Chapter 6- Notes (Book and Packet) Flashcards
A document that sets out the basic idea underlying a business and related startup considerations.
Business Plan
- Identifies the nature and context of the business opportunity.
- Presents the entrepreneur’s approach to exploting the opportunity.
- Identifies factors affecting the venture’s success.
- Serves as the entrepreneur’s tool for raising capital.
The Purpose of a Business Plan
- To provide a clearly articulated statement of goals and strategies for internal use.
- To serve as a selling document to be shared with outsiders.
Primary Function- The Need for a Business Plan
Imposes discipline on the entrepreneur and management team.
To Provide a Clearly Articulated Statement of Goals and Strategies for Internal Use
- Provides a credible overview for prospective customers, suppliers, and investors.
- Helps secure favorable credit terms for suppliers.
- Opens approaches to lenders and other sources of financing
To Serve as a Selling Document to be Shared with Outsiders
- 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
Factors Affecting the Extent of a Business Plan
- Mini-Plan
- Comprehensive Plan
Types of Business Plans
A short form of a business plan that presents only the most important issues and projections.
Mini-Plan (Summary 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.
Comprehensive Plan
- The context and basic format of the plan
- Factual support for the concept in the form of strong supporting evidence.
- The effectiveness of the written presentation
- Clear writing that effectively communicates
Issues Critical in Preparing a Business Plan
- The opportunity
- Critical resources
- The entrepreneurial team
- The financing structure
- The context (or external factors)
Factors that Help Determine the Context of a Business Plan for a Startup (Key Factors for Success)
Section Heading
- Cover (title) page
- Table of Contents
- Executive Summary
- Industry, target customer, and competitor analysis
- Company description
- Product/service plan
- Marketing plan
- Critical risks
- Offering
- Financial plan
- Appendix of supporting documents
Abbreviated Business Plan Outline
- Cover Page
- Table of contents
- Executive summary/Synopsis/Narrative
- Industry description
- Target customers
- 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
- 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
Cover Page
Provides a sequential listing fo the sections of the plan, with page numbers.
Table of Contents
- 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.
Executive Summary/Synopsis/Narrative
- 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
Industry Description
Demographics and phychological variables- vales, attitudes, and fears.
Target Customers
Product or service attributes that are or are not provided by competitors.
Competitor Analysis
- 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 the 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 the ownership of the firm to be structured?
Company Description
Describes the product and/or service to be provided and explains its merits.
Product/Service Plan
Describes the user benefits of the product or service and the type of market that exists.
Marketing Plan
How product will be produced or service provided.
Operations and Development Plan
Describes the firm’s organizational structure and the backgrounds and qualifications of key personnel.
Management Team
Identifies the potential risks that may be encountered by an investor.
Critical Risks
Indicates to an investor how much money is needed and when, and how the money will be used.
Offering
Projects the company’s financial position based on well-substantiated assumptions and explains how the figures have been determined.
- Pro-forma statements project a firm’s financial condition for up to 5 years.
Financial Plan
Supplementary materials and attachments to expand the reader’s understanding of the plan:
- Resumes of key investors and owners/managers
- Professional references
- Photographs of products, facilities, and buildings.
- Marketing research studies.
- Pertinent published research
- Signed contracts of sale
Appendix of Supporting Documents
- 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 throughly
- Include financial statements that are neither overly detailed nor incomplete.
- Don’t hide weaknesses- identify potential fatal flaws.
Making an Effective Written Presentation
- Understanding the investor’s perspective
- The investor’s short attention span
Presenting a Business Plan to Investors
- Entrepreneurs are optimists; investors are skeptics.
- Investors seek to maximize return through cash flow while minimizing exposure to risk.
- Bad information and poor preparation cause investors to lose interest quickly.
Understanding the Investor’s Perspective
A business plan must be an effective marketing document that quickly captures investor interest.
The Investor’s Short Attention Span
- Are market-oriented in meeting identifiable 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 that Speak the Investor’s Language
- Computer-aided business planning
- Professional assistance
Resources for Business Plan Preparation
- Word-processors
- Spreadsheets
- Specialized business plan software packages
Computer-Aided Business Planning
- Accountants
- Marketing specialists
- Attorneys
- Investment banker
- Financial intermediary
- Small business development centers (SBDC)
- Incubator organizations
- Regional and local economic development offices
- Service Corps of Retired Executives (SCORE)
- FastTrac Entrepreneural Training Program
Professional Assistance
- Good business plans don’t ensure success.
- Writing a business plan is an ongoing process and only secondarily the means to an outcome.
Keeping the Right Perspective
Effective implementation is what succeeds.
Good Business Plans Don’t Ensure Success
- The process is just as important as- if not more so than- the finished product.
- The plan represents what it has been anticipated; a good entrepreneur adapts the plan to fit the unexpected.
Writing a business plan is an ongoing process and only secondarily the means to an outcome.
- 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
Mistakes to Avoid in Preparing a Business Plan
- A logical statement of a problem and its solution.
- A significant amount of cold, hard evidence.
- Candor about the risks, gaps, and assumptions that might be proved wrong.
John Mullins- Three Key Elements that Should be in Every Business Plan
This happens if the business does not align with your personal goals.
You are not Likely to Succeed, and you Certainly will not Enjoy the Journey
If well done, is a tool to be used by company insiders for direction and it aid in the development of relationships with outsiders who could help the company achieve its goals.
A Business Plan
Consists of the internal users of the plan:
- The entrepreneur
- The firm’s management
- It’s employees
The First Group
- Provides a framework that helps the entrepreneur and the management team focus on important issues and activities for the new venture.
- Helps the entrepreneur communicate his or her activities for the new venture.
- Helps the entrepreneur communicate his or her vision to current and prospective employees of the firm.
- Helpful with outsiders
The Business Plan
The entrepreneur must convince outsiders- potential customers, suppliers, lenders, and investors- to become linked with the firm.
To Make a Business Successful
