4. Business Plan Overview

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WHY PLAN?


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The Business Plan

A written document that carefully explains

every aspect of a new business venture

Inside the firm, the business plan is used todevelop a road map

Outside the firm, the business plan introduces

potential investors and other stakeholders to

the business opportunities


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Reasons for Writing a Business Plan

1. InternalForces the founders of the firm to

think through every aspect of their new

venture

2. ExternalCommunicates the merits of a new

venture to outsiders, such as investors and

bankers


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Who Reads The BP & What Are They

Looking For?

Two primary audiences:

Firms employees

Looking for the vision and future of the firm

Investors and other stakeholders

Investors, potential business partners, potential

customers, grant awarding agencies who are being

recruited


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Guidelines

1. Structure and style of the business plan

2. Content of the business plan

3. Measuring the business plan against yourpersonal goals and aspirations

4. Recognizing that elements of the plan may

change


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Structure and Style

Conventional structure

25 to 35 pages in length

Look sharp but not tooexpensive or flashy


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Structure and Style

Elevator speech: A brief,

carefully constructed

statement, usually 45

seconds to 2 minutes long

that outlines the merits of

a business venture or

business plan insightfeature


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Elevator Speech

Four steps in an elevator speech (from business

plan insight feature)

1.Describe the opportunity

2.Describe how your product or service

meets the opportunity

3.Describe your qualifications

4.Describe your market


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Content of the Business Plan

Sections

Convince the reader that the opportunity is

exciting, feasible, defensible and within thecapabilities of the people who will be

launching the firm


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Red Flags

1. Founders with none of their own money at

risk

2. A poorly cited plan

3. Defining the market size too broadly

4. Overly aggressive financials

5. Hiding or avoiding weakness

6. Sloppiness in any area

7. Too long of a plan


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Recognizing that Elements of the Business

Plan May ChangeCorridor principle

Academic principle that statesonce an entrepreneur starts a

business, he or she begins a

journey down a path where

corridors leading to new ventureopportunities become apparent


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Recognizing that Elements of the

Business Plan May Change

The business plan is

a living, breathing

document, rather

than something set

in stone


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Recognizing that Elements of the

Business Plan May ChangeWrite deliberate (but) act emergent

Create a deliberate plan that is a specific

blueprint to follow

Think emergent with a mindset that is open

to change and influenced by the realities of

the marketplace


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Types of Business

Four distinct types of businesses

Survival

Lifestyle Managed growth

Aggressive growth


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Types of Business

Survival: Provides its

owner just enough

money to put food on

the table and pay bills


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Types of Business

Lifestyle: Provides its

owner the opportunity

to pursue a certain

lifestyle and make a

living at it (clothing

boutique, personal

trainer)


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Types of Business

Managed growth

Employs 10 or more

people, may have

several outlets, and may

be introducing new

products or services to

the market (regionalrestaurant chain, multi-

unit franchise)


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Types of Business

Aggressive growth

Bringing new productsand services to the

market and hasaggressive growth plans(computer software,medical equipment,national restaurantchain)


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Starting the Process

A business plan is an essential document for

a firm to have at its disposal, particularly if it

plans to reach out to others to try to gain

access to resources


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What To Do Before the Business Plan

Is Written Comprehensive process

Four steps of the comprehensive feasibility

analysis/business planning process


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DEVELOPING AND

SCREENING BUSINESSIDEAS


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Introduction

Many businesses fail because the idea wasnt

a good one to begin with

Techniques can be used to explore the mostcommon sources for new business ideas

First Screen provides entrepreneurs with

multiple business ideas


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Three Most Common Sources of

Business Ideas

The first step in creating an effective business

plan is selecting an idea that fills a need and

provides unique value to the customer It is difficult to get people to change habits and

behaviors to try a new product even if the new

product is better or less expensive


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First Screen

The First Screen is an entrepreneurs first pass

at assessing the feasibility of a business idea

There are 5 main parts in a First Screen


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First Screen

Part One: Strength of the business idea

Part Two: Industry-related issues

Part Three: Market- and customer-relatedissues

Part Four: Founder-related issues

Part Five: Financial issues


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Part One: Strength of the Business Idea

Its timeliness in market introduction

An open window of opportunity

The added value for the buyer The successfulness of replacing an existing

product that consumers are satisfied with

The likelihood that product will causeconsumers to make meaningful changes in

behavior


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Part Two: Industry-Related Issues

Industry-related issues account for 8 to 30% in

firm profitability

Number of competitors

Current life cycle stage of industry

Growth rate of industry

R

elative importance of product to customers Average operating margins


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Part Three: Market- and Customer-

R

elated Issues Market and Customer-related Issues include

Identification of the target market

A target market is a place within a larger

industry or market segment that represents a

narrower group of customers with similar

interests


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Part Three: Market and Customer-

related Issues

Barriers to entry: A condition that creates a

disincentive for another firm to enter the

companys niche market Economies of scale

Product differentiation

Unique access to distribution channels

Intellectual property protection


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Part Three: Market- and Customer-

related Issues

Purchasing power of potential customers

The ease of making customers aware of the

new product

Growth potential of a firms target market


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Part Four: Founder-Related Issues

Attributes of a strong founding team

Experience in the industry

Skills related to the new product

Social and professional networks

Personal goals and aspiration

Likelihood the team can grow and launch

the new venture


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Part Five: Financial Issues

Initial capital investment with growth estimates

Average small business is started for about

P50,000 from owners personal savings

Number of revenue drivers

Time needed to break even or recoup initial

investment

Assess financial performance of similar firms

Fund initial product development and start-up

expenses

4. Business Plan Overview

Documents

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