The Art of Writing the Business
Plan
Presented by
Jeffrey A. Robinson, Ph.D.
Assistant Professor of Management &
Entrepreneurship
What is a good framework for entrepreneurship?
Opportunity
Innovatio
n
• Capital can be acquired, exchanged &
converted
• Five forms of capital
–
–
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–
Financial (debt, equity, etc.)
Human (skills, education)
Social (networks of people)
Cultural (social resources, family background
and knowledge of cultural nuances)
– Intellectual (IP in firms, transferable)
• The identification, evaluation,
exploration, and exploitation
of a venture opportunity
• The structures around an
opportunity or context
Opportunity
• The cultivation and management of innovation
and innovative practices
• The innovation of business models
• The protection of innovations
Innovatio
n
• Networks connect people within
organizations and between organization
• Networks connect entrepreneurs to
capital, innovation, opportunities
Networks
• Networks tie everything together
• Personal Networks/Professional
Networks/ Entrepreneurial Networks
Entrepreneurship
Opportunity
Capital
Networks
Innovatio
n
The success or failure of your venture depends upon how your put these pieces together.
Why is this important?
• … because good entrepreneurs leverage
capital, opportunities, innovation and networks
to create viable ventures
• … because good business plans demonstrate
how an entrepreneurial team will leverage
capital, opportunities, innovation and networks
to create a new venture
Traditional Ventures:
Types of Firms
• Lifestyle firms
– generally < $1M in revenues
– founders have no desire to expand
– founders usually are pursuing their passion
• Growth Firms
– $1 M to 20 M revenues, 10-20% growth
– $20M + revenues, >20% growth {gazelles}
– Founders want to expand and grow the firm
Scale and Sustainability are key!!
Social Entrepreneurship:
Formal Definition
Social entrepreneurship uses entrepreneurial
and business skills to create innovative
approaches to social problems. These are
mission driven organizations focused on the
double bottom line of social impact and
financial sustainability or profitability.
Examples of Social Entrepreneurship
across sectors
• Charter/Contract/New Schools
– New Schools
• Social Service/ Social Action
– One Economy
– Poverty Solutions
– Simultel
Social Ventures
can be for profit
or non-profit
organizations
• Underserved/Underrepresented
– CitySoft
– CityFresh Foods
• Economic Development/Workforce Development
– Greyston Foundation (Greyston Bakery)
Are my goals well defined?
“The Questions Every
Entrepreneur Must Answer”
Personal Aspirations
Business sustainability and size
Tolerance for risk
If the answer is yes…
Do I have the right strategy?
Clear definition
Profitability and potential for growth
Durability & Rate of growth
If the answer is no …
Can I execute the strategy?
Resources
Organizational infrastructure
The founder’s role
Source: Amar Bhide
Questions for the New Venture
• New Venture Idea
– What existing need or want does the concept fill?
In other words, what is the problem you solve?
– Describe the service/product – will it change the
way people live, work, or do business?
– Who is your customer? What is your market
segment? Is there more than one customer group?
– What is the unique selling benefit? (Why will they
buy?)
Opportunities: Evaluation,
Exploration, and Improvement
The real big opportunities are here …
•
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Untapped Markets
Underserved Markets
Underdeveloped Markets
Unique Perspectives
Examples
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•
•
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•
Dogloo
Dell
TV One
Altitunes/Laptop Lane/WayPort
ZipCar
FUBU/Sean Jean/Phat Farm
Opportunities: Evaluation, Exploration
and Improvement
I. Where do opportunities come from?
II. Evaluating and Exploring Venture
Opportunities
III. Developing the Venture Idea and Concept
Current Trends
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Baby boomers entering their 50s
New boomer crop of children
Growing disparity between rich and poor
Increasing globalization of business
Reinvention of religion
Yearning for high-touch product and services
Mass Customization
From the Business Owner’s Toolkit -- www.toolkit.cch.com/text/p01_0595.asp
Other trends
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Healthy food/healthy living
Hyper-customization
For profit social service providers
Outsourcing
Common Mistakes in Choosing a
Business
• Error #1 – Converting a hobby or interest into
a small business without first finding out if
there is sufficient demand for a choices
• Error #2 – Starting the business without
adequate planning
• Error #3 – Resisting the urge to ask for help.
From the Business Owner’s Toolkit -- www.toolkit.cch.com
Assessing and Evaluating
Venture Opportunities
• All ideas are not venture opportunities!
• All ideas are not created equal!
The Entrepreneurial Process:
Simplified
Opportunity
Identification
Opportunity
Evaluation & Exploration
Analysis
Opportunity
Exploitation
Action
Evaluating an Opportunity
Does the opportunity …
Fill a need?
Show evidence of product/service
acceptance?
Show that a market/opportunity
exists now?
Reflect that your
product/service/solution is better
than the competition’s?
Show an upside gain potential?
(scale and sustainability)
Describe the cost to achieve this
potential?
Source: Modified from Patterns of Entrepreneurship by Jack Kaplan
The Management Team
Are you the right team to pursue this
opportunity?
Why a team?
• Most successful ventures are led by teams!!
• Teams leverage the strengths/creativity of team
members.
• Solo entrepreneurs have limited capital
(financial, human, social, cultural and
intellectual)
Survivor
Percentage of businesses still in operation among ...
Companies of all sizes Companies that hired Companies that hired
(Soloists included)
1 to 4 people
5 or more people
After 2 years
76%
92%
94%
After 4 years
47%
80%
87%
After 6 years
38%
76%
79%
After 8 years
29%
53%
70%
After 10 years
21%
41%
62%
Source: U.S. Small Business Administration, The State of Small Business: A Report of the President, 1997. Data for year 10 are
estimated by the SBA.
The Management
• Are you the right team to pursue this
opportunity?
– Do you have some experience in the venture area
you are exploring?
– Do you have some contacts in the venture area you
are exploring?
– Does your team have most of the
business/technical skills covered (marketing,
finance, operations, etc.)
Characteristics of the
A-Team vs. B-Team
• The A-Team
– Knows something about
the industry/market/issue
– Has previous
entrepreneurship
experience
– Has a solid team
including
advisors/mentors who
have influence
• The B-Team
– Knows very little about
the industry/market/issue
– Is starting their first
venture
– Have a loosely
committed team with no
advisors/mentors with
influence
The Role of Advisors and Mentors
• Advisors and Mentors
– Volunteers
– Provide contacts to resources and key people
– Are good sounding boards for your ideas, strategies,
etc.
– Provide an outsiders perspective
– May become investors
Key Hires
• Understand where the gaps are in the
entrepreneurial team
• Develop a list of key future hires for your
venture
• Explain in your plan what role these key future
hires will have in your company
Elements of the Business Plan
Executive Summary
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Business Concept
Market Size and opportunity
Product/Service Description
Intellectual Property Summary (if any)
Business Model (i.e. how you will make revenues and
profits)
Key Competition
Key Points of Advantage and Difference
Management biographies (1 paragraph)
Financial Summary
Business Concept
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Company Overview/History
Description of Industry
Product/Service Overview
Factors giving rise to opportunity
Market opportunity and strategy to exploit it
Industry segment and current participants
Target addressable market and projections
Sources of revenue
Milestone
Key drivers for success and critical assumptions
Business Model Economics
• Gross and Operating Margins
• Fixed and Variable Costs
• Cash Flow Analysis (time and money to cash
flow positive)
• Break-even analysis (time and money to breakeven)
• Product or service unit analysis (cost and profit
margins)
Market Analysis and Research
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Demonstration of market need
Customer Base
Market Size and Trends
Target addressable market and projections
Pricing
Willingness of Customers to Pay Above Corporate Cost
Value Added For Customers, Customer Benefits/Problems
Solved
• Competition and Competitive Advantage
• Overall marketing and selling strategy
• Projected sales and market share
Marketing Plan
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Strategy and positioning
Tactics
Pricing
Distribution and selling
Communication strategy (Advertising, promotion and PR)
Selling and Collection Cycle
Critical Mass/Reference Customers Required for Market
Traction
• Implementation Strategy (Customer service, retention,
warranty)
Product Development
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Development Status and Next Steps
Risk Factors
Costs and Budget
Opportunity Specific Issues
Operations Plan
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Operating Cycle
How the Business Works
Manufacturing Process (or Retail Locations)
Shipping/Product Delivery
Geographic Locations and Local Resources
Physical Facilities and Equipment
Human Capital (hiring, requirements, training,
compensation)
• Regulatory and Legal issues
• Business timeline and schedule
Management Team
• Organization (Chart)
• Key Management Personnel (biographies, esp.
key relevant accomplishments)
• Management compensation and ownership
• Employee Incentive Plans
• Board of Directors and other advisors
Critical Risk Factors and
Mitigation of them/Contingency
Plans
• (What are the risks and what are you able to do
about them?)
Financing Requirements and
Opportunity
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Target financings (equity and debt)
Current Offering
Capitalization
Use of Proceeds
Financial Projections
• 5 year summary projections
• 3 year detailed, quarterly projections
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Balance Sheet
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Income Statement
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Cash Flow Operational
•
Break-even Analysis
Appendices
• Exhibits, articles, tables, specifications,
references
Developing the venture idea
and concept
Tips on developing the venture idea
…
• Describe your new venture idea in compelling
terms. Be persuasive but not over-the-top!
• Be clear about your target customer/client/
community.
• Remember to frame your venture idea in terms of
the benefits to the consumer/client/community.
Framing Your Business as Benefits to the
Customer/Consumer/Community
The best benefits are the ones that a potential
customer can hold on to. For example:
– The consumer can make money with your product
or service
– The consumer can save money (time) with your
product or service
– The consumer can feel good (or feel better) with
your product or service
This approach feeds into the Marketing Strategy!
Questions & Answers ….
3
great websites
Inc Magazine --- www.inc.com – click on article by topic
Entreworld – www.entreworld.com
Business Owner’s Toolkit – www.toolkit.cch.com