chapter 9: business plan1 copyright 1999 prentice hall publishing company crafting a winning...
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Chapter 9: Business Plan 1Copyright 1999 Prentice Hall Publishing Company
Crafting a Winning
Business Plan
Crafting a Winning
Business Plan
Chapter 9: Business Plan 2Copyright 1999 Prentice Hall Publishing Company
The Business Plan:The Business Plan:Two Essential FunctionsTwo Essential Functions
A business plan is a written summary of an A business plan is a written summary of an entrepreneur’s proposed business venture, its entrepreneur’s proposed business venture, its operational and financial details, its marketing operational and financial details, its marketing opportunities and strategy, and its managers’ skills opportunities and strategy, and its managers’ skills and abilities. It serves two essential functions:and abilities. It serves two essential functions:
Chapter 9: Business Plan 3Copyright 1999 Prentice Hall Publishing Company
A business plan is a written summary of an A business plan is a written summary of an entrepreneur’s proposed business venture, its entrepreneur’s proposed business venture, its operational and financial details, its marketing operational and financial details, its marketing opportunities and strategy, and its managers’ skills opportunities and strategy, and its managers’ skills and abilities. It serves two essential functions:and abilities. It serves two essential functions: Guiding the company by charting its future Guiding the company by charting its future
course and defining its strategy for following it.course and defining its strategy for following it.
The Business Plan:The Business Plan:Two Essential FunctionsTwo Essential Functions
Chapter 9: Business Plan 4Copyright 1999 Prentice Hall Publishing Company
A business plan is a written summary of an A business plan is a written summary of an entrepreneur’s proposed business venture, its entrepreneur’s proposed business venture, its operational and financial details, its marketing operational and financial details, its marketing opportunities and strategy, and its managers’ skills opportunities and strategy, and its managers’ skills and abilities. It serves two essential functions:and abilities. It serves two essential functions: Guiding the company by charting its future Guiding the company by charting its future
course and defining its strategy for following it.course and defining its strategy for following it. Attracting lenders and investors who will provide Attracting lenders and investors who will provide
needed capital.needed capital.
The Business Plan:The Business Plan:Two Essential FunctionsTwo Essential Functions
Chapter 9: Business Plan 5Copyright 1999 Prentice Hall Publishing Company
Guidelines for PreparingGuidelines for Preparinga Business Plana Business Plan
Remember: No one can create your plan Remember: No one can create your plan forfor you. you. Potential lenders want to see financial Potential lenders want to see financial
projections, but they are more interested in the projections, but they are more interested in the strategiesstrategies for reaching those projections. for reaching those projections.
Show how you plan to set your business apart Show how you plan to set your business apart from competitors; don't fall into the "me too" from competitors; don't fall into the "me too" trap.trap.
Identify your target market, and offer evidence Identify your target market, and offer evidence that customers for your product or service exist. that customers for your product or service exist.
Chapter 9: Business Plan 6Copyright 1999 Prentice Hall Publishing Company
Be Be market-drivenmarket-driven, not product-driven., not product-driven. AlwaysAlways include an analysis of the competition. include an analysis of the competition. Remember: Lenders and investors prefer Remember: Lenders and investors prefer
experienced managers.experienced managers. Develop realistic financial forecasts and be sure Develop realistic financial forecasts and be sure
to include a to include a cash forecastcash forecast.. Include a timetable for implementing the plan.Include a timetable for implementing the plan. Keep your plan “crisp” - 25 to 55 pages is ideal.Keep your plan “crisp” - 25 to 55 pages is ideal.
(Continued)
Guidelines for PreparingGuidelines for Preparinga Business Plana Business Plan
Chapter 9: Business Plan 7Copyright 1999 Prentice Hall Publishing Company
Include a statement of the Include a statement of the assumptions assumptions on which on which your financial projections are based.your financial projections are based.
Include an exit strategy for potential investors, if Include an exit strategy for potential investors, if appropriate.appropriate.
Make sure that your plan free of “typos” and is Make sure that your plan free of “typos” and is visually appealing.visually appealing.
Include a table of contents so that readers can Include a table of contents so that readers can navigate the plan easily.navigate the plan easily.
Make your plan interesting.Make your plan interesting.
(Continued)
Guidelines for PreparingGuidelines for Preparinga Business Plana Business Plan
Chapter 9: Business Plan 8Copyright 1999 Prentice Hall Publishing Company
Why Take the Time to Why Take the Time to Build a Business Plan?Build a Business Plan?
Although building a plan does not Although building a plan does not guarantee success, it does increase an guarantee success, it does increase an entrepreneur’s chances of succeeding in entrepreneur’s chances of succeeding in business.business.
A plan is like a road map that serves as a A plan is like a road map that serves as a guide on a journey through unfamiliar, guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t harsh, and dangerous territory. Don’t attempt the trip without a map!attempt the trip without a map!
Chapter 9: Business Plan 9Copyright 1999 Prentice Hall Publishing Company
Key Elements of a Key Elements of a Business PlanBusiness Plan
Executive SummaryExecutive Summary Mission StatementMission Statement Company HistoryCompany History Industry and Business ProfileIndustry and Business Profile
Mission, Goals, and Objectives
Mission
Goals
Objectives
Chapter 9: Business Plan 11Copyright 1999 Prentice Hall Publishing Company
Key Elements of a Key Elements of a Business PlanBusiness Plan
Business StrategyBusiness Strategy Description of Products or ServicesDescription of Products or Services
Executive SummaryExecutive Summary Mission StatementMission Statement Company HistoryCompany History Industry and Business ProfileIndustry and Business Profile
Chapter 9: Business Plan 12Copyright 1999 Prentice Hall Publishing Company
Features vs. BenefitsFeatures vs. Benefits A A featurefeature is a descriptive fact about a is a descriptive fact about a
product or service - e.g. “an ergonomically product or service - e.g. “an ergonomically designed, more comfortable handle.”designed, more comfortable handle.”
A A benefitbenefit is what a the customer gains is what a the customer gains from the product or service feature - e.g. from the product or service feature - e.g. “fewer problems with carpal tunnel “fewer problems with carpal tunnel syndrome and increased productivity.”syndrome and increased productivity.”
This part of the plan should emphasize This part of the plan should emphasize customer benefits over product features.customer benefits over product features.
Chapter 9: Business Plan 13Copyright 1999 Prentice Hall Publishing Company
Marketing Strategy.Marketing Strategy.
Key Elements of a Key Elements of a Business PlanBusiness Plan
Chapter 9: Business Plan 14Copyright 1999 Prentice Hall Publishing Company
Proving a Market ExistsProving a Market Exists
Showing customer interest.Showing customer interest. Documenting market claimsDocumenting market claims
Target market Target market AdvertisingAdvertising Market size and trendsMarket size and trends LocationLocation PricingPricing DistributionDistribution
The link between pricing, perceived quality, and company image.The link between pricing, perceived quality, and company image.
Price
Perceived Quality
Low
High
Low High
Upscale image.Target: Those whowant the best and areable to pay for it.
Value image.Target: Those whoare looking for valuewhat they spend.
Bargain image.Target: Those to whom low prices aremore important thanquality.
Contradictory image.Target: Unknown.This is a dangerousposition to be in.
Chapter 9: Business Plan 16Copyright 1999 Prentice Hall Publishing Company
Competitor Analysis.Competitor Analysis. Owners'/Officers' Resumes.Owners'/Officers' Resumes. Plan of Operation.Plan of Operation. Financial Data.Financial Data. Request for funds.Request for funds.
Key Elements of a Key Elements of a Business PlanBusiness Plan
Marketing Strategy.Marketing Strategy.
Chapter 9: Business Plan 17Copyright 1999 Prentice Hall Publishing Company
A Plan Must Pass Three TestsA Plan Must Pass Three Tests The Reality Test - The Reality Test - proving :proving :
that a market really does exist for your product or service. that a market really does exist for your product or service. that you can actually build or provide it for the cost that you can actually build or provide it for the cost
estimates in the plan.estimates in the plan. The Competitive Test The Competitive Test - evaluates: - evaluates:
a company’s position relative to its customers.a company’s position relative to its customers. management’s ability to create a company that will gain management’s ability to create a company that will gain
an edge over its rivals.an edge over its rivals. The Value Test The Value Test - proving:- proving:
that a venture offers investors or lenders an attractive rate that a venture offers investors or lenders an attractive rate of return or a high probability of repayment.of return or a high probability of repayment.
Chapter 9: Business Plan 18Copyright 1999 Prentice Hall Publishing Company
Presenting the PlanPresenting the Plan
Demonstrate enthusiasm, but Demonstrate enthusiasm, but don’t be overemotional.don’t be overemotional.
““Hook” investors quickly with an Hook” investors quickly with an up-front explanation of the up-front explanation of the venture, its opportunities, and its venture, its opportunities, and its benefits to them.benefits to them.
Use visual aids.Use visual aids. Hit the highlights; focus on the Hit the highlights; focus on the
details later.details later.
Chapter 9: Business Plan 19Copyright 1999 Prentice Hall Publishing Company
Presenting the PlanPresenting the Plan
Avoid overloading your Avoid overloading your audience with technological audience with technological jargon.jargon.
Be prepared (with details) for Be prepared (with details) for potential investors’ questions.potential investors’ questions.
Follow up with every investor Follow up with every investor to whom you make your to whom you make your presentation.presentation.
Chapter 9: Business Plan 20Copyright 1999 Prentice Hall Publishing Company
The "5 Cs" of The "5 Cs" of CreditCredit
Capital.Capital.
Capacity.Capacity.
Collateral.Collateral.
Character.Character.
Conditions.Conditions.