Chapter 3
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
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
Chapter 3
Slide 2
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Vocabulary
 business plan
Chapter 3
Slide 3
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Business Plan
 business plan
 a written document that describes all the
steps necessary for opening and operating
a successful business
Chapter 3
Slide 4
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 A business plan will describe your:
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Chapter 1
Slide 5
products
manufacturing methods
customers
management
suppliers
competitive strategies
how business will earn a profit
future growth plans
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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 your
business will achieve them
 describes the experience of the people
who will run the business
Chapter 3
Slide 6
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
What are the three main purposes of a
business plan?
Chapter 1
Slide 7
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
Chapter 3
Slide 8
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why is a business plan important to
an entrepreneur?
Chapter 1
Slide 9
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
Chapter 3
Slide 10
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Vocabulary

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pro forma financial statement
harvest strategy
cover letter
statement of purpose
executive summary
Chapter 3
Slide 11
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Basic Elements of a Business
Plan
 The main body of a business plan
should be organized into the following
elements:
1.
2.
3.
4.
5.
Chapter 3
Slide 12
Introduction
Marketing
Financial Management
Operations
Concluding Statement
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Introduction
 The introduction should contain the
following information:
 A detailed description of business goals
 Ownership and legal structure of the
business
 Your skills and experience
 The competitive advantages of the
business
Chapter 3
Slide 13
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Detailed Description
 Describe how you came up with your
business
 Outline the business goals for the
 Short-term
 Medium-term
 Long-term
Chapter 3
Slide 14
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Ownership and Legal Structure
 sole proprietor, partnership, or corporation
 identify leadership team
 list number of shareholders
Chapter 3
Slide 15
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Skills and Experience of the Leadership
Team
 list all of your relevant business experience
 paid work
 volunteer work
 hobbies
 list all of the relevant business experience of
your leadership team
Chapter 3
Slide 16
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Advantages
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Chapter 3
Slide 17
Performance
Quality
Reliability
Distribution
Price
Promotion
Public image or reputation
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Marketing
 The marketing section of the business
plan should describe:
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Chapter 3
Slide 18
Products and/or services
Market
Industry
Location
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Financial Management
 Identification of Risks
 Prospective lenders and investors will
want to know what risks your business
faces and how you plan to deal with them.
Chapter 3
Slide 19
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Financial Statements
 pro forma financial statement
 a financial statement based on projected revenues
and expenses
 Funding Request and Return on
Investment
 borrowed money
 personal investment
 anticipated return on investment
Chapter 3
Slide 20
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Operations

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daily business management
hiring and personnel procedures
insurance
lease or rental agreements
equipment
Chapter 3
Slide 21
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 harvest strategy
 the way an entrepreneur intends to extract
his or her money from a business after it is
operating successfully
Chapter 3
Slide 22
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Concluding Statement
 Summarize goals and objectives.
 Emphasize your commitment to the
success of your business.
Chapter 3
Slide 23
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
List the elements of the main body of
a business plan and explain why each
one is important.
Chapter 1
Slide 24
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Complete the Business Plan
 Introductory elements
 cover letter
 a letter that introduces and explains an
accompanying document or set of documents
Chapter 3
Slide 25
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 3
Slide 26
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Title Page
 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
Chapter 3
Slide 27
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 3
Slide 28
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Executive Summary
 a short restatement of the report
 An executive summary should:

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Chapter 3
Slide 29
describe your business concept
include projections for sales, costs, and profits
identify physical needs
state the requested loan value
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 1
Slide 30
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Appendix
 includes supporting documents that provide
additional information to support the body of
the report
 Put It All Together
 The business plan should be:
 neat
 well organized
 inviting to read
Chapter 3
Slide 31
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 1
Slide 32
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why should you include supporting
documents in your business plan?
Chapter 1
Slide 33
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
Chapter 3
Slide 34
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Vocabulary
 Small Business Administration (SBA)
 Small Business Development Centers
(SBDC)
 Service Corps of Retired Executives
(SCORE)
 trade associations
Chapter 3
Slide 35
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Research the Business Plan
 Most entrepreneurs spend 50 to 100
hours developing their business plans.
Chapter 3
Slide 36
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Community, Government, and
Professional Resources
 Small Business Administration
(SBA)
 an independent agency of the federal
government
 helps Americans develop new businesses
Chapter 3
Slide 37
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Small Business Development
Centers (SBDC)
 a cooperative effort of the private sector, the
educational community, and federal, state,
and local governments
 provides free help for businesses that cannot
afford a private consultant
Chapter 3
Slide 38
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Service Corps of Retired Executives
(SCORE)
 retired executives provide free, confidential
advice to entrepreneurs
 either in person or over the Internet
 business related workshops
 both short-term and long-term assistance is
available
Chapter 3
Slide 39
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Chamber of Commerce
 provides information on local business trends
 Trade Associations
 organizations that are made up of
professionals in a specific industry
 provide educational and networking
opportunities
Chapter 3
Slide 40
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Professional Consultants
 experts who will provide business assistance
for a fee
 Financial Institutions
 Bankers and accountants can provide
information about loans and financial
statements.
Chapter 3
Slide 41
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Print Resources
 library
 magazines
 government documents
Chapter 3
Slide 42
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Online Resources
 provide information similar to print
information
 websites targeted to entrepreneurs and
small business owners
 provide business plan templates
Chapter 3
Slide 43
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
What are some of the resources that
are available to help you develop your
business plan?
Chapter 1
Slide 44
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Mistakes in Business Planning
 Avoid making the following mistakes:





Chapter 3
Slide 45
Unrealistic financial projections
An undefined target market
Poor research
Ignored competition
Inconsistencies in the business plan
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
List some common mistakes that are
made in business planning.
Chapter 1
Slide 46
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
PERFORMANCE INDICATORS
 Demonstrate effective communication skills
 Demonstrate skills in developing a speech
using the three basic elements
Chapter 3
Slide 47
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
 Utilize nonverbal gestures as needed
 Apply speaking techniques using
appropriate tempo and pitch
 Secure facts and data from multiple
sources, emphasizing research skills
Chapter 3
Slide 48
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
THINK CRITICALLY
1. How can good speaking skills benefit
an entrepreneur?
2. Why is research important when
preparing a speech?
Chapter 3
Slide 49
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
3. Why should you follow copyright laws
when preparing a speech?
4. How do the three elements of a speech
contribute to its effectiveness?
Chapter 3
Slide 50
Entrepreneurship: Ideas in Action 5e
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.