:

- Where am I now?- Where am I going?- How will I get there?

Scope & Value of the Business Plan

Is read by employees, investors, bankers, venture capitalists, suppliers, customers, advisors & consultants.

Is important because:- It helps determine the viability of the venture in

designated market.- It provides guidance to the entrepreneur in

organizing his or her planning activities.- It serves as an important tool in helping to

obtain financing.

Information Needs

Establishing goals & objectives help in defining what kind of information is required from what sources. Market Information: such as▪ Target market▪ Market potential for product or service▪ Industry & environmental trends (Macro & Micro

environment)▪ Competitors▪ Product/service required features

Information Needs

General environmental & Demographic trends

National industry trends

National environmental & Demographic trends

Local industry trends

Local competition , Strengths & weaknesses

Market Positioning

Market Objectives

Information Needs

Operations Information: such as:- Location- Manufacturing operations- Raw materials- Equipment- Labor skills- Space- Overheads

Information Needs

Financial Information Needs: all the information required for budgeting such as:

- Capital expenditure- direct operating expense- forecast for revenue and sales

Writing a Business Plan

1. Introductory Page

A. Name & Address of business

B. Name(s) & Address(s) of Principal(s).

C. Nature of Business

D. Statement of financing Needed

E. Statement of confidentiality of report

Writing a Business Plan

II. Executive Summary – Two to three pages summarizing the complete business plan

III. Industry Analysis

A. Future outlook & Trends

B. Analysis of competitors

C. Market Segmentation

D. Industry & Market forecasts

Writing a Business Plan

IV. Description of Venture

A. Product(s)

B. Service(s)

C. Size of Business

D. Office equipment & Personnel

E. Background of Entrepreneur(s)

Writing a Business Plan

V. Production Plan

A. Manufacturing Process (amount subcontracted)

B. Physical Plant

C. Machinery & Equipment

D. Names of suppliers of raw materials

Writing a Business Plan

VI. Operational Plan

A. Description of company’s operations

B. Flow of orders for goods and/or services

C. Technology Utilization

Writing a Business Plan

VII. Marketing Plan

A. Pricing

B. Distribution

C. Promotion

D. Product forecasts

E. Controls

Writing a Business Plan

VIII. Organizational Plan

A. Form of ownership

B. Identification of partners or principal shareholders

C. Authority of principals

D. Management – team background

E. Roles and responsibilities of members of organization

Writing a business plan

IX. Assessment of Risk

A. Evaluate weakness(es) of business

B. New technologies

C. Contingency Plans

Writing a Business Plan

X. Financial Plan

A. Assumptions

B. Pro forma income statement

C. Cash flow projections

D. Pro forma balance sheet

E. Break even analysis

F. Sources & application of funds

XI. Appendix (contains backup material)

A. Letters

B. Market research data

C. Leases or contracts

D. Price lists from suppliers

Review & Discussion

If a business plan is to be used to raise capital, the why would the entrepreneur want to advertise the firm’s major risks by detailing them in the business plan?