BUS827

BUS827

Entrepreneurship and Business

Strategy

Seminar 4: Feasibility Analysis &

Writing a Business Plan

BUS827, 2013 Seminar 4- Writing a Business Plan 1

 1. Course Objectives:
1. Apply the entrepreneurial process model to analyse
entrepreneurs’ venture creation.
2. Understand and practise idea generation and screening
including opportunity analysis trends, feasibility and competitive
analysis.
3. Understand the process how to write up feasibility analysis
and business plan to launch the new venture successfully.
4. Understand the basics of entrepreneurial finance: raising funds,
growth financing, financial evaluation of opportunities, and
acquisition financing.
5. Comprehend the issues and tasks involved in setting up a
venture, marketing and financing the venture, and evaluating
venture performance for growth and sustainability.

2
 Business Model

• Entrepreneurs do not lack creative ideas,

but …once the idea has been developed,
a business model is needed.
• A business model defines the process a
company will use to generate sales and a
profit.

4-3 Ch. 4: Feasibility Analysis

& Business Plan
 Business Model

A business model is comprised of:

►A definition of target customers and how the
company will reach them
►The customer value proposition the company offers
►Point of differentiation
►Pricing
►Selling process
►Distribution system
►Customer support

Ch. 4: Feasibility Analysis

& Business Plan
 The Business Plan

• A written summary of:

►An entrepreneur’s proposed business venture
►The operational and financial details
►The marketing opportunities and strategy
►The managers’ skills and abilities
• A business plan is the best insurance against
launching a business destined to fail or
mismanaging a potentially successful company.

Ch. 4: Feasibility Analysis

& Business Plan
 The Business Plan:
Two Essential Functions

1. Guiding the company by

charting its future course
and defining its strategy for
following it.
2. Attracting lenders and
investors who will provide
needed capital.

Ch. 4: Feasibility Analysis

& Business Plan
 A Plan Must Pass Three Tests
1. The Reality Test – proving that:
►A market really does exist for your product or service.
►You can actually build or provide it for the cost
estimates in the plan.
2. The Competitive Test – evaluates:
►A company’s position relative to its competitors.
►Management’s ability to create a company that will
gain an edge over its rivals.
3. The Value Test – proving that:
►A venture offers investors or lenders an attractive rate
of return or a high probability of repayment.

Ch. 4: Feasibility Analysis

& Business Plan
 Why Take the Time to
Build a Business Plan?

• Although building a plan does not guarantee

success, it does increase your chances of
succeeding in business.
• A plan is like a road map that serves as a
guide on a journey through unfamiliar, harsh,
and dangerous territory. Don’t attempt the
trip without a map!

Ch. 4: Feasibility Analysis

& Business Plan
Benefits of Creating a Business Plan

Ch. 4: Feasibility Analysis

& Business Plan
Key Elements of a Business Plan

• Title Page and Table of Contents

• Executive Summary
• Vision and Mission Statement
• Company History
• Business and Industry Profile Our
Business
Plan

• Goals and Objectives

4 - 10 Ch. 4: Feasibility Analysis

& Business Plan
Mission, Goals, and Objectives

Ch. 4: Feasibility Analysis

& Business Plan
Key Elements of a Business Plan

• Title Page and Table of Contents

• Executive Summary The
Business
Plan

• Mission Statement
• Company History
• Business and Industry Profile
• Goals and Objectives
• Business Strategy
• Description of Products/Services
Ch. 4: Feasibility Analysis
& Business Plan
 Features vs. Benefits

• Feature – a descriptive fact about a

product or service:
“an ergonomically designed,
more comfortable handle”
• Benefit – what a customer gains from the
product or service feature:
“fewer problems with carpal
tunnel syndrome and
increased productivity”
Ch. 4: Feasibility Analysis
& Business Plan
Key Elements of a Business Plan
(continued)

• Marketing Strategy The

Business
Plan

– Document market claims

– Show customer interest
• Competitor Analysis
• Description of Management Team
• Plan of Operation
Our
Business

• Projected Financial Statements

Plan

• Loan or Investment Proposal

Ch. 4: Feasibility Analysis
& Business Plan
 Five Forces Model
Potential
Entrants
Threat of
New Entrants

Bargaining Power
of Suppliers Industry
Bargaining Power
Competitors of Buyers

Suppliers Buyers
Rivalry among
existing firms

Threat of Substitute
Products or Services

Substitutes
4 - 15 Ch. 4: Feasibility Analysis
& Business Plan
 Guidelines for Preparing
a Business Plan
• Remember: No one can create your plan for
you.
• Potential lenders want to see financial
projections, but they are more interested in the
strategies for reaching those projections.
• Show how you plan to set your business apart
from competitors; don’t fall into the “me too” trap.
• Identify your target market and offer evidence
that customers for your product or service exist.

4 - 16 Ch. 4: Feasibility Analysis

& Business Plan
 Tips on Preparing
a Business Plan

• Make sure your plan has an attractive

cover. (First impressions are crucial.)
• Rid your plan of all spelling and
grammatical errors.
• Make your plan visually appealing.
• Include a table of contents to allow readers
to navigate your plan easily.
• Make it interesting.
4 - 17 Ch. 4: Feasibility Analysis
& Business Plan
 Tips on Preparing
a Business Plan
(continued)

• Your plan must prove that the business will make

money (not necessarily immediately, but
eventually).
• Use spreadsheets to generate financial
forecasts.
• Always include cash flow projections.
• Keep your plan “crisp” – between 25 and 40
pages long.
• Tell the truth – always.
4 - 18 Ch. 4: Feasibility Analysis
& Business Plan
 Guidelines for Writing a Business Plan

• Structure of the Business Plan (continued)

– Software Packages
• There are many software packages available that employ an interactive,
menu-driven approach to assist in the writing of a business plan.
• Examples:
– http://maus.com.au/
– http://www.mplans.com/sample_marketing_plans.php
• Some of these programs are very helpful. However, entrepreneurs should
avoid a boilerplate plan that looks as though it came from a “canned”
source.
– Sense of Excitement
• Along with facts and figures, a business plan needs to project a sense of
anticipation and excitement about the possibilities that surround a new
venture.

4-19.
Guidelines for Writing a Business Plan

Types of Business Plans

4-20.
 Guidelines for Writing a Business Plan

• Recognizing the Elements of the Plan May Change

– It’s important to recognize that the plan will usually change
while written.
– New insights invariably emerge when an entrepreneur or a
team of entrepreneurs immerse themselves in writing the
plan and start getting feedback from others.

4-21.
 Section 1: Executive Summary

• Executive Summary
– The 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-spaced
pages.

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 2: Industry Analysis

• Industry Analysis
– This section should begin 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
• Nature of participants
• Key success factors
• Industry trends
• Long-term prospects

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 3: Company Description

• Company Description
– This section begins 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)

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 4: Market Analysis

• Market Analysis
– The 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

Copyright ©2012 Pearson

Education, Inc. publishing
Section 5: The Economics of the Business

• The Economics of the Business

– This section addresses the basic logic of how profits are earned in
the business and how many units of a business’s profits must be
sold for the business to “break even” and then start earning a
profit.
– Items to include in this section:
• Revenue drivers and profit margins
• Fixed and variable costs
• Operating leverage and its implications
• Start-up costs
• Break-even chart and calculations

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 6: Marketing Plan

• Marketing Plan
– The 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
• Sales process (or Cycle)
• Sales tactics

Copyright ©2012 Pearson

Education, Inc. publishing
Section 7: Design and Development Plan

• Design and Development Plan

– If you’re developing a completely new product or service,
you need to include a section in your business plan that
focuses on the status of your development efforts.
– Items to include in this section:
• Development status and tasks
• Challenges and risks
• Projected development costs
• Proprietary issues (patents, trademarks, copyrights, licenses, brand
names)
Copyright ©2012 Pearson
Education, Inc. publishing
 Section 8: Operations Plan

• Operations Plan
– Outlines how your business will be run and how your product
or service will be produced.
– A useful way to illustrate how your business will be run is to
describe it in terms of “back stage” (unseen to the customer)
and “front stage” (seen by the customer) activities.
– Items to include in this section:
• General approach to operations
• Business location
• Facilities and equipment

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 9: Management Team and
Company Structure
1 of 2

• Management Team and Company Structure

– The 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

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 10: Overall Schedule

• Overall Schedule
– A schedule should be prepared that shows the major events required to
launch the business.
– The schedule should be in the format of milestones critical to the
business’s success.
– Examples of milestones:
• Incorporating the venture
• Completion of prototypes
• Rental of facilities
• Obtaining critical financing
• Starting production
• Obtaining the first sale

Copyright ©2012 Pearson

Education, Inc. publishing
 Section 11: Financial Projections

• Financial Projections
– The 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
• Ratio analysis

Copyright ©2012 Pearson

Education, Inc. publishing
What Lenders and Investors Look for in a
Business Plan

The “5 Cs” of Credit

•Capital
•Capacity
•Collateral
•Character
•Conditions

4 - 33 Ch. 4: Feasibility Analysis

& Business Plan
 Presenting the Plan

• Demonstrate enthusiasm, but don’t be

overemotional.
• Know your audience thoroughly.
• “Hook” investors quickly with an up-front
explanation of the venture, its opportunities,
and its benefits to them.
• Hit the highlights; focus on
the details later.
• Keep your presentation
simple – 2 or 3 major points.
4 - 34 Ch. 4: Feasibility Analysis
& Business Plan
 Presenting the Plan

• Avoid overloading your audience with

technological jargon.
• Use visual aids.
• Close by reinforcing the nature of the
opportunity.
• Be prepared (with details) for potential
investors’ questions.
• Follow up with every investor to whom you
make your presentation.
4 - 35 Ch. 4: Feasibility Analysis
& Business Plan
 Presenting the Business Plan to Investors

Twelve PowerPoint Slides to Include in an Investor Presentation

1. Title Slide 7. Marketing and sales

2. Problem 8. Management team
3. Solution 9. Financial projections
4. Opportunity and target market 10. Current status
5. Technology 11. Financing sought
6. Competition 12. Summary

. 4-36
 BUS827

Conclusion

• There are no guarantees for success.

• Creating a business plan will be valuable
primarily because of the process itself.
• The business planning process may provide
insight to increase the chances for success.
• The business plan: Entrepreneurs benefit;
lenders and investors demand it!

Ch. 4: Feasibility Analysis & Business Plan 4 - 37