DACA 4142 Technopreneurship

Lecture 2

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Developing An Effective Business Plan

Pitfalls to Avoid in Planning

Pitfall

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1: No Realistic Goals Pitfall 2: Failure to Anticipate Roadblocks Pitfall 3: No Commitment or Dedication Pitfall 4: Lack of Demonstrated Experience (Business or Technical) Pitfall 5: No Market Niche (Segment)

The Seven Pitfalls for a New Venture Business Plans

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Source: Baron & Shane (2005)

What is a Business Plan?

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?

It

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

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IMPORTANT TIP!

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 19 March 2012 6 proceeding their business.

Model of Business Planning Used by Many Entrepreneurs

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Source: Baron & Shane (2005)

Benefits of a Business Plan

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.

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

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 WellConceived Business Plan

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Components of a Business Plan: Basic Requirement

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?

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Components of a Business Plan: Basic Requirement

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

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

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

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.

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.

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.

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.

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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Complete Outline of a Business Plan, cont.

Section VII: Strategies A. Potential Problems B. Obstacles and risks C. Alternative courses of action (TOWS Matrix or SWOT ANALYSIS) Section VIII: Recommendation Section VIIII: Appendix or Bibliography

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Presentation of the Business Plan

Know

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

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Business Plan Assessment: Complete Evaluation of Each Component

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END OF LECTURE
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