1. Chapter 10: Business Plan1 Copyright 2002 Prentice Hall Publishing Company Crafting a Winning Business Plan

2. Chapter 10: Business Plan2 Copyright 2002 Prentice Hall Publishing Company The Business Plan: Two Essential Functions n Business plan – a written summary of:  An entrepreneur’s proposed business venture  Its operational and financial details  Its marketing opportunities and strategy  Its managers’ skills and abilities n It serves two essential functions:  Guiding the company by charting its future course and defining its strategy for following it  Attracting lenders and investors who will provide needed capital

3. Chapter 10: Business Plan3 Copyright 2002 Prentice Hall Publishing Company Why Take the Time to Build a Business Plan? n Although building a plan does not guarantee success, it does increase your chances of succeeding in business. n A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t attempt the trip without a map!

4. Chapter 10: Business Plan4 Copyright 2002 Prentice Hall Publishing Company Key Elements of a Business Plan n Executive Summary n Mission Statement n Company History n Business and Industry Profile n Business Strategy n Description of Products/Services

5. Chapter 10: Business Plan5 Copyright 2002 Prentice Hall Publishing Company Features vs. Benefits n Feature – a descriptive fact about a product or service (“an ergonomically designed, more comfortable handle”). n Benefit – what a customer gains from the product or service feature (“fewer problems with carpal tunnel syndrome and increased productivity”).

6. Chapter 10: Business Plan6 Copyright 2002 Prentice Hall Publishing Company Key Elements of a Business Plan n Marketing Strategy n Competitor Analysis n Description of Management Team n Plan of Operation n Forecasted Financial Statements n Loan or Investment Proposal (continued)

7. Chapter 10: Business Plan7 Copyright 2002 Prentice Hall Publishing Company Guidelines for Preparing a Business Plan n Remember: No one can create your plan for you. n Potential lenders want to see financial projections, but they are more interested in the strategies for reaching those projections. n Show how you plan to set your business apart from competitors; don't fall into the “me too” trap. n Identify your target market, and offer evidence that customers for your product or service exist.

8. Chapter 10: Business Plan8 Copyright 2002 Prentice Hall Publishing Company Tips on Preparing a Business Plan Make sure your plan has an attractive cover. (First impressions are crucial.) Make sure your plan has an attractive cover. (First impressions are crucial.) n Rid your plan of all spelling and grammatical errors. n Make your plan visually appealing. n Include a table of contents to allow readers to navigate your plan easily. n Make it interesting. (continued)

9. Chapter 10: Business Plan9 Copyright 2002 Prentice Hall Publishing Company Tips on Preparing a Business Plan n Your plan must prove that the business will make money (not necessarily immediately, but eventually). n Use spreadsheets to generate financial forecasts. n Always include cash flow projections. n Keep your plan “crisp” – between 25 and 50 pages long. n Tell the truth – always. (continued)

10. Chapter 10: Business Plan10 Copyright 2002 Prentice Hall Publishing Company A Plan Must Pass Three Tests n The Reality Test - proving that:  a market really does exist for your product or service.  you can actually build or provide it for the cost estimates in the plan. n The Competitive Test - evaluates:  a company’s position relative to its customers.  management’s ability to create a company that will gain an edge over its rivals. n The Value Test – proving that:  a venture offers investors or lenders an attractive rate of return or a high probability of repayment.

11. Chapter 10: Business Plan11 Copyright 2002 Prentice Hall Publishing Company Presenting the Plan n Demonstrate enthusiasm, but don’t be overemotional. n Know your audience thoroughly. n “Hook” investors quickly with an up-front explanation of the venture, its opportunities, and its benefits to them. n Hit the highlights; focus on the details later. n Keep your presentation simple – 2 or 3 major points.

12. Chapter 10: Business Plan12 Copyright 2002 Prentice Hall Publishing Company Presenting the Plan n Avoid overloading your audience with technological jargon. n Use visual aids. n Close by reinforcing the nature of the opportunity. n Be prepared (with details) for potential investors’ questions. n Follow up with every investor to whom you make your presentation. (continued)

13. Chapter 10: Business Plan13 Copyright 2002 Prentice Hall Publishing Company The “5 Cs” of Credit n Capital n Capacity n Collateral n Character n Conditions