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OBJECTIVES
1. To be able to understand the purpose and
objectives of business plans.

2. To be able to give the rationale for writing a

business plan when starting a new venture.

3. To be able to describe the preferred content and

format for a business plan.
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HOMEWORK

Study about the

Intellectual Property
Rights for next session’s
10-item quiz.
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Motivation
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DISCUSSION OUTLINE
The Business Plan
I. Definition
II. Purpose/Objectives
III. Form
IV. Content and Format
V. Effectiveness
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What is a
Business Plan?
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WHAT IS A BUSINESS PLAN?

Entrepreneur.com:
A written document describing the nature of the
business, the sales and marketing strategy, and
the financial background, and containing a
projected profit and loss statement.
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WHAT IS A BUSINESS PLAN?

Investopedia.com:
• A written document that describes in detail
how a business, usually a new one, is going to
achieve its goals.
• It is prepared for an established business that is
moving in a new direction.
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WHAT IS A BUSINESS PLAN?

• Basically: a document that outlines the basic
concept underlying a business (what problem
will be solved) and how to execute your plan
(how to solve the problem)

• Entrepreneur’s game plan

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WHAT IS A BUSINESS PLAN?

• No one correct formula
• Should lay out your basic idea for your
venture
• Should include descriptions of where you are
now, where you want to go, and how you
intend to get there
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Why Should You

Write a Business
Plan?
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WHY WRITE A BUSINESS PLAN?

• Assesses if a good idea is also a good
investment opportunity
• Determines whether business aligns with
personal goals
• Provides direction for insiders
• Convinces outsiders to enter into a relationship
with the company
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WHY WRITE A BUSINESS PLAN?

Internal External

• Entrepreneur • Prospective
• New management customers, suppliers,
and employees lenders, and investors

Important issues and Be linked with the firm

activities;
Vision
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What Form Will

the Business Plan
Take?
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FORM OF THE BUSINESS PLAN?

2 Forms:

1. The Short Plan

2. The Comprehensive Plan
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FORM OF THE BUSINESS PLAN?

1. The Short Plan

- Abbreviated form of traditional business plan

that addresses only the most important issues
in a firm’s success

- Will frequently satisfy an investor

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FORM OF THE BUSINESS PLAN?

2. The Comprehensive Plan

- In-depth analysis of the critical factors that

will determine a firm’s success or failure
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How to Prepare
the Business Plan?
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HOW TO PREPARE THE

BUSINESS PLAN?
2 Primary Concerns

1. Content and Format

2. Effectiveness of the Written Presentation

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HOW TO PREPARE THE

BUSINESS PLAN?
1. Content and Format

- No specific format, but investors want to see a

format that is familiar to them
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HOW TO PREPARE?
1. Content and Format
A. Cover Page H. Operations and
B. Table of Contents Development Plan
C. Executive Summary I. Management Team
D. Industry, Target J. Critical Risks
Customer, and K. Offering
Competitor Analysis L. Exit Strategy
E. Company Description M. Financial Plan
F. Product/Service Plan N. Appendix of Supporting
G. Marketing Plan Documents
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HOW TO PREPARE?
A. Cover Page
• Company name and contact information
• Tagline and company logo
• Name of contact person (preferably the president) with
contact information
• Date
• If the plan is being given to investors: a confidentiality
disclaimer
• Number of the copy
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HOW TO PREPARE?
B. Table of Contents
• Provides sequential listing
of the plan
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HOW TO PREPARE?
C. Executive Summary (Overview)

• Most important section = catch readers’ attention

• Must convey a clear and concise picture of
proposed venture
• Must create a sense of excitement, interest
• At the beginning of the plan but should be written
last
• No more than three (3) pages
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HOW TO PREPARE?
C. Executive Summary (Overview)
• May be in the form of:
1. Synopsis
2. Narrative
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HOW TO PREPARE?
C. Executive Summary (Overview)

1. Synopsis
 Briefly covers all aspects of the business plan
 Relatively equal treatment for each topic
 Easy to prepare but rather dry reading
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HOW TO PREPARE?
C. Executive Summary (Overview)
2. Narrative
 tells a story, conveys greater excitement
 requires a gifted writer
 works well for companies with interesting or
impressive backgrounds or histories
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HOW TO PREPARE?
C. Executive Summary (Overview)
• Should include:
 Description of the opportunity
 Explanation of the business concept
 Industry overview
 Target market
 Competitive advantage you hope to achieve in the market
 The economics of the opportunity
 The management team
 The amount and purpose of the money being requested (the
“offering”), if you are seeking financing
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HOW TO PREPARE?
D. Company Description
• Type of business being proposed
• Firm’s objectives
• Firm’s location
• Whether it will serve a local or international
market
• If existing business: history should be included
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HOW TO PREPARE?
D. Company Description
In writing this section, entrepreneur should answer the
following questions:
1. When and where is the business to be started?
2. What is the history of the company?
3. What are the firm’s objectives?
4. What changes have been made in structure
and/or ownership?
5. In what stage of development is the firm?
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HOW TO PREPARE?
D. Company Description
In writing this section, entrepreneur should answer the
following questions:
6. What has been achieved to date?
7. What is the firm’s competitive advantage, or what
we might call distinctive competence?
8. What are the basic nature and activity of the
business?
9. What is its primary product or service?
10. What customers will be served?
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HOW TO PREPARE?
D. Company Description
In writing this section, entrepreneur should answer the
following questions:
11. What is the firm’s form of organization?
12. What are the current and projected economic states
of the industry?
13. Does the firm intend to sell to another company or
an investment group? Does it plan to be a publicly
traded company, or do the owners want to transfer
ownership to the next generation of the family?
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HOW TO PREPARE?
E. Industry, Target Customer, and Competitor Analysis
• Present the opportunity
• Demonstrate why there is a significant market to be
served

• Describe industry: Market identification process

• Describe industry: Provide the context of the
opportunity and demonstrate that a target market
segment is being underserved
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HOW TO PREPARE?
E. Industry, Target Customer, and Competitor Analysis

• Describe target customers: demographics and

psychological variables

• Analyze competitors: product or service attributes

that they offer or are failing to provide
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HOW TO PREPARE?
F. Product/Service Plan
• Convincing presentation of company’s competitive advantage
• Based on earlier description of industry and its major players,
explain how product or service fills a gap in the market or is
“better, cheaper, and/or faster”
• Growth strategy = growth is a primary determinant of firm’s
value
• If relevant, describe secondary targets the firm will pursue
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HOW TO PREPARE?
G. Marketing Plan
• How the firm will reach and service customers within a
given market
• Should present the marketing strategy
 Identifying and attracting customers
 Pricing, sales force, distribution channels
 Sales promotion and advertising
 Credit and pricing policies
• Warranties and planned product updates
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HOW TO PREPARE?
H. Operations and Development Plan
• Offers information on how the service will be provided
• Explain how operations will contribute to firm’s competitive
advantage (how it will create value for the customer)
• Discuss location and facilities
• Should explain firm’s proposed approach to assuring quality,
controlling inventory, subcontractors
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HOW TO PREPARE?
I. Management Team

• Prospective investors look for well-managed companies

• Should detail proposed venture’s organizational structure and

the backgrounds of people in key positions
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HOW TO PREPARE?
J. Critical Risks
• The business plan is intended to tell a story of a success, but
there are always risks associated with starting a new venture.

• Identifies potential pitfalls that may be encountered by an

investor
• Common risks include: lack of market acceptance, competitor
retaliation, longer time and higher expenses than expected,
inadequate financing, government regulations
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HOW TO PREPARE?
K. Offering
• If entrepreneur is seeking capital from investors, an
offering should be included in the plan to indicate clearly
how much money is needed and when.
• May be conveyed in a sources and uses table that indicates
the type of financing and how funds will be used
• If equity is being requested, entrepreneur will need to
decide how much of ownership to give up
• Typically, amount of money being raised should carry the
firm for 12 – 18 months
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HOW TO PREPARE?
K. Offering
• Sources and Uses Table Example: $ 500,000
Sources:
Bank debt $ 100,000
Equity:
New investors 300,000
Founders 100,000
Total sources $ 500,000

Uses:
Product development $ 125,000
Personnel costs 75,000
Working capital:
Cash 20,000
Accounts receivable 100,000
Inventory 80,000
Machinery 100,000
Total uses $ 500,000
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HOW TO PREPARE?
L. Exit Strategy
• Investors will want to know the possible options for cashing
out of their investment
• Most investors will not invest in a startup or early-stage
business if they are not confident that there will be an
opportunity to recover their principal investment and a nice
return on the investment
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HOW TO PREPARE?
M. Financial Plan
• Presents financial forecasts as pro forma statements
• Should show that proposed business can be self-
supporting and profitable
• Ideally include annual reports for three to five years
• Should be supported by well-substantiated assumptions
and explanations of how the figures have been
determined
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HOW TO PREPARE?
N. Appendix of Supporting Documents
• Various supplementary reading materials and attachments
to expand the reader’s understanding of the plan
• Include any items referenced in the text of business plan:
 Resumes
 Photographs
 Professional references
 Marketing research studies
 Pertinent published research
 Signed con
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HOW TO PREPARE THE

BUSINESS PLAN?
2. Effectiveness of the Written Presentation
• The plan is not the business.
 A poorly conceived new venture cannot be rescued by a good
presentation, and
 A good concept may be destroyed by a presentation that fails to
communicate effectively
• Ultimately depends on quality of the underlying business
opportunity
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HOW TO PREPARE?
2. Effectiveness of the Written Presentation
A. Analyze the market thoroughly
B. Provide solid evidence for any claims
C. Think like an investor
D. Don’t hide weakness – identify potential fatal flaws
E. Maintain confidentiality
F. Pay attention to details
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HOW TO PREPARE?
A. Analyze the Market Thoroughly
Answer some basic questions that investors and lenders require
1. What is your target market?
2. How large is the target market?
3. What problems concern the target market?
4. Are any of these problems greater than the one you’re
addressing?
5. How does your product or service fix the problem?
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HOW TO PREPARE?
A. Analyze the Market Thoroughly
Answer some basic questions that investors and lenders require
6. Who will buy your product or service?
7. How much are they willing to pay for it?
8. Why do they need it?
9. Why would they buy from you?
10. Who are your competitors?
11. What are their strengths and weaknesses?
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HOW TO PREPARE?
A. Analyze the Market Thoroughly

• Hard evidence to support claims when presenting market

analysis
• Gathering secondary data about the market is important, but
if you are not out talking to prospective customers, then
your analysis has no credibility
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HOW TO PREPARE?
B. Provide Solid Evidence for Any Claims

• Factual support for claims or assurances made

• Plan must be believable
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HOW TO PREPARE?
C. Think Like an Investor
• “You should think like [an investor] and act like an
entrepreneur.” -Jeffrey Bussgang
• Energy of the entrepreneur and discipline of the
investor
• Prospective investors have a single goal: to maximize
potential return on an investment through cash flows
that will be received, while minimizing the risk
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HOW TO PREPARE?
D. Don’t Hide Weakness – Identify Potential Fatal Flaws
• Every business has them
• Potential flaws may be overlooked because of the
excitement over an opportunity
• If there are weaknesses in the plan, the investor will find
them
• Be open and straightforward about weaknesses
• Integrity
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HOW TO PREPARE?
E. Maintain Confidentiality
• Indicate that all information in the plan is proprietary
and confidential
• Number every copy of the plan
• Account for each outstanding copy
• Be cautious about divulging highly sensitive specifics
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HOW TO PREPARE?
F. Pay Attention to Details
• Suggestions:
1. Use good grammar.
2. Limit the presentation to a reasonable length.
3. Go for an attractive, professional appearance.
4. Describe your service in lay terms.
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REFLECTION

Why must entrepreneurs

write a business plan for
their product/services?