Transcript
Page 1: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 11Chapter 6: Business PlanChapter 6: Business Plan

Crafting a Winning

Business Plan

Page 2: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 22Chapter 6: Business PlanChapter 6: Business Plan

A Business Plan Is…A Business Plan Is…

a systematic evaluation of a venture’s a systematic evaluation of a venture’s chances for success.chances for success.

a way to determine the risks facing a a way to determine the risks facing a venture.venture.

a game plan for managing a business a game plan for managing a business successfully.successfully.

a tool for comparing actual and target a tool for comparing actual and target results.results.

an important tool for attracting capital.an important tool for attracting capital.

Page 3: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 33Chapter 6: Business PlanChapter 6: Business Plan

A Business PlanA Business Plan

A written summary of:A written summary of: an entrepreneur’s proposed business an entrepreneur’s proposed business

ventureventure its operational and financial detailsits operational and financial details its marketing opportunities and its marketing opportunities and

strategystrategy its managers’ skills and abilities. its managers’ skills and abilities.

Page 4: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 44Chapter 6: Business PlanChapter 6: Business Plan

A Business Plan:A Business Plan:Two Essential Two Essential FunctionsFunctions

1.1. Guiding the company by Guiding the company by charting its future course charting its future course and defining its strategy and defining its strategy for following it.for following it.

2.2. Attracting lenders and Attracting lenders and investors who will investors who will provide needed capital.provide needed capital.

Page 5: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 55Chapter 6: Business PlanChapter 6: Business Plan

A Business PlanA Business Plan

A plan is a reflection of its creator.A plan is a reflection of its creator. Sometimes the primary benefit of Sometimes the primary benefit of

preparing a plan is the realization preparing a plan is the realization that a business idea just won’t work! that a business idea just won’t work!

The real value in preparing a plan is The real value in preparing a plan is not as much in the plan itself as it is not as much in the plan itself as it is in the in the processprocess of creating it. of creating it.

Page 6: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 66Chapter 6: Business PlanChapter 6: Business Plan

Why Take the Time Why Take the Time to Build a Business to Build a Business Plan?Plan?

Although building a plan does Although building a plan does not guarantee success, it not guarantee success, it doesdoes increase your chances of increase your chances of succeeding in business.succeeding in business.

A plan is like a road map that A plan is like a road map that serves as a guide on a journey serves as a guide on a journey through unfamiliar, harsh, and through unfamiliar, harsh, and dangerous territory. Don’t dangerous territory. Don’t attempt the trip without a attempt the trip without a map!map!

Page 7: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 77Chapter 6: Business PlanChapter 6: Business Plan

Covering the Bases in Covering the Bases in a Business Plana Business Plan

Key peopleKey people Promising opportunityPromising opportunity Business contextBusiness context Risks and rewardsRisks and rewards

Page 8: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 88Chapter 6: Business PlanChapter 6: Business Plan

Key Elements of a Key Elements of a Business PlanBusiness Plan Executive summary Executive summary Mission statementMission statement Company historyCompany history Business and industry Business and industry

profileprofile Business strategyBusiness strategy Description of Description of

products/servicesproducts/services

Page 9: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 99Chapter 6: Business PlanChapter 6: Business Plan

Features vs. BenefitsFeatures vs. Benefits

Feature – a descriptive fact about a Feature – a descriptive fact about a product or service (“an product or service (“an ergonomically designed, more ergonomically designed, more comfortable handle”).comfortable handle”).

Benefit – what a customer gains from Benefit – what a customer gains from the product or service feature the product or service feature (“fewer problems with carpal tunnel (“fewer problems with carpal tunnel syndrome and increased syndrome and increased productivity”). productivity”).

Page 10: Chapter 6: Business Plan Copyright 2006 Prentice Hall Publishing Company 1 Crafting a Winning Business Plan

Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1010Chapter 6: Business PlanChapter 6: Business Plan

Key Elements of a Key Elements of a Business PlanBusiness Plan Marketing strategyMarketing strategy

(Continued)(Continued)

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Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1111Chapter 6: Business PlanChapter 6: Business Plan

Marketing StrategyMarketing Strategy

Prove that a market existsProve that a market exists Show customer interestShow customer interest Document market claims with Document market claims with researchresearch

Business prototypingBusiness prototyping

Describe target customers Describe target customers Advertising and promotion Advertising and promotion Market size and trendsMarket size and trends Location analysisLocation analysis PricingPricing DistributionDistribution

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Key Elements of a Key Elements of a Business PlanBusiness Plan Marketing strategyMarketing strategy

(Continued)(Continued)

Competitor analysisCompetitor analysis Owners’ and managers’ Owners’ and managers’

résumrésuméés s Plan of operationPlan of operation Financial forecastsFinancial forecasts

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Financial ForecastsFinancial Forecasts

Projected financial statementsProjected financial statements Monthly for one yearMonthly for one year Quarterly for next twoQuarterly for next two

Income statementIncome statement Balance sheetBalance sheet Cash FlowCash Flow Capital expendituresCapital expenditures

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Financial ForecastsFinancial Forecasts

Three forecastsThree forecasts PessimisticPessimistic Most LikelyMost Likely OptimisticOptimistic

Realistic!Realistic! Include assumptions on which Include assumptions on which

forecasts are basedforecasts are based

(Continued)(Continued)

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Key Elements of a Key Elements of a Business PlanBusiness Plan Marketing strategyMarketing strategy

(Continued)(Continued)

Competitor analysisCompetitor analysis Owners’ and managers’ Owners’ and managers’

résumrésuméés s Plan of operationPlan of operation Financial forecastsFinancial forecasts Request for fundsRequest for funds

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Tips on PreparingTips on Preparinga Business Plana Business Plan

Rid your plan of all spelling and Rid your plan of all spelling and grammatical errors. grammatical errors.

Make your plan visually appealing. Make your plan visually appealing. Leave ample “white space” in margins.Leave ample “white space” in margins. Make sure your plan has an attractive Make sure your plan has an attractive

cover. (First impressions are crucial.)cover. (First impressions are crucial.) Include a table of contents to allow Include a table of contents to allow

readers to navigate your plan easily. readers to navigate your plan easily.

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Tips on PreparingTips on Preparinga Business Plana Business Plan

Write in a conversational style and use Write in a conversational style and use “bullets.”“bullets.”

Support claims with facts and avoid Support claims with facts and avoid generalizations. generalizations.

Avoid overusing industry jargon.Avoid overusing industry jargon. Make it interesting!Make it interesting! Use spreadsheets to generate financial Use spreadsheets to generate financial

forecasts.forecasts.

(Continued)(Continued)

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Tips on PreparingTips on Preparinga Business Plana Business Plan

AlwaysAlways include cash flow projections. include cash flow projections. Keep your plan “crisp” – between 25 and Keep your plan “crisp” – between 25 and

50 pages long.50 pages long. Tell the truth – Tell the truth – alwaysalways. .

(Continued)(Continued)

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Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 1919Chapter 6: Business PlanChapter 6: Business Plan

Your Plan Must Pass Your Plan Must Pass Three TestsThree Tests The Reality TestThe Reality Test - - proving that :proving that :

A market really does exist for your product or A market really does exist for your product or service. service.

You can actually build or provide it for the cost You can actually build or provide it for the cost estimates in the plan.estimates in the plan.

The Competitive TestThe 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 Management’s ability to create a company

that will gain an edge over its rivals.that will gain an edge over its rivals. The Value TestThe Value Test – proving that:– proving that:

A venture offers investors or lenders an A venture offers investors or lenders an attractive rate of return or a high probability of attractive rate of return or a high probability of repayment.repayment.

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Copyright 2006 Prentice Hall Publishing CompanyCopyright 2006 Prentice Hall Publishing Company 2020Chapter 6: Business PlanChapter 6: Business Plan

Presenting the PlanPresenting the Plan

Prepare!Prepare! Demonstrate enthusiasm, but don’t be Demonstrate enthusiasm, but don’t be

overemotional.overemotional. Start by communicating the dynamic Start by communicating the dynamic

opportunity your business idea offers. opportunity your business idea offers. ““Hook” investors quickly with an up-Hook” investors quickly with an up-

front explanation of the venture, its front explanation of the venture, its opportunities, and its benefits to opportunities, and its benefits to them.them.

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Presenting the PlanPresenting the Plan

Use visual aids.Use visual aids. Hit the highlights; focus on the Hit the highlights; focus on the

details later.details later. Keep your presentation “crisp” – Keep your presentation “crisp” –

2 or 3 major points. 2 or 3 major points. Avoid overloading your audience Avoid overloading your audience

with technological jargon.with technological jargon.

(Continued)(Continued)

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Presenting the PlanPresenting the Plan

Answer every lender or investor’s Answer every lender or investor’s question: “What’s in it for me?”question: “What’s in it for me?”

Close by reinforcing the nature of Close by reinforcing the nature of the opportunity. the opportunity.

Be prepared (with details) for Be prepared (with details) for questions investors are likely to questions investors are likely to ask.ask.

(Continued)(Continued)

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Presenting the PlanPresenting the Plan

Learn to read the pattern of Learn to read the pattern of investors’ questions and address investors’ questions and address the issues that concern them. the issues that concern them.

Follow up with every investor to Follow up with every investor to whom you make your whom you make your presentation.presentation.

(Continued)(Continued)

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The "5 Cs" of The "5 Cs" of CreditCredit

CapitalCapital

CapacityCapacity CollateralCollateral CharacterCharacter

ConditionsConditions


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