Chapter 12
Developing a sustainable business plan
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Objectives
1.
2.
3.
4.
5.
6.
7.
To define a sustainable business plan and demonstrate its value
To explore the business planning pitfalls that plague many new ventures
To describe the benefits of a business plan
To set forth the viewpoints of those who read a business plan
To emphasise the importance of coordinating the business plan segments
To review key recommendations by venture capital experts regarding a
business plan
To present a complete outline of an effective business plan
8. To present some helpful hints for writing an effective business plan
9. To highlight points to remember in the presentation of a business
plan
10. To underline some of the contrarian viewpoints on the
importance of a business plan.
3
But first
?
Q. What is a ‘business plan’?
Q. And what could it be used
for?
4
What is a business plan?
• A document in which you:
–
–
–
–
Make your business case
Describe your operations
Identify your management team
Project the future financial situation
• A tool for determining the essential operations
• A primary document for managing the venture and
raising funds
• The entrepreneur’s roadmap
5
What about sustainability
• Consider ‘impact’, in terms of:
– Greenhouse gases
– Energy use
– Product life-cycle
• Industrial systems (including firms) are not
separate from the biosphere
6
The sustainable business plan
7
Business plan pitfalls
1.
2.
3.
4.
Green theming
No realistic goals
Failure to anticipate roadblocks
No commitment or dedication
5. Lack of demonstrated experience
6. No market niche
8
Benefits of a business plan
• For the entrepreneur
–
Analyses all aspects of the
venture
– Strategy for uncertainties
– Critical and objective view
– Scrutinises assumptions
– Examines operating strategies
and expected results
– Measurable benchmarks
–A communication tool for
sources of funding
–
A tool for guiding the
venture
• For the investor
–
–
–
–
–
Details of market potential
and securing market share
Ability to service debt and
provide adequate returns
Critical risks and crucial
events
A comprehensive overview
of the entire operation
A useful guide for assessing
planning and managerial
ability
9
Who reads the plan?
?
Q. Who might be interested in
reading your plan?
(Identify all of the potential
audiences)
10
Who reads the plan?
•
•
•
•
•
•
Venture capitalists
Bankers
Investors
Potential large customers
Lawyers
Consultants
• Suppliers
11
Who reads the plan?
• Bankers
Stress financial aspects of the proposal
• Equity investors and venture capital fund managers
Emphasise market and finance issues
• Business angels
Look at the entrepreneur and ‘investor fit’
12
Three viewpoints
1. The entrepreneur’s viewpoint
2. The potential customers’ viewpoint
3. The investors’ viewpoint
13
The five minute reading
• The venture capitalists’ approach:
1. What are the characteristics of the venture and its
industry?
2. What is the financial structure of the plan?
3. What does the balance sheet say about liquidity, net
worth and debt/equity?
4. What is the quality of the entrepreneur(s)?
5. What is the unique feature of this venture?
6. Then, they skim read the entire plan
14
Putting the package together
• Appearance – middle ground (plastic spiral bound,
mostly single colour)
• Length – no more than 50 pages
• Cover and title page – company name, address and
issue date
• The executive summary – two to three pages
• Table of contents
15
Ten guidelines
1.
2.
3.
4.
5.
6.
7.
Keep the plan respectably short
Organise and package the plan appropriately
Orient the plan towards the future
Avoid exaggeration
Highlight critical risks
Give evidence of an effective entrepreneurial team
Do not over-diversify
8. Identify the target market
… and be able to
9. Write in the third person
confidently answer the ten
10. Capture the reader’s interest
questions under the
heading ‘Questions to be
answered’
16
Business plan outline
?
Q. What content might you
expect to see included in a
business plan?
17
Business plan outline
18
Business plan outline (cont.)
19
Business plan outline (cont.)
Adapted from: Donald F. Kuratko and Robert C. McDonald, The Entrepreneurial Planning Guide,
Bloomington: Kelley School of Business, Indiana University, 2007
20
Business plan elements (1)
I.
Executive summary
–
–
II.
Write this after the rest of the business plan
A clever snapshot of the complete plan
Business description
–
–
III.
Industry background, status and future trends
Thoroughly describe the venture
Sustainability
–
Define sustainability relevant to the business
21
Business plan elements (2)
IV.
Marketing
–
V.
(As per Chapter 10)
Operations
–
VI.
Location, labour availability, wage rate, proximity to suppliers,
customers and community support, taxes and zoning, plant
and equipment
Sustainable development measures of performance
–
Describe how sustainability can be demonstrated
(including triple bottom line indicators)
22
Business plan elements (3)
VII.
Management
–
Key personnel, advisers, consultants, or members of the board;
structure of payment and ownership
VIII. Financial
–
–
IX.
(As per Chapter 11)
Viability of the undertaking, pro forma balance sheet, income
statement and cash–flow statement
Critical risks
–
Unfavourable trends and difficulties
23
Business plan elements (4)
IX.
Harvest strategy
–
X.
Management succession and investor exit strategies
Milestone schedule
–
XI.
Provide a timetable for the various activities
Appendix and/or bibliography
–
Additional documentation
24
A practical example
Refer to Appendix 1 for an example business plan –
‘Red River Optical: Affordable reading glasses for
Vietnam’
25
The pitch
?
Q. Now it is written.
How can you (verbally)
present your plan to an
audience?
26
The pitch
• Presenting the plan to stakeholders –
especially funding providers
• This is also known as ‘the elevator pitch’
• Be organised, well-prepared, interesting and
flexible
27
The pitch
•
•
•
•
•
Focus on the plan
Demonstrate a reachable market
Explain the business model
Tout the management team
Explain the metrics
• Motivate the audience
• Answer: ‘Why you?’ and ‘why now?’
28
Key concepts
?
(close your books)
Q. Who will read your business
plan?
Q. What are the main sections
in a business plan?
29
Key concepts
• Business plan audiences
–
Venture capitalists, bankers, investors, potential large
customers, lawyers, consultants and suppliers
• The business plan outline:
I.
II.
III.
Executive summary
Business description
Sustainability
IV. Marketing
V. Operations
VI. Sustainable development
measures of performance
VII.
VIII.
IX.
X.
XI.
XII.
Management
Financial
Critical risks
Harvest strategy
Milestone schedule
Appendix and/or bibliography
30