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LECTURE 6

BUSINESS PLAN

31 October 2017
 LEARNING OUTCOMES
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To understand the many topics that should be

addressed in a business plan.
To realize business plans are helpful for both start-
ups and existing business.
To be able to write a business plan that could be
submitted to a bank or investor for financing.

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

unless you know where you want to go.
The business plan is the entrepreneurs
roadmap for a successful enterprise.

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The Seven Pitfalls for a New Venture
Business Plans
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Source: Baron & Shane (2005)

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 IMPORTANT TIP!
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The clearer the links between the goals sought and

the means for accomplishing them, the more
impressive (and persuasive) the plan will be.
Entrepreneurs do not write a business plan solely to
persuade others to invest in their new ventures. The
business plan will also provide entrepreneurs a
clearer understanding of the best ways of proceeding
their business.

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Model of Business Planning Used by
Many Entrepreneurs
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Source: Baron & Shane (2005)

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

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 Benefits of a Business Plan, cont.
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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.
The business plan quantifies objectives,
providing measurable benchmarks for
comparing forecasts with actual results.
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.
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 Benefits of the Business Plan
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Specifically for the financial sources:
Details of the market potential and plans for
securing a share of that market.
The ventures ability to service debt or provide
an adequate return on equity.
Identifies critical risks and crucial events with a
discussion of contingency plans.
A clear, concise document that contains the
necessary information for a thorough business
and financial evaluation.

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 Developing a Well-
Conceived Business Plan
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 Components of a Business Plan: Basic
Requirement
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What is the basic idea for the new product or

service?
Why is this new product useful or appealing - and to
whom?
How will the idea for the new venture be realized -
what is the overall plan for producing the product,
for marketing it, for dealing with existing and future
competition?

31 October 2017
 Components of a Business Plan: Basic
Requirement
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Who are the entrepreneurs - do they have the

required knowledge, experience, and skills to
develop this idea and to run a new company?
If the plan is designed to raise money;
how much funding is needed?
what type of financing is needed?
how will it be used? And
how will both the entrepreneurs and other persons realize a
return on their investment?

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 The Five-Minute Reading
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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, net worth, 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, charts, exhibits, and other plan components)
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 Putting the Package Together
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Appearance
Length
The cover and title page
The executive summary
The table of contents
*the business plan must look professional

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 Guidelines to Remember
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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 Over Diversify
Identify the Target Market
Keep the Plan Written in the Third Person
Capture the Readers Interest
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Elements of a
Business Plan
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 Complete Outline of a Business Plan
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Section I: Executive Summary (2 - 3 pages)

(should be short, clear, and a persuasive overview
of what the new venture is all about)
Section II: Business Description
A. General description of business
B. Industry background
C. Goals and potential of the business
and milestones (if any)
D. Uniqueness of product or service

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

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Complete Outline of a Business Plan, cont.
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Section IV: Operations

A. Identify location
1. Advantages
2. Zoning
B. Proximity to supplies
C. Access to transportation

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

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Complete Outline of a Business Plan, cont.
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Section VI: Financial

A. Financial forecast
1. Proforma Income Statement (Revenue
& expenses)
2. Cash flow (Managing cash)
3. Proforma Balance Sheet (Fixed assets,
current assets, liabilities & equities)
4. Break-even analysis

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BALANCE SHEET

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CASH FLOW

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INCOME STATEMENT

25 31 October 2017
Complete Outline of a Business Plan, cont.
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Section VII: Strategies
A. Potential Problems
B. Obstacles and risks
C. SWOT ANALYSIS

Section VIII: Recommendation

Section VIIII: Appendix or Bibliography

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 Presentation of the Business Plan
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Know the outline thoroughly

Rehearse the presentation
Be familiar with any equipment
Be Confident (Have Faith)!

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END OF LECTURE
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31 October 2017