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 Purposes of a Business Plan o Development tool for organizational founders oVision and mission clarification oPlanning and evaluation guidelines oTool for securing financial resources oTool for guiding growth

4. Chapter 10: Business Plan4 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!

5. Chapter 10: Business Plan5 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

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 Technology and Operations Strategies for Entrepreneurs Layout Strategies Work Design Strategies Location Strategies Production Process Strategies Production-Operations Management Strategies Capacity Strategies ResourcesProducts

8. Chapter 10: Business Plan8 Copyright 2002 Prentice Hall Publishing Company Production Process Strategies Three Possible Choices: p The process-focused strategy p The product-focused strategy p The repetitive-focused strategy

9. Chapter 10: Business Plan9 Copyright 2002 Prentice Hall Publishing Company Layout Strategies Six Potential Layout Strategies: p The fixed position p The process-oriented layout p The office layout p The retail-service layout p The warehouse layout p The product-oriented layout

10. Chapter 10: Business Plan10 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.

11. Chapter 10: Business Plan11 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)

12. Chapter 10: Business Plan12 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)

13. Chapter 10: Business Plan13 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”).

14. Chapter 10: Business Plan14 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.

15. Chapter 10: Business Plan15 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.

16. Chapter 10: Business Plan16 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)

17. Chapter 10: Business Plan17 Copyright 2002 Prentice Hall Publishing Company The “5 Cs” of Credit n Capital n Capacity n Collateral n Character n Conditions

18. Chapter 10: Business Plan18 Copyright 2002 Prentice Hall Publishing Company Business Planning (Recap) What the Business Plan Should Include: p Executive Summary p Analysis of Opportunity p Analysis of Context p Description of Business p Financial Data and Projections p Supporting Documentation

19. Chapter 10: Business Plan19 Copyright 2002 Prentice Hall Publishing Company Writing a Successful Business Plan 10 Characteristics: 1. Clear, realistic financial projections 2. Detailed market research 3. Detailed competitor research 4. Descriptions of key decision makers 5. Thorough summary 6. Proof of vision 7. Good formatting and clear writing 8. Brief and concise 9. Writing that demonstrates the importance of the bottom line 10. A plan that captures “you” 10. A plan that captures “you”