The Entrepreneurial Perspective

Chapter 4

Concept & • Chapter 4 Slides

Development of
Entrepreneurship • Course name
Entrepreneurial
• Course number
Decision Process
• Prof. name
Types of Start-up
• School name
Ventures
• Date

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Chapter Learning Objectives

Chapter 4
1. To define what the business plan is.
Concept & 2. To understand the scope and value of the business plan.
Development of
Entrepreneurship
3. To identify information needs and sources.
Entrepreneurial 4. To enhance awareness of the ability of the Internet as an
Decision Process
information source.
5. To present examples and a step-by-step explanation.
Types of Start-up
Ventures 6. To present helpful questions for the entrepreneur.
7. To understand how to monitor the business plan.
Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Chapter Opening Profile

Chapter 4
Jimmy Pattison www.jimpattison.com

Concept & • Privately-owned company and intends to stay that way

Development of
Entrepreneurship • Owner of Jim Pattison Group, ranked as the fifth-richest
Canadian by Canadian Business magazine.
Entrepreneurial
Decision Process
• Collection of businesses in vastly different industries
including entertainment, supermarkets, advertising,
Types of Start-up
automotive retailing.
Ventures • Personal objective is that every business must exceed
customer expectations.
Entrepreneurship & • Considered a tough employer with high expectations.
Economic
Development • Relies heavily on business planning for making
decisions.
Ethics and Social
Responsibility
• Considers the long-term perspective.
• Never overpay for an asset.

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 Business Planning is an
ESSENTIAL business skill
Chapter 4

Concept & Whether you

Development of
Entrepreneurship • Start your own company
Entrepreneurial
• Or work as an employee
Decision Process
Being able to write a business plan is important
Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Business Planning is an
ESSENTIAL business skill
Chapter 4

Concept & For entrepreneurs, writing a good business plan is essential

Development of
Entrepreneurship • To raise money
Entrepreneurial
• To manage your company
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Planning

Chapter 4 • Business plan (definition): written document describing

all relevant internal and external elements and strategies
Concept &
Development of for starting a new venture
Entrepreneurship – To provide guidance to management in a changing market
environment
Entrepreneurial – A roadmap for success
Decision Process
– Written once and then updated continuously
– Process used to determine feasibility of the venture
Types of Start-up
Ventures
– Used to solicit support and financing for the venture
– The first question asked by those in the industry

Entrepreneurship &
Economic
Development • What is included in the
Business Plan?
Ethics and Social – Marketing
Responsibility
– Finance
– Manufacturing
– Human Resources

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 Who Reads the Business Plan?

Chapter 4
• Employees
Concept & • Investors
Development of
Entrepreneurship • Bankers
• Venture capitalists
Entrepreneurial
Decision Process • Suppliers
• Customers
Types of Start-up • Advisors • Who should create the business
Ventures plan?
• Consultants
– The entrepreneur
• Family
Entrepreneurship & – The entrepreneur’s
Economic • Friends
Development accountant or other
advisor
Ethics and Social – A consulting firm
Responsibility

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 3 Perspectives to Consider

Chapter 4
• When preparing the plan, consider:
Concept &
Development of
– Perspective of the entrepreneur
Entrepreneurship
• Does the idea make sense?
Entrepreneurial • Creativity and technology used
Decision Process
• Does it meet customer needs?
Types of Start-up
– Perspective of the market
Ventures
• How does the customer see this?
• Who would buy it?
Entrepreneurship &
Economic – Perspective of the investor
Development
• Is the venture viable?
Ethics and Social • Return on investment expected?
Responsibility

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 How Investors Evaluate the Plan

Chapter 4
You
Concept &
Development of
• Know your credit history and rating
Entrepreneurship
• Investors want to know:
Entrepreneurial – How much are your asking for?
Decision Process
– What is my return?
Types of Start-up – What is the risk?
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 How Investors Evaluate the Plan

Chapter 4
• Lenders focus on four C’s of credit:
Concept &
Development of – Character
Entrepreneurship
– Cash flow
Entrepreneurial
Decision Process
– Collateral
– Equity contribution
Types of Start-up
Ventures

The Investment Plan

Entrepreneurship & – Keep it short
Economic – Know your investor
Development
– Invest in your plan
PROFIT magazine
Ethics and Social
Responsibility

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 How Investors Evaluate the Plan
Winning Investors Over to Your Plan
Chapter 4
Investors look for the following
Concept & • A clearly communicated business model
Development of
Entrepreneurship • Proof your business model makes sense
• Strong management team
Entrepreneurial
Decision Process • Board of advisors
• Realistic financial projections
Types of Start-up • Modest size salary for the entrepreneur
Ventures
• Show that you (the owner) have invested
– Put your money where your mouth is to give confidence to others
Entrepreneurship &
Economic • A clear marketing plan
Development
– 4P’s product, price, promotion, place
Ethics and Social • Accurate start-up costs
Responsibility
• An appreciation of the lender’s needs
– They want to make their money back !
• An exit strategy

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 Ethics
Protecting Your Business Idea
Chapter 4

Concept &
Development of
Entrepreneurs worry about the consequences of
Entrepreneurship sharing a business idea with friends and
Entrepreneurial
associates
Decision Process
• The best strategy is to ask people to sign a
Types of Start-up
non-disclosure agreement
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Preparing to Write the Business Plan

Chapter 4
• It is often necessary for an entrepreneur to orally present
Concept &
Development of
the business plan
Entrepreneurship
• Plan on devoting time and energy to gathering information
Entrepreneurial and writing
Decision Process
• Review quantitative and qualitative goals for the venture
Types of Start-up • Will need (verifiable) facts not just opinions
Ventures

Entrepreneurship & • Three categories of The Internet as a Resource

Economic
Development information: • Business intelligence:
– Market – Industry
Ethics and Social
Responsibility – Operations – Competition
– Market potential
– Financial
• Marketing and sales channel

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 Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Preparing the Killer Investment Plan
Chapter 4

Concept &
Development of
Keep it short
Entrepreneurship
• Busy investors have short attention spans
Entrepreneurial • Don’t focus on your product
Decision Process
– Focus on how the business will make money and the
Types of Start-up investor will get paid back
Ventures
• Know your investor
Entrepreneurship & – Some entrepreneurs produce different versions of their
Economic
Development plan emphasizing different things to capture the
interest of different people
Ethics and Social
Responsibility

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 Assess Trends in the Industry Sector
Chapter 4

Concept &
Development of
• General local economic trends
Entrepreneurship
• Assess local industry
Entrepreneurial • Provincial regulations
Decision Process
• Local competitive environment
Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Operations Information Needs

Chapter 4
• Location
Concept &
Development of
• Manufacturing operations
Entrepreneurship
• Raw materials
Entrepreneurial • Equipment
Decision Process
• Labour skills
Types of Start-up • Space
Ventures
• Overhead expenses
Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Financial Information Needs

Chapter 4
• Proforma income statement (budget)
Concept &
• Proforma balance sheet
Development of
Entrepreneurship
• Proforma cash flow statement
(Note: these will be covered in later chapters)
Entrepreneurial • Will use benchmarks, financial ratios, and estimates
Decision Process
• Sources:
– Dun & Bradstreet
Types of Start-up
Ventures – Statistics Canada
– Trade associations
Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Using the Internet as a Resource Tool
Chapter 4

Concept &
Development of
Access competitor’s websites
Entrepreneurship
– Likely your investors will have done that
Entrepreneurial • Investigate newsgroups
Decision Process
• Discussion groups and chatrooms
Types of Start-up
Ventures
• Blogs
• Online customer forums • Internet resources:
Entrepreneurship &
– Business intelligence
Economic – Competitors’ websites
Development
– Newsgroups
Ethics and Social
– Discussion groups
Responsibility – Marketing research

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 Writing the Business Plan

Chapter 4
• More than one version can be
Concept &
prepared:
Development of
Entrepreneurship
• Snapshot plan:
– Used to get investors’
Entrepreneurial attention
Decision Process
– 15 to 50 pages
Types of Start-up • Master plan:
Ventures
– The comprehensive plan
– Two to three times longer • Scope depends on:
Entrepreneurship & than the snapshot plan
Economic – Who reads it
Development
– Size of the venture
– Specific industry
Ethics and Social
Responsibility

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 Outline of a Business Plan

Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Outline of a Business Plan, continued

Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Outline of a Business Plan, continued

Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Develop a Plan for Writing Your Plan
Chapter 4

Concept &
Development of
• Develop a timeline
Entrepreneurship
• Break the larger sections into smaller tasks
Entrepreneurial • Guard against information overload
Decision Process
• Carefully pick the headings
Types of Start-up
Ventures
– Then fill-in the info for each heading

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Develop a Plan for Writing Your Plan
Chapter 4

Concept &
Development of
• Introductory Page
Entrepreneurship
– Sets out the basic concept
Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Introductory Page example
Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Executive Summary

Chapter 4
• Prepared after the total plan is written
Concept & • Executive Summary
Development of
Entrepreneurship – Written after the complete plan finished
• Some say the most important thing shown to potential investors
Entrepreneurial who read just this before deciding if they will take the time to read
Decision Process
the whole plan
Types of Start-up
Ventures • Two to three pages in length
– What is the business concept or model?
Entrepreneurship & – How is this concept or model unique?
Economic
Development – Why will you be successful?
– What sustainable advantage are you creating?
Ethics and Social
Responsibility – Who are your customers, and why is this segment attractive?
– Who are the individuals starting the business?
– How will you make money?
– How much money will you make?
– What are your long-term exit strategies?

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 Environment and Industry Analysis

Chapter 4
• Environmental analysis (definition): assessment of external
Concept & uncontrollable variables that may impact the business plan
Development of
Entrepreneurship – Economy
Entrepreneurial
– Culture
Decision Process
– Technology
Types of Start-up
– Legal concerns
Ventures
• Industry analysis: reviews industry trends and competitive
advantage
Entrepreneurship &
Economic – Industry demand
Development
– competition
Ethics and Social
Responsibility

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 Critical Issues for Environmental
and Industry Analysis

Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Describing the Venture

Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Production Plan

Chapter 4

Concept &
Development of
Entrepreneurship

Entrepreneurial
Decision Process

Types of Start-up
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Marketing Plan

Chapter 4
• Marketing Plan (definition): describes market conditions
Concept &
Development of and strategy related to how products and services will be
Entrepreneurship
distributed, priced and promoted
Entrepreneurial
Decision Process
• Discussed in further detail in Chapter 7
– Marketing research
Types of Start-up
Ventures
– Sales forecasting
– Market segmentation,
Entrepreneurship &
targeting, and positioning
Economic
Development
– Goals and objectives
• Updated on an annual basis
Ethics and Social
Responsibility

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 Organizational Plan

Chapter 4 • Organizational Plan (definition): describes form of ownership

and lines of authority and responsibility of members of new venture
Concept &
Development of – Who are the partners, principle shareholders
Entrepreneurship
– # shares of voting or nonvoting stock
Entrepreneurial
– Board of Directors
Decision Process – Management team roles and responsibilities

Types of Start-up – Who are the partners,

Ventures principle shareholders
– # shares of voting or • Human Resources Plan
Entrepreneurship &
nonvoting stock
– Organizational chart
Economic
Development
– Board of Directors – Detailed job descriptions
– Management team – Hiring plan
Ethics and Social
roles and
– Company policies
Responsibility responsibilities

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 Assessment of Risk

Chapter 4 • Assessment of Risk: identifies potential hazards and

Concept &
alternative strategies to meet business goals and objectives
Development of – Potential risks
Entrepreneurship
– Prevention
Entrepreneurial – Response
Decision Process

• Porter’s Five Forces Model

Types of Start-up
Ventures – Rivalry among competitors
– Threat of new entrants
– Supplier power
Entrepreneurship &
Economic – Buyer power
Development
– Threat of substitutions

Ethics and Social

Responsibility

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 Measuring Plan Progress

Chapter 4
• Business plan done on a monthly basis
Concept &
Development of • Need to check for progress on an ongoing basis
Entrepreneurship
• Control elements:
Entrepreneurial
Decision Process
– Inventory control
– Production control
Types of Start-up – Quality control
Ventures
– Sales control
Entrepreneurship &
– Disbursements
Economic
Development

Ethics and Social

Responsibility

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 Why Some Business Plans Fail

Chapter 4
• Unreasonable goals
Concept &
Development of
• Goals are not measurable
Entrepreneurship
• Lack of commitment by entrepreneur
Entrepreneurial • Lack of experience in the planned business
Decision Process
• No sense of potential threats or weaknesses
Types of Start-up
• Customer need for product/service not established
Ventures

Entrepreneurship &
Economic
Development

Ethics and Social

Responsibility

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 Chapter Closing Comments

Chapter 4
1. To define what the business plan is, who prepares it,
Concept & who reads it, and how it is evaluated.
Development of
Entrepreneurship 2. To understand the scope and value of the business plan
to investors, lenders, employees, suppliers, and
Entrepreneurial
Decision Process customers.
3. To identify information needs and sources for each
Types of Start-up critical section of the business plan.
Ventures
4. To enhance awareness of the ability of the Internet as an
information resource and marketing tool.
Entrepreneurship &
Economic
Development
5. To present examples and a step-by-step explanation of
the business plan.
Ethics and Social 6. To present helpful questions for the entrepreneur at
Responsibility
each stage of the planning process.
7. To understand how to monitor the business plan.

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