Making a Business Plan

Making a Business Plan

A business plan is the written representation
of your vision for your business.

It is the story of your venture written by you.

 Making a Business Plan
• Business plans are used by entrepreneurs for various purposes.
• It can be used to get debt from banks or to get equity funding from
angel investors or venture capitalists.
• It can also be used to attract business partners and key employees
or to make business alliances.
• One of the important uses of the business plan is to clarify the exact
nature of the business to you.
• Often, many lacunae in our business planning come to the fore only
after the plan has been put down in paper.
• So, a business plan also gives us an opportunity to think through and
come up with answers to questions we had not considered
previously
 Making a Business Plan
• A business plan must describe the company, its
product, and its entrepreneurial team.
• It must state the money needed by the business and
how it will be spent as well as the objectives of the
business and how they will be achieved.
• The business plan must help the entrepreneur
understand the business and make him/her confident
that the venture’s objectives can be achieved.
• A well-written business plan is an asset to the
entrepreneur.
 Key sections in a Business Plan
• Executive Summery
• The company
• The management team
• The industry and the market
• Operations
• The marketing plan
• Financial Plan
• Risk and contingencies
• Appendices

• Depending upon the business idea, some of these sections can be dropped, or
there can be some entirely different sections too.

A good business plan should not only concentrate on the strengths of the business but also
make a realistic assessment of its risks and shortcomings too. Then only will it make a
convincing presentation of the company’s worth.
 FedEx Corporation

• Fred Smith is the son of Frederick C. Smith, the founder of the Toddle
House restaurant chain.
• In 1962, Fred entered Yale University to do his graduation in economics.
While in Yale, he wrote a paper, outlining a concept of a business based
on an overnight delivery service highly reliant on exchange of information
and on predicting volumes. His view was that the information about the
package was as important as the package itself. His professor was not at
all impressed and he received a ‘C’ for this paper.
• The unappreciated paper led to the birth of Federal Express. Fred
graduated in 1966 and after a stint in the Marines and a couple of other
businesses, he started FedEx Corporation. It commenced operations in
1973 with 14 aircraft connecting 25 cities in the US. Currently, FedEx
Corporation is a $34 billion enterprise employing about 2,75,000 people
and operating in all major countries of the world.
Uses of a Business Plan
 Uses of a Business Plan
Equity Funding
• A venture capitalist or an angel investor will very
rarely commit an investment to a start-up without
perusing its business plan.
• The venture capitalist will primarily use the business
plan to gauge risks and forecast growth prospects.
• The investor will never restrict analysis of the
business to just the business plan but it will always
remain an important reference point.
 Uses of a Business Plan
Bank Finance
• A banker obviously concentrates on the ability of
the business to repay the debt and on the
availability of the collateral or other securities.
• Banks look for at least some specific issues to be
addressed in the business plan.
• For example, a bank needs projected balance
sheets and profit and loss accounts for the first
five years.
 Uses of a Business Plan
Alliances
• An entrepreneurial firm may need to form alliances
with other firms to reach new markets, develop new
products, or create common facilities.
• Other firms may want to know more about the
business before committing to any long-term
arrangement.
• Sometimes, a business plan can help convince a well-
established retailer or distributor to commit to the
start-up.
 Uses of a Business Plan
Recruitment
• A good business needs support from
experienced top-level employees.

• A business plan will help them understand

what they are getting into.
 Uses of a Business Plan
Explain the Business
• A business plan helps in planning.
• While writing the business plan, it is likely that
the entrepreneur was able to detect many
shortcomings in the original business idea and
these shortcomings could be overcome by
thinking through and plugging the gaps.
• Later, this plan can serve as a guide or manual to
help in business and strategy formulation.
 Uses of a Business Plan
Miscellaneous Uses
• Very often, an entrepreneur seeks moral
support from friends and family.
• A business plan can be a good way of
presenting your business to your father,
mother, wife and colleagues.
• By going through it, they will have a better
appreciation of what you are setting out to do.
Writing a Business Plan
 Writing a Business Plan

• Like any other project, writing a business plan

has to be carefully planned and systematically
executed.
• This will improve the quality of the final
business plan and it will also keep things
moving smoothly.
 Writing a Business Plan
Define Purpose
• The business Plan will serve its purpose better if its
purpose is spelt out in the very beginning.
• There may be multiple goals in writing the business plan.
• E.g. The entrepreneur may be planning on using the
business plan to secure bank finance as well as to attract
a major corporation as a strategic partner.
• It is okay to have multiple goals, but some amount of
customizing should be done before placing it in front of
different audiences.
 Writing a Business Plan
Collect Information
• All sorts of information about the business and the
industry should be collected.
• List out all the information you already have with you,
• Figure out the major gaps in information, and
• Go out to get more information.
• Do not rate the quality of this information; just gather
it.
• At this point, the more you can find, the better.
 Writing a Business Plan
Write Down Things
• After enough information has been gathered, you can plan on
starting the actual writing.
• Think of a rough structure appropriate for the business plan
and start writing.
• It is important to note down things on paper without being too
particular about sequence and grammar.
• Approach it like a brainstorming session.
• Do not be critical of your efforts.
• Just make sure that you are putting enough thoughts on paper.
 Writing a Business Plan
Prepare a Rough Draft
• Now it is time to give shape to your business plan and make it
concrete.
• Correct grammatical mistakes and break up the written account into
meaningful sections.
• Compare your writing to your intended outline and make necessary
changes.
• As your work progresses, you need to make a note of what else
needs to be added.
• For some topics, more information will be needed.
• At this stage of writing process, you are going to decide on the level
of detail necessary to be included in the business plan.
 Writing a Business Plan
Do Financial Analysis
• The numbers will continue to be important.
• After all costs and revenue estimates have been
arrived at, pro-forma financial statements are to
be drafted.
• That will lead to sensitivity analysis, the ROI
calculation, the break-even analysis, and the other
financial ratios.
• The numbers should be realistic and consistent.
 Writing a Business Plan
Finalize the Plan

• Finalizing the business plan is certainly a hard job.

• Language and spellings have to be checked, the numbers have
to be scrutinized and formatting has to be completed.
• The business plan should not be ornate but should have a
professional look about it.
• Set a deadline for completing it and adhere to the deadline.
• One good way to enforce a deadline is to tell some people that
you will be showing them the business plan by a certain date.
Then it will be hard for you to ignore the deadline.
 Writing a Business Plan
Get the Plan Reviewed
• Do not review your business plan yourself.
• Ask someone else to do it.
• It could be a family member, a friend, or a
professional acquaintance.
• Even better would be if you could get a
number of people to do it.
• .............
 Writing a Business Plan
Get the Plan Reviewed
• Even better would be if you could get a
number of people to do it.
• After getting comments on your paln, you
should incorporate only those suggestions
that you find convincing.

• After all, this is your business plan!!!

 RESOURCES

Business Plan Archive

 Business Plan Archive
• The Business Plan Archive is a unique resource for budding entrepreneurs.
(http://www.businessplanarchive.org)
• It is a joint initiative of the Library of Congress, the Center for History and New
Media, and the University of Maryland Libraries.
• The Archive collects and preserves business plans and other planning
documents from the dot com boom, so that future generations will be able to
learn from this remarkable period in the history of technology and
entrepreneurship.
• The Archive is built by the voluntary contributions by entrepreneurs and
managers of that time.
• Because some of the material may contain proprietary information,
contributors retain a lot of control on how the information is treated and who
is allowed access to the material.
• It also provide researchers to take a closer look at the crash and find lessons
for the future generations of entrepreneurs.
 Business-Plan Competitions

• There are literally hundreds of business-plan

competitions being organized by business
schools and other technical education centres
in India and abroad.
• Some of the better known business-plan
competitions are listed here.....
 Business-Plan Competitions

• Some of the better known business-plan competitions

are listed here.....
• National Level
1) Eureka: E-cell at IIT Bombay
2) Anveshan: Centre for Innovation, Incubation and
Entrepreneurship(CIIE) at IIM Ahemedabad.
3) BZZWings: IIM Bangalore
4) Ananya: Xavier Institute of Management, Bhubaneshwar
5) Lock, Stock and Barrel: S.P. Jain Institute of Management
Studies, Mumbai
 Business-Plan Competitions

• Some of the better known business-plan competitions are

listed here.....
• International Level
1) DFJ Venture Challenge: Draper Fisher Jurvetson
2) Berkley Business Plan Competition: Hass School of Business,
UC, Berkley
3) USF-PSI: University of San Francisco
4) HKUST IBPC: Hong Kong University of Science and Technology
Note: Often, business-plan competitions are discontinued or re-launched with a different name.
 Data Collection
• A business plan is no good if does not include a lot of data.
• In that case, financiers who will read the business plan, will
look elsewhere for additional information about the business.
• It will really look bad if they are able to come across a lot of
critical information that has not been included in the business
plan.
• They might think that you have not researched the business
properly and will doubt your ability to run the business.
• They might think that you wilfully withheld information in
order to mislead them.
• None of the above scenarios is desirable...
 Data Collection
• If all the data listed below is collected early in the
business plan writing process, the writing does not have
to be regularly interrupted for lack of information.
• Company Details
• Management
• Industry and Competitions
• Operations
• Marketing and Sales
• Financial Information
 Data Collection
• Company Details:
1) Documents relating to formation
2) Shareholding Details
3) Permits and Registrations
 Data Collection
• Management:
1) Organization chart
2) Details of key employees
3) Consultants and advisors
4) Compensation and other employee agreements
 Data Collection
• Industry and Competitions:
1) Market Statistics from secondary sources
2) Reports on trends, etc.
3) Competitor data
4) Customer surveys
 Data Collection
• Operations:
1) Product specifications
2) Contracts and purchase orders for raw materials
3) Competitive advantages
4) Details of intellectual property(Patent, licence, and
trademarks)
5) Regulatory approvals
6) Industry standards as per regulations
7) Plant layout and operations plan
8) Research and development plans
 Data Collection
• Marketing and Sales
1) Marketing Plan
2) Advance orders, if any
3) Marketing materials
• Financial Information
1) Data on fixed and variable costs to be incurred
2) Financial forecasts
 Data Collection
• This is not an exhaustive list but is only
indicative of the kind of information that may
be needed.

• Other data may also be required, depending

upon the requirements of your company or
the orientation of the business plan.
 Kinds of Business Plans
• Common Question:
What should be the ideal length of the business
plan?
Well, there is no ideal length.
It depends on business idea and also on main
purpose of writing the plan.
 Kinds of Business Plans
• Broadly, there are five versions of business
plans for an entrepreneur to choose from:
• Summary plan
• Executive summary
• Full business plan
• Operational business plan
• Oral presentation
 Kinds of Business Plans
Summary Plan
• A ten to fifteen page summary plan can be used by an
entrepreneur interested in testing the investment waters;
on finding sufficient interest from the investors, a more
comprehensive business plan can be assembled.
• A summary plan may also be appropriate for entrepreneurs
with a proven track record.
• In case of seasoned entrepreneurs with a history of
success, a venture capitalist may not require as much
information from the entrepreneur in the early stages as
from an inexperienced first-time entrepreneur.
 Kinds of Business Plans
Summary Plan
• The summary business plan should include
enough information to convince potential
investors that
1) The business idea is sound and viable;
2) The entrepreneurial team is committed and capable to
make the business idea a success; and
3) The team has studied the market and has understood the
business.
 Kinds of Business Plans

Executive Summary
• Instead of summary plan, an entrepreneur may use just an executive summary, of
not more than three pages.
• It only serves to introduce the business and the entrepreneurial team to the reader.
• The entrepreneur expects that a summary plan will lead to the full business plan
being called upon.

Single-page Snapshot
• An interesting variation of executive summary is a single-page snapshot.
• One has to be very careful before crafting a single page attempting to describe the
entire business idea.
• Only selective highlights can be presented and these highlights may not be able to
properly address the concerns of the readers.
• None the less, it is a great presentation tool if done properly.
 Kinds of Business Plans
Full Business Plan
• If you are planning on raising a lot of money, a 30 to 40 page
full business plan is very useful aid.
• It helps clarify complicated business models and complex
operations to potential financiers.
• It contains all relevant and some irrelevant information about
the proposed business.
• It is enriched by a number of exhibits, which present market
analysis, financial and sales forecasts, and technical reports.
• All assumptions, risks, and critical factors are laid out in this
business plan for the reader to evaluate.
 Kinds of Business Plans
Operational Business Plan
• An operational business plan becomes important once operations
commence.
• This business plan is envisaged as a source of guidance to managers
and other employees.
• It serves as a manual on company operations.
• It helps managers understand the goals of the company and directs
them towards their role in achieving the goals.
• The operational business plan can be very lengthy, maybe even 100
pages and it is likely to have a number of detailed exhibits.
• It may also be a good idea to keep revising the operational business
plan from time to time.
 Kinds of Business Plans
Oral Presentation
• It is a very good idea to plan an oral
presentation in which you summarize the
business plan and present its significant
points.
• A twenty minute oral presentation will suffice.
• The presentation should be carefully
structured and a script can be prepared.
 Key sections in a Business Plan
• Executive Summery
• The company
• The management team
• The industry and the market
• Operations
• The marketing plan
• Financial Plan
• Risk and contingencies
• Appendices

• Depending upon the business idea, some of these sections can be dropped, or
there can be some entirely different sections too.

A good business plan should not only concentrate on the strengths of the business but also
make a realistic assessment of its risks and shortcomings too. Then only will it make a
convincing presentation of the company’s worth.
 Importance of Executive Summary
• An executive summary is not an abstract of the business plan and it
is certainly not a preface.
• It is designed to be complete yet concise business plan by itself.
• In a number of B-plan competitions around the world, the finalists
are short-listed on the basis of their executive summary.
• A full business plan is required to be submitted only by the short-
listed finalists.
• There are some entrepreneurs who first make the executive
summary and then use that as a base for making a detailed
business plan.
• Then there are others who first make the detailed business plan
and then summarize the important points to make an executive
summary.
 Importance of Executive Summary
• Include the key strengths of the business: Why you feel that
the business will be successful.
• Reasons could be: competent management team, location
advantages, proprietary intellectual property, and many other
such factors.
• State some obvious risks and then outline the steps you are
taking to mitigate the risks.
• Include numbers: If there are some dramatic cost advantages,
then that should be presented in detail.
• If the projections are very attractive, they should be
presented and explained in detail.
• It should be able to capture the attention of the reader.
 Description of the Business
• History:

• Current Status:

• Future:
 Description of the Business
• History:
• A start-up is unlikely to have a history of any
significance but it might be relevant to
mention some details of the origin of the
business idea such as what led to the idea,
when was the company formed and who were
the initial supporters.
 Description of the Business
• Current Status:
• Many times, some efforts would have already made towards
establishing the company.
• The company may be registered, land may have been
acquired, some amount of product development may have
been carried out, and some key employees may already be in
place.
• The fact that operations have already started can also serve to
demonstrate commitment on the part of the entrepreneurs.
• This subsection will have comprehensive details about current
status of the organization, including its legal entity, place of
operation, current size, etc.
 Description of the Business
• Future: (Projections should be realistic)
• Most important subsection to the reader.
• Give the reader a sense of direction the company is going to
take in the coming years.
• The company’s future should make sense with reference to
the history of the industry and the capabilities of the start-
up.
• A company that projects sales increase of 50 % annually for
the coming three years does not make a very convincing case
if the start-up is not able to articulate any great competitive
advantage and during the previous ten years, industry sales
have never gone up more than 10% in a particular year.
 Project Report by Consultants
• Chartered accountants and other consultants in
cities across India offer project-report making as
a service.
• Often, it does not just involve writing a project
report or a business plan but also involves
presenting the report or plan to the bank and
getting the loan sanctioned.
• The consultants may charge a fixed rate, a
success fee, or a mix of both.(usually, the
success fee is about 2 percent)
 Project Report by Consultants
• The consultants may charge a fixed rate, a
success fee, or a mix of both.(usually, the success
fee is about 2 percent)
• Sometimes, the success fee can go up to 10
percent or more.
• In such cases, it is clear to both the consultant
and the client that the business plan is not good
and that the entrepreneur has no intention of
seriously doing the business.
•
 The Management Team
• While gauging the viability of the start-up, financiers and venture capitalists
focus special attention on the entrepreneur.
• They look for the following characteristics from the entrepreneur:
– Technical and professional qualifications
– Quality work experience
– Experience in the relevant sector
– Reputation in the business community
– Moral integrity
– Financial capacity
– Networking with other vital people in the industry
• They are certainly unlikely to find all of the above traits in a single entrepreneur,
but every entrepreneur can have his/her own way of prioritizing the above
qualities
• This section should present all the strengths of the entrepreneur.
• It is good to include a short summary bio-data as a paragraph and then include a
detailed CV as an exhibit.
 The Management Team
• This section should present all the strengths of the entrepreneur.
• If more than one entrepreneur involved in the start-up, all should
find mention in this section.
• In case of some senior employees with good experience in the
sector, they should also be pointed out.
• This section can declare any distinguished external consultants
being engaged by the company to help with specific activities.
• In case of private-limited company, it may be relevant to talk about
the constituents of the formal board of directors.
• It should include the roles and responsibilities of various people in
the organization(organization chart as an exhibit).
• Compensation packages being offered to key members of the
management (linked to the long-term well being of the venture).
Industry and The Market
Operations
Marketing Plan
 B-Plan Software
• There is a number of software programs that aid you in making a business
plan.
• Many of these such as the Business Plan Workbook, Fast Track Business Plan,
and the Ultimate Business Plan Starter are available free on the Net.
• One of the leaders in this field is Business Plan Pro by Palo Alto Software.
• Currently, the company sells a standard version for $99 and a premium
version for about twice of this price.
• Critics of B-Plan software claim that using such a software product tends to
standardize B-Plans and their individuality is lost.
• On the other hand, this software will give you access to over 500 sample
business plans and over 9000 industry profiles.
• I f not anything else, it certainly adds to the perspective of the entrepreneur.
• Also, using a template means you are less likely to omit any important
aspects of the B-Plan.
Finance
Risk and Contingencies
Appendices