1. Develop a Business Plan
Entrepreneurship
Chapter 5
Develop a Business Plan
LESSONS
5.1 Why Do You Need a Business Plan?
5.2 What Goes into a Business Plan?
5.3 Create an Effective Business Plan
Why is it important to plan?
What goes into planning a major event?
What happens to the event if proper planning is not done?
State:
With this chapter, we are going to begin talking about the importance of planning for a business.
Ask for volunteers to read the Build A Business case (“The Importance of a Plan”) aloud.
Point out that this case is meant to introduce students to:
What a business plan is and why one is needed.
What goes into a business plan.
How to create an effective business plan.
Chapter 5

2. Lesson 5.1 Why Do You Need a Business Plan?
Entrepreneurship
Lesson 5.1 Why Do You Need a Business Plan?
GOALS
Explain the purpose of writing a good business plan.
Describe the importance of a business plan.
This lesson…
explains what a business plan is.
discusses three important purposes of a business plan.
describes four ways a business plan is important to a new business.
Ask a student to read the opening paragraph aloud.
Ask students:
What would you want to ask an entrepreneur seeking a loan from a bank if you were a loan officer of the bank?
Chapter 5

3. Entrepreneurship
What is a Business Plan?
A business plan is a written document that describes all the steps necessary to open and operate a successful business.
Writing a business plan is both difficult and important.
A solid business plan is critical to a new business.
Chapter 5

4. What are the Three Main Purposes of a Business Plan?
Entrepreneurship
What are the Three Main Purposes of a Business Plan?
Explains the idea behind your business and spells out how your product or service will be produced and sold.
Sets specific objectives and describes how your business expects to achieve them.
Describes the background and experience of the people who will be running the business.
Explains the idea behind your business and spells out how your product or service will be produced and sold.
Need a new product or service or one that is better or less expensive than existing items on the market.
Need to identify target customers and show how you will be able to get and keep customers.
Sets specific objectives and describes how your business expects to achieve them.
Includes sales projects for the short term (first year), medium term (2-5 years), and long term (5+ years).
Describes products and services to be introduced in the future.
Sets forth future plans for the business, such as expansion.
Describes the background and experience of the people who will be running the business.
Before lenders will loan money to an entrepreneur, they need to be convinced that the people running the business have the skills and characteristics necessary to succeed.
How do the three purposes of a business plan apply to obtaining financing for a new business?
How do the three purposes apply to starting a new business if the entrepreneur does not need financing?
Why is a business plan important for every new business?
Chapter 5

5. What Are Some Reasons Why a Business Plan Is Important?
Entrepreneurship
What Are Some Reasons Why a Business Plan Is Important?
Makes you think about all aspects of your business.
May help you secure financing for your business.
Helps you communicate your ideas to others.
Can serve as a tool for managing your business.
Makes you think about all aspects of your business.
Business strategies, limitations, problems that may be encountered.
May help you secure financing for your business.
Without a business plan, you will not be able to obtain a business loan.
Helps you communicate your ideas to others.
If you believe your business will be a success and can present it well on paper, it can help you get loans from banks and possibly persuade suppliers to extend credit to your company.
Can serve as a tool for managing your business.
Entrepreneurs often return to their business plan after the business has started to help in decision making.
Chapter 5

6. Lesson 5.2 What Goes into a Business Plan?
Entrepreneurship
Lesson 5.2 What Goes into a Business Plan?
GOALS
Study the seven basic elements of a business plan.
Recognize what additional elements may be needed.
This lesson…
names seven basic components of a business plan.
discusses how to describe the components in a written business plan.
Chapter 5

7. Seven Basic Elements of a Business Plan
Entrepreneurship
Seven Basic Elements of a Business Plan
History and background
Goals and objectives
Products or services
Form of ownership
Management and staffing
Marketing
Current and projected financial statements
Although the kind of business determines the content of a business plan, all business plans have the same basic elements.
Chapter 5

8. History and Background
Entrepreneurship
History and Background
Describing how you came up with your idea can help lenders, investors, and others understand how your business will operate.
Chapter 5

9. Entrepreneurship
Goals and Objectives
Your business plan should outline your goals—short-term, medium-term, and long-term.
Most entrepreneurs know their short-term goals, but they may not have thought about further down the line.
Creating a business plan forces them to think about longer-term goals and plan accordingly.
Chapter 5

10. Entrepreneurship
Products or Services
Explain how your products or services differ from those already on the market.
Describe the industry you will operate in.
Describe the location of your business.
Descriptions of products or services should include any unique features and the benefits people will receive by buying them.
What items should you include in the section that describes the industry you will operate in?
External factors affecting your business, such as high competition or a lack of certain suppliers.
Growth potential of the industry.
Economic trends of the industry.
Technology trends that may affect the industry.
Forecasts for industry growth.
How can you find this type of information?
Research – government documents, articles and books on industry leaders, the Internet, etc.
How might the location of your business affect its success?
Chapter 5

11. Form of Ownership Identify your form of ownership
Entrepreneurship
Form of Ownership
Identify your form of ownership
Provide information relevant to your form of ownership
You should note whether the business will be a sole proprietorship, partnership, or corporation and why you chose that form of organization, including advantages and disadvantages.
What might “information relevant to your form of ownership” include?
Names of partners
How many shareholders the company has or will have.
Chapter 5

12. Management and Staffing
Entrepreneurship
Management and Staffing
Demonstrate that you and the people working for you have the experience, maturity, and common sense to manage your business.
Lenders want to know whether the people who will manage and staff the business have the qualifications to do so.
Chapter 5

13. Marketing Identify and describe your prospective customers.
Entrepreneurship
Marketing
Identify and describe your prospective customers.
Describe the size of the market for your product or service.
Explain how you plan to enter the market.
Explain how you plan to deal with competition.
You should list your company’s advantages over the competition in the Marketing section of your business plan.
What might the advantages include?
Performance
Quality
Price
Promotion
Reliability
Reputation or public image
Distribution
Chapter 5

14. Current and Projected Financial Statements
Entrepreneurship
Current and Projected Financial Statements
The financial section has three elements:
Identification of risks
Financial statements
Funding request and return on investment
The financial statements section should explain both the amount you are investing and the amount that needs to be borrowed.
You should describe how the money will be used and give investors an idea of how much they can expect to earn on their investment in your business.
Should you list potential problems in your business plan?
Yes – lenders know that every business faces risks.
You should identify risks and explain plans for handling them to demonstrate you have clearly thought through things and will not be caught by surprise without a plan.
What is a “pro forma financial statement,” and when is it needed?
A pro forma financial statement is a financial statement based on projected revenues and expenses.
It is used by new or beginning businesses since they do not have current financial statements yet to present in a business plan.
Chapter 5

15. Additional Elements of the Business Plan
Entrepreneurship
Additional Elements of the Business Plan
Some businesses need to provide additional information in their business plans related to:
Licensing
Legal restrictions
Regulations
Checkpoint Question (p. 114):
Why should some businesses include additional information in their business plans?
If the business has specific regulations or issues.
How do you know if you need to include additional information or sections in your business plan?
Ask yourself what you would want to know about a business before you would lend it money. Would there be enough information from the seven basic elements of a business plan, or do you need more information?
What special elements might be included in a business plan for an amusement park?
Safety issues
Insurance
Health regulations for food operations
Chapter 5

16. Lesson 5.3 Create an Effective Business Plan
Entrepreneurship
Lesson 5.3 Create an Effective Business Plan
GOALS
Research your business plan.
Organize your business plan.
This lesson…
discusses resources for researching the information for a business plan.
describes the mechanics of putting the business plan together.
Chapter 5

17. Research the Business Plan
Entrepreneurship
Research the Business Plan
Print resources
Online resources
People resources
Additional resources
It’s important to conduct research to develop all the information required in a business plan.
What are some print resources for developing a business plan?
Books on entrepreneurship, marketing, financing, and hiring and managing a staff.
Small business magazines and industry journals
Government documents from the SBA and other federal agencies
Online resources could include Internet sites such as the SBA web site.
Who are some people resources that can help you with your plan?
Counselors from Small Business Development Centers (SBDC)
Volunteers from SCORE (Service Corps of Retired Executives)
People working in the industry
Banking professionals
Suppliers and vendors
What additional resources might you use to help in writing a business plan?
Chambers of Commerce
Trade associations
Professional business consultants
Chapter 5

18. Put Your Business Plan Together
Entrepreneurship
Put Your Business Plan Together
NOTE: Activity following lecture for Lesson 5.3 is p. 38 of workbook – relating to introductory elements and appendix of a business plan.
Introductory elements
Cover letter
Cover sheets
Table of contents
Statement of purpose
Executive summary
Main body of your plan
Appendix
Your business plan is your opportunity to convince others that your idea is valid and that you have the talent and resources to make it a success.
The business plan needs to be neat, well-organized and easy-to-read.
It should be typed, not handwritten.
Introductory Elements
The executive summary appears before the body of the business plan, but it should be written after the business plan is written to be sure all the important and persuasive points are included in the summary.
The executive summary is crucial because if it is not convincing, a lender may decide not to read the entire business plan.
Main Body
Should include the seven basic elements and any additional elements that are necessary.
Should be short and to the point, using simple language that gives readers a clear idea of what you want to do and how you plan to do it.
Use charts and tables wherever possible to illustrate points.
Why would you have an appendix in a business plan, and what types of information might it include?
May be included to show supporting evidence not in the main body.
Resume, personal financial statements or income tax returns, copies of any large sales contracts already negotiated, letters of recommendation, legal documents, etc.
Chapter 5

19. Develop a Business Plan
Entrepreneurship
Chapter 5
Develop a Business Plan
LESSONS
5.1 Why Do You Need a Business Plan?
5.2 What Goes into a Business Plan?
5.3 Create an Effective Business Plan
Chapter 5