WRITING A

BUSINESS PLAN
Lesson 1: FINALS Entrepreneurship
 LEARNING OUTCOMES

After studying this chapter you should be ready to:

1. Explain the purpose of a business plan.

2. Describe who reads a business plan and what they are looking for.
3. Discuss the guidelines to follow to write an effective business plan.
4. Identify and describe a suggested outline of a business plan.
5. Explain how to effectively present a business plan to potential
investors.
What is a Business Plan?
A business plan is a document that demonstrates the
feasibility of a potential new business and provides a
roadmap for its first years of operation.

Business plans are an important part of creating new

businesses, whether a startup or a spin-off of an existing
business. Document detailing the company's goals and
how they will be achieved.
Two Primary reasons for writing a business plan.

First, writing a business plan forces a firm’s founders to

systematically think through each aspect of their new
venture. This is not a trivial effort—it usually takes several
days or weeks to complete a well-developed business plan—
and the founders typically meet regularly to work on the
plan during this period.

The second reason to write a business plan is to create

a selling document for a company.
 Benefits of Writing a Business Plan

• Initial planning document for a new business.

• Serves as a tool to communicate the idea of the new venture to potential investors, bankers, key
employees.

• Serves as a record to monitor and compare results.

• To obtain bank financing.

• To obtain investment funds.

• To establish strategic alliances.

• To obtain initial contracts.

• To attract key employees.

• To motivate and focus your management team

 Two primary audiences for a
firm’s business plan

Audience What are they looking for?

A clearly written business plan also helps a firm’s rank-
A Firm’s Employees and-file employees
operate in sync and move forward in a consistent and
purposeful manner

A firm’s business plan must make the case that the firm is a
Investors and Other External
good use of an investor’s funds or the attention of others
Stakeholders
THREE TYPES OF
BUSINESS PLANS
Outline of the
Business Plan
 Exploring Each Section of the Plan

COVER PAGE TABLE OF CONTENTS Executive Summary

The executive summary is a

The cover page
should include:  A table of contents
 Company’s name,
address, and phone
number; the date; the
contact information for
the lead entrepreneur;
and the company’s
website address if it has
one.
short overview of the entire
business plan; it provides a busy
should follow the cover reader with everything she needs
letter. It should list the to know about the new venture’s
sections and page distinctive nature.
numbers of the business
plan and the appendices.  In many instances an investor will
first ask for a copy of a firm’s
PowerPoint deck or executive
summary and will request a copy
of the full business plan only if the
PowerPoint deck or executive
summary is sufficiently convincing.
 Exploring Each Section of the Plan

INDUSTRY ANALYSIS COMPANY DESCRIPTION

The main body of the business

plan begins by describing the
industry in which the firm
intends to compete.
 This description should
include data and information
about various characteristics of
the industry, such
as its size, growth rate, and
sales projections.
This section begins with a general description
of the company. Although at first glance this
section may seem less critical than
others, it is extremely important in that it
demonstrates to your reader that you
know how to translate an idea into a business.
MILESTONE

 A milestone is a noteworthy or significant event. If you have

selected and registered your company’s name, completed a feasibility analysis,
developed a business model, and established a legal entity, you have already
cleared several important milestones.

HOW A MILESTONE IS USED IN BUSINESS PLAN?

 Milestones are what you use to convert your business strategy and tactics into
action.

 Just like a milestone on the side of a road marks how far you’ve gone, a
milestone in business tracks your progress as you grow and implement your
plan. They’re what you use to manage responsibilities, track results, and
convert your idea into a functioning business.
MARKET ANALYSIS

The market analysis is distinctly different from the industry

analysis. Whereas the industry analysis focuses on the industry
in which a firm intends to compete (e.g., toy industry, fitness
center industry, men’s clothing industry), the market analysis
breaks the industry into segments and zeroes in on the specific
segment (or target market) to which the firm will try to appeal.
MARKET ANALYSIS

 The first task that is generally tackled in a market analysis is to segment

the industry the business will be entering and then identify the specific target
market on which it will focus. This is done through market segmentation.

MARKET SEGMENTATION
– The process of dividing the market into distinct segments.

 Markets can be segmented in many ways, such as by geography (city, state, country),
demographic variables (age, gender, income), psychographic variables (personality, lifestyle,
values), and so forth. Sometimes a firm segments its market based on more than one
dimension in order to drill down to a specific segment that the firm thinks it is uniquely
capable of serving.
 Exploring Each Section of the Plan
ECONOMICS OF THE
BUSINESS
This section begins the financial
analysis of a business, which is
further fleshed out in the
financial projections.
It addresses the basic logic of
how profits are earned in the
business and how many units of
a business’s product or service
must be sold for the business to
“break even” and then start
earning a profit.
MARKETING PLAN
The marketing plan focuses on how the
business will market and sell its
product or service. It deals with the
nuts and bolts of marketing in terms of
price, promotion, distribution, and
sales.
For example, GreatCall, a firm
producing cell phones for older users,
may have a great product, a well-
defined target market, and a good
understanding of its customers and
competitors, but it still has to find
customers and persuade them to buy
its product.
PRODUCT( OR SERVICE) DESIGN
AND DEVELOPMENT PLAN
If you are developing a completely
new product or service, you need
to include a section in your
business plan that focuses on the
status of your development efforts.
Many seemingly promising start-
ups never get off the ground
because their product development
efforts stall or the actual
development of the product or
service turns out to be more
difficult than expected.
 Exploring Each Section of the Plan

OPERATIONS PLAN MANAGEMENT TEAM AND COMPANY STRUCTURE

The operations plan section of the
business plan outlines how your
business will be run and how your
product or service will be produced.
You have to strike a careful balance
between adequately describing this
topic and providing too much detail.
Many investors and others who read business plans look first at the
executive summary and then go directly to the management team section
to assess the strength of the people starting the firm. Investors read more
business plans with interesting ideas and exciting markets than they are
able to finance.

 Your readers will want an overall

sense of how the business will be
run, but they generally will not be
looking for detailed explanations.
As a result, it is best to keep this
section short and crisp.
 Exploring Each Section of the Plan
OVERALL SCHEDULE
A schedule should be prepared that shows
the major events required to launch the
business.
The schedule should be in the format of
milestones critical to the business’s success,
such as incorporating the venture, completion
of prototypes, rental of facilities, obtaining
critical financing, starting the production of
operations, obtaining the first sale, and so
forth.
FINANCIAL PROJECTIONS
The final section of a business plan presents a firm’s pro
forma (or projected) financial projections. Having
completed the previous sections of the plan, it’s easy to
see why the financial projections come last. They take
the plans you have developed and express them in
financial terms.
The pro forma (or projected) financial statements
 The heart of the financial section of a business plan.
Although at first glance preparing financial
statements appears to be a tedious exercise, it’s a
fairly straightforward process if the preceding
sections of your plan are thorough.
 Exploring Each Section of the Plan

FINANCIAL PROJECTIONS

Sources and Uses of funds statement

 The first thing to include in financial projection. It is a document that lays out specifically
how much money a firm needs (if the intention of the business plan is to raise money), where
the money will come from, and how the money will be used.

Assumptions sheet
 The next item to include is an assumptions sheet , which is an explanation of the most critical
assumptions on which the financial statements are based.
Exploring Each Section of the Plan

APPENDIX

Any material that does not easily fit into the body
of a business
plan should appear in an appendix

• résumés of the top management team,

• photos or diagrams of product or product
prototypes,
• certain financial data, and
• market research projections.
 PRESENTING
THE BUSINESS
PLAN TO
INVESTORS
The Oral Presentation of
a Business Plan
 The Oral Presentation of a
Business Plan
• The founders of a new venture should prepare a set of PowerPoint slides that will fill the time slot allowed
for the presentation portion of the meeting.

• The first rule in making an oral presentation is to follow instructions.

Example: If an investor tells an entrepreneur that he or she has one hour and that the hour will consist of a 20-
minute presentation and a 40-minute questionand- answer period, the presentation shouldn’t last more than 20
minutes.
• The presentation should be smooth and well-rehearsed.

• The slides should be sharp and not cluttered with material.

• The entrepreneur should arrive at the appointment on time and be well prepared.

• If any audiovisual equipment is needed, the entrepreneur should be prepared to supply the equipment if the investor
doesn’t have it.

• The presentation should consist of plain talk and should avoid technical jargon.
 Questions

What is a business What are the What are the two

When is the
plan? advantages of primary reasons for
appropriate time to
preparing a those starting a
write a
business plan for a new venture to
business plan?
new venture? write a
6-4.
business plan?
What are the
differences among a
summary business plan,
a full business plan, and
an operational business
plan?
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