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Entrepreneurship

and Innovation
Course
Pere Joan Ribas Barcel

The Business Plan

What Is a Business Plan?


A business plan is
a written narrative,
typically 25 to 35
pages long and
describes what a
new business
plans to
accomplish.

Business Plan
Dual-Use Document
1. Inside

the firm, the plan helps the company


develop a road map to follow in executing its
strategies and plans.

2. Outside

the firm, it introduces potential


investors and other stakeholders to the
business opportunity the firm is pursuing and
how it plans to pursue it.

Business Plan
The Business Plan should address
two fundamental issues
1. Does a business opportunity exist?
2. Do you have the capability and strategy for
pursuing the opportunity?

Living document
The business plan is a living document
Business planning is NOT a sequential process
Entrepreneurs are continuously updating and
revising their business plan

Each major revision should be kept and filed for


review

The importance of the business plan isnt the


final product, but the:

LEARNING PROCESS

How long ?
It depends
Executive
Summary

Business
Plan

Extended
Business Plan

Operational
Plan

10 Pages (MAX)

25-35 Pages

50-60 Pages

80-100 Pages

of the audience
Lawyer, Investors, customers, potential workers/
managers

Qualities of a good Business Plan

It is short and straight to the point


Can be visualized
Clearly outlines the risks associated
Presents clear evidence of the
viability of the proposed business

PLAN STRUCTURE
1. Executive
Summary
2. Business
opportunity

5. Financial
Projections

3. Analysis
of the
environment

6. Project
Timeline

4. Business
Description

7. Risks and
exits
8. Supporting
Documents

1. Executive Summary
Summarize the key points of your business venture

MOST IMPORTANT PART

OF YOUR BUSINESS PLAN

It should capture the

essence of the business

It should stand as alone


document

Interesting enough so the

reader will continue reading

1. Executive Summary
Summarize the key points of your business venture

Describe your business and


how its different from other
businesses.

Overview of the team

(experience and skills).

Potential competitors.
How much money you need
to raise and how much
profit should investors
expect.

2. Business opportunity
Mission Statement
Details of your analysis of the perceived
opportunity.

Target Market Analysis (customers, market size, )


Product / Service
The Team

2. Business opportunity

Our mission is to organize the worlds


information and make it universally accessible
and useful.

Our mission is to provide a global trading


platform where practically anyone can trade
practically anything.

Our mission is to build a place where people


can come to find and discover anything they
might want to buy online.

Our mission and values are to help people and


businesses throughout the world realize their
full potential.

3. Analysis of the environment


SOCIAL

PEST Analysis
Industry Analysis

ECONOMIC

ENVIRONMENT

TECHNOLOGICAL

POLITICAL

(trends, growth
rate, )

Competitor Analysis

(number, size, strengths


and weaknesses, )

4. Marketing Plan
How will you enter the market?
How will you expand?
How will you advertise your
product/service?

5. Financial Data & Projections


Including a 3 to 5 year
projections

Projected profit and


loss statements

Cash flows and


balance sheets

Break even
Sensibility analysis

5. Financial Data & Projections


$ 400.000

5. Financial Data & Projections


$ 300.000

Including a 3 to 5 year

$ 200.000

projections

$ 100.000
$0
-$ 100.000
-$ 200.000
-$ 300.000

Projected profit an
YEAR 1

YEAR 2

loss statements
YEAR 3
YEAR 4
Cash flows and
balance sheets
Break even
Sensibility analysis

6. Project Timeline
5. Financial Data & Projections

Including a 3 to 5 year
projections

Projected profit an

loss statements
Cash flows and
balance sheets
Break even
Sensibility analysis

7. Risk Analysis
The business plan should answer
What risks does your company face?
How do you prepare for these risks
and how is their impact minimized?

What is the quantitative impact of


each risk?

How does the company survive if the


worst scenario is realized?

The Business Plan Should Seek To Anticipate


And Address The Biggest Risks In Advance
Examples

Internal
risks

External
risks

A key person leaves the company


Conflicts arise between key persons
Key positions cannot be filled
Launch of product is delayed
Costs are bigger than estimated
Follow-up funding is difficult to get

Sales is only half of the expected


volume
Competitors bring better and
cheaper products to the market
earlier than expected
A distribution partner terminates
the agreement
A subcontractor is unable to
deliver
The technology cannot be
patented

Things never turn out


the way they were
planned to
thus alternative
routes and backup
plans should be
developed well in
advance
and still there will be
further surprises!

A Sensitivity Analysis Is Needed For


The Biggest Risk Factors
Increased capital need
Considerations
Market share
10%

300 000

Sales price
10%
Production costs
+10%

Salary costs +20%

Borrowing +3%

240 000

40 000

35 000

10 000

Identify factors with


greatest effect on key
variables such as capital
need
Draw up scenarios
around these factors
Define the actions to be
taken if the risk is
realized
Manage risks by
following-up intermediary
goals/milestones

Scenarios Are Useful For Risk Analysis


Net
cumulative
cash flow

Best case
Payback time
Base case
0

Worst case

Capital need

Breakeven
1

Year

8. Supporting Documentation
Back up your descriptions, assumptions and projections

Charts
Graphs
Tables
Photographs
Plans
Evidence of your
research

Even A Perfect Plan Is Only A Plan

Worth remembering:

Expectations
Goal in
3-5 years

Today

Time

Things never go
exactly as planned

The predictions
will not be correct

Some days
everything goes
right, on others
nothing works

A long journey is
completed taking
one step at a time

Exit Plan
THE PROCESS AS A TRY AND FAIL:

Plan A fail most of the time (70% or more), Good entrepreneurs zig
zag in other projects (Plan B) to move forward. Therefore, we need a
high degree of tolerance towards failure.

Budget allocation: If we know that we are not going to get it right,


dont put all the eggs in the same basket.

PRODUCT: Test if people will like it, measure the market, gather as
much data as you can about customers.

CORRECTING MISTAKES: you might need to tune, tweak or modify


the product after launching it . Therefore, we need to save some
money to have enough room to do it

NEXT QUESTION: Start thinking about what you need next. How it
might evolve.

Source: P. Gallagher Getting down to Business and L. Elkins Tips for Preparing a Business Plan

BUSINESS PLAN CHECK LISTS

The 10 Most Important Questions a


Business Plan Should Answer
1.

Is the business just an idea, or is it


an opportunity with real potential?

2.

Is the product or service viable?


Does it add significant value to the
customer?
Was a feasibility analysis
completed?

3.

Does the firm have an exciting and


sensible business model?
Will other firms be able to easily
copy it?

6.

Is the management team


experienced, skilled, and up to the
task of launching the new firm?

7.

Are the financial projections


realistic, and do they project a
bright future for the firm? What
rate of return can investors
expect?

8.

Is the firm organized in an


appropriate manner? Are its
strategy and business practices
legal and ethical?
How will the firms competitors
react to its entrance into their
markets?

4.

Is the industry in which the product


or service will be competing
growing, stable, or declining?

9.

5.

Does the firm have a well-defined


target market?

10.What are the critical risks, and


does the team have contingency
plans?

THE McKINSEY CHECK LIST

What is new and innovative in


your business idea?

How unique is your business


idea?

Who is the client?

Why should somebody buy


your product or service?

Why is the product better


than similar products already
on the market?

What is your competitive


advantage, and why could/
would it not be copied by
competitors?

Can the business idea be


produced, and how much
would that cost?

How would the product reach


the customers?

How would you earn money


on the product, what are the
costs and what is the price
that can be charged?

How big is the market?

Entrepreneurship
and Innovation
Course
Pere Joan Ribas Barcel

Thank you
for your attention