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.
The Business Plan
business plan
a written document that describes all the
steps necessary for opening and operating
a successful business
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A business plan will describe your:
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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
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© 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
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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.
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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
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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
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© 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
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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
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Advantages
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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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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.
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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
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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
daily business management
hiring and personnel procedures
insurance
lease or rental agreements
equipment
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Entrepreneurship: Ideas in Action 5e
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harvest strategy
the way an entrepreneur intends to extract
his or her money from a business after it is
operating successfully
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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.
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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
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© 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
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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
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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
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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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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
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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
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Chapter 1
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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.
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Entrepreneurship: Ideas in Action 5e
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Community, Government, and
Professional Resources
Small Business Administration
(SBA)
an independent agency of the federal
government
helps Americans develop new businesses
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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
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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
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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
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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.
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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
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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
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Entrepreneurship: Ideas in Action 5e
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Mistakes in Business Planning
Avoid making the following mistakes:
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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.
