The Business Plan: Creating & Starting the Venture Entrepreneurship

Business Plan “is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture.” It is a road map that integrated functional plans and answers questions such as: - Where am I now? - Where am I going? - How will I get there?

Scope & Value of the Business Plan Is read by employees, investors, bankers, venture capitalists, suppliers, customers, advisors & consultants. Is important because: It helps determine the viability of the venture in designated market. It provides guidance to the entrepreneur in organizing his or her planning activities. It serves as an important tool in helping to obtain financing.

Information Needs Establishing goals & objectives help in defining what kind of information is required from what sources. Market Information: such as Target market Market potential for product or service Industry & environmental trends (Macro & Micro environment) Competitors Product/service required features

Information Needs Market Positioning Market Objectives General environmental & Demographic trends National industry trends National environmental & Demographic trends Local industry trends Local competition , Strengths & weaknesses Market Positioning Market Objectives

Information Needs Operations Information: such as: - Location - Manufacturing operations - Raw materials - Equipment - Labor skills - Space - Overheads

Information Needs Financial Information Needs: all the information required for budgeting such as: - Capital expenditure - direct operating expense - forecast for revenue and sales

Writing a Business Plan 1. Introductory Page A. Name & Address of business B. Name(s) & Address(s) of Principal(s). C. Nature of Business D. Statement of financing Needed E. Statement of confidentiality of report

Writing a Business Plan II. Executive Summary – Two to three pages summarizing the complete business plan III. Industry Analysis A. Future outlook & Trends B. Analysis of competitors C. Market Segmentation D. Industry & Market forecasts

Writing a Business Plan IV. Description of Venture A. Product(s) B. Service(s) C. Size of Business D. Office equipment & Personnel E. Background of Entrepreneur(s)

Writing a Business Plan V. Production Plan A. Manufacturing Process (amount subcontracted) B. Physical Plant C. Machinery & Equipment D. Names of suppliers of raw materials

Writing a Business Plan VI. Operational Plan A. Description of company’s operations B. Flow of orders for goods and/or services C. Technology Utilization

Writing a Business Plan VII. Marketing Plan A. Pricing B. Distribution C. Promotion D. Product forecasts E. Controls

Writing a Business Plan VIII. Organizational Plan A. Form of ownership B. Identification of partners or principal shareholders C. Authority of principals D. Management – team background E. Roles and responsibilities of members of organization

Writing a business plan IX. Assessment of Risk A. Evaluate weakness(es) of business B. New technologies C. Contingency Plans

Writing a Business Plan X. Financial Plan A. Assumptions B. Pro forma income statement C. Cash flow projections D. Pro forma balance sheet E. Break even analysis F. Sources & application of funds

XI. Appendix (contains backup material) A. Letters B. Market research data C. Leases or contracts D. Price lists from suppliers

Review & Discussion If a business plan is to be used to raise capital, the why would the entrepreneur want to advertise the firm’s major risks by detailing them in the business plan?