Presentation on theme: "Part III – Developing the Entrepreneurial Plan"— Presentation transcript:
1 Part III – Developing the Entrepreneurial Plan Chapter 7 – Environmental Assessment: Preparation for a New VentureChapter 8 – Marketing Research for New VenturesChapter 9 – Financial Preparation for Entrepreneurial VenturesChapter 10 – Developing an Effective Business PlanCopyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.
2 Chapter 10 – Developing An Effective Business Plan
3 Pitfalls to Avoid in Planning Pitfall 1: No Realistic GoalsPitfall 2: Failure to Anticipate RoadblocksPitfall 3: No Commitment or DedicationPitfall 4: Lack of Demonstrated Experience (Business or Technical)Pitfall 5: No Market Niche (Segment)
4 What is a Business Plan?A business plan is the written document that details the proposed venture. It must describe current status, expected needs, and projected results of the new business. Every aspect of the venture needs to be covered: the project, marketing, research and development, manufacturing, management, critical risks, financing, and milestones or a timetable. A description of all of these facets of the proposed venture is necessary to demonstrate a clear picture of what that venture is, where it is projected to go, and how the entrepreneur proposes it will get there. The business plan is the entrepreneur’s roadmap for a successful enterprise.
5 Benefits of a Business Plan Specifically for the entrepreneur:The time, effort, research, and discipline needed to put together a formal business plan force the entrepreneur to view the venture critically and objectively.The competitive, economic, and financial analysis included in the business plan subject the entrepreneur to close scrutiny of his or her assumptions about the venture’s success.
6 Benefits of a Business Plan, cont. Since all aspects of the business venture must be addressed in the plan, the entrepreneur develops and examines operating strategies and expected results for outside evaluators.The business plan quantifies objectives, providing measurable benchmarks for comparing forecasts with actual results.The completed business plan provides the entrepreneur with a communication tool for outside financial sources as well as an operational tool for guiding the venture towards success.
7 Benefits of the Business Plan Specifically for the financial sources:Details of the market potential and plans for securing a share of that market.The venture’s ability to service debt or provide an adequate return on equity.Identifies critical risks and crucial events with a discussion of contingency plans.A clear, concise document that contains the necessary information for a thorough business and financial evaluation.
9 The Five-Minute Reading Step 1: Determine the characteristics of the venture and its industryStep 2: Determine the financial structure of the plan (amount of debt or equity investment required)Step 3: Read the latest balance sheet (to determine liquidity, net worth, and debt/equity)Step 4: Determine the quality of entrepreneurs in the venture (sometimes the most important step)Step 5: Establish the unique feature in this venture (find out what is different)Step 6: Read the entire plan over lightly (this is when the entire package is paged through for a casual look at graphs, charts, exhibits, and other plan components)
10 Putting the Package Together AppearanceLengthThe cover and title pageThe executive summaryThe table of contents
11 Guidelines to Remember Keep the Plan Respectably ShortOrganize and Package the Plan AppropriatelyOrient the Plan Toward the FutureAvoid ExaggerationHighlight Critical RisksGive Evidence of an Effective Entrepreneurial TeamDo Not OverdiversifyIdentify the Target MarketKeep the Plan Written in the Third PersonCapture the Reader’s Interest
13 Complete Outline of a Business Plan Section I: Executive SummarySection II: Business DescriptionA. General description of businessB. Industry backgroundC. Goals and potential of the business and milestones (if any)D. Uniqueness of product or service
14 Complete Outline of a Business Plan, cont. Section III: MarketingA. Research and analysis1. Target market (customers) identified2. Market size and trends3. Competition4. Estimated market shareB. Marketing plan1. Market strategy – sales and distribution2. Pricing3. Advertising and promotions
15 Complete Outline of a Business Plan, cont. Section IV: OperationsA. Identify location1. Advantages2. Zoning3. TaxesB. Proximity to suppliesC. Access to transportation
16 Complete Outline of a Business Plan, cont. Section V: ManagementA. Management team – key personnelB. Legal structure – stock agreements, employment agreements, ownershipC. Board of directors, advisors, consultants
17 Complete Outline of a Business Plan, cont. Section VI: FinancialA. Financial forecast1. Profit and loss2. Cash flow3. Break-even analysis4. Cost controls5. Budgeting plans
18 Complete Outline of a Business Plan, cont. Section VII: Critical RisksA. Potential ProblemsB. Obstacles and risksC. Alternative courses of actionSection VIII: Harvest StrategyA. Transfer of assetB. Continuity of business strategyC. Identify successor
19 Complete Outline of a Business Plan, cont. Section IX: Milestone ScheduleA. Timing and objectivesB. Deadlines and milestonesC. Relationship of eventsSection X: Appendix or Bibliography
20 Presentation of the Business Plan Know the outline thoroughlyRehearse the presentationBe familiar with any equipment
21 Business Plan Assessment: Complete Evaluation of Each Component
22 What To Do When a Venture Capitalist Turns You Down: Ten Points Confirm the decisionSell for the futureFind out why you were rejectedAsk for adviceAsk for suggestionsGet the nameFind out whyWork on an introductionDevelop a reasonable excuseKnow your referral