Upload
lim-cia-chien
View
225
Download
0
Embed Size (px)
Citation preview
7/27/2019 Chapter 06 Revised
1/24
The Business Plan:
Visualizing the
Dream
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Copyright 2006 Thomson Business & Professional Publishing.
All rights reserved.
Part 3 Developing the New
Venture Business Plan
7/27/2019 Chapter 06 Revised
2/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 62
Looking Ahead
After studying this chapter, you should be able to:1. Explain what a business plan is, when it is needed,
and what form it might take.
2. Explain how to tell a new ventures story to outsiders,
especially investors.3. List practical suggestions to follow in writing a
business plan and outline the key sections of a
business plan.
4. Identify available sources of assistance in preparing abusiness plan.
5. Maintain the proper perspective when writing a
business plan.
7/27/2019 Chapter 06 Revised
3/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 63
What Is a Business Plan?
Business PlanA document that sets out the basic idea underlying a
business and related startup considerations
Identifies the nature and context of the business opportunity
Presents the entrepreneurs approach to exploiting theopportunity
Identifies factors affecting the ventures success
Serves as the entrepreneurs tool for raising capital
7/27/2019 Chapter 06 Revised
4/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 64
The Need for a Business Plan
Primary FunctionsTo provide a clearly articulated statement of goals and
strategies for internal use
Imposes discipline on the entrepreneur and management
team
To serve as a selling document to be shared with
outsiders
Provides a credible overview for prospective customers,
suppliers, and investors Helps secure favorable credit terms from suppliers
Opens approaches to lenders and other sources of financing
7/27/2019 Chapter 06 Revised
5/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 65Exhibit 6.1
Users of Business Plans
7/27/2019 Chapter 06 Revised
6/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 66
Types of Business Plans
Summary PlanA short form of a business plan that presents only the
most important issues and projections for the business
Comprehensive Plan
A full business plan that providesan in-depth analysis of the critical
factors that will determine a firms
success or failure, along with all the
underlying assumptions
7/27/2019 Chapter 06 Revised
7/24Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 67
How Much Business Planning is Needed?
Factors affecting the extent of a business plan:Cost in time and money to prepare the plan
Management style and ability
Preferences of the management team
Complexity of the business
Competitive environment
Level of uncertainty
7/27/2019 Chapter 06 Revised
8/24Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 68
Telling the Story to Others
Attracting InvestorsA business plan must be an effective marketing
document that quickly captures investor interest.
Understanding the Investors Perspective
Entrepreneurs are optimists; investors are skeptics.
Investors focus on break-even and positive cash flow.
Investors have a short attention span.
Bad information and poor preparation cause investors
to lose interest quickly.
7/27/2019 Chapter 06 Revised
9/24Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 69
Features of Plans that Attract Investors
Plans that speak the investors language:Are brief, not extremely long in written length.
Have an attractive overall appearance.
Are well-organized with a table of
contents and numbered pages.
Are market-oriented in meeting
customer needs; are not
product-oriented.
Show evidence of customer
acceptance of the proposed
product or service.
7/27/2019 Chapter 06 Revised
10/24Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 610
Business Plans that Attract Investors
(contd.)
Recognize the investors needs for required rates of
return on investments.
Demonstrate evidence of focus on a limited number of
products or servicesHave a proprietary market position
through patents, copyrights,
and/or trademarks
7/27/2019 Chapter 06 Revised
11/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 611
Features of Plans Unattractive to Investors
Plans that create unfavorable reactions:Show an infatuation with the product or service and
downplay market needs or acceptance.
Are based on financial projections at odds with
accepted industry norms.Have unrealistic growth projections.
Contain a need for custom or
applications engineering,
which makes substantialgrowth difficult.
7/27/2019 Chapter 06 Revised
12/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 612
Features of a Successful Business Plan
It must be arranged appropriately, with an executive summary, a
table of contents, and chapters in the right order.
It must be the right length and have the right appearancenot too
long and not too short, not too fancy and not too plain.
It must give a sense of what the founders and the company expect
to accomplish three to seven years into the future.
It must explain in quantitative and qualitative terms the benefit to the
user of the companys products or services.
It must present hard evidence of the marketability of the products or
services.
It must justify financially the means chosen to sell the products orservices.
It must explain and justify the level of product development which
has been achieved and describe in appropriate detail the
manufacturing process and associated costs.
Exhibit 6.2
7/27/2019 Chapter 06 Revised
13/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 613
Features of a Successful Business Plan (contd.)
It must portray the partners as a team of experienced managers
with complementary business skills.
It must suggest as high an overall rating as possible of the
ventures product development and team sophistication.
It must contain believable financial projections, with the key data
explained and documented.
It must show how investors can cash out in three to seven years,
with appropriate capital appreciation.
It must be presented to the most potentially receptive financiers
possible to avoid wasting precious time as company funds dwindle.
It must be easily and concisely explainable in a well-orchestrated
oral presentation.
Exhibit 6.2 (contd)
7/27/2019 Chapter 06 Revised
14/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 614
Preparing a Business Plan
Two issues critical in preparing a business plan:The basic format and effectiveness of the written
presentation
Clear writing that effectively communicates
The content of the plan Factual support for the concept
in the form of strong supportingevidence
7/27/2019 Chapter 06 Revised
15/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 615
Suggestions for Writing a Business Plan
Provide a table of contents and section tabs.
Use a loose-leaf binder in case of revisions.
Use visual aidsgraphs, exhibits, and tabular
summaries.
Indicate that all information is confidential.
Number copies of the plan and require written receipts.
Be careful about divulging competitive information or
proprietary designs/technology.
Ask other entrepreneurs to review the plan.
7/27/2019 Chapter 06 Revised
16/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 616
Deciding on the Content of a Business Plan
Factors that help determine the content of abusiness plan for a startup:
The entrepreneurial team
The opportunity
The resourcesThe deal structure
The big picture
7/27/2019 Chapter 06 Revised
17/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 617
Good Opportunities Have Good Fit
Exhibit 6.4
7/27/2019 Chapter 06 Revised
18/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 618
Contents of a Business Plan
Title Page Table of Contents
Executive Summary
Synopsis
Narrative
Vision and Mission
Statement
Company Overview
Products and/orServices Plan
Marketing Plan
Operating Plan
Financial Plan
Appendix of
Supporting
Documents
7/27/2019 Chapter 06 Revised
19/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 619
Specialized Plans within the Business Plan
Products and/or Services PlanDescribes the product and/or service to be provided
and explains its merits
Marketing Plan
Describes the user benefits of the product or serviceand the type of market that exists
Management Plan
Describes the new firms organizational structure and
the backgrounds of its key players
7/27/2019 Chapter 06 Revised
20/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 620
Specialized Plans (contd.)
Operating PlanOffers information on how the product will be
produced or a service provided, including descriptions
of the new firms facilities, labor, raw materials, and
processing requirements
Financial Plan
Provides an account of the new firms financial needs
and sources of financing and a projection of its
revenues, costs, and profits Pro forma statementsReports that project a firms financial
condition
7/27/2019 Chapter 06 Revised
21/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 621
What Not to Do
Mistakes to avoid in preparing a business plan:Failing to provide solid data
Failing to describe the product in lay terms
Failing to thoroughly analyze the market
Including financial statements that are overly detailedor incomplete
Hiding weaknesses
Overlooking the fatal flaw
Using bad grammar
Making the overall plan too long
7/27/2019 Chapter 06 Revised
22/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 622
Resources for Business Plan Preparation
Computer-Aided Business PlanningWord processors
Spreadsheets
Specialized business plan software packages
Professional AssistanceAttorneys
Marketing specialists
Engineering and production experts
Accounting firms
Incubator organizations
Small business development agencies
7/27/2019 Chapter 06 Revised
23/24
Copyright 2006 Thomson Business & Professional Publishing. All rights reserved. 623
Keeping the Right Perspective
Good business plans dont ensure success.Effective implementation is what succeeds.
Writing a business plan is primarily an ongoing
process and only secondarily the means to an
outcome.The process is just as important asif not more so
thanthe finished product.
The business plan represents what isanticipated; a good entrepreneur adapts the
plan to fit the unexpected.
7/27/2019 Chapter 06 Revised
24/24
Copyright 2006 Thomson Business & Professional Publishing All rights reserved 624
Key Terms
business plan
summary plan
comprehensive plan
prospectus
executive summary
mission statement
products and/or services plan
marketing plan
management plan
operating plan
financial plan
pro forma statements