2. Objectives
LO1 Understand why and when to develop a business
plan
LO2 Know how to tell the business plan story
LO3 Learn the major sections of the classic business
plan
LO4 Focus business plan sections to meet specific
needs
LO5 Identify the major risks to business plan success
LO6 Master presenting your business plan to others
8-2
3. Business Plan Background
Business plan
– A document designed to detail the major
characteristics of a firm— its product or
service, its industry, its market, its manner of
operating (production, marketing,
management), and its financial outcomes with
an emphasis on the firm’s present and future.
8-3
4. Business Plan Background
External legitimacy
– The extent to which a small business is taken
for granted, accepted, or treated as viable by
organizations or people outside the small
business or the owner’s family.
8-4
5. Business Plan Background
Internal understanding
– extent to which employees, investors, and
family members in the business know the
business’s purposes and operations
8-5
7. The Vision Statement
Vision statement
– A very simple 5–10 word sentence or tagline that
expresses the fundamental idea or goal of the
firm.
Tagline
– Memorable catchphrase that captures the key
idea of a business, its service, product, or
customer.
– also known as a slogan
8-7
8. Question
A _____________ describes the firm’s goals
and competitive advantages.
A. Vision statement
B. Tagline
C. Mission statement
D. Executive summary
8-8
9. The Mission Statement
Mission Statement
– A paragraph that describes the firm’s goals
and competitive advantages
– Talks in terms of how it will make a difference
in for the customer or the industry
8-9
10. The Elevator Pitch
The Elevator Pitch
– A 30-second action-oriented description of a
business designed to sell the idea of the
business to another
– Leads with the hook, follows up with purpose
of the service, ends with where business is
now
– What makes firm unique or superior?
8-10
11. The Executive Summary
Executive summary
– A one- to two-page (250–500 words) overview
of the business, its business model, market,
expectations, and immediate goals.
– Typically put at the start of a business plan
and is the most popular summary form for a
business plan.
8-11
12. Strategizing for the Business Plan:
5-M Model
8-12
Mantra
Mission
Measures
Method
Mechanics
14. Business Plan Outline
8-14
Cover Letter Title Page
Table of
Contents
Executive
Summary
The
Company
The Market
The
Organization
The
Financials
The
Appendixes
15. Business Plan Outline
Cover letter
– A one-page document on business stationery
that introduces the business plan and the
business owner to the recipient and indicates
why the recipient is being asked to read the
plan.
8-15
16. Business Plan Outline
Title Page
– contains introductory information
– Company name
– Contact information
– Date this version of the plan was completed
– Proprietary statement to protect your ideas
8-16
17. Business Plan Outline
Table of contents
– Lists major section headings
• Boldface type
– Sections underneath major sections
• Normal type
– Put page numbers on every page of the
business plan
8-17
18. Business Plan Outline
Company background
– brief description of the company, the firm’s
current status, and the history of the business
– Vision statement / mission statement
– Specific goals, Business’ competitive
advantage
8-18
19. Business Plan Outline
The Company: Product/service and
industry
– Describe firm’s product or service
– Explain how the customer uses the product
– Proprietary technology
– Industry descriptions
8-19
20. Business Plan Outline
The Market: Market and target
customer
– Total population of people or firms you plan to
sell to
– Target customer section: focuses attention on
who would buy
– Demographics’ relation to the product, how
often they buy, and past experience
8-20
21. Business Plan Outline
The Market: Competition and
competitive advantage
– Major competitors
– Competing product or service: market share,
price, competitive advantages and
disadvantages
– what makes product or service unique
8-21
22. Business Plan Outline
The Market: Marketing strategy
– Overall strategy your firm pursues in the
market
– Sales plan that shows specific ways you apply
strategy to secure sales from your customers
– Longer-term competitive plan that shows how
you protect your firm from efforts of the
competition to unseat you
8-22
23. Marketing Strategy
Preselling
– Involves introducing your product to potential
customers and taking orders for later delivery.
Research and development
– The part of a business that is focused on creating
new products or services and preparing new
technologies, ideas, products, or services for the
firm’s market.
8-23
24. Business Plan Outline
The Organization: Legal and
organization structures
– Legal form of the business
– Organizational structure of the firm
– Makes clear how many employees there are
and whether they are full time or part time,
permanent or seasonal, family or non-family
8-24
25. Business Plan Outline
The Organization: Key personnel
– Sell the most important single element in the
business plan – you!
– Who are your key personnel?
– Talk about accomplishments rather than just
experience
– Do not limit yourself to business
8-25
26. Business Plan Outline
The Organization: Related service
providers
– Identify your bank and banker, attorney and
legal firm, accountant or bookkeeper, other
consultants
– Major relationships established with well-
known suppliers or customers
– Board of directors / board of advisors
8-26
27. Business Plan Outline
The Organization: Location
– Description of the facility
– How it meets strategic and sales goal of the
business
– Own, lease, or rent the property
– Plan to expand the facilities
8-27
29. Business Plan Outline
The Appendices
– one-page version of owner’s resume
– Product or service pictures or specifications
– Copies of signed contracts
– Results from marketing studies or pilot sales
efforts
– Industry reports
8-29
30. Focusing Your Business Plan
Pioneering business
– A firm whose product or service is new to the
industry or is itself creating a new industry.
Test marketing
– Selling your product or service in a limited
area, for a limited time.
8-30
31. Focusing Your Business Plan
New entrant business
– A firm whose product or service is established
elsewhere, but is new to this market.
Screening plan
– gives the basic overview of the firm and a
detailed look at the financials.
– Also called a mini-plan
8-31
32. Question
What type of plan is designed to be used
internally for management purposes?
A. Informational plans
B. Key employee/partner plan
C. Invention plan
D. Operational plan
8-32
33. Focusing Your Business Plan
Informational plans
– Give potential customers or suppliers
information about the company and its
product or service.
Proof-of-concept Web site
– An Internet-based type of business plan
providing information or demonstration of a
product or service designed to solicit
information on customer interest.
8-33
34. Focusing Your Business Plan
Key employee/partner plan
– Provides information on the company,
product/service, market, and critical risks to
prospective business or marketing partners or
to prospective key employees.
8-34
35. Focusing Your Business Plan
Invention plan
– A business plan that provides information to
potential licensees. Invention plans focus on
the details of an invention, including
intellectual property rights.
8-35
36. Focusing Your Business Plan
Operational plan
– Business plans designed to be used internally
for management purposes.
Private placement memorandum
– A specialized legal form of business plan
crafted by lawyers for the purpose of soliciting
formal investments.
8-36
37. The Most Common Critical
Risks in a Plan
Risks
– The parts of a business or business plan that
expose the firm to any kind of loss—profits,
sales, reputation, assets, customers, and so
on.
8-37
38. The Most Common Critical
Risks in a Plan
Overstated numbers
Uncertain sales
Overlooked competition
Experience deficits
Inadequate cushion
Inadequate payback
8-38
39. Presenting Your Plan
The key things an influential person looks for
in you are
1. Your passion for the business
2. Your expertise about the business and the plan
3. How professional you are in your work,
4. How easy it would be to work with you.
8-39
Editor's Notes
Start at the top and work your way down. Each is discussed in turn.
The correct answer is C – mission statement
Second step, imagine you’re caught on the 10 th floor going down in an elevator with a venture capitalist. Now quick, convince him to invest in 30 seconds or less. Who are you? why is what you offer needed and different? Why should he meet with you and discuss this further? This makes a good thing to practice in class.
Who are you? Why are you in business? Where are you going?
Patents should be mentioned here whether received or just applied for. Pictures with descriptions are helpful especially for unique products with which the reader may not be familiar.
Who is your market? Where are they? How do they purchase? How can you fill their needs?
It’s a technicality. But are you a partnership? Corporation? S-corp? DBA?
You, the entrepreneur, are the key. You have the passion. You have the desire, the vision, the idea. Now sell it. What have you done? Awards won? Contracts signed? Have you had past successes which may not be applicable to this product but to your overall success rate? Give them a reason to trust you, believe in you, invest in you.
Again, this is technical information but it does lend legitimacy to your organization.
Pictures are also helpful at this stage.
Appendices differ for different plans. You may or may not have and or need each of these. Make sure anything you include increases your legitimacy and builds confidence in you and your plan.
This is just another aspect of what your company is and the situation it is in.
The correct answer is D – operational plan.
These are risks your potential investors may point out. It is typical, because we believe in ourselves and our plans, to overstate what we can do. We become overly optimistic. If pointed out, your plan can be corrected for these problems.
