Overview of a Business Plan Dr. Stan Abraham MHR 423 Spring 2010

Purposes of a Business Plan To get an investment (equity financing) from a third party To get a bank loan To determine what you have to do to launch and grow the business Forms your monthly operational budget Provides specific objectives to achieve Enables you to share the plan with key managers, employees, and prospective advisors To find out whether the business is worth starting at all

What Investors Expect to See An exciting, innovative business concept A proprietary product or some other competitive advantage A sound revenue model (reflecting real demand) Good return on investment The investment deal An exit strategy

What Do Investors Really Invest In? People

What Makes a Good Plan? Is the business concept sound? Can the company compete? Will it make money? Can it be understood? Is it realistic? Can we trust the entrepreneur to make it happen? Will s/he be unfazed by failure? Can s/he inspire and lead a team? Does it inspire confidence?

Main Sections of a Plan (Ext.) What is the business concept? What makes you think people will buy the product/service? Who are your competitors and can you compete with them? How much do you know about your customers? (Who is your target?) What else might affect your business?

Main Sections of a Plan (Int.) Who owns the company and who are the key managers? What experience do they have? How will you organize? What staff will you need? Who will do what? What is your market-entry strategy and marketing plan? What is your operations/production plan? How will you develop your next-generation product? How will you keep on competing?

Main Sections of a Plan (Fin.) What are your financial assumptions and projections? How much capital will you need? When will you break even? What must you do before you can achieve your first revenues? What are the chief risks your business will face? And how will you cope with them? What is the investment deal or loan required?

Why Is It Hard to Prepare? A lot of information to research Hard to make a case why the business will succeed Hard to write clearly so that an outsider will understand it easily Hard to do it quickly Everything has to mesh together consistently Figures have to be realistic Have to get a team together before going for financing

Keep It Short and Simple No fancy colors Simple formatting and fonts Use consistent headings and subheadings Come to the point – shorter is better Round off dollar figures to nearest 100 or 1,000 No decimals ever (these are all estimates) No dollar signs (in projections) Put important but secondary information in appendices (e.g., resumes, brochures)

Edit, Edit, Edit Write your first draft of any section quickly Be prepared to spend at least as long, if not longer, editing and revising it It’s when the real thinking gets done Everyone in the group should be involved in revising and editing sections Develop a way to do this smoothly with as little wasted time as possible is an effective solution

Any Questions?