Chapter 9 Writing a Business Plan Entrepreneurship: Successfully Launching New Ventures Modified from Barringer and Ireland (2006)

What is a Business Plan? A written narrative, around 25 - 35 pages long, that describes what a new business plans to accomplish The Business Plan Serves Dual Purposes The business plan is used inside and outside the firm Inside the firm: the plan helps the company develop a “road map” for executing its strategies and plans A clearly written business plan articulating the vision and future plans helps employees to operate in a consistent and purposeful manner Outside the firm: the plan introduces potential investors and other stakeholders with the business opportunity the firm is pursuing and how it plans to pursue it The plan must make the case that it’s a good use of investors’ funds Make case by including facts of properly conducted feasibility analysis Investors do not respond when a business plan is based strictly on what an entrepreneur “thinks” will happen

Guidelines to Consider when Writing a Business Plan Structure of the Business Plan For the best impression the plan should 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 Software Packages to Assist with Plan Structure There are software packages available can assist in writing the plan While some are very helpful, avoid a plan that looks as though it came from a “canned” source

Guidelines to Consider when Writing a Business Plan Content of the Business Plan Plan should give clear and concise information on all important aspects of the venture It must be long enough to provide sufficient information yet short enough to maintain reader interest (25 to 35 pages is usually sufficient) 3 General Types of Business Plans Summary Business Plan 10-15 pages Good for firms in early stages of development that want to “test the waters” to see if investors are interested Full Business Plan 25-35 pages Good for firms at the point of needing funding; offers “blueprint” of firm’s operations Operational Business Plan 40-100 pages Mostly intended for internal audience; offers “blueprint” of operations; provides guidance to managers

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

Outline of Business Plan Done

Outline of Business Plan Done Done

Outline of Business Plan Done Done Done

Outline of Business Plan Done

Outline of Business Plan Done Done Done

Exploring Each Section of the Plan Cover Page and Table of Contents Cover page: include name of the company, address, phone number, date, contact information for lead entrepreneur The Executive Summary Short overview 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

Exploring Each Section of the Plan The Business Introduce the business by describing the opportunity, the problem/need addressed and how the business addresses the problem/need Include a brief history of the firm, the company’s mission statement, and objectives Explain the firm’s competitive advantage and a brief description of the business model Management Team Include a brief summary of the qualifications of each member of the management team Including his/her relevant employment and professional experiences, significant accomplishments, and educational background

Exploring Each Section of the Plan Company Structure, Ownership, and Intellectual Property (IP) Describe the structure of the new venture, including the reporting relationships among the top management team members Next, explain how the firm is legally structured Finally, discuss IP the firm owns, including patents, trademarks, and copyrights Very important as IP forms the foundation for the valuation and competitive advantage of many entrepreneurial companies

Exploring Each Section of the Plan Industry Analysis Discuss major trends in the industry Important characteristics of the industry (e.g., size, attractiveness, and profit potential) Discuss how the firm will address forces suppressing the industry’s profitability Discuss the competition and how the firm is likely to fair relative to competitors (e.g., a competitor analysis) Define the target market

Exploring Each Section of the Plan Marketing Plan Marketing plan follows industry analysis and it provides details about the new firm’s products or services After reading this section one should be confident that the following are in sync with one another and make sense: The firm’s approach to its target market (fulfillment and interface) Its product strategy (product scope) Pricing strategy Channels of distribution (outbound logistics issues) Promotional strategy (marketing, sales, advertising)

Exploring Each Section of the Plan Operations Plan This deals with day-to-day operations of the company Includes overview of manufacturing plan (or service delivery plan) Describe network of suppliers, business partners, and service providers needed to build/produce the product/service Describe risks/regulations pertaining to the operations (e.g., EPA issues, OSHA issues, etc.)

Exploring Each Section of the Plan Financial Plan Demonstrate the financial viability of the business Begin by explaining the funding needed during the next three to five years along and explain how the funds will be used Include (realistic) financial projections (assumption sheet) Include financial statements (e.g., income statement, statement of cash flows, balance sheets, etc.) Discuss exit strategy

Presenting the Business Plan to Investors Making a Presentation to Investors 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 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) 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 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

Presenting the Business Plan to Investors Most important issues to cover in PPT presentation The Company: 1-slide; overview of company and target market Opportunity (problem solved/need fulfilled): 2-3 slides; this is the “heart” of the presentation Solution: 1-2 slides; explain how problem solved/need fulfilled Management Team Strength: 1-2 slides; briefly explain each manager’s qualifications Intellectual Property (IP): 1-slide; what IP firm owns or that is pending 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 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. Offering, Payback, and Exit Strategy: 1-slide; discuss how much money requested and anticipated exit strategy