Part III – Developing the Entrepreneurial Plan

Chapter 7 – Environmental Assessment: Preparation for a New Venture Chapter 8 – Marketing Research for New Ventures Chapter 9 – Financial Preparation for Entrepreneurial Ventures Chapter 10 – Developing an Effective Business Plan
Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Chapter 10 – Developing An Effective Business Plan

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) .

management. A description of all of these facets of the proposed venture is necessary to demonstrate a clear picture of what that venture is. and milestones or a timetable. manufacturing. It must describe current status. Every aspect of the venture needs to be covered: the project. . research and development. marketing. where it is projected to go. critical risks. and projected results of the new business. and how the entrepreneur proposes it will get there. financing.What is a Business Plan? A business plan is the written document that details the proposed venture. The business plan is the entrepreneur’s roadmap for a successful enterprise. expected needs.

and financial analysis included in the business plan subject the entrepreneur to close scrutiny of his or her assumptions about the venture’s success. • The competitive. effort. . and discipline needed to put together a formal business plan force the entrepreneur to view the venture critically and objectively. economic. research.Benefits of a Business Plan Specifically for the entrepreneur: • The time.

cont. • Since all aspects of the business venture must be addressed in the plan. the entrepreneur develops and examines operating strategies and expected results for outside evaluators. . providing measurable benchmarks for comparing forecasts with actual results. • The business plan quantifies objectives.Benefits of a Business Plan. • The completed business plan provides the entrepreneur with a communication tool for outside financial sources as well as an operational tool for guiding the venture towards success.

Benefits of the Business Plan Specifically for the financial sources: • Details of the market potential and plans for securing a share of that market. • The venture’s ability to service debt or provide an adequate return on equity. . concise document that contains the necessary information for a thorough business and financial evaluation. • Identifies critical risks and crucial events with a discussion of contingency plans. • A clear.

Developing a WellConceived Business Plan .

exhibits.The Five-Minute Reading Step 1: Determine the characteristics of the venture and its industry Step 2: Determine the financial structure of the plan (amount of debt or equity investment required) Step 3: Read the latest balance sheet (to determine liquidity. and other plan components) . net worth. charts. and debt/equity) Step 4: Determine the quality of entrepreneurs in the venture (sometimes the most important step) Step 5: Establish the unique feature in this venture (find out what is different) Step 6: Read the entire plan over lightly (this is when the entire package is paged through for a casual look at graphs.

Putting the Package Together • • • • • Appearance Length The cover and title page The executive summary The table of contents .

Guidelines to Remember • • • • • • • • • • Keep the Plan Respectably Short Organize and Package the Plan Appropriately Orient the Plan Toward the Future Avoid Exaggeration Highlight Critical Risks Give Evidence of an Effective Entrepreneurial Team Do Not Overdiversify Identify the Target Market Keep the Plan Written in the Third Person Capture the Reader’s Interest .

Elements of a Business Plan .

Goals and potential of the business and milestones (if any) D. General description of business B. Uniqueness of product or service . Industry background C.Complete Outline of a Business Plan Section I: Executive Summary Section II: Business Description A.

Section III: Marketing A.Complete Outline of a Business Plan. Pricing 3. Marketing plan 1. Competition 4. Market strategy – sales and distribution 2. Research and analysis 1. Advertising and promotions . Market size and trends 3. Estimated market share B. cont. Target market (customers) identified 2.

Access to transportation . Proximity to supplies C. cont.Complete Outline of a Business Plan. Taxes B. Section IV: Operations A. Zoning 3. Advantages 2. Identify location 1.

Board of directors. consultants . ownership C. Management team – key personnel B.Complete Outline of a Business Plan. cont. advisors. Section V: Management A. employment agreements. Legal structure – stock agreements.

Section VI: Financial A. Financial forecast 1. cont. Profit and loss 2. Cost controls 5.Complete Outline of a Business Plan. Cash flow 3. Budgeting plans . Break-even analysis 4.

cont. Transfer of asset B. Obstacles and risks C. Alternative courses of action Section VIII: Harvest Strategy A. Continuity of business strategy C. Potential Problems B. Identify successor . Section VII: Critical Risks A.Complete Outline of a Business Plan.

Timing and objectives B. Section IX: Milestone Schedule A.Complete Outline of a Business Plan. cont. Relationship of events Section X: Appendix or Bibliography . Deadlines and milestones C.

Presentation of the Business Plan • Know the outline thoroughly • Rehearse the presentation • Be familiar with any equipment .

Business Plan Assessment: Complete Evaluation of Each Component .

Confirm the decision 2. Ask for suggestions 6. Find out why 8. Develop a reasonable excuse 10. Know your referral . Work on an introduction 9.What To Do When a Venture Capitalist Turns You Down: Ten Points 1. Get the name 7. Ask for advice 5. Sell for the future 3. Find out why you were rejected 4.

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