Preparing Effective Business Plans: An

Entrepreneurial Approach
Second Edition

Chapter 1
Why Plan?
Chapter Learning Objectives
1.1 Identify Reasons for Writing a Business Plan
1.2 Discover Who Reads the Business Plan and What They
are Looking For
1.3 Review Guidelines for Writing a Business Plan
1.4 Discuss Types of Business
1.5 Determine Plan for the Text Book
Introduction
• Increased Interest in Study of Entrepreneurship
• 2/3 of Colleges and Universities Offer
Entrepreneurship Coursework
• 320 of 100,000 Adults Created Businesses in 2011
– Approximately 543,000 Businesses Each
Month
• 54% of Millennials (Age 18-34) Either Want to, or
Have Already Created Businesses
– 63% African Americans
– 64% Latinos
The Business Plan
• Written Document That Carefully Explains Every Aspect
of a New Business Venture
• Dual Purpose Document:
– Inside the Firm - Used to Develop a Road Map to
Execute Strategies and Plans
– Outside the Firm - Plan Introduces Potential Investors
and Other Stakeholders to the Business Opportunity
Firm is Pursuing
• Last Step in Comprehensive Process of Screening a
Business Concept
Comprehensive Process
There is a comprehensive process to screen new business
concepts, including:
1.Identifying a business idea
2.Screening the idea to determine preliminary feasibility
3.Conducting a full feasibility analysis to determine if
proceeding with a business plan is warranted
4.Writing a full business plan
Reasons for Writing a Business Plan
• Internal: Forces Business Founders to Think
Through Every Aspect of Their New Venture
• External:
– Sells the Merits of New Venture to Outsiders
▪ Prospective Investors
▪ Business Accelerators and/or Incubators
▪ Suppliers
▪ Potential Partners
– Increases Credibility of New Venture
▪ Win a Business Plan Competition
Who Reads the Business Plan and What
They are Looking For?

Employees External Stakeholders

Company Vision Realistic
Future Plans Plainly Explains Business
Develop Strong Team Business is Viable
Reveal Potential Problems Business Has Impressive
Potential
Guidelines for Writing a Business Plan
• Structure and Style:
– Conventional Format; 25 to 35 Pages Long

• Content:
– Follow a Standard Format (Table 1-1)
– Review for Completeness, Spelling, and Grammar
– Avoid Red Flags (Table 1-2)

• Plan vs. Personal Goals and Aspirations:

– Be Careful What You Wish For

• Elements of Plan May Change Over Time:

– Ask Potential Customers for Feedback
– Corridor Principle – Which Pathway to Choose?
– Write Deliberate But Act Emergent
Business Plan Insight: Elevator Speech
Description Four Steps
• Brief, Carefully 1. Describe Opportunity
Constructed Statement or Problem
2. Describe How Product
• One or Two Minutes Long
or Service Meets the
• Outlines Merits of a Opportunity or Solves
Venture or Business Plan the Problem
3. Describe Your
Qualifications
4. Describe your Market

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Table 1-2 : Red Flags
• Founders with None of Their Own Money at Risk
• Poorly Cited Plan
• Defining the Market Size Too Broadly
• Overly Aggressive Financials
• Hiding or Avoiding Weakness
• Sloppiness in Any Area
• Too Long of a Plan
Content of the Business Plan
Convince Reader the Opportunity is:
Exciting, Feasible, Defensible and Within Capabilities of the
Founders
Measuring the Business Plan Against Your
Personal Goals and Aspirations
Meeting Venture Capitalists’ Expectations v s Choice of
ersu

Lifestyle
• VCs Expect Fast Growth Providing 30 to 40% Annual
Return on Investment for 4 to 7 Years
• Requires Founder’s Total Commitment of Time and
Attention
• Must Share Ownership with VC
Recognizing that Elements of the Business
Plan May Change (1 of 2)
Corridor Principle
Once Entrepreneur Starts a Business, He or She Begins a
Journey Down a Path Where Corridors Leading to New
Venture Opportunities Become Apparent
Recognizing that Elements of the Business
Plan May Change (2 of 2)
• Be Alert to New Ideas
• Write Deliberate (But) Act Emergent
– Create a Deliberate Plan That is a Specific Blueprint
to Follow
– Think Emergent With a Mindset That is Open to
Change and Influenced by the Realities of the
Marketplace
Table 1-3 : Four Types of Business

• Survival
• Lifestyle
• Managed Growth
• Aggressive Growth
 Types of Businesses
• There are four distinct types of businesses:
– Survival—provides its owner just enough money to put food on the table and pay
bills (handyman, part-time childcare)

– Lifestyle—provides its owner the opportunity to pursue a certain lifestyle and

make a living at it (clothing boutique, personal trainer)

– Managed Growth—employs 10 or more people, may have several outlets, and

may be introducing new products or services to the market (regional restaurant
chain, multi-unit franchise)

– Aggressive Growth—bringing new products and services to the market and has
aggressive growth plans (computer software, medical equipment, national
restaurant chain)

– All of these types of businesses are acceptable—there is no value judgment

here. This book, however, focuses primarily on lifestyle, managed growth and
aggressive growth firms. Not all businesses grow rapidly and make tons of
money, but may still provide their owners satisfying lives and financial security.
This book equally targets this type of business along with more aggressive
Types of Business: Survival
Provides Just Enough Money to Put Food on the Table and
Pay Bills
• Examples:
– Handyman
– Lawn Service
– Part-Time Childcare
Types of Business: Lifestyle
Provides Owner the Opportunity to Pursue a Certain
Lifestyle and Make a Living
• Examples:
– Clothing Boutique
– Personal Trainer
Types of Business: Managed Growth
Employs 10 or More People, May Have
Several Outlets, and May be Introducing
New Products or Services to the Market
• Examples:
– Multi-Unit Franchise
– Regional Restaurant Chain
– Web Retailer
Types of Business: Aggressive Growth
Bringing New Products and Services to the Market and Has
Aggressive Growth Plans
• Examples:
– Computer Software
– Medical Equipment
– National Restaurant Chain
The Plan for the Book
• Section One: Starting the Process
• Section Two: What to do Before the Business Plan is
Written
• Section Three: Preparing a Business Plan
• Section Four: Presenting the Business Plan
Section 1: Starting the Process
Chapter 1: Why Plan?
• Systematically Think Through Each Aspect of the New
Venture
• Focus on Structure, Style and Content
• Introduce Business Plan to External Stakeholders
• Business Plan Coincide With Personal Goals and
Aspirations
Section 2: What to Do Before Plan is
Written
Chapter 2: Develop and Screen Ideas
1. Identify a Business Idea
2. Screen the Idea to Determine its Initial Feasibility
Chapter 3: Feasibility Analysis
3. Conduct a Full Feasibility Analysis to Determine if
Proceeding with a Business Plan is Warranted
4. Write the Plan
From an Idea to a Business Plan

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Section 3: Preparing a Business Plan
Chapter 4: Introductory Material
Chapter 5: Industry Analysis
Chapter 6: Market Analysis
Chapter 7: Marketing Plan
Chapter 8: Management Team & Company
Structure
Chapter 9: Operations Plan
Chapter 10: Financial Projections
Section 4: Presenting the Business Plan
• Chapter 11
– Suggestions for Making Effective Presentations
– Using PowerPoint Slides Effectively
– Fielding Questions From an Audience Effectively
Did You Learn?
1. Identify Reasons for Writing a Business Plan
2. Discover Who Reads the Business Plan and What They
are Looking For
3. Review Guidelines for Writing a Business Plan
4. Discuss Types of Business
5. Determine Plan for the Text Book
End of lecture

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