FROM THE OPPORTUNITY TO THE

BUSINESS PLAN
CHAPTER

The Business Plan: Creating and Starting the Venture

CHAPTER

The Marketing Plan

CHAPTER

The Organizational Plan

CHAPTER

1O

TheFinancial Pln
i:

'

"

' - .':i'

':
-.

THE BUSINESS PLAN:..CREATING AND

STARTING THE VENTURE

To

To

definewhat the business plan

identify information

.OPENING PROFILE

BELINDA GUADARRAMA

'.' The business plan. although it is often criticized as being ,,dreams of glory,, is
probably the single.most important document to the entrepreneur at the start-up

. ,l'..-.
_

'

,.-.,

'

stage. Potential investors are not likely to consider investing in a new venture until
plan has been cornpleted. l addition, tfe business plan helps 1fe-e, ,.'.the business
'
trepreneur maintain perspective as to what n"d, to b"
accomplished.
The development and preparation

-,
':

of a business plan

can entail many obstacles and takes a strong commitmnt

byan entrepreneur before it can actually be completed and then implemented. No

this better than Belinda Guadarrama. the president and GEO of GC Micro
Corporation.
Her company supplies computer hardware and software to Fortune 1000
.,':' 'i,.,. companies as well as the defense and aerospace industry.
'
"',. , As the entrepreneur of this now multi-mllion-dollar company, Belinda has been
' recognized by two Hispanic organizations-the U.5. Hispanic Chamber of Commerce
or1 knows

.. r.

"

't.

and the Latin Business Association-as Hispanic Businesswoman of the Year 2002.
Her firm has been consistently ranked arnong the 500 largest Hispanic-owned

':.: on the door indicating that the business was closed.

188

PART

FROM THE OPPORruNIYTO THE BUSINESS PI.AN

pont to put everythng on the line. Eventually, with business plan in hand, she began
knocking on doors to try to raise money for the start-up. lt was then that she began

to face

some of the lows in the entrepreneurial process as she incurred one rejection
after another. She could not even get a bank to lend her 95,000 to keep going. Fortunately, she persisted until she came upon the 5mall Business Administration (5BA) loan
program that guarantees a large percentage of a loan through a local participating
bank. After submitting her plan through this program, she received her first loan
from a local bank.
Raising the start-up capital was only one of the early obstacles that she overcame.
Being a woman and a Latina. she had to overcome many negative stereotypes. In one
meeting with a potential client she was told that as a minorty woman she did not

have sufficient management qualifications to represent its product line and was hence
turned down. However, her hard work and persistence paid off, and at the end of the
first year of business the company attained revenue of $209,000. With this success, the

client that had turned her down changed its mind and she became an authorized
dealer for its products.
Other success followed. and soon she was pursuing contracts with the U.S. Department of Defense. In researching this market. she discovered that many government
contractors are required to include a percentage of minority-owned businesses as
subcontractors. She also discovered that there were not enough minority-owned
businesses, presenting great opportunties for her venture. However, as she contin-

ued to investigate her opportunities she found she was blocked from records to
which she had previously had access. She decided to pursue this in court. knowing
that this coufd put her entire business on the line. 5ubsequently. the case GC Micro
Corporation v. the Defense Logistics Agency reached the courts and then dragged on
for several years. During this time her business was in jeopardy since many companies
stated they would no longer work with her. Eventually she won her case. Her reputation as someone not afraid to take a stand and with strong leadership skills spread
throughout the industry.
The company has become one of the few just-in-time (JlT) system contract suppliers. In 2003 the company received the JIT Supplier Partnership Award. Guadarrama's
entrepreneurial skills have also spilled over to civic-minded activities, supporting
such programs as the California Latino-Chicano High School Drop-Out Prevention
Program, the Canal Community Alliance. the Ochoa Migrant Farm Workers Camp,
and the Gilroy YMCA. Belinda's success is a tribute to her strong entrepreneural
character. She was not afraid of the hard work required to plan her business-and
she was not afraid to stand up for what she felt was right. Her commitment to the
community has made her an inspiration to many other Hispanic businessmen and
women.
GC Micro Corporation now has 14 warehouses across the United States and is an
authorized dealer for about 200 manufacturers such as sun Microsystems, lBM,
Hewlett-Packard, Storage Tek, Cisco. Dell. Apple, and Sony. Now with 30 employees,
sales revenue has reached $35 million.l

CHAPTER

THEBUSINESS PLAN: CREATINGANDSARTTNGTHEVENTURE 189

PLANNING AS PART OF THE BUSINESS OPERATION

Before we begin a discussion of the business plan, it is important for the
reader to understand the different types of plans that may be part ofany business operation. planning is a process that never ends for a business. It is extremely important in
the early
stages of any new venture when the entrepreneur will need to prepare preliminary
a
business plan. The plan witl become finalized as the entrep."n"u, hu,
a better sense of
the maket, the product or services to be marketed, the management team,
and the finan_
cial needs of the venture. As the venture evolves from an early start-up to a mature
business, planning will continue as management seeks to meet its short-ierm
or long-term

business goals.
For any given organization, it is possible to rrnd financial plans, marketing plans, human resource plans, production plans, and sales plans, to name a few. plans
may be
short-term or long-term, or they may be strategic or operational. Plans will also
differ in
scope depending on the type of business or the anticipated size of the start-up
operationEven though they may serve different funcfions, all these plans have one important purpose: to provide guidance and structure to management in a rapidly changing
market
environment-

WHAT IS THE BUSINESS PLAN?

business

plan

WrrIIen

document describing all

relevant internal ad
external elements and
strtegies for starting a
new venture

The business planis a written document prepared by the entrepreneur that describes
all the
relevant external and internal elements involved in starting a new venture. It is
often an
integration of functional plans such as marketing, frnance, manufacturing, and human resources. As in the case of Belinda Guadarrama, it addresses the integration
and coordination ofeffective business objectives and straregies when the venture contains a variety of

products and services. It also addresses both short-term and long-term decision
making for
the hrst three years of operation. Thus, the business plan----or, as it is sometimes
referred to,
the game plan or road map-answers the questions, where am I now? where
am I going?
and How will I get there? Potential investors, suppliers, and even customers will request
or
require a business plan.
If we think of the business plan as a road map, we might better understand its significance. Let's suppose you wete trying to decide whether to drive from Boston
to Los Angeles
(mission or goal) in a motor home. There are a number of possible routes,
each requiring
different time frames and costs. Like the entrepreneur, the traveler must make rorn" i*po.tant decisions and gather information before preparing the plan.
The travel plan would consider external factors such as emergency car repai weather
conditions, road conditions, sights to see, and available campgrounds. These factors are
basically uncontrollable by the traveler but must be considered in the plan,just as the entrepreneur would consider external factors such as new regulations, competition, social
changes, changes in consumer needs, or new technology.
On the other hand, the traveler does have some idea of how much money is available;
how much time he or she has; and the choices of highways, roads, campgrounds, sights,
and so forth. Similarly, the entrepreneur has some control over manufacturing, marketing,
and personnel in the new venture.
The traveler should consider all these factors in determining what roads to take, what

campgrounds to stay in, how much time to spend in selected locations, how much time and
money to allow for vehicle mainlenance, who will drive, and so on. Thus, the travel plan responds to three questions: whee am I now? where am I going? and How do I get there?
Then the traveler in our example-or the entrepreneur, the subject of our book-will be

190

PART

FROM THE OPPORruN|TY TO THE BUSINESS PLAN

will be needed from existing sources or new sources to

achieve the plan.
We saw in the opening example of this chapter how Belinda Guadarrama used the busi.
ness plan to address these questions. The functional elements of the business plan are
discussed here but are also presented in more detail in the chapters that follow.
able to determine how much money

WHO SHOULD WRITE THE PLAN?

The business plan should be prepared by the entrepreneur; however, he or she may consult
with many other sources in its preparation. Lawyers, accountants, marketing consultants,
and engineers are useful in the preparation of the plan. Some of these needed sources

can be found through services offered by the Smatl Business Administration (SBA),
the Senior Corps of Retired Executives (SCORE), small-business development centers
(SBDCs), universities, and friends or relatives. The Internet also provides a wealth of
information as well as actual sample templates or outlines for business planning. Most
of these sources are free of charge or have minimal fees for workshop attendance or to
purchase or download any information. In many instances entrepreneurs will actually
hire or offer equity (partnership) to another person who might provide the appropriate
expefise in preparing the business plan as well as become an important member of the
management team.
To help determine whether to hire a consultant or to make use of other resources, the
entrepreneur can make an objective assessment of his or her own skills. Table 7.1 is an
illustration of a rating to determine what skills are lacking and by how much. For example, a sales engineer designed a new machine that allows a user to send a lO-second personalized message in a greeting card. A primary concern was how best to market the
machine: as a promotional tool a hrm could use for its distributors, suppliers, shareholders, or employees; or as a retail product for end users. This entrepreneur, in assessing his
skills, rated himself as excellent in product design and sales, good in organizing, and
only fair or poor in the remaining skills. To supplement the dehned weaknesses, the
entrepreneur found a partner who could contribute those skills that were lacking or weak.
Through such an assessment, the entrepreneur can identify what skills are needed and
where to obtain them.

cHAprER

THE BUSTNESS pLAN: CREATING AND STARTTNG

THE

SCOPE AND VALUE OF THE BUSINESS

VENTRE r9r

PLAN_

WHO READS THE PLAN?

The business plan may be read by employees, investors,
bankers, venture capitalists, suppliers, customers, advisors, and consulan$- ho is expected
to read the plan can often affect
groups reads the plan for different purposes,

,:l*i];]]

m*Xi#';#Ti"[tlii*!

However,rhereareprobabryrhre"-n".,0"11,*",i#Tfifi y"ff :ffi

3lfi 1"i:

ing the plan. First is the perspective ofihe entrepreneur, who

understands better than anyone else the creativity and technology involved in the
new venture. The entrepreneur
must

is all aboul Second is the marketing perspec_

der only the product or technology and not

eyesof

rheircusromer.rhiscustomer*"J;fi

.,'.'#..TrHiff

:lT'ffi ;H:#::

the entrepreneur should try to view his or her business through

the eyes of the investor.
Sound financial projections are required; if the entrepreneur
does not have the skills to pre-

pare this information, then outside sources can be

of assistance.2
The depth and detail in the business plan depend on the size
and scope ofthe proposed
new venture- An entrepreneur planning to market a new high-tech
machine will need a
comprehensive business plan, largely because of the nature
oithe product and market. An
entrepreneur who plans to open a retail clothing store will
not need the comprehensive coverage required by a new high-tech machine manufacturer.
A new e-commerce business,
however, may require a very different focus, palticularly
on how to market the Web site ttrat
will offer the goods and services. Thus, differences in the scope ofthe
business plan may
depend on whether the new venture is a service, involves
manufacturing, or is a consumer
good or industrial product. The size of the market, competition,
and poiential growth may
also affect the scope ofthe business plan.
The business plan is valuable to the entrepreneur, potential
investors, or evn new perwho are trying to familiarize themselves with ihe venture, its goals,
and objectives.
19nry1
The business plan is important to these people because:

'
'
.

It helps determine the viability of the venture in a designated market.

It provides guidance to the entrepreneur in organizing his or her planning

activities.

It serves as an important tool in helping to obtain financing.

Potential investors are very particular about what should

be included in the business
if some of the information is based on assumptions, the thinking process required to complete the plan is a valuable experience for
the entrepreneur since it forces him
or her to assess such things as cash flow and cash requirements.
In addition, the thinking

plan' Even

process takes the entrepreneur into the

future, leading him or her to consider important issues
that could impede the road to success.
The process also provides a self-assessment by the entrepreneur.
Usually, he or she feels
that the new venture is assured of success. However, the planning
p.o".r, io.."s the entre-

preneurto bring objectivity to the idea and to reflect on

such qu"riion, as: ..Does the idea
will it work? who is my customer? Does it satisfy customer needs? what kind
o_f protection can I get against imitation
by competitors? can I manage such a business?
Whom will I compete with?" This self-evaluation is similar to
role playiig, requiring the entrepreneur to think through various scenaios and consider
obstacles thaimight prevent
make sense?

the

A5

SEE

IN

Q: l'm an

man

self
now

'.

make the i

knew each

conduit-it is pretty tough to make the

that you deserve iompensation from their joint
venture, Chell says: "lf you'd done something specific this time-maybe. But in this case, maybe not."
asked to be a

case

A: The compensation you're asking about might

be termed a "finder's fee," in which an individual
gets a flat fee or a percentage of a business deal that
he or she helped arrange, typically by making an introduction. "A finder's fee is associated with the performance of some type of service. The finder acts as
an agent and thus is entitled to a fee for performance," says Robert Chell, a longtime business consultant in Indian Wells, Calif.
Howeve in your case, that introduction took place
30 years ago, and then the parties lost touch. After

Other experts agreed. " lf the business rttionship

began and ended with the production of -the song
way back in 1979, then an expectation of some reward. monetary or otherwise, is not in ordet' says
Sheldon Kopin, president of JBS Assoiiates, a management consulting firm in Cincinnati.

Source: Reprinted from September 15,2009, issue ofBusinessWeek

by special permission, copyright @ 2009 by The McGraw-Hill Companies, Inc., from "Don't Expect a Fee for Making an Introduction"
bv Karen E Klein- www.businessweek.com,/smallbiz.

venture from succeeding. The process allows the entrepreneur to plan ways to avoid such
obstacles. It may even be possible that, after preparing the business plan, the entrepreneur
will realize the obstacles cannot be avoided or overcome. Hence, the venture may be terminated while still on paper. Although this certainly is not the most desirable conclusion,
it would be much better to terminate the business endeavor before investins further time
and money.

HOW DO POTENTIAL LENDERS AND INVESTORS

EVALUATE THE PLAN?
As stated earlie there are a number of cookie-cutter or computer-generated software packages
or samples on the Internet that are available to assist the entrepreneur in preparing a business plan. These sources, howeve should be used only to assist in its preparation, since the
business plan should address the needs of all the potential readers or evaluators and should
reflect the strengths of management and personnel, the product or service, and available
resources. There are many different ways to present a quality business plan and thus any attempt to imitate or fit your strategy and objectives into a cookie-cutter approach could have
very negative results. The plan needs to focus on the above-mentioned factors and should

ultimately consider its purpose.

It is conceivable that the entrepreneur will prepare

fust draft of the business plan from his

or her own personal ewpoint without consideration of the constituencies that

192

will ultimately

cHAprER

THE BusrNEss pLAN: CREATTNG AND sTARflNGTFIE

VENTRE

r93

on the four Cs of credit: c

what this means is that le
srory, the ability of the e
payments (cash flow), the collateral or tangible assets being
secured for the loan, and the
amount ofpersonal equity that the entrepreneur has invested.

ui
th

projections during this critical five- to seven-year period.

Entrepreneurs, in sharing their business plan with others, often become paranoid,
fearwill be stolen by one of the external readers. Most external advisors and

ing that their idea

G YOUR BUSINESS IDEA

One of the serious concerns that entrepreneurs voice

relates to how to piotect their business ideas, when

they are also advised to share their business plans
with many friends and associates. Since these plans
provide comprehensive discussion of the new venture. the concern is understandable. Most individuals
who are asked to comment and review a business
plan would act in an ethical and professional manner
in providing any advice to entrepreneurs. However,
there are also many examples of situations in which a
family member, friend. or business associate has been
accused of "stealing" an idea.

The best strategy for an entrepreneur, outside of

seeking the advice of an attorney, is to ask all readers
who are not representing a professional firm (such as
a venture capitalist) to sign a noncornpete or nondisclosure agreement. An example of such an agreement
can be found in Chapter 6. Those representing a professional organization (such as a bank or venture capitalist) need not be asked to complete a nondisclosure
form since they would be insulted and would be inclined to reject the venture before they had even
read the olan.

potential investors are bound by a professional code of ethics, and the entrepreneur should
not be deterred from seeking external advice (see Ethics box).

PRESENTING THE PLAN

Often, colleges and universities or locally sponsored business meetings offer an opportu-

nity for selected entrepreneurs to present their business plans in a competitive and structured setting. Typically, each selected entrepreneur is asked to present the highlights ofhis
or her business plan in a defrned time frame. The entrepreneur is expected to "sell" his or
her business concept in this designated period of time. This implies that the entreprenur
must decide what to say and how to present the information- Typically the entrepreneur will
tbcus on why this is a good opportunity, providing an overview of the marketing program
(how the opportunity will convert to reality) and the results of this effort (sales and prohts).
Concluding remarks might reflect the recognized risks and how the entrepreneur plans to
address them.

Audiences at these presentations usually include potential investors who are given an
opportunity to ask pointed questions regarding any of the strategies conveyed in the business plan presentation. After the completion of all the scheduled business plan presentations, a winner is usually declared, with a hnancial reward that can range from $10,000 to
$50,000- The beneht of these competitions is not necessarily the hnancial award since there
can be only one winner. However, since the audience is made up of professional investors,
there is always the opportunity for any one of the business plans presented to attract the
attention of a venture capitalist or private investor. This interest may result in further negotiations and perhaps a future investment in the new venture. The number of schools that
sponsor these business plan competitions seems to be growing significantly, and often the
schools will advertise, requesting that interested entrepreneurs submit an application for
participation in the competition.a
Some investors describe these presentations as elevator pitches, since they are analogous to an entrepreneur getting on an elevator with one or more investors and trying to
persuade them that his or her business concept is a good investment before the elevator
reaches its final destination. Even for those wbo do not win aprtze, the opportunity to
present a plan and then make adjustments in the plan based on the feedback is a great
learning experience.
194

cHAprER

7 THE BUSTNESS

pLAN:

CREATTNG AND STARTTNG THE

VENTRE 19s

INFORMATION NEEDS

east Asia, that there may be a marke

decided to launch a furniture importi

ture manufactured in Indonesia that

were being ripped out of homes destined for renovation or demolition.
The business de-

target market and soon business took off. They now expct to exceed
sales of $l million.5
From the hrst example, we can see the importance of feasible, well-defined goals
and objectives in the business plan. In the second example,
we note that a well-dehned business
strategy based on market information can provide a more effective
focus of the business
model. Once this solid foundation is in place, strategy decisions can then
be established
that will allow the company to achieve those goals and objectives.

Market Information

196

PART

FROM THE OPPORTUNITY TO THE zuSINESS PLAN

educated or less educated people? A well-dehned target maket will make it easier to project market size and subsequent market goals for the new venture. For example, let's assume
that an entrepreneur in the Boston area notes the success of businesses such as Au Bon Pain
and Panera Bread Company and thus is considering launching a food business that offers
the convenience of "fast food" but with the taste of a sit-down restaurant. With a huge
tourism trade the entrepreneur decides on a mobile (food cart) crepe business that will include a number of carts situated in high-trafhc areas.
To build a strong marketing plan with reasonable and measurable market goals and objectives the entrepreneur will need to gather information on the industry and market. Most
entrepreneurs have diff,rculty with this stage and do not often know where to begin. The
best way to start is to lust visualize this process as an inverted pyramid (see Figure 7.1).
This means that we start with very broad-based data and information and work down until
we can develop a positioning strategy and quantihable goals and objectives. All this infomation can then be used in the industry analysis and marketing planning sections of the
business plan that are discussed later in this chapter. (Also see Chapter 8.)
As noted in Figure 7.1, we begin the process by evaluating general envionmental trends.
This would include household income trends, populaon shifts, food consumption habits

cHAprER

THE BUsrNEss pLAN: CREATTNGAND STARflNGTHEVENTURE

1s7

198

PART

FROM THE OPPORruNIY TO THE BUSINESS PLAN

The next step is the assessment of trends in the national food service industry. We
would look for data on total food sales and commercial restaurant sales by type of restaurant. This information can be found in such sources as Dun and Bradstreet's AllBusiness,
Standard & Poor's (S&P's) Market Insight, and S&P's NetAdvantage. Standard and
Poor's also provides very specific data on the food industry such as inits Industry Surveys: Restaurants and the National Restaurant Association. Also see Table7.2 for more
in-depth information on some of the important sources of information that can be used in
this analysis.
Notice that the first two stages in Figure 7-l focus on the national market, and the next
two stages consider trends in the local market where the business will be located This consists of general local economic trends and an assessment of the local food service industry.
The sources may include the same ones mentioned above except data related only to the
local maket would be considered. In addition, the state of Massachusetts publishes data on
tourism (the Massachusetts Travel Industry Report) and economic trends (U.S. Census
Bureau). Also implicit in this local food service industry analysis is the regulatory environment. Each state has distinct regulations regarding alcohol and food delivery license
requirements. These data can also be found online or in your local library.
The final step is an analysis of the local competitive environment. In this example the
entrepreneur would need to identify any restaurants, food stands, or push-cart food services
that could be competitors. This list can be found in the yellow pages, local town hall (food
license bureau), or througb observation. Each local competitor's strengths and weaknesses
should be assessed. This can bejudged by using marketing research (discussed in Chapter 8); evaluating the competitors'Web sites, advertising, menus, and locations; and reviewing any published articles that have appeared in the local media. A spreadsheet can then be
prepared with the list of competitors in the frrst column, followed by columns devoted to
their strengths and weaknesses.
Once all this analysis has been completed, the entrepreneur is ready to clarily the product or service offering, actual market positioning in the competitive environment, and market objectives. These are part of the marketing plan and are discussed in more detail in
Chapter 8. These data in addition to contributing to the preparation of the maketing plan,
lay the groundwork for the financial projections and forecasts discussed in Chapter 10.

0perations Information Needs

The relevance of a feasibility study of the manufacturing operations depends on the nature
of the business. Most of the information needed can be obtained through directcontact with
the appropria0e source. The entrepreneur may need information on the following:

.
.

[,ocaton. The company's location and its accessibility to customers, suppliers, and
distributors need to be determined.

Manufacturing operations. Basic machine and assembly operations need to be

identified, as well as whether any of these operations would be subcontracted and to
whom.

Raw materials. The raw materials needed and suppliers' names, addresses, and costs
should be determined.

.
.

Equipment The equipment needed should be listed, with its cost and whether it will be
purchased or leased.
Labor skills. Each unique skill needed, the number of personnel required for each
skill, pay rate, and an assessment of where and how these skills will be obtained
should be determined.

CHAPTER

'

Space. The
space

'

will

7 THE BUSINESS PLAN: CREATINGANDSTARTINGTHEVENTURE

total amount of space needed should

be owned or leased.

be

199

determined, including whether the

overhead. Each item needed to support manufacturing-such as toors,

supplies,
utilities, and salaries-should be determined.
incorporaed directly into the business plan.
to those who will
the proposal.

s information is necessary

FINANCIAL INFORMATION NEEDS

USING THE INTERNET AS A RESOURCE TOOL

2OO PART 3 FROMTHEOPPORruNTYTOTHEBUSINESSPI.AN

a valuable resource in later-stage planning and decision making. Besides being a business
intelligence resource, the Internet also provides opportunities for marketing strategy;

through its Web site, a firm can provide information on the company, its products and
services, and ordering instructions.
According to data published by the Department of Commerce, online sales have continued to increase in spite of the economic downturn. In the third quarter of 2008 online
sales were up 6 percent over the same period one year ealier. E-commerce sales reached
$34.4 billion in the third quarter of 2008. Although online retail sales accounts for only
3.4 percent of all retail sales, it continues to grow each year as more and more consumers
enjoy the benefit of ordering products from their home.6
An entrepreneur in the process of writing a business plan can also access one of th" popular seach engines: Google, Yahoo!, MSN, AOL, or Ask Jeeves. Simply conducng a
search of a topic (for example, "online sporting goods") may reveal several Web sites, articles, or sources of information to assist the entrepreneur in writing the business plan- Use
of these searches has grown about 20 percent over the past two years, depending on the
search engine.T

An entrepreneur should access competitors' Web sites to gain more knowledge about
their strategy in the marketplace. Internet service is not costly and is an important vehicle
for the entrepreneur to gather information about ttre market, competition, and customers as
well as to distribute, advertise, and sell company products and services.
In addition to accessing Web sites, the entrepreneur can also investigate social networks,
blogs, and discussion groups. Discussion groups such as Yahoo! Groups and Usenet are the
most noteworthy, although many Web sites also have discussion groups associated with
them. Blogs refer more to talking to or about something rather than creating a dialogue.
Social networks are Web sites where those with similar interests can communicate using
such sites as MySpace, Bebo, or Facebook. These sites may serve many uses depending on
the needs of the entrepreneur. Using Usenet, which represents the newsgroups on the Internet, the entrepreneur can use keywords to identify the most appropriate newsgroups- These
newsgroups represent potential customers who can be asked specific questions on their
needs, competitive products, and potential interest in e new venture's products and services. Individuals who are members of the newsgroups will then respond to these questions, providing valuable information to the entrepreneur.
Compared with alternative sources the entrepreneur need only make a small investment
in hardware and softwae to be ready to use these online services. With its continuous improvements and modifications, the Internet will continue to provide invaluable opportuni
ties for the entrepreneur in planning the staf-up or the growth of a venture.

WRTING THE BUSINESS PLAN

The business plan could take hundreds ofhours to pfepare, depending on the experience
and knowledge ofthe entrepreneur as well as the purpose it is intended to serve. It should
be comprehensive enough to give any potential investor a complete picture and understnding of the new venture, and it should help the entrepreneur clarify his or her thinking about
the business.

Many entrepreneurs incorrectly estimate the length of time that an effective plan will
take to prepare. Once the process has begun, however, the entrepreneur will realize that it
is invaluable in sorting out the business functions of a new venture.
The outtine for a business plan is illustrated in Table l.3.Eac.h of the items in the outline is detailed in the following paragraphs of this chapter. Key questions in each section
are also appropriately detailed.

CHAPTER

THE BUsrNEss pLAN: GREATTNG AND STARTTNG THE

VENTRE 2ol

2O2

PART

FROM THE OPPORTUNITYTO THE BUSINESS PLAN

Introductory Page
This is the title or cover page that provides a brief summary of the business plan's contents.
The introductory page should contain the following:
The name and address of the company.
The name of the entrepreneur(s), telephone number, fax number, e-mail address, and
Web site address if available.

A paragraph describing the company

and the nature

of the

business.

The amount of ftnancing needed. The entrepreneur may offer a package (e-g., stock
or debt). However, many venture capitalists prefer to structure this package in their
own way.
statement ofthe confidentiality of the report. This is for security purposes and is
important for the entrepreneur.

sets out the basic concept that the entrepreneur is attempting to develop.
Investors conside it important because they can determine the amount of investment
needed without having to read through the entire plan. An illustration of this page can be
found in Table7.4.

This title page

Executive Summary
This section of the business plan is prepared after the total plan is written. About two to
three pages in length, the executive summary should stimulate the interest of the potential
investor. This is a very important section of the business plan and should not be taken
lightly by the entrepreneur since the investor uses the summary to determine if the entire
business plan is worth reading. Thus, it should highlight in a concise and convincing
manner the key points in the business plan.

cHAprER

THE BUsrNEss pr..AN: GRF-ATfNGAND srARnNc

THEVENTURE zn3

Generally the executive summary should address

a number of is.sues or questions that
anyone picking up the written plan for the
rrrst time wourd want to know. For example:
What is the business concept or model?
How is this business concept or model unique?
Who are the individuals starting this business?
How will they make money and how much?

Ifthe new venture has a strong growth plan and in

five years expects to be positioned for
an initial public offering (IPo), then the
executive summary shuld also include
strategy-

If the venture is not initially expecting this kind Lf gro*th,

the

an

exit

entrepreneurs

should avoid any discussion of an exiistralgy

in the executive ir'o
Any supportive evidence, such as data pints
from maketing res#cn or legal docu_
ments or contracts fhat might strengthen the
case on the preceding-issues, also should
be included' under no circumstances should the entrepreneur
try to summarize every section of
the plan, especially since the emphasis placed
on th" pr"""oing irru", d;ends on who is
reading the plan.

It should

be

in

nv,ro

onalj s is
of external

me nt al

Assessment

uncontollable vai ables

that may impact the
business plan

be remembered that this secrion is

thep

tivate th

only meant to highlight key factors and mo_

'"iTJ$ib[.J.iilfi:i::1.[T#:r,'Ji

other

her background needs to be emphasized. If the

hen this would be highlighted in the
nt a lawyermight make in an impor_
a salesperson in a sales call.

Environmentat and Industry Anatysis

It is important to put the-new-venture in a proper context by
first conducting
environmental

an

analysis to identify trends and chang"s occurring on

a national and international level that may impact the new venture.
This process was described earlier in
this chapter. Examples of these environmental
factors are:
Economy. The entrepreneur should consider
trends in the GNp, unemployment by
geographic area, disposable income, and
so on.

in the population by
the growing elderly
in safety, health, and
nt' may all have an impact on the
ds

entrepreneur's business

plan.

Technology' Advances in technology are

difficult to predict. However, the entrepreneur
should consider potentiar technological developments
determined from resources

vernment. Being in a market that is

pment will require the entrepreneur to
as well as to be prepared with
al developments that may affect his or

in

. There are many important legal issues

in Chapter 6. The entrepreneur should be
may affect the product or service,

channel

these

204

PART

FROMTHEOPPORruNIYTOTHEBUSINESSPLAN

promotion strategy. The deregulation of prices, restrictions on media advertising (e.g.,

ban on cigarette ads or requirements for advertising to children), and safety regulations
affecting the product or packaging ue examples of legal restrictions that can affect any
marketing program.

All

the preceding external factors are generally uncontrollable. However, as indicated,

ofthese factors using some ofthe sources identified can provide strong support for the opportunity and can be invaluable in developing the appropriate
marketing strategy.
As stated earlier (see Figure 7.1), this process can be visualized as an upsidedown pyramid leading to specific market strategy and objecves. Once an assessment of the environment is complete, the entrepreneur should conduct an industry annlysis that will focus on
specihc industry tends. Some examples of these factors are:
an awareness and assessment

industry analysis
Reviews industry trends
and competitive strateges

Industry demnnd- Demand as it relates to the industry is often available from published
sources. Knowledge of whether the maket is growing or declining, the number of new
competitors, and possible changes in consumer needs are all important issues in trying
to ascertain the potential business that migbt be achieved by the new venture. The
projected demand for the entrepreneur's prduct or service will require some additional
marketing research, which will be discussed in Chapter 8.
Competition. Most entrepreneurs generally face potential threats from larger corporations.
The entrepreneur must be prepared for these threats and should be awae ofwho the
competors are and what their strengths and weaknesses are so that an effective marketing
plan can be implemented. Most competitors can be easily identifred from experience.
trade journal articles, advertisements, Web sites, or even the yellow pagesThere are numerous sources that the entrepreneur can consult to attain general industry
and competitive data for inclusion in this part of the business plan. Some of these were
menrioned ealier in this chapter (also review Table 7 .2), ir relation to our discussion of the
gathering of market information. Many of these sources can be found in local or university
libraries. They include Encyclopedia ofAmerican Industries, Encyclopedia of Emerging
Industries, Standard and Poor's Industry Suneys, MarketLine Business Informntion Centre, Forrester Investext Plus, and Mintel Reports. Each ofthese sources focuses on different types of industries or markets and can be easily evaluated as to their benefit either by an
online search (such as Google) or by a visit to a local library. Most of these sources also
provide published reports that are availabl for purchase.
The last part of the business plan's industry analysis section should focus on the specific
market, which would include such information as who the customer is and what the business environment is like in the specific market and geographic area where the venture will
compete. Thus, any differences in any of the preceding vaiables that reflect the specific
market area in which the new venture will operate must be considered. This information is
particularly significant to the preparation of the maketing plan section of the business plan,
which is discussed in Chapter 8.
In addition to the numerous industry sources given, there are also many market databases
that can be researched for relevant data to incorporate into this section of the business plan'
Market share and size of market often can be assessed from databases such as: TableBase
and Business & Industry, Market Share Reporter, Ecotwmic Census, County Business Patterns, Current Industrial Reports, Service Arunual Survey, and Monthly Retail and Food Service Sales and Inventoris. More specific data on demographic trends and possible target
market numbers can be found in Profiles of General Demographic Characteristbs 2000
Census/Population, Population Projections (projections for 2010 available), Mediamark

CHAPTER

THE BUSINESS PLAN: .REATING AND STARTING

THE

VENruRE 205

Reporter, and Lifestyle Market anary*. Finally, state-by-state

population, demographic, and
housing data usually are available from each
.tut",, W"b.it".
A list of some key questions the entrepreneur should consider
for this section of the
-business
plan is provided in Table 7.5.

Description of Venture
descripliou of the
venture Provides
complete overview of the
product(s), service(s), and
operatlons of a new
ventu re

206

PART

FROMTHEOPPORTUNITYTOTHEBUSINESSPLAN

required drivers to make a left turn into the doughnut shop, crossing the outbound lane. Unfortunately, the roadway was divided by a concrete center strip with no break to allow for a
leflhand turn. The only possibility for entry into the shop required the customer to drive
down about 400 yards and make a U-turn. It would also be difhcult for the customer to get
back on the roadway traveling in the right direction. Since the town was unwilling to open

this site from any further consideration.

This simple assessment of the location, market, and so on, saved the entrepreneur from
a potential disaster. Maps that locate customers, competitors, and even altemative locations
for a building or site can be helpful in this evaluation. Some of the important questions that
might be asked by an entrepreneur are as follows:

the road, the entrepreneur eliminated

How much space is needed?

Should I buy or lease the building?
What is the cost per square foot?
Is the site zoned for commercial use?

What town restrictions exist for signs, parking, and so forth?

Is renovation of the building necessary?
Is the facility accessible to traffic?
Is there adequate parking?

Will the existing facility

have

room for expansion?

What is the economic and demographic prohle of the area?

Is there an adequate labor pool available?

What are local taxes?

Are sewage, electricity, and plumbing adequate?

If the bulding or site decision involves legal issues, such as a lease, or requires town
variances, the entrepreneur should hire a lawyer. Problems relating to regulations and

CHAPTER

THE BUSINESS PLAN:

'REATING

ANo STARTING THE VENTURE 2o7

leases can be avoided easily, but under

no crrcumstances should the entrepreneur ffy to
negotiate with the town or a landlord witho Lt good
legal advice.

Pnoduction Plan
productionplant Details
how the product(s) will
be maufactured

whole or i
ayout; the
raw matet

rn a manuracturing operarion, rhe is"ussio?

potential investor in assessing hnancial needs.

:liH

:"JH:

triifl :ffi :ffiJ ffil';

Table 7 -l summarizes some of the key questions

in this section of the business plan.
the new venture does not include any manufacturing
functions, this section should be
eliminated from the plan.

If

0perations Ptan
All businesses-manufacturing

or nonmanufacturing-should include an operations

pran
pa'' of the business plan. This section goes beyond
the manufacturing process (when
1s
the new venture involves manufacturing)1nd
describes the flow of goJJs a^d services

208

PART

FROMTHEOPPORTUNTYTOTHEB|JSINESSPLAN

from production to the customer- It might include inventory or storage of manufactured

products, shipping, inventory control procedures, and customer support services. A nonmanufacturer such as a retailer or service provider would also need this section in the
business plan to explain the chronological steps in completing a business transaction. For
example, an lnternet retail sports clothing operation would need to describe how and
where the products offered would be purchased, how they would be stored, how the inventory would be managed, how products would be shipped, and, importantly, how a
customer would log on and complete a transaction. In addition, this would be a convenient place for the entrepreneur to discuss the role of technology in the business transaction process. For any Internet retail operation, some explanation of the technology
requirements needed to eff,rciently and profitably complete a successful business transaction should be included in this section
It is important to note here that the major distinction between services and manufactured
goods is services involve intangible performances. This implies that they cannot be
touched, seen, tasted, heard, or felt in the same manner as manufactured products. Airlines,
hotels, car rental agencies, theaters, and hospitals, to name a few, rely on business delivery
or quality of service. For these firms, performance often depends on location, facility layout, and personnel, which can, in turn, affect service quality (including such factors as reliability, responsiveness, and assurance). The process of delivering this service quality is

what distinguishes one new service venture from another and thus needs to be the focus of
an operations plan. Some key questions or issues for both the manufacturing and nonmanufacturing new venture are summaized in Table 7.7.

Marketing Plan
markcting plnrl
Describes market

conditions and strategy

related to how the

product(s) and service(s)

will be distributed,
priced, and promoted

The marketing plnn (discussed in detail in Chapter 8) is an important part of the business
plan since it describes how the product(s) or service(s) will be distributed, priced, and promoted. Markeng research evidence to support any of the critical marketing decision strategies as well as for forecasting sales should be described in this section. Specihc forecasts
for a product(s) or service(s) are indicated to project the prohtability ofthe venture- The
budget and appropriate controls needed for marketing strategy decisions are also discussed
in detail in Chapter 8. Potential investors regard the marketing plan as critical to the success of the new venture. Thus, the entrepreneur should make every effort to prepare as comprehensive and detailed a plan as possible so that investors can be clear as to what the goals
of the venture are and what strategies are to be implemented to effectively achieve these
goals. Marketing planning will be an annual requirement (with careful monitoring and
changes made on a weekly or monthly basis) for the entrepreneur and should be regarded
as the road map for short{erm decision making.

Organizational Plan
organixalional plan
Describes form of
ownership and lines of
authority and
responsibility of members
of new venture

The organizatiorutl plan is the part of the business plan that describes the venture's form of
ownership-that is, proprietonhip, partnership, or corporation. If the venture is a partnership,
the terms of the pannership should be included. If the venture is a corporation, it is important
to detail the shares of stock authoriznlandshare options, as well as the names, addresses, and
resumes ofthe directors and offrcers ofthe corporation. It is also helpful to provide an organization chart indicang the line of authority and the responsibilities of the members of the organization. Table 7.8 summarizes some of the key questions the entrepreneur needs to answer
in preparing this section of the business plari. This information provides the potential investor
with a clear understanding of who controls the organization and how other members will

CHAPTER

THE BUSTNESS

pMN:

CREATTNG AND STARTTNG THE

VENTURE 20e

interact in performing their management functions.

Chapter 9 provides more detail on this

part of the business plan.

Assessment of Risk
assessment o;f

risk

Identihes potential
hazards and alternative

strategies to meet
business plan goals and

objectives

FinanciaI Ptan
Jinancial plan
Projections of key
financial data that
determine economic

feasibility and necessary

financial investment
commrtment

A5 5EFru IgW BU5//Vg55WEEK

ELEVATOR PITCH FOR PERFECT DINNER
A relative who has been very successful in the restaurant business has recently sold his restaurant for a
huge profit and is looking for a good investment for
some of his funds. He knows that you are a good resource since. as a struggling entrepreneur in your
own right, you try to maintain an wareness of other
fart-ups in the area. Would you consider introducing
your uncle to Karen and Jill after reading about their
unique idea?
Forget Boston Market or the prepared-foods sction of Jewel or Whole Foods. In Oak Park, there's the
Perfect Dinner. a kitchen that prepares "home-style",
take-out and delivered meals. fhe startup is amed
mostly at "El" riders. who can 90 online to scope

out the shop's menu of eight to

10 daily entres

and order ahead before exiting Oak Station on the

Green Line.

The business was founded by Karen Gruber, 4&

who formerly handled the Kraft cheese account at ad
agency J. Walter Thompson, and Jill Haas, 47, a onetime food scientist at Kraft Foods. The Perfect Dinner

broke even with $500,000 in revenue last year-the

average check is $41-and is looking at 8o/o to 'l0o/o
growth this year. Gruber says' The pair, who started
the venture with $250,000 from friends, family, and
their own savings. is now trying to drum up $700,000
to open two more sites this fall.
Source: Reprinted

from MaY

special permission, copyright

nies. Inc-. from "Perfect
Most Promising Startups," www.businessweek.com/smallbiz'

Dime

The last financial item needed in this section ofthe business plan is the projected balance sheet. This shows the financial condition of the business at a specifrc time. It summarizes
the assets of a business, its liabilities (what is owed), the investment of the ntrepreneur and

be listed for the benefrt ofthe potential investor-

Appendix
The appendix ofthe business plan generally contains any backup material that is not necin the text of the document. Reference to any of the documents in the appendix
".rury
should be made in the plan itself.
Letters from customers, distributors, or subcontractors are examples of information that

USIT'{G

ANE IMPLENIENTII{G THE BIJSINESS PtAild

The business plan is designed to guide the entrepreneuf through the hrst year of operations'

cHAprER

7 THE BUsrNEss

pLAN: CREATTNG AND

STARTING THE

VENTRE

211

Measuring Ptan Progress

"
o

Inventorl control. By controlling inventory, the firm can ensure maximum service to
the customer- The faster the firm gets back its investment in raw materials
and

,ooo,,

rhe fasrer rhat capirar can

finished

* *H;..:"r..:#::j;lj:ffi::ffi"Tj;.",

to control machine time, worker hours, process

"

Quality control. This will depend on the type of production system but is designed to

-*.

sure that the product performs satisfactorily.

"
he

"

Disbursements.Trrc new venture should also control the amount of money paid
out.
be reviewed to determine how much is being disbursed and for what

All bills should

purpose.

"

web site control- with more and more sales being supported or garnered from
a
company's web site, it is very important to continually evaluate the web site
to

asce
man
proc

mention here but can easily be identihed from an Intemet search.e

fe
is

to

are

212

PART

FROMTHEOPPORTUNITYTOTHEBUSINESSPLAN

Updating the Plan

The most effective business plan can become out-ofdate if conditions change. Envionmental
factors such as the economy, customers, new tecnology, or competition-and internal factors
such as the loss or adtion of key employees----can all change the diection of the business
plan. Thus, it is important to be sensitive to changes in the company, indusbry, and market. If
these changes are likely to affect the business plar the entrepreneur should determine what revisions are needed. In this manner, the entrepreneur can maintain reasonable targets and goals
and keep the new venture on a course that will increase its probability of success.

WHY SOME BUSINESS PLANS FAIL

Generally, a poorly prepared business plan can be blamed on one or more of the following
factors:

.
.
.
.
.
.

Goals set by the entrepreneur ae unreasonable.

Objectives are not measurable.

The entrepreneur has not made a total commitment to the business or to the family.
The entrepreneur has no experience in the planned businessThe entrepreneur has no sense of potential threats or weaknesses to the business.
No customer need was established for the proposed product or service-

Setting objectives requires the entrepreneur to be well informed about the type of business
ard the competitive environment. Objectives should be specific and not so mundane as to
lack any basis of control. For example, the entrepreneur may target a specific market share,
units sold, or revenue. These objectives are measurable and can be monitored over time.
In addition, the entrepreneur and his or her family must make a total commitment to the
business to be able to meet the demands of a new venture. For example, it is difficult to operate a new venture on a part-time basis while still holding onto a full-time position. And it
is also diffrcult to operate a business without an understanding from family members as

to the time and resources that will be needed. Lenders or investors will not be favorably
inclined toward a venture that does not have full-time commitment.
Generally, a lack ofexperience will result in failure unless the entrepreneur can either
attain the necessary knowledge or team up with someone who already has it. For example,
an entrepreneur trying to start a new restraurant without any experience or knowledge of the
restaurant business would be in a disastrous situation.
The entrepreneur should also document customer needs before preparing the plan. Customer needs can be identified from direct experience, letters from customers, or marketing
research. A clear understanding of these needs and how the entrepreneur's business will
effectively meet them is vital to the success ofthe new venture.

IN REVIEW

SUMMARY
This chapter has established the scope and value of the business plan and has outlined

the

steps in its preparation. The business plan may be read by ernployees, invelors, lenders,
suppliers, customert and consultants- The scope of the plan will depend on who reads it,
the size of the venture, and the specific industry for which the venture is intended.

CHAPTER

THE BUSNESS PLAN: CREATING ANDSTARTNG THE

VENTURE 213

The

business plan is essential in launchng a new venture.

The result of many hours
of preparation will be a comprehensive, wll-written. and well-organized
document
that will serve as a guide to the entrepreneur and as an instrumenito
rase necessary

capital and financing.

Before beginning the business plan, the entrepreneur will
need information on
_

tr# Lt

:*1*i]

rrt* *ffi

:"T Til

#fj rij j'{iljf{:fl,i'

objectives. The Internet represents a low-cost service that can provide

valuable information on the market, customers and their needs, and competitors.
This information
should be evaluated based on the goals and objectives of the
new venture. These
goals and objectives also provide a framework for setting
up controls for the business plan.
The chapter presents a comprehensive discussion and outline
of a typical business
plan' Each key element in the plan is discussed, an information-gattrering
process is
described, and examples are provided. control decisions are presnted
to ensure the

effective implementation of the business plan. In addition. some insights

as to why

business plans fail are discussed

RESEARCH TASKS
1. Approximately how many books have been written on ,,how to
write a business
plan"? How many software packages are there that am
to herp entrepreneurs
write a business plan? use data to back up your estmates. why are
there so
many?

2'

Find five business plans. What are the common topics covered
across all five plans?
are the differences? choose the one that you believe is the
best written and
then describe why you believe it is better than the others.
3. speak to five entrepreneurs and find out why they have (or do not have) a
business plan. For those who do have a business pran, find
out when it was
written, the purpose for which it was created, and whether it has been
used
a nd/or kept up-to-date.

what

CLASS DISCUSSION
1. Given the difficurties in accuratery predctng the future,
useful?

2. What

is a business

pran

makes an excellent business plan?

3' would the entrepreneur be better off spending more time seiling

his or her
product rather than investing so much time in writing
a business pran?
4. lf a business plan is to be used to raise capital. then why would the entrepreneur
want to advertise the firm's major risks by detailing them in the business

plan?

5'

of the business pran if the audience is (a) the entrepreneur;

a key supplier? How might the plan be adapted for these
or do you berieve that it is better to simpry have one business
udiences?

214

PART

FROMTHEOPPORTUNIYTOTHEBUSINESSPLAN

SEtECTED READINGS
:l5:l T

(November 2008). Plan for the Worst. Fortune Small Business, vol.

18,

Contingency planning should be an important function of the entrepreneur' Most

entrepreneurs and small-busrness owners lack experience in hiring people and often
end up making a poor choice. Preparation in making bad decisions should be
reflected in a plan so the entrepreneur wll know what action to take when poor
decisions are made. tn addition, other staff members should also be involved and be

aware of any contngency PIan.

Burmeistei paul. (March 2003). What

to

Present

to

Venture Capitalists. Strategic

Finance, PP. 36-39.

This article describes some of the key aspects of each secton of the business plan
that should be presented to venture capitalists. It also emphasizes the importance
of the format and the presentation of the business plan'
b e r 2 0 0 3 ) Sta rt- u p M a r k et i n e

'i :ii::;;' f"; ilHTi

111 ?l 3l;i'i5::H",,.1" "'

This paper reflects on the experience ofthe authors as consu/tants and executives
and develops insight as to marketing practces that make a difference for a start-uq
of these firms, representing a wide varicompany. They report that the
"r"irtr"s
and business plans to obtain fnanc'
marketng
formal
ety of idustries, atl created
in'g for their ventures. Many also regarded montoring compettor activity and
industry trends as essentia/ to success.
Cfarke. Geri. (5ummer 2005). International Marketing Environment Analysis' Marketing
Review pp.159-73.

This paper proposes a framework for internationa! industry and environmental

anatysii. The authors argue that international market analysis is lacking and that
domestic environmental audits are not sufficient in the more complicated interna-

tional markets.
Duffy. Bobby; Kate smith; George Terhanian; and John Brerner. (2005). comparing
Data from Online and Face-to-Faie Surveys. lnternational Journal of Market Research,
vol. 47, no. 6, pp. 615-39.
This paper exptores some of the issues surrounding the use of lnternet-based
methodologies compared to face-to-face data collection. Data from parallel surveys
using both data collection techniques are compared' The authors put forth a number of theories as to why dfferences may exist.

Henricks, Mark. (December 2008). Do You Really Need a Business Plan? Entrepreneut)
vol. 36, no.12, pp. 92-95.
This article emphaszes the
The cofounders of a new
through the start-uP Pha
actual writing of the Plan
of the planning process.
Macrae. John. (October/November 2008). lmprove Performance Before lt's Too Late'
IJ-5. Business Review, vol. 9, no. 8, pp. 14-1 5.
One of the inefficiencies of efforts to gather business and com
that analysis tends to focus on explaining the past rather than
what decisions need to be made in the future. A software in
to
Dashboard allows users direct access to information that can improve their ability
make future management decisions-

CHAPTER

THEBUSINESS PLAN:CREATINGANDSTARTINGTHEVENTURE

215

Mason, colin; and Matthew stark. (June 2004). what Do

lnvestors Look for in a Busi_
ness Plan? A Comparison of the
Business Angels. tnternational S
This

article studies investors,

the ticket of admission givin

impress prospective sources of finance
by the prospective funder whether to
business plan to consider the proposal
quality of the business plan used to support the funding proposal.
Matherne, Brett p. (November 2oo4). rf you Fair to pran. Do you pran
to Fail? Academy
of Management Executive, vol. 1g, no.4. rp. 156_57.

completion of the business plan.

Mohanty, Soumendra. (December 200g). Measuring the Value
of Intelligence in Busi_
ness f ntelligence. DM Review vol. 1g, no. 12, pp.20_23.
:
This article focuses on the measurement of the value of
intelligence in business

intelligence (Bt). Bt is important in assisting the

data and finding trends and activties in
asement. tdenlifuins key performance
data is an important part of effectve bu

user

to

"n"tii-turge

amoun9

of

f{i;"

Perry Stephen c. (2001)- The Relationship between Written

Business plans and the failure of Smaf l Businesses in the u.5. Journal of small Business
uun"g""i
vor. 39, no. 3,
pp.201-8.

paper describes a study that investigafes fhe influence of platning

on rJ.s.
small-business failures. The main conclusion is that very little forat planning
goes
on in U.S' small businesses; howeve| nonfailed firms d more planning
than similar
This

failed firms prior to failure

sahfman. william A. (1997). How to

write a Great Business pran. Harvard Busness

Reviev4 vol.75, no. 4, pp. 9g-108.
This paper proposes that a great business plan is one
that focuses on a series of
questons relating to four factors critical to the juccess
of every new venture. These
factors are: the peopre, the opportunity, the context, and the possntt*
i,
risk and reward. The questions rerated to these four
factors a discussed.

i.l

Stein, Afexander. (December 200g/January 2009). Fear. Fortune

small Business,vol. 1g.

no. 10. pp.78-81.

The recent financial crisis has affected many smallbusinesses.
This article drscusses
how fear and anxiety during a crisis can affct business decisions.

END NOTES

216

PART

FROMTHEOPPORUNITYTOfHEBUSINESSPLAN

2. Donald F. Kuratko and Arnold Cirtin, "Developing a Business Plan

3.
4.
5.

6.
7.
8.
9.

for Your

Clients," The National Public Accountant (January 1990), pp. 24-27.

Brian O'Reilly, "Rugs to Riches," Fortune Small Business (May 2007), pp. 51-54.
David E. Gumpert, "AWinning Plan ls Just the start," BusinessWeek Online
(November 22,2005).
Kristin Ohlson, "Get Creative," Entrepreneur (July 2008), pp- 62-67 '
Wilf iam Hoffman, "Retailers' Online Gains, " Traffic World (December 1 5, 2008), p. 15.
Marshall Ereeding, "Winning the Competition for Attention on the Web,"
Computers in Libraries (June 2008), p. 31 .
Mark Henricks, "Do You Really Need a Business Plan?" Entrepreneur (December
2008), pp. 92-9s.
John Clyman, Molly K. Mclaughlin. Michael J. Steinhart, and Sahil GambhiC
"Manage Your Customers and Contacts," PC Magazine (November 30, 2004),
pp- 146-47.

APPENDIXTA: SAMPLE BUSINESS PLAN-GOPHER IT

The following business plan has been condensed and edited somewhat because of
space requirements. However, the areas where editing has taken place are clearly identified and do not in any way detract from the meaningfulness of this example: An
average business plan will vary in length depending on the industry, the size of the
appendix, and the number of illustrations. The actual text of a business plan would
consewatively range between 15 and 25 pages.

Venture Description
is a personal shopping service located in the downtown business district of
Boston, Massachusetts. lt is based on the belief that people's schedules today are more
demanding; thus the value of personal leisure time has increased. As we continue the
21st century with more and more dual-career families. personal convenience services
are a high-growth market opportunity. The professional white-collar ernployee in the
downtown district, who has high disposable income and a strong motive to increase
leisure time, represents the main focus of the venture's marketing efforts.
Running errands before work, during lunch breaks, or after work takes time and is
often irritating. People often have to wait in line for services, fight traffic, and skip
lunch or an opportunity for a quiet time away from the pressures of the office. Gopher

Gopher lt

It has established an errand service for professionals in the heart of the downtown
Street, on the first
business district of Boston. The company will be located at
flooq where employees will have direct access to public transportation and customers
will typically be
will be able to stop by and conveniently request any service. Employees
college students, who will perform services on foot, use public transportaton, or ride
a bicycle to efficiently meet customer needs. The office will contain storage space for
pickup and delivery tems as well as refrigeration for any specific food products. The

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ffi :llll"if :::llil:""il:;:1,:1,:llff

1".11l;lli,llil,*::'"':x1llil,]l3ili,!:,l1lffl

":,'"";;::1i1T:;
when the office is most busv (earrv

The diverse services that will be offered are categorized as standard or custom.
Standard services include dropping off and/or picking up laundry, dry cleaning, mail,
tickets such as airline or theater, and prescriptions; shopping for groceries or gifts; and

CHAPTER

THE BUSINESS PLAN: CREATING ANDSTARTTNG THE VENTURE 2.t7

Industry Analysis
The service sector in the United states continues to grow. Entrepreneurs
have initiated
many new ventures in the service sector in response to greater demand for
leisure
time, the increasing nurnber of dual-career famiiies, and m-ore disposable income.

lThis section of the business plan would provide statistical data

of the significant demographic trends that would support the
by this proposed venture.l

Cornpetitor
no
services have
there are

response to customer
more common to find

re are many indirect competitors to Gopher lt,

that offer such a broad range of services. Courier
ut other service businesses hive been slow in their

pair shops offering pic

to be ad

hoc, with

littl

Although there are a number of small businesses in other states that offer pickup and
delivery services, none compares with Gopher lt n terms of the extent of
services offered.

Marketing Plan
The marketing strategy was designed on the basis of personal interviews conducted
with employers and business professionals in the downtown Boston market. which
represents our target market. These interviews indicated that the individuals preferred

to have someone else perform many of the time-consuming errands that they were required to do on a weekly or regular basis. The majority of these individuals
commented that they had less leisure time than in the past and.

as a result,

valued this free

time more than ever before. They indicated a need for the types of services offered by
Gopher lt and

willingness to pay for these services.

218

PART

FROMTHEOPPORTUNITYTOTHEBUSINESSPLAN

indicated that more than 13,000 individuals would pass our office to and from their
office to their transit stop. This high-traffic location lends itself to the convenience
services that we can provide for our target market.

Marketing Goals
n

"

To meet the growing needs of a

target market defined on the basis of geography,

demographics, lifestyle, and buyer intentions.
To evaluate the competitive environment and continue to establish a differential
advantage.

To establish an effective and profitable marketing mix of service, place, price. and

promotion.

Marketing Objectives
u To establsh

a customer base of 10 percent of the defined target market in the

first year.
To generate

To increase sales by 10 percent annually for the first three years.

To expand

Size

$ISO,OOO

in sales for the first year.

to at leasttwo new locations bythe end of the firstthree

yeais.

of Market According to our research. there are about 250,000 people in the cen-

tral business district of the city of Boston. There are approximately 10,300to

13,200

people (represents the primary market) who pass our office every business day. On the
basis of our research and on demographic studies conducted in the city-of Boston,
about 75 percent of these individuals match our target market. This would consist of
individuals between the ages of 28 and 65, male or female, with high disposable
income, employed as professional businesspersons or office staff.
There is also the potentialto reach an additional 10,000 customers who work on the
fringe of this area and may not directly pass our office on a regular basis. This secondary
market may be penetrated through advertising, word of mouth, and the distribution
of marketing literature.
On the basis of the preceding information, it is estimated that the potential market is
between 17,000 and 20,000 people. Our objective is to reach 10 percent of the primary
market and 5 percent of the secondary market. Thus, in our first year the market
would consist of about 1,275 customers.

Service The services that will be provided by Gopher lt are designed to provide customers with the benefits of convenience and the saving of time. Although the services
vary widely, there are standard services offered to the customer. Standard servies include lunch delivery, dry cleaning pickup and drop-off, grocery shopping (maximum of
10 items), and gift shopping in the downtown area. Customized services of almost any
kind will also be offered on a fee-for-time basis. Examoles of these customized services
are auto pickup and/or drop-off, pickup of theater tickets, supply pickup, post office
visits, and bank deposits. Delivery and pickup willtypically involve walking, riding a
bicycle, or using the transit. The most efficient and economic solution will be chosen for
each situation.

Price Pricing strategy is based on a fee per errand. This strategy was determined from
an evaluation of Errands Unlimited, a similar business located in Milwaukee, Wisconsin.
as well as a marketing research study of the target market. For the customzed services

the
ing
five

nclUds

than

ccord-

ingl

Pick
rrcK

for

!l1

showr

lor spo

rabooka
obile at

." .

re
..

'

.r a..

ing'::-ll
Bank deposits.

Any-glhqlpersonal 9rr:and5.,. .

0-5

.' r

-.

.$10

5-10

$1s

11-15

$20

16-20

$2s

21-25

$30

26+

$o

Regular or Standard Servics

Express lunih delivery

$l

Dry cleaning drop-off

,t

Dry cleaning pickup

$t

Grocery shopping (maximum

of

10 items)

Gift shopping in downtown area

5tz
$le

Promotion Gopher lt will rely extensvely on word-of-mouth advertising. However; it

will be important to create an awareness of our services to the target market. To attract attention and to create awareness, signs will display our name and describe our
services to the many individuals who actually pass by the office. Pamphlets will also be
distributed to office buildings in the target market.
Facilities Plan The location of Gopher ft will be in the lobby at _
Street in the
downtown district of Boston. This location is ideal because it provides access to a large
base of potential customers who pass the office going to and from work to the transit
station or garage as well as those who stroll around the area during unchtime. Estimates of the daily traffic are between 4,000 and 5,000 individuals passing through the
lobby at each rush hour, which projects to between 8,000 and 10,000 passes per day.
There are also about'l ,000 people who work in this building and another 1,300 to
2,200 individuals who pass through the lobby at non-rush-hour time. Thus. in a typical
day there are between 10,300 and 13,200 potential consumers who are likely to pass
by our business location. lf we also include the Bank of Bofon and Shawmut building,
f

22O

PART

FROM THE OPPORTUNITYTOTHEBUSINESSPLAN

both on a connecting street, we have effectively extended our potential market to

over 20,000 people. This large base of potential consumers is an excellent target market for our services. Even with limited resources, our storefront and location will be an
important asset in promoting an awareness of Gopher lt's services.
The initial location will be leased. Rent will be based on a 940 per square foot price.
With electricity and other charges the rental cost will be $50 per square foot or $lO,OO0
per month.
Certain equipment will also be necessary to operate the business effectively-a multiline phone systern; computer and printer; fax machine; storage for hot and cold
foods; and storage for garments, gifts, and groceries. counters will be set up in a small
area at the front-of the office for conducting business with clients. Little space is
needed for the attendant, whose main function will be to take orders from walk-in
clients and to answerthe phone for call-in orders. The storage space would have food
storage on one side and garment and gift storage on the other.

Organizational Plan
Gopher lt will be.established as a partnership. There will be three partners: David
Wilson, Jack Welch, and Laura Shanley. Each will assume an equal ownership in the
business. Background and roles of each of the three partners are described in the following. A partnership greement is summarized in the Appendix.
ManagementTeam Background David Wilson was born in 5an Diego, California, and
graduated from Swarthmore College with an accounting degree. Past employers include
numerous restaurants. a specialty retaileri and a large bank (mutual funds). He has significant experience in managing and training people as well as financial management.
Jack Welch was born in Atlanta, Georgia, and has a food science degree from the
University of Maryland and an MBA degree from Boston College. He has had extensive
experience in food retailng and more recently in sales and marketing with a large consumer food oroducer.
Laura Shanley was born in Jamaica Plain, Massachusetts, and has a bachelor of
science degree in marketing from Boston College. She has extensive experience in a
family business, a chan of small retail gift shops. This gift shop experience involved
expansion to new locations, buying, promotion. and customer relations. The business
has since been sold, and Laura is seeking new endeavors in a start-up venture.

Duties and Responsibilities of the Patners

Laura Shanley-General Administrator and Manager Laura will oversee the daily
operations of the business. This includes the hiring and firing of employees as well
as training and supervising. Periodic employee evaluations will be completed by
the general administrator and manager. She will also handle all purchasing for the
office and will be responsible for opening and closing the office each day.
Jack Welch-Marketing and 5a/es Manager Jack will be responsible for creating
promotional activities, monitoring sales, and establshing effective strategies for
creating awareness of the business. He will be responsible for the design and
distribution of all direct marketing materials.

David Wilson-Financial Manager David will be responsible for f inance,

accounting, payroll, billing, taxes, and any other matters related to sales and
revenue budgets.

CHAPTER Z ' +IE BUSNESS E.UN: CCArIruG AND STARTING THE

VENTURE 221

Risk Assessment
The proposed errand service offered by Gopher lt, although free
from any direct compe_
tition, has a very low barrier to entry. Setup costs and high liquidity will be
a significant

attraction to competitors. who could subsequently penetrate sonre of

Gopher lt,s market' Gopher lt will need to rely on its quality of service and being first in
the market to
protect its market share. our convenient location and flexibility
in providing a wide
range of services should support the long-term success of Gopher lt in
this market.

Appendix*
Resumes of partners

Partnership Agreement
Lease

Agreement

Facility Layout

Market Research Survey Results

Marketing Brochure with price List

*The actual information

in the Appendix has not been included because of space. However, the
student should be able to infer fiom the example provided trere te scop ariJ
content of a
complete business plan.