Business Plans

Seeing Audiences and Your

Business Clearly

Chapter 08

McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
 Objectives

LO1 Understand why and when to develop a

business plan
LO2 Know how to tell the business plan story
LO3 Learn the major sections of the classic
business plan
LO4 Focus business plan sections to meet specific
needs
LO5 Identify the major risks to business plan
success
LO6 Master presenting your business plan to others
8-2
 Business Plan Background

Business plan
– A document designed to detail the major
characteristics of a firm— its product or
service, its industry, its market, its manner
of operating (production, marketing,
management), and its financial outcomes
with an emphasis on the firm’s present
and future.

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 Business Plan Background

External legitimacy
– The extent to which a small business is
taken for granted, accepted, or treated
as viable by organizations or people
outside the small business or the owner’s
family.

8-4
 Business Plan Background

Internal understanding
– extent to which employees, investors, and
family members in the business know the
business’s purposes and operations

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Starting Small and Building Up

Figure 8.1

8-6
 The Vision Statement

Vision statement
– A very simple 5–10 word sentence or tagline
that expresses the fundamental idea or goal
of the firm.
Tagline
– Memorable catchphrase that captures the
key idea of a business, its service, product, or
customer.
– also known as a slogan

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 Question

A _____________ describes the firm’s

goals and competitive advantages.
A. Vision statement
B. Tagline
C. Mission statement
D. Executive summary

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 The Mission Statement

Mission Statement
– A paragraph that describes the firm’s
goals and competitive advantages
– Talks in terms of how it will make a
difference in for the customer or the
industry

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 The Elevator Pitch

The Elevator Pitch

– A 30-second action-oriented description
of a business designed to sell the idea of
the business to another
– Leads with the hook, follows up with
purpose of the service, ends with where
business is now
– What makes firm unique or superior?

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 The Executive Summary

Executive summary
– A one- to two-page (250–500 words)
overview of the business, its business
model, market, expectations, and
immediate goals.
– Typically put at the start of a business plan
and is the most popular summary form for
a business plan.

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Strategizing for the Business Plan:
5-M Model

Mantra

Mechanics Mission

Method Measures
8-12
 Janexia Waterproofing:
A 5-M Model Example

Figure 8.2

8-13
 Business Plan Outline

Table of
Cover Letter Title Page
Contents

Executive The
The Market
Summary Company

The The The

Organization Financials Appendixes

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 Business Plan Outline

Cover letter
– A one-page document on business
stationery that introduces the business
plan and the business owner to the
recipient and indicates why the recipient
is being asked to read the plan.

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 Business Plan Outline

Title Page
– contains introductory information
– Company name
– Contact information
– Date this version of the plan was
completed
– Proprietary statement to protect your
ideas

8-16
 Business Plan Outline

Table of contents
– Lists major section headings
• Boldface type
– Sections underneath major sections
• Normal type
– Put page numbers on every page of the
business plan

8-17
 Business Plan Outline

Company background
– brief description of the company, the
firm’s current status, and the history of the
business
– Vision statement / mission statement
– Specific goals, Business’ competitive
advantage

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 Business Plan Outline

The Company: Product/service and

industry
– Describe firm’s product or service
– Explain how the customer uses the
product
– Proprietary technology
– Industry descriptions

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 Business Plan Outline

The Market: Market and target

customer
– Total population of people or firms you
plan to sell to
– Target customer section: focuses
attention on who would buy
– Demographics’ relation to the product,
how often they buy, and past experience

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 Business Plan Outline

The Market: Competition and

competitive advantage
– Major competitors
– Competing product or service: market
share, price, competitive advantages
and disadvantages
– what makes product or service unique

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 Business Plan Outline

The Market: Marketing strategy

– Overall strategy your firm pursues in the
market
– Sales plan that shows specific ways you
apply strategy to secure sales from your
customers
– Longer-term competitive plan that shows
how you protect your firm from efforts of
the competition to unseat you

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 Marketing Strategy

Preselling
– Involves introducing your product to
potential customers and taking orders for
later delivery.
Research and development
– The part of a business that is focused on
creating new products or services and
preparing new technologies, ideas, products,
or services for the firm’s market.

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 Business Plan Outline

The Organization: Legal and

organization structures
– Legal form of the business
– Organizational structure of the firm
– Makes clear how many employees there
are and whether they are full time or part
time, permanent or seasonal, family or
non-family

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 Business Plan Outline

The Organization: Key personnel

– Sell the most important single element in
the business plan – you!
– Who are your key personnel?
– Talk about accomplishments rather than
just experience
– Do not limit yourself to business

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 Business Plan Outline

The Organization: Related service

providers
– Identify your bank and banker, attorney
and legal firm, accountant or
bookkeeper, other consultants
– Major relationships established with well-
known suppliers or customers
– Board of directors / board of advisors

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 Business Plan Outline

The Organization: Location

– Description of the facility
– How it meets strategic and sales goal of
the business
– Own, lease, or rent the property
– Plan to expand the facilities

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Financials Layout for a
Typical Business Plan

Exhibit 8.2
8-28
 Business Plan Outline

The Appendices
– one-page version of owner’s resume
– Product or service pictures or
specifications
– Copies of signed contracts
– Results from marketing studies or pilot
sales efforts
– Industry reports

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 Focusing Your Business Plan

Pioneering business
– A firm whose product or service is new to
the industry or is itself creating a new
industry.
Test marketing
– Selling your product or service in a limited
area, for a limited time.

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 Focusing Your Business Plan

New entrant business

– A firm whose product or service is
established elsewhere, but is new to this
market.
Screening plan
– gives the basic overview of the firm and a
detailed look at the financials.
– Also called a mini-plan

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 Question

What type of plan is designed to be

used internally for management
purposes?
A. Informational plans
B. Key employee/partner plan
C. Invention plan
D. Operational plan

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 Focusing Your Business Plan

Informational plans
– Give potential customers or suppliers
information about the company and its
product or service.
Proof-of-concept Web site
– An Internet-based type of business plan
providing information or demonstration of
a product or service designed to solicit
information on customer interest.

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 Focusing Your Business Plan

Key employee/partner plan

– Provides information on the company,
product/service, market, and critical risks
to prospective business or marketing
partners or to prospective key employees.

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 Focusing Your Business Plan

Invention plan
– A business plan that provides information
to potential licensees. Invention plans
focus on the details of an invention,
including intellectual property rights.

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 Focusing Your Business Plan

Operational plan
– Business plans designed to be used
internally for management purposes.
Private placement memorandum
– A specialized legal form of business plan
crafted by lawyers for the purpose of
soliciting formal investments.

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 The Most Common Critical
Risks in a Plan
Risks
– The parts of a business or business plan
that expose the firm to any kind of loss—
profits, sales, reputation, assets, customers,
and so on.

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 The Most Common Critical
Risks in a Plan
Overstated numbers
Uncertain sales
Overlooked competition
Experience deficits
Inadequate cushion
Inadequate payback

8-38
 Presenting Your Plan

The key things an influential person looks

for in you are
1. Your passion for the business
2. Your expertise about the business and the
plan
3. How professional you are in your work,
4. How easy it would be to work with you.

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