Business Plan

Dušan Milutinović, M.B.A.

milutind@mgmt.purdue.edu
Why make a business plan?

 What is a business plan?

 Establishment/development needs
 Loan
 Investment
 Reporting to internal/external
stakeholders
 Discipline of management action and
reasoning
What are stakeholders and
investors looking for?
 Form vs. content
 Visualization of all functions
 Management Team
 Good problem prediction
 Explain assumptions and predictions
 Explain critical factors of success/failure
 Explain major landmarks
 Provide proof of top management/entrepreneur
commitment
Procedures and Methodology
 Detailed expert and business analysis
 Answer all questions
 Top management interviews
 Knowledge of micro/macroeconomic
environment and economic laws that apply –
theory and practice
 Qualifications of the presenter and analyst
 Consulting with experts
 Review and update
Formats Used

 europe
 EBRD
 World Bank
 USA
 EY model
 Northpoint model
Length of the Business Plan

 Depends on the stage of development of

the firm
 Start-up
 Early stage
 Late stage
 Layers of business plan writing and
presenting
Structure
 Executive Summary
 The Firm
 Market Analysis
 Competitive Analysis and Barriers to Entry
 Products and Services
 Sales and Marketing
 Operations
 Finances
 Appendix
Executive Summary

 Length – 1-2 pages

 Content – the essence
 A negative decision is made quickly
 Method of preparation
 Summary financial data
 Requested ammount
 Prospects
About the firm

 Vision and Mission

 Strategy and Value Propositions
 Legal forms – why, and breakdown of
ownership.
 Technology and alliances
 Facilities and equipment
 Risks – in general
Market Analysis
 Market description – Critical needs
 Market research
 Focus groups
 Studies etc.
 The buyer
 Buying criteria – Who is the decision maker, influencer…
 Buying cycle
 Market size
 Today
 In one year
 In five years
 Market segmentation - criteria
 Geographical
 Demographical
 Psychographical etc.
Analysis of the Competition and
Barriers to Entry
 Potential and existing competition
 Total market size and growth
 Analysis of major competitors
 Analysis of consumer perception based
on focus group – perceptual map
 Comparative advantage
 SWOT analysis
Products and Services

 Product lines
 R&D, future plans
 Positioning
 Product life cycle
 Packaging
 The product/service delivery cycle
 Post sales services and costs
Sales and Marketing
 Sales characteristics and methods (internal or external)
 Training of sales reps
 Sales reps motivation
 Sales activities
 Prospect identification
 Prioritization of prospects
 Measurement of sales efforts by period (telephone calls
etc.) and per product/services sold
 Average sale size
 Customer retainment rate
 Up-to-date sales successes and market penetration
 Graphical depiction of market share
Marketing Process and
Communications
 Marketing Plan (4 P-s)
 Distribution Channel Strategy
 Results of market tests
 Distribution channels...internet
 Pricing Strategy (EDLP, Penetration,
Value, Mark-up, lock-in)
 Growth strategy
Marketing Communications
 Promotion, advertising
 Printed materials
 Fairs
 Media and PR
 Conferences, Seminars
 Internet
 Professional and industry publications
 Direct mail and coverpage
 Telemarketing
Operations Analysis
 Characteristics of the production process -
subcontractors
 Production process description
 Necessary facilities and equipment?
 Raw materials?
 Cost of production?
 Future capital investment needs?
 Production process and inventory management?
 Warehousing?
 Location
 Necessary time for investment to be operational
 HR needs
Financial Analysis

 Assumptions, Assumptions,
Assumptions!!!
 Necessary reports and projections:
 Balance sheet, income statement, cash
flow, NPV, ratios
 Current and prospective ownership
structure
 Exit strategies
 ...
Some sites
 www.bplans.com
 www.businessfinance.com/index.htm
 www.ceebic.org
 www.drapervc.com/Resources.html
 www.edgeonline.com
 www.entrepreneurmag.com
 www.inc.com
 www.nbia.org
 www.sba.gov
 www.business.gov
 www.scn.org/civic/score-online/
 www.startupbiz.com