Entrepreneurship and smaill business management chapter 04

Entrepreneurship and Small Business Management Chapter 4 The Business Plan: Road Map to Success...  Explain the various purposes for a business plan and the audience for it..  Be able

Entrepreneurship and

Small Business Management

Chapter 4

The Business Plan:

Road Map to Success

 Explain the various purposes for a business

plan and the audience for it.

 Understand the components of a business

plan.

 Be able to demonstrate proper development

and formatting of a business plan.

What Is a Feasibility

Analysis?

 A study to assist in making the

“go/no go” decision

 Used to test a business concept

in three areas:

 Product and/or service feasibility

 Market and industry feasibility

 Financial feasibility

Analyzing Product and/or

Service Feasibility

 Can the product or service be

produced and delivered at a

profit, in an ongoing manner?

 Is there sufficient customer

demand for the product or

service?

Analyzing Market and

Industry Feasibility

 How attractive is the opportunity

in the proposed industry?

 Do any strategic, defensible

niches exist in the proposed

market?

Porter’s Five Forces

Analysis

More Attractive If…

 Larger or fewer than five

 Varied

 Growing rapidly

 Differentiation matters

More Attractive If…

 Low for entry

 Not based on firm size

 Minimal or absent

 Low cost to change suppliers

 Customer resistance to change is low

 Channels established, but open

 Policies do not impede entry; may facilitate entry

More Attractive If…

 Not readily available

 Prices not significantly lower

 Supply is uneven or limited

 High cost to change suppliers

 Make substituting difficult or illegal

 Large number of buyers

 Small part of costs of goods

 Restricted geographic area

Analyzing Financial

Feasibility

 How much start-up capital is required?

 How much revenue is expected (based

on anticipated pricing and volume)?

 What are the expected costs?

Projected revenues, less projected costs, equals

potential profit Evaluate the return on the capital

invested to make a “go/no go” decision.

What Is a Business Plan?

Document that thoroughly explains a

business idea and how it will be carried

Why Create a Business

Plan?

 Saves time and money

 Key to raising capital

 Serves as an operations guide

Business Plan Components

 Financial analysis and projections

 Funding request

 Exit strategy

 Appendices

Cover Page and Table of

Contents

Cover Page

 Name of the business

 Name of the principals

 Avoid excessive detail which uses too many pages.

Executive Summary

Should Be:

 Clear—identify concept and purpose

 Concise—one to two pages long

 Comprehensive—answer basic who, what, when, where, and how

questions

 Compelling—generate enthusiasm

 Written last

Mission, Vision, and

Culture

 Mission—concise communication of

strategy with a business definition and

competitive advantage; expressed in a

statement

 Vision—broad “picture” of what you want

the organization to become

 Culture—beliefs, values, and behavioral

norms of the organization which will form

the business “environment”

Company Description

 Overview of track record: business

progress and financial success

 Legal form of the business

Opportunity Analysis

 Industry analysis—definition, size, and

growth/decline of the industry

Opportunity Analysis

(continued)

 Target market segments—groups

defined by common factors such as demographics, psychographics, age, and geography

 Competitive analysis—comparison of

the business to direct and indirect competitors

Marketing Strategy and

Management and

Operations

 Management team and employees

 Research and development

 Physical location(s) of facilities with emphasis on logistics and workforce

 Production processes

 Inventory control systems

 Quality assurance methods

Financial Analysis and

Projections

 Sources and uses of capital

 Cash flow projections

Cash flow statement shows cash receipts less cash disbursements over

a time period

 Balance sheet projections

Assets = Liabilities + Owner’s Equity

Financial Analysis and

Projections

(continued)

 Income statements for three years

 Also called profit and loss statements (P&L)

 Summarize income and expense activity

Funding Request & Exit

Strategy

 Amount of funds needed

 Type of financing, including terms

 Proposed exit scenarios, such as:

 Buyout plan

 Initial public offering (IPO)

 Sold when benchmarks or date reached

 Succession plan

 Implementation schedule (milestones)

 Specifications/photos/diagrams of products and packaging

 Advertising and promotional

samples

 Detailed financial projections

 Other supportive materials

Business Plan Suggestions

 Write for your audience.

 Show that you have “skin in the game.”

 Be clear and concise.

 Use current industry data and reports.

 Select a “voice” and stick with it.

 Use a consistent, easy-to-read format.

 Number and label items throughout the plan.

 Present the plan professionally.

Presenting the Business

Plan

 Presentations may be formal or informal.

 Presentation time may be limited to

between 5 and 20 minutes.

 Prepare an “elevator pitch” (15-30 sec.)

 Multimedia formats work well in formal

situations.

 Business plan competitions may provide

cash prizes and access to capital.