Lecture 4

The Business Plan

The Business Plan
 Objectives
 Carefully articulate the merits, requirements,
risks, and potential rewards of the opportunity
and how it will be seized
 Demonstrate how the four anchors reveal
themselves to the founders and investors by
converting all the research, careful thought, and
creative problem solving from the Venture
Opportunity Screening Exercises into a
thorough business plan
What Does It Reveal?

 A business plan for a high potential venture reveals the

business’ ability to:
 Create or add significant value to a customer or end
user
 Solve a significant problem, or meet a significant want
or need for which someone will pay a premium
 Have robust market, margin, and moneymaking
characteristics
 Fit well with the founder(s) and management team at
the time, in the marketplace, and with the risk-reward
balance
 Types of Plans

Operational Plan for internal use.

80+ pages long.

Formal plan for external use.

25 to 40 pages long.

An expanded executive summary for enticing

interested stakeholders.
7 to 10 pages long.
The Plan Is Not the Business
 Developing the business plan is one of the best ways to define
the strategy, resource, and people requirements for a new
venture.
 It is difficult to raise capital from informal and formal investors
without a business plan.

However

Just because you have a plan does not mean the

business will be successful. Some of the most
impressive business plans never become great
businesses and vise versa.
The Plan Is Not the Business

 Establishing relationships between the

founder and the investor is also crucial.
a. Investors evaluate the founders’
attitudes and abilities.
b. The entrepreneur evaluates the
value potential investors can bring to
the venture.
Who Develops the Plan?

 Reasons not to hire an outside

professional to prepare the business plan
 Consequences of different strategies and
tactics can be considered
 Human and financial requirements for
launching and building the venture can be
examined
Writing a Business Plan
 Steps outlining the process by which a
business plan is written
 Segmenting information into sections within
the framework of the overall plan
 Creating an overall schedule
 Create a specific list of tasks, identify priorities and
who is responsible for them.
 Creating an action calendar
 Doing the work and writing the plan
The Business Plan/the Cover & Table of Contents
 Executive Summary
Write Executive Summary after working through all
the other sections;

Hook the reader;

Provide compelling information on the following:

- Description of Opportunity
- Business Concept
- Industry Overview
- Target Market and projections
- Competitive Advantage
- Economics, profitability and harvest potential
-Team
-Offering
The Business Plan/Main Parts

Company
Industry & &Product
Competitor Description
Marketing Plan
Analysis

Financial Plan Executive Operations

Summary

Offering Development Plan

Critical Risks
Team
Business Plan
 THE INDUSTRY AND MARKET
 The industry
 Customers / Target market
 Market size and trends
 Competition and competitive edge
 Estimated market share and sales

 THE COMPANY AND ITS PRODUCT(S) OR

SERVICE(S)
 The company and the concept
 Products and services
 Entry and growth strategy
Business Plan
 MARKETING PLAN
 Overall marketing strategy
 Pricing
 Sales tactics
 Service and warranty policies
 Advertising and promotion
 Distribution

 OPERATIONS AND MANUFACTURING PLAN

 Operating cycle
 Geographical location
 Facilities and improvements
 Strategy and plans
 Regulatory and legal issues
Business Plan
 DEVELOPMENT AND DESIGN PLAN
 Development status and tasks
 Difficulties and risks
 Product improvement and new products
 Costs
 Proprietary issues
Business Plan
 MANAGEMENT TEAM
 Organization
 Key management personnel
 Management compensation and ownership
 Other investors
 Employment and other agreements and stock option
and bonus plans
 Board of directors
 Other shareholders, rights, and restrictions
 Supporting professional advisors and services

CRITICAL RISKS, PROBLEMS, AND ASSUMPTIONS

 Business Plan

 THE FINANCIAL PLAN

 Assumptions
 Pro forma income statements / forma
balance sheets
 Pro forma cash flow analysis
 Breakeven chart and calculations
 Cost control
 Highlights
Business Plan

 THE ECONOMICS OF THE BUSINESS

 Gross and operating margins
 Profit potential and durability
 Fixed, variable, and semi-variable costs
 Months to breakeven
 Months to reach positive cash flow
Business Plan

 PROPOSED COMPANY OFFERING

 Desired financing
 Offering
 Capitalization
 Use of funds
 Investor’s return

 APPENDICES
 Conclusion

The process allows the entrepreneur

to better anticipate instead of react.

Entrepreneurs can get feedback from

experts, including investors, vendors
and customers.
The Plan Is Obsolete at the Printer

 Technology and the global marketplace have

shortened the already brief life expectancy of
any business plan.

 The entrepreneur must be prepared to

continually adjust course to minimize risk and
ensure success