Chapter 9: Business Plan1 Copyright 1999 Prentice Hall Publishing Company Crafting a Winning Business Plan

Chapter 9: Business Plan2 Copyright 1999 Prentice Hall Publishing Company The Business Plan: Two Essential Functions A business plan is a written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. It serves two essential functions:

Chapter 9: Business Plan3 Copyright 1999 Prentice Hall Publishing Company A business plan is a written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. It serves two essential functions: â Guiding the company by charting its future course and defining its strategy for following it. The Business Plan: Two Essential Functions

Chapter 9: Business Plan4 Copyright 1999 Prentice Hall Publishing Company A business plan is a written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities. It serves two essential functions: â Guiding the company by charting its future course and defining its strategy for following it. â Attracting lenders and investors who will provide needed capital. The Business Plan: Two Essential Functions

Chapter 9: Business Plan5 Copyright 1999 Prentice Hall Publishing Company Guidelines for Preparing a Business Plan l Remember: No one can create your plan for you. l Potential lenders want to see financial projections, but they are more interested in the strategies for reaching those projections. l Show how you plan to set your business apart from competitors; don't fall into the "me too" trap. l Identify your target market, and offer evidence that customers for your product or service exist.

Chapter 9: Business Plan6 Copyright 1999 Prentice Hall Publishing Company Be market-driven, not product-driven. Be market-driven, not product-driven. l Always include an analysis of the competition. l Remember: Lenders and investors prefer experienced managers. l Develop realistic financial forecasts and be sure to include a cash forecast. l Include a timetable for implementing the plan. l Keep your plan “crisp” - 25 to 55 pages is ideal. (Continued) Guidelines for Preparing a Business Plan

Chapter 9: Business Plan7 Copyright 1999 Prentice Hall Publishing Company Include a statement of the assumptions on which your financial projections are based. Include a statement of the assumptions on which your financial projections are based. l Include an exit strategy for potential investors, if appropriate. l Make sure that your plan free of “typos” and is visually appealing. l Include a table of contents so that readers can navigate the plan easily. l Make your plan interesting. (Continued) Guidelines for Preparing a Business Plan

Chapter 9: Business Plan8 Copyright 1999 Prentice Hall Publishing Company Why Take the Time to Build a Business Plan? l Although building a plan does not guarantee success, it does increase an entrepreneur’s chances of succeeding in business. l A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t attempt the trip without a map!

Chapter 9: Business Plan9 Copyright 1999 Prentice Hall Publishing Company Key Elements of a Business Plan l Executive Summary l Mission Statement l Company History l Industry and Business Profile

Mission, Goals, and Objectives Mission Goals Objectives

Chapter 9: Business Plan11 Copyright 1999 Prentice Hall Publishing Company Key Elements of a Business Plan l Business Strategy l Description of Products or Services l Executive Summary l Mission Statement l Company History l Industry and Business Profile

Chapter 9: Business Plan12 Copyright 1999 Prentice Hall Publishing Company Features vs. Benefits l A feature is a descriptive fact about a product or service - e.g. “an ergonomically designed, more comfortable handle.” l A benefit is what a the customer gains from the product or service feature - e.g. “fewer problems with carpal tunnel syndrome and increased productivity.” This part of the plan should emphasize customer benefits over product features.

Chapter 9: Business Plan13 Copyright 1999 Prentice Hall Publishing Company l Marketing Strategy. Key Elements of a Business Plan

Chapter 9: Business Plan14 Copyright 1999 Prentice Hall Publishing Company Proving a Market Exists l Showing customer interest. l Documenting market claims â Target market â Advertising â Market size and trends â Location â Pricing â Distribution

The link between pricing, perceived quality, and company image. Price Perceived Quality Low High LowHigh Upscale image. Target: Those who want the best and are able to pay for it. Value image. Target: Those who are looking for value what they spend. Bargain image. Target: Those to whom low prices are more important than quality. Contradictory image. Target: Unknown. This is a dangerous position to be in.

Chapter 9: Business Plan16 Copyright 1999 Prentice Hall Publishing Company l Competitor Analysis. l Owners'/Officers' Resumes. l Plan of Operation. l Financial Data. l Request for funds. Key Elements of a Business Plan l Marketing Strategy.

Chapter 9: Business Plan17 Copyright 1999 Prentice Hall Publishing Company A Plan Must Pass Three Tests l The Reality Test - proving : â that a market really does exist for your product or service. â that you can actually build or provide it for the cost estimates in the plan. l The Competitive Test - evaluates: â a company’s position relative to its customers. â management’s ability to create a company that will gain an edge over its rivals. l The Value Test - proving: â that a venture offers investors or lenders an attractive rate of return or a high probability of repayment.

Chapter 9: Business Plan18 Copyright 1999 Prentice Hall Publishing Company Presenting the Plan l Demonstrate enthusiasm, but don’t be overemotional. l “Hook” investors quickly with an up-front explanation of the venture, its opportunities, and its benefits to them. l Use visual aids. l Hit the highlights; focus on the details later.

Chapter 9: Business Plan19 Copyright 1999 Prentice Hall Publishing Company Presenting the Plan l Avoid overloading your audience with technological jargon. l Be prepared (with details) for potential investors’ questions. l Follow up with every investor to whom you make your presentation.

Chapter 9: Business Plan20 Copyright 1999 Prentice Hall Publishing Company The "5 Cs" of Credit l Capital. l Capacity. l Collateral. l Character. l Conditions.