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Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter
Develop a Business Plan
3.1 Why a Business Plan is Important
3.2 What Goes into a Business Plan?
3.3 How to Create an Effective
Business Plan
3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 2
Ideas in Action
Two young men turned a passion for graffiti art
into a business.
Prior to requesting financing from a bank, you
should prepare the “five c’s.”
character
capacity
capital
collateral
conditions
Turning an Idea into a Business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 3
Lesson 3.1
Why a Business Plan is
Important
Goals
Explain the purpose of writing a good
business plan.
Describe the importance of a business
plan.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 4
Terms
business plan
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 5
The Business Plan
business plan
a written document that describes all the steps necessary for opening and operating a successful business
A business plan will:
describe your ideas to investors
serve as a guide for you as you start your business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 6
Purposes of a Business Plan
A business plan:
explains the idea behind your business
how your product or service will be produced
and sold
sets specific objectives and how you will
achieve them
describes the experience of the people
who will run the business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 7
What are the three main purposes
of a business plan?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 8
Importance of a Business Plan
A business plan:
makes you think about all aspects of your
business
may help you secure financing
helps you communicate your ideas to
others
can serve as a tool for managing your
business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 9
Why is a business plan important to
an entrepreneur?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 10
Lesson 3.2
What Goes into a Business
Plan?
Goals
List and describe the basic elements of
a business plan.
Describe how to pull a business plan
together.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 11
Terms
pro forma financial statement
cover letter
statement of purpose
executive summary
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 12
Basic Elements of a Business
Plan
The three basic components of a
business plan are:
introductory materials
the main body
the appendix
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 13
Introduction
Marketing
Financial Management
Operations
Concluding Statement
The main body of a business plan
contains the following elements:
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 14
Introduction
The introduction should contain the
following information:
A detailed description of business goals
short, medium, and long-term goals
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 15
sole proprietor, partnership, or corporation
Your applicable skills and experience
paid, volunteer, and hobbies
The legal structure of the business,
including ownership
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 16
Performance
Quality
Reliability
Distribution
Price
Promotion
Public image or reputation
The competitive advantages of your
business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 17
Marketing
The marketing section of the business
plan should describe:
Products and/or services
Market
Industry
Location
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 18
Financial Management
Identification of Risks
It is reassuring to lenders to know that you
have proactively defined risks and that you
have a plan for dealing with them.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 19
pro forma financial statement a financial statement based on projected revenues
and expenses
Funding Request and Return on Investment
personal investment
loan based financing
anticipated return on investment
Financial Statements
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 20
Operations
daily business management
staffing
facilities
buy or lease
equipment
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 21
Concluding Statement
Summarize goals and objectives.
Emphasize your commitment to the
success of your business.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 22
List the elements of the main body
of a business plan and explain why
each one is important.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 23
Complete the Business Plan
Introductory elements
cover letter
a letter that introduces and explains an
accompanying document or set of documents
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 24
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 25
Table of Contents
Statement of Purpose
a brief explanation of why you are asking for a
loan and what you plan to do with the money
Title Page
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 26
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 27
a short restatement of the report
An executive summary should:
compel the reader to continue reading
describe your business concept
include financial projections
identify physical needs
state the requested loan value
Executive Summary
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 28
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 29
includes supporting documents that provide additional information to support the body of the report
Put It All Together
The business plan should be: neat
attractive
well organized
inviting to read
Appendix
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 30
Why should you include supporting
documents in your business plan?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 31
Lesson 3.3
How to Create an Effective
Business Plan
Goals
Describe resources available for
researching your business plan.
Name common mistakes to avoid in
business planning.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 32
Terms
Small Business Administration (SBA)
Small Business Development Centers
(SBDC)
Service Corps of Retired Executives
(SCORE)
trade associations
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 33
Research the Business Plan
Most entrepreneurs spend 50 to 100
hours developing their business plan.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 34
Community, Government, and
Professional Resources
Small Business Administration
(SBA)
an independent government agency
helps Americans develop new businesses
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 35
a cooperative effort of the private sector, the
educational community, and federal, state,
and local governments
provides free, individualized help for business
plan development for those who cannot afford
a private consultant
Small Business Development
Centers (SBDC)
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 36
retired executives provide free, confidential
advice to entrepreneurs
either in person or over the Internet
both short-term and long-term assistance is
available
Service Corps of Retired Executives
(SCORE)
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 37
provides information on local business trends
Trade Associations
organizations that are comprised of
professionals in a specific industry
provide educational and networking
opportunities
Chamber of Commerce
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 38
experts who will provide business assistance
for a fee
Financial Institutions
Bankers and Accountants can provide
information about loans and financial
statements.
Professional Consultants
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 39
Print Resources
library
magazines
government documents
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 40
Online Resources
Provide information similar to library
information
Industry specific websites
Websites targeted to entrepreneurs and
small business owners
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 41
What are some of the resources
that are available to help you
develop your business plan?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 42
Mistakes in Business Planning
Avoid making the following mistakes:
Unrealistic financial projections
An undefined target market
Poor research
Ignored competition
Inconsistencies in the Business Plan
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 43
List some common mistakes that
are made in business planning.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 44
PERFORMANCE INDICATORS
EVALUATED
Demonstrate effective communication skills.
Demonstrate skills in developing a speech
using the three basic elements.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 45
Apply speaking techniques using
appropriate tempo and pitch.
Secure facts and data from multiple
sources, emphasizing research skills.
Utilize non-verbal gestures as needed.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 46
THINK CRITICALLY
1. How can good speaking skills benefit
an entrepreneur?
2. Why is research important when
preparing a speech?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3
Slide 47
4. How do the three elements of a speech
contribute to its effectiveness?
3. Why should you follow copyright laws
when preparing a speech?