The Business Plan : Creating and Starting The Venture

(Chapter 7, Entrepreneurship, 6th Edition, 2005 Hisrich, Peters, & Shepherd, McGraw-Hill Irwin)

Learning Objectives
To define what the business plan is, who prepares it,

who reads it, and how it is evaluated. To understand the scope and value of the business plan to investors, lenders, employees, suppliers, and customers To identify information needs and sources for each critical section of the business plan. To enhance awareness of the ability of the internet as an information resource and marketing tool. To present examples and a step by step explanation of the business plan. To present helpful questions for the entrepreneur at

Planning as Part of The Business Operation

Planning is a process than never ends for a business.

It is extremely important in the early stages of any new

venture when the entrepreneur will need to prepare a preliminary business plan. As the venture grow up to mature business, planning will continue Plan may be short term or long term, strategic or operational.

What is Business Plan?

The business plan is a written document prepared by

the entrepreneur that describes all the relevant internal and external elements and strategies for starting a new venture. It is a integration of functional plans such as marketing, finance, manufacturing, sales and human resources.

Who should write the plan?

The business plan should be prepared by the

entrepreneur. The entrepreneur may consult with many other sources in its preparation, such as lawyers, accountants, marketing consultants, and engineers.

Scope and Value of the Business Plan Who Reads The Plans?
The business plan may be read by employees,

investors, bankers, venture capitalists, suppliers, customers, advisors, and consultants. There are three perspectives should be considered in preparing the plan :
Perspective of the entrepreneur
Marketing perspective Investors perspective

Scope and Value

The business plan is valuable to the entrepreneur,

potential investors, or even new personnel, who are trying to familiarize themselves with the venture, it goals, and objectives.
It helps determine the viability of the venture in a

designated market It provides guidance to the entrepreneur in organizing his or her planning activities It serves as an important tool in helping to obtain financing.

How do Potential Lenders and Investors Evaluate The Plan?

Four Cs of Credit:
Characters Cash flow Collateral Equity of Contribution

Another
Marketable Payback period

Risk
Feasibility, etc

Presenting The Plan

It is often necessary for an entrepreneur to orally

present the business plan before an audience of potential investors. In this typical forum the entrepreneur would be expected to provide a short (perhaps 20-minutes or half-hour) presentation of the business plan.

Information Needs
Before committing time and energy to preparing a

business plan, the entrepreneur should do a quick feasibility study of the business concept to see whether there a any possible barriers to success. The information, obtainable from many sources should focus on marketing (segmenting, targeting, and positioning), finance (list of all possible expenditures, demand forecast, revenue), and production (location, manufacturing operations, raw materials, equipment, labor skills, space, overhead) . Internet can be a valuable resource.
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Outline of a Business Plan

Introductory Page
Name and address of business Name(s) and address(es) of principal(s) Nature of business Statement of financing needed

Statement of confidentially of report

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Outline
Executive Summary Three to four pages

summarizing the complete business plan

What is the business concept or model? How is this business concept or model unique? Who are the individuals starting this business?

How will they make money and how much?

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Outline
Environmental and Industry Analysis
Future outlook and trends Analysis of competitors Market segmentation Industry and market forecasts

Description of Venture
Product(s) Service(s)

Size of business
Office equipment and personnel Background of entrepreneurs
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Outline
Production Plan
Manufacturing process (amount subcontracted) Physical plant Machinery and equipment Names of suppliers of raw materials

Operational Plan
Description of companys operations Flow of orders for goods and/or services

Technology utilization

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Outline
Marketing Plan
Pricing Distribution Promotion Product forecasts

Controls

Organizational Plan
Form of ownership

Identification of partners or principal shareholders

Authority of principals Management-team background
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Roles and responsibilities of members of organization

Outline
Assessment of Risk
Evaluate weakness of business New technologies Contingency Plans

Financial Plan
Pro forma income statement Cash flow projections Pro forma balance sheet

Break-even analysis
Sources and applications of funds

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Outline
Appendix (contains backup material)
Letters Market research data Leases or contracts Price lists from suppliers.

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Using and Implementing The Business Plan

The business plan is designed to guide the entrepreneur

through the first year of operations. Implementation of the strategy contain control point to ascertain progress and to initiate contingency plan if necessary. Business plan not end up in a drawer somewhere once the financing has been attained and the business launched.

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Measuring Plan Progress

Entrepreneur should check the profit and loss

statement, cash flow projections, and information on inventory, production, quality, sales, collection of accounts receivable, and disbursements for the previous month.
Inventory control
Production control Quality control Sales control Disbursements

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Updating the Plan

The most effective business plan can become out-of-

date if condition change. If the change are likely to affect the business plan, the entrepreneur should determine what revisions are needed. In this manner, the entrepreneur can maintain reasonable targets and goals and keep the new venture on a course that will increase probability of success.

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Why Some Business Plans Fails?

Goals set by the entrepreneur are unreasonable.

Goals are not measurable

The entrepreneur has not made a total commitment to

the business or to the family. The entrepreneur has no experience in the planned business. The entrepreneur has no sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or service.
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Thank You

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 Collect existing data sub-leting it Consumer feedback Scope of improvement Competition Market leader analysis Distribution New Products POP POD

Mfg system Value Chain

What consumer want? Changing choices!!!/Trend

analysis GAP PESTEL

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How innovation or IT driven business evolves

Innovation Complex, Futuristic, Strong vision

Dark side Not for mass, Adoptability

Bright side Life Changing, Scope of inevitability Collaboration Human, Emotions & Lifestyle Business Partner Competitors Sustainability Habit vs. Needs, Improvisation Dependence Data, Secrete, Confidential &

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Continuous Feedback System Driven Dreams, Aspirations, Mother Nature What is it all about Its about that one thing!! Who can do it - ???