Entrepreneurship: Ideas in Action © Cengage Learning/South-Western ChapterChapter Develop a Business Plan 3.1 Why a Business Plan is Important 3.2 What Goes into a Business Plan? 3.3 How to Create an Effective Business Plan 3

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 2 Ideas in Action Passion for graffiti art turned into a business. Prior to requesting financing from a bank, you should prepare the “five c’s.” Character - are you honest and dependable? Capacity - can you earn enough $ to pay back loans? Capital - do you have enough $ on hand to pay bills? Collateral - do you have values to back up your loans? Conditions - do you have potential to continue earning $? Turning an Idea into a Business (p.63)

Chapter 3 Slide 3 Lesson 3.1 Why a Business Plan is Important Goals Explain the purpose of writing a good business plan. Describe the importance of a business plan.

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 4 The Business Plan business plan a written document that describes all the steps necessary for opening and operating a successful business A business plan will: describe your ideas to investors serve as a guide for you as you start your business

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 5 Purposes of a Business Plan A business plan: explains the idea behind your business how your product/service will be produced & sold sets specific objectives and how you will achieve them describes the experience of the people who will run the business

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 6 Purposes of a Business Plan A business plan helps obtain finances: Convinces investors that your business idea is solid Products must be newer, better, or less expensive then those previously available Showing how you will retain customers Short-, Medium-, & Long-terms sales projections should show profitability Background & Experience must convince investors that you are capable for running the business. 3.1

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 7 What are the three main purposes of a business plan?

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 8 Importance of a Business Plan A business plan: 1.makes you think about all aspects of your business 2.may help you secure financing 3.helps you communicate your ideas to others 4.can serve as a tool for managing your business

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 9 Why is a business plan important to an entrepreneur?

Chapter 3 Slide 10 Lesson 3.2 What Goes into a Business Plan? Goals List and describe the basic elements of a business plan. Describe how to pull a business plan together.

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 11 Basic Elements of a Business Plan The three basic components of a business plan are: introductory materials the main body the appendix All business plans will differ but should contain the same basic information.

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 12 Business Plan Layout Body Elements Introduction Marketing Finances Operations Concluding Statements Appendix Intro Elements Title Page Table of Contents Cover Letter Statement of Purpose Executive Summary

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 13 The main body of a business plan contains the bulk of the information about the business idea including: Introduction Marketing Financial Management Operations Concluding Statement 5 Elements of the Main Body

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 14 Main Body - Introduction Introduction should contain following info: A detailed description of business goals short, medium, and long-term goals Legal structure of business, including ownership sole proprietor, partnership, or corporation Your applicable skills and experience paid, volunteer, and hobbies

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 15 The competitive advantages of your business Performance Quality Reliability Distribution Price Promotion Public image or reputation Main Body - Introduction

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 16 Main Body - Marketing The marketing section of the business plan should describe: Products/Services Market Industry Location Described on next slide

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 17 Products/Services Describe products/services Explain how they differ from existing products Highlight unique features Explain the customer benefits Market Who is your market? How large is the market? How do you plan to enter the market? How will you deal with competition? 3.2

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 18 Industry Growth potential Economic trends Technology impacts Forecast for the industry growth External factors that affect the business High competition or lack of suppliers Location Location to competition Location to target market Availability of parking & other shopping 3.2

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 19 Main Body – Financial Management Helps determine your financial needs. Consists of 3 elements 1.Identification of Risks It is reassuring to lenders to know that you have proactively defined risks and that you have a plan for dealing with them. 3.2

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 20 2.Financial Statements pro forma financial statement: a financial statement based on projected revenues and expenses 3.Funding Request and Return on Investment personal investment loan based financing (borrowing) plan for how the funding will be used anticipated return on investment (ROI) Main Body – Financial Management 3.2

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 21 Operations Daily Business Management Staffing hiring and personnel procedures Facilities buy or lease Equipment production and delivery equipment

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 22 Concluding Statement Summarize goals and objectives. Emphasize your commitment to the success of your business.

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 23 List the elements of the main body of a business plan and explain why each one is important.

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 24 Complete the Business Plan Introductory elements 1.Title Page 2.cover letter a letter that introduces and explains an accompanying document or set of documents 3.Table of Contents 4.Statement of Purpose a brief explanation of why you are asking for a loan and what you plan to do with the money

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 25

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 26

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 27 5.Executive Summary A short restatement of the report An executive summary should: compel the reader to continue reading describe your business concept include financial projections identify physical needs state the requested loan value Complete the Business Plan

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 28

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 29 includes supporting documents that provide additional information to support the body of the report Put It All Together The business plan should be: neat attractive well-organized inviting to read Appendix Complete the Business Plan

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 30 Why should you include supporting documents in your business plan?

Chapter 3 Slide 31 Lesson 3.3 How to Create an Effective Business Plan Goals Describe resources available for researching your business plan. Name common mistakes to avoid in business planning.

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 32 Research the Business Plan Convince readers you have a practical business idea by including information and data from objective resources and showing solid evidence. Most entrepreneurs spend 50 to 100 hours developing their business plan. Process requires: Patience, Research, Thought, Great Deal of Writing and Editing

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 33 Community, Government, & Professional Resources 1.Small Business Administration (SBA) an independent government agency helps Americans develop new businesses 2.Small Business Development Centers (SBDC) a cooperative effort of the private sector, the educational community, and federal, state, and local governments provides free, individualized help for business plan development for those who cannot afford private consultant 3.3

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 34 3.Service Corps of Retired Executives (SCORE) retired executives provide free, confidential advice to entrepreneurs either in person or over the Internet both short-term and long-term assistance is available 4.Chamber of Commerce provides information on local business trends Community, Government, & Professional Resources 3.3

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 35 5.Trade Associations organizations that are comprised of professionals in a specific industry provide educational and networking opportunities 6.Professional Consultants experts who will provide business assistance for a fee 7.Financial Institutions Bankers and Accountants can provide information about loans and financial statements. Community, Government, & Professional Resources 3.3

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 36 Print Resources library (books on business development) magazines (trade and small business) government documents (publications) Provide information similar to library information Industry specific websites Websites targeted to entrepreneurs and small business owners Online Resources 3.3

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western People Resources Small Business Development Centers One-on-One Assistance Inexpensive workshops SCORE’s Volunteer Executives Free confidential advice Professional Consultants Confidential advice at a cost Chapter 3 Slide

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 38 What are some of the resources that are available to help you develop your business plan?

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 39 Mistakes in Business Planning Avoid making the following mistakes: Unrealistic financial projections An undefined target market Poor research Ignored competition Inconsistencies in the Business Plan

Entrepreneurship: Ideas in Action © Cengage Learning/South-Western Chapter 3 Slide 40 List some common mistakes that are made in business planning.