EP2150 – Entrepreneurship
Unit 2 - Business Planning
2.1 List and discuss the components of a business plan
2.2 Discuss the importance of a business plan for a small business
2.3 List and explain the steps involved in developing a business plan
2.4 Distinguish between a mission and a vision statement
2.5 Assess the importance of strategic planning for a small business
The Stages of Planning a Business
•
•
Stage 1: Opportunity Screening
Stage 2: Business Plan
Stage 1 :
The Opportunity
Screen
Stage 1: Opportunity Screening
• must handle a large number of inputs and
quickly identify the most promising 5 - 10 %
• should acknowledge that not every opportunity
is appropriate for every organization
• Approaches:
– Qualitative
– Quantitative
Evaluation methods can be organized according
to the intensity of effort:
Preliminary
Screening
Breakeven
Analysis
Feasibility
Study
Intensity of Effort
Business
Plan
• trade-offs (accuracy vs effort) may range from

ball-park guesstimates




financial ratios and rules of thumb
secondary research
primary research
price quotations
Quantitative
Rating scales applied to systematic criteria, such as:
– market factors
– economic & harvest issues
• (e.g. profitability, time to B/E, ROI)
– competitive advantage issues
– management team
– fatal flaw / risk issues
See Jeffrey Timmons (Harvard):
• Quickscreen
• Venture Opportunity Screening Guide
Market Issues
Criterion
Stronger
Weaker
Need
Identified
Unclear
Payback to User
< one year
> 3 years
Product life cycle
Long – easy to recover
investment
Short – difficult to recover
investment
Industry structure
Weak competition
Aggressively competitive
Total available market
$ 100 M
< $ 10M
Market growth rate
30-50 %
<3%
Gross margins
30 – 60 % +
<5%
Mkt share attanable (yr 5)
20+ %
<5%
A Qualitative Framework for
Opportunity Assessment
Opportunity
FIT
Resource
Requirements
Individual
Classifying an Opportunity’s Potential:
A Starting Point
• Lifestyle / marginal
• Stable & profitable
• High growth
Stage 2 :
The Business Plan
The Components of Successful
Entrepreneurial Ventures
Opportunity
The Entrepreneur
Organization
Business Plan
Strategy
Resources
Business Plan
A “Business Plan” is a “Selling Document”
that conveys the excitement and promise
of your business to any potential backers
and stakeholders .
Reasons for Writing a Business
Plan
 To sell yourself on the business
 To obtain bank financing
 To obtain investment funds
 To establish strategic alliances
 To obtain initial contracts
 To attract key employees
 To motivate and focus your management team
Types of Business Plans
1. The Summary Business Plan: 10 pages
Used for:
•
Bank Loan Application
•
Lifestyle business
•
To gauge initial investor interest
Types of Business Plans
2. The Full Business Plan:
25-40 pages
Used for:
•
Seeking a substantial amount of financing
•
Looking for a Strategic Partner
Types of Business Plans
3. The Operational Plan:
40+ pages
Used for:
•
Complex, rapidly growing companies
•
Part of an annual planning process
Key Elements of a Business Plan
• An economically viable product or
service with attractive markets.
• An established attack plan that can be
replicated.
• A seasoned management team that has
demonstrated it can carry out the
attack plan.
What Should a Business Plan Contain?
1. Letter of Transmittal
2.
3.
4.
5.
Title Page
Table of Contents
Executive Summary and Fact Sheet
Body of the Plan
The Company and Industry
The Product/Service Offering
Market Analysis
The Marketing Plan
The Development Plan
The Production/Operations Plan
The Management Team
Implementation Schedule and Risks Associated with the Venture
The Financial Plan
6. Appendices
A Typical Business Plan
Business Plan Contents
1.
Letter of Transmittal
2.
Title Page
3.
Table of Contents
4.
Executive Summary
and Fact Sheet
Introduce your business plan to the reader
Outline the major features that may be of interest
Provide identifying information about you and your
proposed business. Name, address and contact
numbers for the business as well as key company
contacts
A list of the major headings and sub-headings
contained in your plan.
A 1-2 page summary of the most important points
in your plan
May be the most important part of your business
plan
Your Fact Sheet summarizes the basic information
that relates to the venture
Continued
A Typical Business Plan (Continued)
5.
Body of the Plan
Company and the Industry
Product-Service Offering
Market Analysis
History and current situation of your company
Goals and objectives for the business
Principal characteristics and trends in the industry
Detailed description of your product or service
Outline stage of development and proprietary position
Describe the profile of your principal target customers
Indicate current market size, trends, and seasonal
patterns
Assess the nature of your competition
Estimate your expected sales and market share
Continued
A Typical Business Plan (Continued)
5.
Body of the Plan
(Continued)
Your Marketing Plan
Your Development Plan
Your
Production/Operations
Plan
Detail the marketing strategy you plan to use
Describe your marketing plan insofar as your sales
strategy, advertising and promotion plans, pricing
policy, and channels of distribution
Outline of the development status of your product and
what is still required to get it to a market-ready state
Are there regulatory, testing or other requirements that
still have to be met?
Outline the operating side of your business
Describe your location, kind of facilities, space
requirements, capital equipment needs, and labour
requirements
Continued
A Typical Business Plan Continued)
5.
Body of the Plan
(Continued)
Your Management
Team
Identify your key management people, their
responsibilities and their qualifications
Indicate the principal shareholders of the business, your
principal advisors and the members of your Board of
Directors
Your Implementation
Schedule
Present an overall schedule indicating what needs to be
done to launch your business and the timing required to
bring it about
Discuss the major problems and risks that you will have
to deal with as well
Continued
A Typical Business Plan (Continued)
5.
Body of the Plan
(Continued)
Your Financial Plan
Indicate the type and amount of financing you are
looking for and how the funds will be used
Outline your proposed terms of investment, the
potential return to the investor, and what benefit is
being provided
Provide an overview of the current financial structure
of your business
Prepare realistic financial projections that reflect the
effect of financing. Include:
Cash flow forecasts
Pro forma profit and loss statements
Pro forma balance sheet
Breakeven analysis
Continued
A Typical Business Plan (Continued)
Supporting material for your plan including:
6.
Appendices
Detailed resumes of the management team
Product literature and photographs
Names of possible customers and suppliers
Consulting reports and market surveys
Copies of legal documents
Publicity material
Letters of reference
The Business Plan
a document describing…
– what the venture is
– where it is projected to go
– how it will get there
Purpose
 force the Epr to consider ALL aspects of the venture
 force the Epr to view the venture critically & objectively
 reduce uncertainty & risk
 provide a communications tool for outside stakeholders
 provide goals to monitor performance (i.e. control)
Bplan Structure
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Cover Page
Executive Summary
Opportunity/Venture
Organization & Management
Industry & Market
Marketing plan
Operations plan
Financial plan
Critical risks
Milestones
Appendices
Cover Page





Name/address of business
Name(s)/ address(es) of owners
Nature of business
Amount of financing required
Confidentiality statement
Executive Summary
 Provides a brief overview
 1-2 pages
 Helps put all elements in perspective
 Written last
Business Description
 Identify the type of business & industry
 Vision / Mission statement
 Thoroughly describe the new venture
 Establish your competitive advantage
Organization & Management
 Business type & ownership structure
 Key mgt. positions and responsibilities
 Convince us that the mgt. team can do this!
 Provide resumes in Appendix
 Identify advisors, mentors, board members
 Strategic partnerships
Industry & Business Environment
• Industry structure & dynamics
• Business environment:
– government
– economic
– social
– technological
Market
• Must convince readers there is a market
• Must convince that sales target is achievable
• Must convince that competition can be beat
• Identify market niche, market share & growth
• Develop marketing plan
Operations
• New product? - development status & timeline
• Location
• Equipment (& layout)
• Inventory needs and suppliers
• Costing information
• Quality control
• Schedule of start-up costs
• Operating Plan & Budget
Financial
• schedule of start-up costs
• opening balance sheet
• 3 years forecast income statements
• 3 years forecast balance sheets
• 1 year monthly cash flow statement
Critical Risks
• Identify 4-5 major risk factors that could
adversely affect the business
• Provide alternative strategies to address
these risks
Milestones
• A schedule of critical events in the startup process: e.g.








incorporation
complete design & development
hiring
promo
contracts
ordering materials & equip.
renovations & fixtures in place
first sale
Some Tips…
• Know your audience
• Be interesting !
• Avoid exaggeration
• Strengthen the key sections
• Limit to 25-30 pages
Sample Plans
Generico: Price Waterhouse http://www.tenxmedical.com/devbusplexmpl.pdf
Business Plan Archive: Actual plans from the dot.com era (registration required; highly
recommended) http://www.businessplanarchive.org/
60 Plans from Bplan Pro http://www.entrepreneur.com/businessplan/a-z/0,7257,,00.html
Index of BPlans: Carnegie Library
http://www.carnegielibrary.org/subject/business/bplansindex.html
AllBusiness Samples http://www.allbusiness.com/business_advice/BusinessPlans/index1746.html
Royal Bank http://www.rbcroyalbank.com/sme/bigidea/michaels.html
Web Strategies for BPlans http://www.bplans.com/sp/webplans.cfm
BPlans: “How-to” Links
Price Waterhouse: Developing a Business Plan
Canada Business
http://www.canadabusiness.ca/eng/125/138/
Canada Interactive Business Planner
no longer available
Business Plan for a Startup Business
http://www.score.org/template_gallery.html
Entreworld
http://www.entreworld.org/Channel/SYB.cfm?ContentID=2647
Tips for Developing Your Business Plan
• Business planning involves a lot of work. Be prepared to spend
weeks developing your plan.
• Work on sections at a time.
• Be brief but complete.
• Focus on your intended reader.
• Use layman’s terms.
• Be realistic.
• Discuss the risks associated with the business
• back up your statements with background data and market
information.