1. Chapter 9 Writing a Business Plan Entrepreneurship: Successfully Launching New Ventures Diane M. Sullivan, Ph.D. (2007)

2. What is a Business Plan? A written document A written document Describes what a new business plans to accomplish and how it plans to accomplish it Describes what a new business plans to accomplish and how it plans to accomplish it The Business Plan can serve multiple purposes The Business Plan can serve multiple purposes Inside the firm: help company develop “road map” for executing strategies and plans Inside the firm: help company develop “road map” for executing strategies and plans Outside the firm: introduces potential investors to business opportunity the firm is pursuing and how it plans to pursue it Outside the firm: introduces potential investors to business opportunity the firm is pursuing and how it plans to pursue it Generally around 25 - 35 pages long (not including appendices) Generally around 25 - 35 pages long (not including appendices) Our Focus Today

3. Guidelines to Consider when Writing a Business Plan Structure of the Business Plan Structure of the Business Plan For the best impression follow a conventional structure (see p. 212-213 in text for conventional business plan outline) For the best impression follow a conventional structure (see p. 212-213 in text for conventional business plan outline) Investors are very busy and want to easily find critical information Investors are very busy and want to easily find critical information Software Packages to Assist with Plan Structure Software Packages to Assist with Plan Structure There are software packages available can assist in writing the plan There are software packages available can assist in writing the plan PaloAlto Software Business PlanPro ($199.00 retail cost) PaloAlto Software Business PlanPro ($199.00 retail cost) Get a FREE copy if enter the UD Business Plan Competition (www.bpc.com)!!! Get a FREE copy if enter the UD Business Plan Competition (www.bpc.com)!!!www.bpc.com)

4. Outline of Business Plan Outline of Business Plan Outline of Business Plan A suggested outline is as follows A suggested outline is as follows Most plans don’t include all elements presented in the text and discussed here Most plans don’t include all elements presented in the text and discussed here These are included for completeness These are included for completeness Entrepreneurs must decide which elements to include Entrepreneurs must decide which elements to include

5. Outline of Business Plan *This slide modified from Barringer & Ireland (2006)

6. Outline of Business Plan *This slide modified from Barringer & Ireland (2006)

7. Outline of Business Plan *This slide modified from Barringer & Ireland (2006)

8. Outline of Business Plan *This slide modified from Barringer & Ireland (2006)

9. Outline of Business Plan *This slide modified from Barringer & Ireland (2006)

10. Basic Business Plan Components 1. Cover Page 2. Table of Contents 3. Executive Summary 4. Description of the Business Opportunity 5. Description of the Industry 6. Description of the Target Market and Marketing Plan 7. R & D (if applicable) and Legal actions taken to protect technology 8. Firm Founding Location 9. Management 10. Financials 11. Payback/Exit Strategy 12. Critical risks 13. Milestone Schedule 14. Appendices

11. Cover Page & Table of Contents Cover page should include: Cover page should include: Name of the company Name of the company Address Address Phone Number Phone Number Date Date Contact information for the lead entrepreneur Contact information for the lead entrepreneur Table of contents includes the page number to which the Business Plan sections correspond Table of contents includes the page number to which the Business Plan sections correspond

12. Executive Summary Should be completed LAST Should be completed LAST Short overview (1-2 pages) of entire business plan; provides everything need to known about venture’s distinctive nature Short overview (1-2 pages) of entire business plan; provides everything need to known about venture’s distinctive nature Sometimes investors ask for executive summary and then full business plan only if executive summary is sufficiently convincing Sometimes investors ask for executive summary and then full business plan only if executive summary is sufficiently convincing Generally includes brief overview of: Generally includes brief overview of: Opportunity Opportunity Industry/Competitors Industry/Competitors Target Market Target Market Management Team Management Team Financials Financials Exit Strategy Exit Strategy Critical Risks Critical Risks

13. Description of the Business (1 of 2) Introduce the business by describing Introduce the business by describing The opportunity (general description of the product/service offering): Paper thin solar panels The opportunity (general description of the product/service offering): Paper thin solar panels The problem/need addressed (what consumer need are you addressing): Traditional solar panels are too heavy and too fragile for many uses The problem/need addressed (what consumer need are you addressing): Traditional solar panels are too heavy and too fragile for many uses How the business addresses the problem/need (how does this business address the consumer need): Developed solar panels that are the consistency of film. Thus, they are light weight and can be applied used for nearly any application How the business addresses the problem/need (how does this business address the consumer need): Developed solar panels that are the consistency of film. Thus, they are light weight and can be applied used for nearly any application Include a brief history of the firm: How the business came to being and its current status Include a brief history of the firm: How the business came to being and its current status The company’s mission: The purpose of the business is and what criteria should be used to measure performance The company’s mission: The purpose of the business is and what criteria should be used to measure performance Explain the firm’s competitive advantage: Describe how this ventures’ offerings are different/better than existing, analogous, offerings Explain the firm’s competitive advantage: Describe how this ventures’ offerings are different/better than existing, analogous, offerings

14. Description of the Business (2 of 2) A brief description of the business model (e.g., the logic behind the operations of the firm)—Porter’s Value Chain, Porter’s Generic Strategies, Business Model Components A brief description of the business model (e.g., the logic behind the operations of the firm)—Porter’s Value Chain, Porter’s Generic Strategies, Business Model Components How you get your raw materials and where you store them How you get your raw materials and where you store them How you physically manufacture the product How you physically manufacture the product How your store or warehouse finished products How your store or warehouse finished products How you physically distribute/ship finished products to customers How you physically distribute/ship finished products to customers How you execute sales of your product (e.g., sales force, internet sales, etc.) How you execute sales of your product (e.g., sales force, internet sales, etc.) How you help customers after you execute the sale (e.g., returns, warranty, technical support, etc.) How you help customers after you execute the sale (e.g., returns, warranty, technical support, etc.) How you handle research and development (if applicable) How you handle research and development (if applicable) How you handle accounting, legal, and financial management issues How you handle accounting, legal, and financial management issues

15. Description of the Industry & Competition (1 of 2) Discuss important characteristics of the industry (e.g., size, growth rates, etc.) Discuss important characteristics of the industry (e.g., size, growth rates, etc.) Discuss major trends in the industry (e.g., sociocultural, technological, political/legal, economic)—forces/trends in the external environment Discuss major trends in the industry (e.g., sociocultural, technological, political/legal, economic)—forces/trends in the external environment Discuss how the firm will address factors impacting the industry’s profitability—Porter’s Five Forces: Discuss how the firm will address factors impacting the industry’s profitability—Porter’s Five Forces: How much power do raw material suppliers have over firms in the industry? How much power do raw material suppliers have over firms in the industry? Can they force firms to pay high costs for their supplies? Can they force firms to pay high costs for their supplies? How much power do customers have over firms in the industry? How much power do customers have over firms in the industry? Can they bargain down prices of firms’ products? Can they bargain down prices of firms’ products? How much competition there is in the industry and is competition intense? How much competition there is in the industry and is competition intense? Are there may types of products that can serve the same purpose (e.g., cars, buses, bicycles, planes, rollerblades, etc. all serve the purpose of transportation) Are there may types of products that can serve the same purpose (e.g., cars, buses, bicycles, planes, rollerblades, etc. all serve the purpose of transportation) Is it likely that many new firms will try to enter and compete within this industry? Is it likely that many new firms will try to enter and compete within this industry?

16. Description of the Industry & Competition (2 of 2) Discuss In what stage of the lifecycle is the industry?—industry structures Discuss In what stage of the lifecycle is the industry?—industry structures Is it an industry that is declining becoming obsolete (e.g., VCRs, Walkmans)? Is it an industry that is declining becoming obsolete (e.g., VCRs, Walkmans)? Discuss what implications the lifecycle stage has for the business Discuss what implications the lifecycle stage has for the business Discuss the competition and how the firm will fair relative to competitors (competitor analysis)—competitor analysis grid Discuss the competition and how the firm will fair relative to competitors (competitor analysis)—competitor analysis grid How many firms are vying for the same target customers as your firm? How many firms are vying for the same target customers as your firm? Does your firm possess any distinctive resources or capabilities allowing you to ward off competitors? Does your firm possess any distinctive resources or capabilities allowing you to ward off competitors? Intellectual property (e.g., patents on your technology) Intellectual property (e.g., patents on your technology) Advantageous access to raw materials (e.g., can get supplies at a lower cost) Advantageous access to raw materials (e.g., can get supplies at a lower cost)

17. Description of the Target Market Describe exactly who the firm will target—Concept Statement, Concept Test, Usability Test Describe exactly who the firm will target—Concept Statement, Concept Test, Usability Test Use primary research (e.g., surveys, focus groups, interviews) to find out Use primary research (e.g., surveys, focus groups, interviews) to find out About how many customers you are likely to capture About how many customers you are likely to capture Try to determine how likely people will be to purchase your products Try to determine how likely people will be to purchase your products Discuss what their profile looks like (e.g., age, household income, education level, gender, employment status, etc.) Discuss what their profile looks like (e.g., age, household income, education level, gender, employment status, etc.) Discuss their preferences for a product like yours and how you address them Discuss their preferences for a product like yours and how you address them Discuss the price that they perceive is appropriate for your product Discuss the price that they perceive is appropriate for your product Use secondary research (e.g., databases, articles, competitors’ websites, US Census data, trade association documents, etc.) find: Use secondary research (e.g., databases, articles, competitors’ websites, US Census data, trade association documents, etc.) find: What competitors’ customers “look like” What competitors’ customers “look like” What customers are willing to pay for competitors’ products What customers are willing to pay for competitors’ products About how many units are sold in a year About how many units are sold in a year If the firm has secured a contract with an important customer, discuss If the firm has secured a contract with an important customer, discuss

18. Finding Industry, Competitive, & Customer Data Research Databases in the Roesch Library (http://library.udayton.edu/) like: Research Databases in the Roesch Library (http://library.udayton.edu/) like:http://library.udayton.edu/ Hoovers (general industry information) Hoovers (general industry information) Standard & Poor’s NetAdvantage (industry and company information) Standard & Poor’s NetAdvantage (industry and company information) Mintel Reports (research reports on industry and market information) Mintel Reports (research reports on industry and market information) Business Source Complete (scholarly and popular press articles about industries, and consumers) Business Source Complete (scholarly and popular press articles about industries, and consumers) Industry Trade Association websites (can often find industry trade association names in Hoovers database) Industry Trade Association websites (can often find industry trade association names in Hoovers database) Competitors’ websites, annual reports, SEC filings, etc. Competitors’ websites, annual reports, SEC filings, etc. When on a firm’s website, look for a link that says something like “investor relations”, “about the company”, or “company information” When on a firm’s website, look for a link that says something like “investor relations”, “about the company”, or “company information” Will direct you to internal firm publications (as long as it is a public company) Will direct you to internal firm publications (as long as it is a public company)

19. Marketing Plan Describe how you plan to create awareness about your business. Discuss the four P’s of marketing: Describe how you plan to create awareness about your business. Discuss the four P’s of marketing: Person: Who you are targeting—this is covered in the target market description Person: Who you are targeting—this is covered in the target market description Pricing: How are your offerings going to be priced? How does this compare to competitors? If it is significantly different, why? Pricing: How are your offerings going to be priced? How does this compare to competitors? If it is significantly different, why? Promotion: How are you going to generate awareness about your business? What types of advertising, promotions, etc. are you going to use and why? Promotion: How are you going to generate awareness about your business? What types of advertising, promotions, etc. are you going to use and why? Placement: How are you distributing your product (e.g., where/how to do customer physically purchase your product?). Internet? Retail store? Other direct sales? Catalogs? Sales teams? Discuss why you chose this/these distribution channels. Placement: How are you distributing your product (e.g., where/how to do customer physically purchase your product?). Internet? Retail store? Other direct sales? Catalogs? Sales teams? Discuss why you chose this/these distribution channels.

20. Research & Development This section is particularly important for technologically sophisticated products This section is particularly important for technologically sophisticated products Discuss the technical details of the product Discuss the technical details of the product Discuss the current status of the design (e.g., prototype stage) Discuss the current status of the design (e.g., prototype stage) For tech-intense offerings, investors really like to see progress on prototypes For tech-intense offerings, investors really like to see progress on prototypes Provide details as to what has been accomplished and what is yet to be accomplished Provide details as to what has been accomplished and what is yet to be accomplished Discuss time and financial implications for future prototype development and R&D—be sure to clarify how estimates were developed Discuss time and financial implications for future prototype development and R&D—be sure to clarify how estimates were developed

21. Legal Concerns Another very important section for firms where IP is relevant (can alternatively be covered in the management description) Another very important section for firms where IP is relevant (can alternatively be covered in the management description) Investors are very concerned about how firms will protect their rights to their developments Investors are very concerned about how firms will protect their rights to their developments Discuss the status of intellectual property (IP) protection Discuss the status of intellectual property (IP) protection Have you secured a patent attorney? If so, discuss who they are and what the status of the patent is. Have you secured a patent attorney? If so, discuss who they are and what the status of the patent is. If you have not, discuss the timeline and procedures for pursuing IP If you have not, discuss the timeline and procedures for pursuing IP Search the US Patent office database for existing patents/patents pending (www.uspto.gov) Search the US Patent office database for existing patents/patents pending (www.uspto.gov)

22. Firm Location Discuss where the business will be headquartered and the reasons Discuss where the business will be headquartered and the reasons Was the location chosen because of some advantage? Was the location chosen because of some advantage? Located in a firm cluster (e.g., Silicon Valley) Located in a firm cluster (e.g., Silicon Valley) Located near important suppliers Located near important suppliers Located near large customers/customer groups Located near large customers/customer groups The area has many employees with the necessary qualifications The area has many employees with the necessary qualifications There are some tax or other financial benefits (e.g., cost of land/living is cheap, etc.) There are some tax or other financial benefits (e.g., cost of land/living is cheap, etc.) Other benefits like zoning needs, regulations, access to distribution channels, etc. are favorable Other benefits like zoning needs, regulations, access to distribution channels, etc. are favorable Look at the Small Business Administration website (www.sba.gov) to start gathering information about different state’s dis/advantages Look at the Small Business Administration website (www.sba.gov) to start gathering information about different state’s dis/advantageswww.sba.gov

23. Management Description Discuss the legal form of the business (e.g., corporation, sole proprietorship, partnership, LLC, etc.) Discuss the legal form of the business (e.g., corporation, sole proprietorship, partnership, LLC, etc.) Discuss why this legal form was chosen Discuss why this legal form was chosen Other resource-related, legal (e.g., IP), etc information included here—VRIO Other resource-related, legal (e.g., IP), etc information included here—VRIO Describe the members who compose the management team Describe the members who compose the management team The key people in charge of the business The key people in charge of the business What is their background (e.g., education, employment, etc.)? What is their background (e.g., education, employment, etc.)? Make the case for why they are qualified to start and run this type of business Make the case for why they are qualified to start and run this type of business Discuss the roles (e.g., CEO, CFO, CIO, etc.) of each team member Discuss the roles (e.g., CEO, CFO, CIO, etc.) of each team member Describe other important “human” resources Describe other important “human” resources Composition of the board of directors (if a corporation) Composition of the board of directors (if a corporation) Composition of the board of advisors (if applicable) Composition of the board of advisors (if applicable) If the firm has been endorsed by a reputable person/firm, discuss this If the firm has been endorsed by a reputable person/firm, discuss this Has Bill Gates provided positive feedback about the firm? Has Bill Gates provided positive feedback about the firm? Discuss the potential need and plan for recruiting future human resources Discuss the potential need and plan for recruiting future human resources

24. Financials Demonstrate the financial viability of the business Demonstrate the financial viability of the business Begin by explaining the funding needed during the next three to five years along and how the funds will be used Begin by explaining the funding needed during the next three to five years along and how the funds will be used Describe where the funds will come from (e.g., self, family, loans, investors) Describe where the funds will come from (e.g., self, family, loans, investors) Include realistic financial projections Include realistic financial projections How fast you expect to go through the funds before turning a profit (called the “burn rate”) How fast you expect to go through the funds before turning a profit (called the “burn rate”) When do you expect to turn a profit and at what rate do you expect profits to grow? When do you expect to turn a profit and at what rate do you expect profits to grow? In the body of the Business Plan, you will include summary tables and prose that describes the financial situation In the body of the Business Plan, you will include summary tables and prose that describes the financial situation In your appendices, you include supporting and detailed financial statements to back up this discussion. Always include: In your appendices, you include supporting and detailed financial statements to back up this discussion. Always include: Assumption sheet: The assumptions you made in coming up with the projections Assumption sheet: The assumptions you made in coming up with the projections Income statement: Shows the estimated income and expenses over a year Income statement: Shows the estimated income and expenses over a year Cash flows statement: Shows how the company is paying for its operations Cash flows statement: Shows how the company is paying for its operations Financial indicators: Financial ratios that indicate the “health” of the business Financial indicators: Financial ratios that indicate the “health” of the business

25. Payback/Exit Strategy Discuss how and when you anticipate investors will recoup their money. Examples: Discuss how and when you anticipate investors will recoup their money. Examples: Go public (IPO), investors cash out Go public (IPO), investors cash out Liquidity event (e.g., sell to another company), investors cash out Liquidity event (e.g., sell to another company), investors cash out Internal cash flows pay back investors Internal cash flows pay back investors Discuss the timeframe expected for investor exit Discuss the timeframe expected for investor exit Discuss likelihood and assumptions that lead to exit strategy Discuss likelihood and assumptions that lead to exit strategy

26. Critical Risks Businesses do not operate in a vacuum Businesses do not operate in a vacuum They face uncertain futures and new ventures are based on many assumptions as to “how the game will be play out” They face uncertain futures and new ventures are based on many assumptions as to “how the game will be play out” Must be realistic about potential risks and courses of action to combat potential risks Must be realistic about potential risks and courses of action to combat potential risks Discuss likely risks/problems that the firm might face and how the firm would deal with them. Discuss likely risks/problems that the firm might face and how the firm would deal with them. Examples: Examples: Financial projections are somehow flawed Financial projections are somehow flawed Unable to obtain patent protection Unable to obtain patent protection Assumptions about consumer preferences flawed Assumptions about consumer preferences flawed Speed and processes used to manufacture products flawed Speed and processes used to manufacture products flawed Competitive responses are different from what expected Competitive responses are different from what expected

27. Milestone Schedule Discuss timeline and actions for achieving business activities Discuss timeline and actions for achieving business activities Initial funding received Initial funding received Prototype completion Prototype completion Additional funding received Additional funding received Manufacturing capabilities solidified Manufacturing capabilities solidified Advertising campaign designed and launch Advertising campaign designed and launch Initial sales achieved Initial sales achieved Expected time to breakeven Expected time to breakeven Actions taken to turn profit Actions taken to turn profit Estimates for growth actions (e.g., expansions, increase production, increase R&D, etc.) Estimates for growth actions (e.g., expansions, increase production, increase R&D, etc.)

28. Appendices Supporting, detailed, documents that expand on Business Plan text Supporting, detailed, documents that expand on Business Plan text Common items included: Common items included: Pictures of the product/prototype Pictures of the product/prototype Management team resumes Management team resumes Patent, IP, legal documentation Patent, IP, legal documentation Surveys and summary data used to study target market Surveys and summary data used to study target market Financial statements Financial statements Other supporting documents that will help make your case for how this is going to become a lucrative business Other supporting documents that will help make your case for how this is going to become a lucrative business

29. Other Resources to Help Small Business Administration (www.sba.gov) Small Business Administration (www.sba.gov)www.sba.gov FREE advising at regional office; FREE help identify sources of financing, FREE help write business plan, other FREE business help FREE advising at regional office; FREE help identify sources of financing, FREE help write business plan, other FREE business help Small Business Development Centers (SBDC) (http://www.odod.state.oh.us/edd/osb/sbdc/default.htm) Small Business Development Centers (SBDC) (http://www.odod.state.oh.us/edd/osb/sbdc/default.htm) Help with doing business in local regions Help with doing business in local regions Business Incubators (http://www.techincubator.org/index.html) Business Incubators (http://www.techincubator.org/index.html) Provide free or greatly discounted office space, R&D laboratories, administrative support, consulting, etc. Provide free or greatly discounted office space, R&D laboratories, administrative support, consulting, etc. Most good-sized cities have at least one incubator Most good-sized cities have at least one incubator Many favor high-tech businesses Many favor high-tech businesses A variety of helpful business plan website links can be found at the following: http://www.sba.udayton.edu/entrepreneur/business_plan_links.asp A variety of helpful business plan website links can be found at the following: http://www.sba.udayton.edu/entrepreneur/business_plan_links.asp http://www.sba.udayton.edu/entrepreneur/business_plan_links.asp Free Sample Business Plans (http://www.bplans.com/sample_business_plans/index.cfm) Free Sample Business Plans (http://www.bplans.com/sample_business_plans/index.cfm) Many other helpful business-related websites can be found at: http://sba.udayton.edu/entrepreneur/ Many other helpful business-related websites can be found at: http://sba.udayton.edu/entrepreneur/

30. Presenting the Business Plan to Investors Making a Presentation to Investors Making a Presentation to Investors If the business plan elicits interests of investors, next step to present the plan in person If the business plan elicits interests of investors, next step to present the plan in person The first meeting is generally very short (e.g., about one hour) The first meeting is generally very short (e.g., about one hour) The investor will generally ask the firm to make a 20- to 30- minute PowerPoint presentation and then ask question The investor will generally ask the firm to make a 20- to 30- minute PowerPoint presentation and then ask question #1 rule—follow instructions given to you by investor(s) #1 rule—follow instructions given to you by investor(s) Be sure to create PPT slides that will fit the time slot allocated (e.g., if given 30-minutes for presentation, make sure it’s no longer than 30 minutes) Be sure to create PPT slides that will fit the time slot allocated (e.g., if given 30-minutes for presentation, make sure it’s no longer than 30 minutes) Presentation should be smooth and well rehearsed Presentation should be smooth and well rehearsed Slides should be sharp and not cluttered with material Slides should be sharp and not cluttered with material If still interested after initial meeting/presentation, the firm will be asked back for another meeting If still interested after initial meeting/presentation, the firm will be asked back for another meeting

31. Presenting the Business Plan to Investors Most important issues to cover in PPT presentation Most important issues to cover in PPT presentation 1.The Company: 1-slide; overview of company and target market 2.Opportunity (problem solved/need fulfilled): 2-3 slides; this is the “heart” of the presentation 3.Solution: 1-2 slides; explain how problem solved/need fulfilled 4.Management Team Strength: 1-2 slides; briefly explain each manager’s qualifications 5.Intellectual Property (IP): 1-slide; what IP firm owns or that is pending 6.Industry, Target Market (TM), Competition: 2-3 slides; briefly review the industry, its TM, and direct/indirect competitors; explain how the firm will compete against established firms 7.Financials: 2-3 slides; briefly discuss the financials; stress when firm will achieve profitability; how much capital to get to profitability; when expect to break even. 8.Offering, Payback, and Exit Strategy: 1-slide; discuss how much money requested and anticipated exit strategy