Entrepreneurial Management Presenting the Plan

 The entrepreneur is expected to “sell” the business concept.

- Focus on why this is a good opportunity.
Chapter 5: The Business Plan: Creating and Starting the
- Provide an overview of the marketing program; sales and
Venture
profits.
- Address risks and how to overcome them.
Planning as Part of the Business Operation
 Audience includes potential investors who may raise
 Plans provide guidance and structure in a rapidly changing
questions.
market environment.
 Investors describe these presentations as elevator pitches.
 Plans get finalized as the entrepreneur has a better sense of
the market, the product or services, the management team,
Information Needs
and the financial needs of the venture.
 Before creating a business plan, the entrepreneur must
 They help meet short-term or long-term business goals.
undertake a feasibility study.
 Information for a feasibility study should focus on
What is the Business Plan?
marketing, finance, and production.
 A written document describing all relevant internal and
 Feasible, well-defined goals and objectives need to be
external elements, and strategies for starting a new venture.
established.
 It is an integration of functional plans; addresses short-term
- Based on this, strategy decisions can be established.
and long-term decision making for the first three years of
operation.

Who Should Write the Plan?

 The plan should be prepared by the entrepreneur in
consultation with other sources.
 The entrepreneur should make an objective assessment of
his or her own skills before deciding to hire a consultant.

Scope and Value of the Business Plan—Who Reads the Plan?

 Who is expected to read the plan can often affect its actual
content and focus.
 In preparing the plan it is important to consider the:
- Entrepreneur’s perspective
- Marketing perspective
An Upside-Down Pyramid Approach to Gathering Market
- Investor's perspective
Information
 Depth and detail in the business plan depend on:
 Operations Information Needs
- Size and scope of the proposed new venture.
- Location
- Size of the market
- Manufacturing operations
- Competition
- Raw materials
- Potential growth
- Equipment
 The business plan is valuable because it:
- Labor skills
- Helps determine the viability of the venture in a
- Space
designated market.
- Overhead
- Guides the entrepreneur in organizing planning activities.
- Most of the information should be incorporated directly
- Serves as an important tool in obtaining financing.
into the business plan
 This process provides a self-assessment by the
entrepreneur.
Financial Information Needs
 The entrepreneur has to prepare a budget of all possible
How do Potential Lenders and Investors Evaluate the Plan?
expenditures and revenue sources, including sales and any
 The business plan must reflect:
external available funds.
- The strengths of management and personnel
 The budget includes capital expenditures, direct operating
- The product/service
expenses, and cash expenditures for non-expense items.
- Available resources
 Industry benchmarks can be used in preparing the final pro
 Lenders are interested in the venture’s ability to pay back the
forma statements in the financial plan.
debt.
- Focus on the four Cs of credit - Character, cash flow,
Using the Internet as a Resource Tool
collateral, and equity contribution.
 The Internet can provide information for industry analysis,
 Banks want an objective analysis of the business opportunity
competitor analysis, and measurement of market potential.
and the risks.
 It is a valuable resource in later-stage planning and decision
 Investors, particularly venture capitalists, have different
making; provides opportunities for marketing strategy.
needs:
 An entrepreneur can access:
- Place more emphasis on the entrepreneur’s character
- Popular search engines
- Spend much time conducting background checks
- Competitors’ Web sites
- Demand high rates of return
- Social networks, blogs, and discussion groups
- Focus on market and financial projections
Writing the Business Plan
 A business plan should be comprehensive enough to give
any potential investor a complete picture and understanding
of the new venture.
 It should help the entrepreneur clarify his or her thinking Production Plan
about the business.
 Operations Plan
 Introductory Page - All businesses (manufacturing or nonmanufacturing)
- Name and address of the company should include an operations plan as part of the business
- Name of the entrepreneur(s), telephone number, fax plan.
number, e-mail address, and Web site address - It goes beyond the manufacturing process.
- Description of the company and nature of the business - Describes the flow of goods and services from production
- Statement of financing needed to the customer.
- Statement of confidentiality of report - The major distinction between services and
 Executive Summary manufactured goods is services involve intangible
- About two to three pages in length summarizing the performances.
complete business plan.  Marketing Plan
 Environmental and Industry Analysis - It describes market conditions and strategy related to
- The environmental analysis assesses external how the product/service will be distributed, priced, and
uncontrollable variables that may impact the business promoted.
plan. - Marketing research evidence to support any of the
o Examples: Economy, culture, technology, legal marketing decision strategies as well as for forecasting
concerns, etc. sales should be described in this section.
- The industry analysis involves reviewing industry trends - Potential investors regard the marketing plan as critical
and competitive strategies. to the success of the new venture.
o Examples: Industry demand, competition, etc.  Organizational Plan
- It describes the form of ownership and lines of authority
and responsibility of members of new venture.
- In case of a partnership, the terms of the partnership
should be included.
- In case of a corporation, the following should be included:
o Shares of stock authorized and share options
o Names, addresses, and resumes of directors and
officers
o Organization chart
 Assessment of Risk
- Identifies potential hazards and alternative strategies to
meet goals and objectives.
- The entrepreneur should indicate:
Critical Issues for Environmental and Industry Analysis o Potential risks to the new venture.
o Impact of the risks.
o Strategy to prevent, minimize, or respond to the risk.
- Major risks could result from:
o Competitor’s reaction
o Weaknesses in marketing/ production/ management
team
o New advances in technology
 Financial Plan
- It contains projections of key financial data that
determine economic feasibility and necessary financial
investment commitment.
- It should contain:
o Summarized forecasted sales and appropriate
expenses for at least the first three years
Describing the Venture
o Cash flow figures for three years
o Projected balance sheet
 Appendix
- It contains any backup material that is not necessary in
the text of the document.
- It may include:
o Letters from customers, distributors, or
subcontractors.
o Secondary data or primary research data used to
support plan decisions.
 o Leases, contracts, or other types of agreements.
o Price lists from suppliers and competitors.

Using and Implementing the Business Plan

 The business plan is designed to guide the entrepreneur
through the first year of operations.
 The strategy should contain control points to ascertain
progress and to initiate contingency plans if necessary.
 Without good planning employees will not understand the
company’s goals.
 Businesses fail due to entrepreneur’s inability to plan
effectively.
 Measuring Plan Progress
- Business plan projections are made on a 12-month
schedule but the entrepreneur should frequently check
on:
o Profit and loss statement
o Cash flow projections
o Inventory control
o Production control
o Quality control
o Sales control
o Disbursements
o Web site control
 Updating the Plan
- Entrepreneurs must be sensitive to changes in the
company, industry, and market.
- Determine what revisions are needed if changes are
likely to affect the business plan.
- This helps entrepreneurs to:
o Maintain reasonable targets and goals.
o Keep the new venture on a course to high probability
of success.

Why Some Business Plans Fail

 Goals are unreasonable.
 Objectives are not measurable.
 Entrepreneur has not made a total commitment to the
business or to the family.
 Lack of experience in the planned business.
 No sense of potential threats or weaknesses to the business.
 No customer need was established for the proposed product
or service.