1. ENTR 452 (Business Plan Slides, Chapter 7)

2. BUSINESS PLAN BASICS
The BP is a written summary and explanation of an entrepreneur’s proposed venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities.
Describes tasks/goals for first 3-5 years of operations
Research shows a link between planning and performance.
However, you can be successful without a plan (most businesses are founded without a business plan)

3. MAJOR PURPOSES OF A BUSINESS PLAN
- Opportunity Development
- Strategic Planning and Benchmarking
- Raising Money
- Recruiting
Consider who you are writing for: yourself, investors, customers, suppliers, banks, judges

4. BUSINESS PLAN COVERAGE AREAS
Key People
Promising Opportunity
Business Context
Risks and rewards

5. BUSINESS PLAN BASICS
Many different outlines/forms of plan. If you are trying to raise money, I recommend having three documents prepared for potential readers:
1. Executive Summary (most important part of a plan)
Page Short-Form Plan (PowerPoint Presentation)
3. Full Business Plan

6. INFORMATION NEEDS Clearly defined business concept.
Market data – support the concept by detailing the market potential
Operations – must discuss location, equipment, raw materials, supply needs, labor skills, space
Financials – at a minimum need a cash budget (full financials w/cash flow statement, income statement, and balance sheet is preferable)

7. FORMAT/MAJOR SECTIONS
Cover Page (name of company, contact info)
Table of Contents
Executive Summary
Description of Product/Service
Market Data
Analysis of Competition

8. FORMAT/MAJOR SECTIONS
Marketing Plan
Management Plan
Financial Info
Deal Structure/Exit Strategy
Appendices (e.g., financial spreadsheets, resumes, supporting marketing material)

9. BUSINESS PLAN EVALUATION
Before you get any financing, investors will conduct “due diligence” (fact checking and background check) on you and your plan
You will also have to present your business plan
Again, know your target
- Bankers
- Angel Investors
- Venture Capitalists
- Competition Judges

10. ENVIRONMENTAL AND INDUSTRY ANALYSIS
Environmental analysis: assessment of external uncontrollable variables that may impact the business plan.
Examples: Economy, culture, technology, legal concerns,
Industry analysis: reviews industry trends and competitive strategies.
Examples: Industry demand, competition

11. ENVIRONMENTAL AND INDUSTRY ANALYSIS
What are the major economic, technological, legal, and political trends on a national and an international level?
What are total industry sales over the past five years?
What is anticipated growth in this industry?
How many new firms have entered this industry in the past three years?
What new products have been recently introduced in this industry?
Who are the nearest competitors?
How will your business operation be better than this?
Are the sales of each of your major competitors growing, declining, or steady?
What are the strengths and weaknesses of each of your competitors?
What trends are occurring in your specific market area?
What is the profile of your customers?
How does your customer profile differ from that of your competition?

12. APPENDICES
Contains any backup material that is not necessary in the text of the document. May include:
Letters from customers, distributors, or subcontractors.
Secondary data or primary research data used to
support plan decisions.
Leases, contracts, or other types of agreements.
Price lists from suppliers and competitors.

13. THE THREE TESTS A BUSINESS PLAN MUST PASS
Reality Test – is it realistic?
Competitive Test – does the firm have an edge over the competition?
Value Test – does the firm represent a good financial risk/return?

14. WHY BUSINESS PLANS FAIL
Factors can be one of many of the following:
Goals set by the entrepreneur are unreasonable.
Goals are not measurable.
Entrepreneur has not made a total commitment to the
business or to the family.
Entrepreneur has no experience in the planned venture.
Entrepreneur has no sense of potential threats or
weaknesses to the business.
No customer need was established for the proposed
product or service.

15. BUSINESS PLAN PRESENTATION
Again, you will need to present your plan if you expect to receive any funding.
Should cover 5 major areas:
Company’s background and its products/services
Market analysis and description of the opportunities
Competitive edge and marketing strategies
Management team (experience and qualifications)
Financial analysis (projections)

16. 5 C’s OF CREDIT Lenders/Investors will look at these 5 “C’s”:
Capital – Contribution by entrepreneur(s)
Capacity – ability to repay loan/provide a return (cash flow)
Collateral – assets that back up the loan/investment
Character – of the entrepreneur
Conditions – that surround the business

17. LIKELY EVALUATION QUESTIONS
SCA?????
Quality of management
- Hiring agreements w/outsiders if funded
- Advisory board
Resources controlled by the entrepreneur(s)
Financials (assumptions and projections)
Exit strategy

18. OTHER THOUGHTS ON BUSINESS PLANS
Before you write anything, should know specifically who your first customer is going to be
Business plan software – still a lot of work
Hiring a consultant – must work closely w/the consultant in order to ensure vision is expressed
Plan does not have to be flashy

19. OTHER THOUGHTS ON BUSINESS PLANS
Read and re-read
Avoid “fluff” and overly flattering language
Evidence of good research
Be optimistic, but realistic
Have an advisory board for review purposes

20. OTHER THOUGHTS ON BUSINESS PLANS
Clearly lay out the exit strategy
- may be different for different plan readers
How will your competition react?
Be prepared to defend and constantly update your plan as conditions change