3ObjectivesTo define a sustainable business plan and demonstrate its valueTo explore the business planning pitfalls that plague many new venturesTo describe the benefits of a business planTo set forth the viewpoints of those who read a business planTo emphasise the importance of coordinating the business plan segmentsTo review key recommendations by venture capital experts regarding a business planTo present a complete outline of an effective business plan8. To present some helpful hints for writing an effective business plan9. To highlight points to remember in the presentation of a business planTo underline some of the contrarian viewpoints on the importance of a business plan.
4But first?Q. What is a ‘business plan’? Q. And what could it be used for?
5What is a business plan? A document in which you: Make your business caseDescribe your operationsIdentify your management teamProject the future financial situationA tool for determining the essential operationsA primary document for managing the venture and raising fundsThe entrepreneur’s roadmap
6What about sustainability Consider ‘impact’, in terms of:Greenhouse gasesEnergy useProduct life-cycleIndustrial systems (including firms) are not separate from the biosphere
8Business plan pitfalls Green themingNo realistic goalsFailure to anticipate roadblocksNo commitment or dedication5. Lack of demonstrated experience6. No market niche
9Benefits of a business plan For the entrepreneurAnalyses all aspects of the ventureStrategy for uncertaintiesCritical and objective viewScrutinises assumptionsExamines operating strategies and expected resultsMeasurable benchmarks–A communication tool for sources of fundingA tool for guiding the ventureFor the investorDetails of market potential and securing market shareAbility to service debt and provide adequate returnsCritical risks and crucial eventsA comprehensive overview of the entire operationA useful guide for assessing planning and managerial ability
10Who reads the plan??Q. Who might be interested in reading your plan? (Identify all of the potential audiences)
11Who reads the plan? Venture capitalists Bankers Investors Potential large customersLawyersConsultantsSuppliers
12Who reads the plan? Bankers Stress financial aspects of the proposal Equity investors and venture capital fund managers Emphasise market and finance issuesBusiness angels Look at the entrepreneur and ‘investor fit’
13Three viewpoints The entrepreneur’s viewpoint The potential customers’ viewpointThe investors’ viewpoint
14The five minute reading The venture capitalists’ approach:What are the characteristics of the venture and its industry?What is the financial structure of the plan?What does the balance sheet say about liquidity, net worth and debt/equity?What is the quality of the entrepreneur(s)?5. What is the unique feature of this venture?6. Then, they skim read the entire plan
15Putting the package together Appearance – middle ground (plastic spiral bound, mostly single colour)Length – no more than 50 pagesCover and title page – company name, address and issue dateThe executive summary – two to three pagesTable of contents
16Ten guidelines Keep the plan respectably short Organise and package the plan appropriatelyOrient the plan towards the futureAvoid exaggerationHighlight critical risksGive evidence of an effective entrepreneurial teamDo not over-diversify8. Identify the target market9. Write in the third person10. Capture the reader’s interest… and be able to confidently answer the ten questions under the heading ‘Questions to be answered’
17Business plan outline?Q. What content might you expect to see included in a business plan?
20Business plan outline (cont.) Adapted from: Donald F. Kuratko and Robert C. McDonald, The Entrepreneurial Planning Guide,Bloomington: Kelley School of Business, Indiana University, 2007
21Business plan elements (1) Executive summaryWrite this after the rest of the business planA clever snapshot of the complete planBusiness descriptionIndustry background, status and future trendsThoroughly describe the ventureSustainabilityDefine sustainability relevant to the business
22Business plan elements (2) Marketing(As per Chapter 10)OperationsLocation, labour availability, wage rate, proximity to suppliers, customers and community support, taxes and zoning, plant and equipmentSustainable development measures of performanceDescribe how sustainability can be demonstrated (including triple bottom line indicators)
23Business plan elements (3) ManagementKey personnel, advisers, consultants, or members of the board; structure of payment and ownershipFinancial(As per Chapter 11)Viability of the undertaking, pro forma balance sheet, income statement and cash–flow statementCritical risksUnfavourable trends and difficulties
24Business plan elements (4) Harvest strategyManagement succession and investor exit strategiesMilestone scheduleProvide a timetable for the various activitiesAppendix and/or bibliographyAdditional documentation
25A practical exampleRefer to Appendix 1 for an example business plan – ‘Red River Optical: Affordable reading glasses for Vietnam’
26The pitch?Q. Now it is written. How can you (verbally) present your plan to an audience?
27The pitchPresenting the plan to stakeholders – especially funding providersThis is also known as ‘the elevator pitch’Be organised, well-prepared, interesting and flexible
28The pitch Focus on the plan Demonstrate a reachable market Explain the business modelTout the management teamExplain the metricsMotivate the audienceAnswer: ‘Why you?’ and ‘why now?’
29Key concepts?(close your books) Q. Who will read your business plan? Q. What are the main sections in a business plan?
30Key concepts Business plan audiences The business plan outline: Venture capitalists, bankers, investors, potential large customers, lawyers, consultants and suppliersThe business plan outline:Executive summaryBusiness descriptionSustainabilityIV. MarketingV. OperationsVI. Sustainable development measures of performanceManagementFinancialCritical risksHarvest strategyMilestone scheduleAppendix and/or bibliography