PowerPoint Presentations for Small Business Management: Launching and Growing New Ventures, Fifth Canadian Edition Adapted by Cheryl Dowell Algonquin College

CHAPTER 5 Developing an Effective Business Plan 5-2

LOOKING AHEAD After studying this chapter, you should be able to: 1.Answer the question “What is a business plan?” 2.Explain the need for a business plan from the perspectives of the entrepreneur, the investor, and the lenders. 3.Describe what determines how much planning an entrepreneur and a management team are likely to do. 4.List practical suggestions to follow in writing a business plan and outline the key sections of a business plan. 5. List the key “musts” and pitfalls in writing a business plan. 6.Identify available resources of assistance in preparing a business plan. Copyright © 2013 by Nelson Education Limited 5-3

WHAT IS A BUSINESS PLAN? Sets out the basic idea Underlying a business and related start-up Identifies the nature and context of the opportunity Entrepreneur’s approach to exploiting the opportunity Identifies factors affecting the venture’s success Entrepreneur’s tool for raising capital Copyright © 2013 by Nelson Education Limited 5-4 LO 1

THE NEED FOR A BUSINESS PLAN Copyright © 2013 by Nelson Education Limited 5-5 Clearly articulated statement of goals and strategies for internal use – Imposes discipline on the entrepreneur and management team Selling document to be shared with outsiders – Provides a credible overview for prospective customers, suppliers, and investors – Helps secure favourable credit terms from suppliers – Opens approaches to lenders and other sources of financing LO 2

USERS OF A BUSINESS PLAN Copyright © 2013 by Nelson Education Limited 5-6 LO 2

COMMON BUSINESS PLAN FLAWS 1.Overly optimistic financial projections, inadequate competitive analysis and/or weak environmental assessments 2.Vague marketing strategies 3.Lack of research 4.Unprofessional presentation 5.Hazy timelines, vague risk assessment Copyright © 2013 by Nelson Education Limited 5-7 LO 2

FEATURES OF THE PLAN THAT REPEL INVESTORS Copyright © 2013 by Nelson Education Limited 5-8 Show an infatuation with product or service and downplay market needs or acceptance Based on financial projections at odds with accepted industry norms Unrealistic growth projections Contain a need for custom or applications engineering, which makes substantial growth difficult LO 2

BUSINESS PLANS THAT ATTRACT INVESTORS Copyright © 2013 by Nelson Education Limited 5-9 Recognize the investors’ needs for required rates of return on investments Demonstrate evidence of focus on a limited number of products or services Have a proprietary market position through patents, copyrights, and trademarks LO 2

THE LENDER’S PERSPECTIVE Copyright © 2013 by Nelson Education Limited Cs of Credit 1.Collateral assets to put toward credit 2.Capacity strength of cash flow 3.Capital personal investment in business 4.Conditions industry risk and conditions 5.Character competence and credit history LO 2

HOW MUCH BUSINESS PLAN IS NEEDED? Copyright © 2013 by Nelson Education Limited 5-11 Factors affecting the extent of a business plan: – Cost in time and money to prepare the plan – Preferences of the management team – Complexity of the business – Competitive environment – Level of uncertainty LO 3

Copyright © 2013 by Nelson Education Limited 5-12 THE BUSINESS PLANNING PROCESS LO 4

Copyright © 2013 by Nelson Education Limited 5-13 THE BUSINESS PLANNING PROCESS LO 4

PREPARING A BUSINESS PLAN Copyright © 2013 by Nelson Education Limited Research 2.Format/effectiveness of written presentation 3.Content of the plan LO 4

MARKET RESEARCH PROCESS STEP 1: IDENTIFY THE INFORMATION NEEDED Copyright © 2013 by Nelson Education Limited 5-15 Is the research really necessary? Will data obtained justify the expense? Can I do the research myself? LO 4

STEP 2: SEARCHING FOR SECONDARY DATA Business Source Complete (Ebsco) Canadian Newsstand Business and Company Resource Center (Gale) Global Market Information Database (Euromonitor) Canadian Business and Current Affairs (Proquest) Sustainalytics Regional Business News (Proquest) Copyright © 2013 by Nelson Education Limited 5-16 LO 4

WEB SOURCES Atlantic Canada Opportunities Agency Government Services for Entrepreneurs Profit Magazine Profit Magazine Canadian Council for Small Business and Entrepreneurship Canadian Federation of Independent Business Canadian Innovation Centre Canadian Youth Business Foundation Export Development Canada Guerrilla Marketing Copyright © 2013 by Nelson Education Limited 5-17 LO 4

WEB SOURCES Statistics Canada Industry Canada GD Sourcing Industry Canada’s SME Benchmarking Tool Tax information for small business Canada Business Atlantic Canada Opportunities Agency Copyright © 2013 by Nelson Education Limited 5-18 LO 4

STEP 3: COLLECTING PRIMARY DATA Observation Focus Groups Test Marketing Questioning Methods Copyright © 2013 by Nelson Education Limited 5-19 LO 4

STEP 4: INTERPRETING THE DATA Descriptive statistics: – mean – mode – median Copyright © 2013 by Nelson Education Limited 5-20 LO 4

DECIDING ON THE CONTENT OF A BUSINESS PLAN Copyright © 2013 by Nelson Education Limited 5-21 People – Those involved in starting and running the venture Opportunity – Business’ profile—products, customers, expected growth, profitability, and anticipated challenges and problems Context – The big picture—firm’s competitive environment Risk and Reward – Assessment of potential problems and responses LO 4

BUSINESS PLAN OVERVIEW Cover Page Table of Contents Executive Summary  Synopsis  Narrative Mission Statement and Goals Company Overview Products and/or Services Plan Marketing Plan Management Plan Operating Plan Financial Plan Appendix of Supporting Documents Copyright © 2013 by Nelson Education Limited 5-22 LO 4

RESOURCES FOR BUSINESS PLAN PREPARATION Marketing specialists Engineering and production experts Accounting firms Incubator organizations Lawyers Business Service Centres such as Canada Business Copyright © 2013 by Nelson Education Limited 5-23 LO 5