Entrepreneurship:

Successfully Launching
New Ventures, 1/e
Bruce R. Barringer
R. Duane Ireland

Chapter 9

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Chapter Objectives
(1 of 2)

1. Explain the purpose of a business plan.

2. Discuss how a business plan can be a dual-use
document.
3. Explain how the process of writing a business plan
can be as important as the plan itself.
4. Identify the advantages and disadvantages of using
software packages to assist in the preparation of a
business plan.
5. Explain the difference between a summary business
plan, a full business plan, and an operational
business plan.
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Chapter Objectives
(2 of 2)

6.

Explain why the executive summary may be the most

important section of a business plan.
7. Describe a milestone and how milestones are used in
business plans.
8. Explain the purpose of a sources and uses of funds
statement.
9. Describe a liquidity event.
10. Detail the parts of an oral presentation of a business
plan.

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What is a Business Plan?

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

Dual-Use Document
For most new ventures, the business plan is a dual-purpose
document used both inside and outside the firm.
Inside the firm, the plan helps the company develop a road map
to follow in executing its strategies and plans.
Outside the firm, it introduces potential investors and other
stakeholders with the business opportunity the firm is pursuing and
how it plans to pursue it.
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Why Read the Business Planand What

Are They Looking For?
There are two primary audience for a firms business plan.
Audience

What They are Looking For

A Firms
Employees

A clearly written business plan, which articulates the

vision and future plans of the firm, helps the employees of
a firm operate in sync and move forward in a consistent
and purposeful manner.

Investors and
other external
stakeholders

A firms business plan must make the case that the firm is a
good use of an investors funds or the attention of other
external stakeholders. The key is to include facts generated
through a properly conducted feasibility analysis. A
business plan rings hollow if it is based strictly on what an
entrepreneur or team of founders thinks will happen.

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Guidelines for Writing a Business Plan

(1 of 4)

Structure of the Business Plan

To make the best impression, a business plan should follow
a conventional structure, such as the outline for the
business plan shown in the chapter.
Although some entrepreneurs want to demonstrate
creativity in everything they do, departing from the basic
structure of the conventional business plan format is
usually a mistake.
Typically, investors are very busy people and want a plan
where they can easily find critical information.

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Guidelines for Writing a Business Plan

(2 of 4)

Structure of the Business Plan (continued)

Software Packages
There are many software packages available that employ an
interactive, menu-driven approach to assist in the writing of a
business plan.
Some of these programs are very helpful. However, entrepreneurs
should avoid a boilerplate plan that looks as though it came from a
canned source.

Sense of Excitement
Along with facts and figures, a business plan needs to project a
sense of anticipation and excitement about the possibilities that
surround a new venture.
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Guidelines for Writing a Business Plan

(3 of 4)

Content of the Business Plan

The business plan should give clear and concise
information on all the important aspects of the proposed
venture.
It must be long enough to provide sufficient information
yet short enough to maintain reader interest.
For most plans, 25 to 35 pages is sufficient.

Types of Business Plans

There are three types of business plans, which are shown
on the next slide.
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Guidelines for Writing a Business Plan

(4 of 4)
Figure 9.1
Types of Business Plans

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Outline of Business Plan

(1 of 6)

Outline of Business Plan

A suggested outline of a business plan is shown on the next
several slides.
Most business plans do not include all the elements
introduced in the sample plan; we include them here for the
purpose of completeness.
Each entrepreneur must decide which elements to include
in his or her plan.

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Outline of Business Plan

(2 of 6)
Table 9.2
Business Plan Outline (Sections I and II)

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Outline of Business Plan

(3 of 6)
Table 9.2 (continued)
Business Plan Outline (Sections III and IV)

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Outline of Business Plan

(4 of 6)
Table 9.2 (continued)
Business Plan Outline (Sections V and VI)

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Outline of Business Plan

(5 of 6)
Table 9.2 (continued)
Business Plan Outline (Sections VII and VIII)

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Outline of Business Plan

(6 of 6)
Table 9.2 (continued)
Business Plan Outline (Sections IX and X)

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Exploring Each Section of the Plan

(1 of 10)

Cover Page and Table of Contents

The cover page should include the name of the company,
its address, its phone number, the data, and contact
information for the lead entrepreneur.

The Executive Summary

The executive summary is a short overview of the entire
business plan; it provides a busy reader with everything
that needs to be known about the new ventures distinctive
nature.
In many instances, an investor will first ask for a copy of the
executive summary and will request a copy of the full business
plan only if the executive summary is sufficiently convincing.
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Exploring Each Section of the Plan

(2 of 10)

The Business
The most effective way to introduce the business is to
describe the opportunity the entrepreneur has identified
that is, the problem to solve or the need to be filledand
then describe how the business plans to address the issue.
The description of the opportunity should be followed by a
brief history of the company, along with the companys
mission statement and objectives.
An explanation of the companys competitive advantage
and a brief description of the business model follow.

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Exploring Each Section of the Plan

(3 of 10)

Management Team
As mentioned earlier, one of the most important things
investors want to see when reviewing the viability of new
ventures is the strength of its management team.
If the team doesnt pass muster, most investors wont
read further.
The material in this section should include a brief summary
of the qualifications of each member of the management
team, including his or her relevant employment and
professional experiences, significant accomplishments, and
educational background.
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Exploring Each Section of the Plan

(4 of 10)

Company Structure, Ownership, and Intellectual Property

This section should begin by describing the structure of the new
venture, including the reporting relationships among the top
management team members.
The next part of the section should explain how the firm is legally
structured.
The third part of this section should discuss the intellectual property
the firm owns, including patents, trademarks, and copyrights.
This is a very important issue. Intellectual property forms the foundation
for the valuation and competitive advantage of many entrepreneurial
companies.

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Exploring Each Section of the Plan

(5 of 10)

Industry Analysis
This section should begin by discussing the major trends in
the industry in which the firm intends to compete along
with important characteristics of the industry, such as its
size, attractiveness, and profit potential.
This section should also discuss how the firm will diminish
or sidestep the forces that suppress its industrys
profitability.
The firms target market should be discussed next, along
with an analysis of how it will compete in that market.
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Exploring Each Section of the Plan

(6 of 10)

Marketing Plan
This marketing plan should immediately follow the
industry analysis and should provide details about the new
firms products or services.
After reading this section of the plan, an investor should be
confident that the firms overall approach to its target
market and its product strategy, pricing strategy, channels
of distribution, and promotional strategy are in sync with
one another and make sense.

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Exploring Each Section of the Plan

(7 of 10)

Operations Plan
This section of the plan deals with the day-to-day
operations of the company.
An overview of the manufacturing plan (or service delivery
plan) should be followed by a description of the network of
suppliers, business partners, and service providers that will
be necessary to build the product or produce the service the
firm will sell.
Any risks or regulations pertaining to the operations of the
firm should be disclosed, such as nonroutine regulations
regarding waste disposal and worker safety.
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Exploring Each Section of the Plan

(8 of 10)

Financial Plan
The financial section of the plan must demonstrate the
financial viability of the business. A careful reader of the
plan will scrutinize this section.
The financial plan should begin with an explanation of the
funding that will be needed by the business during the next
three to five years along with an explanation of how the
funds will be used.
This information is called a sources and uses of funds statement.

The next portion of this section includes financial

projections, which are intended to further demonstrate the
financial viability of the business.
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Exploring Each Section of the Plan

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Financial Plan (continued)

The financial projections should include three to five years
of pro forma income statements, balance sheets, and
statements of cash flows, as described in Chapter 7.
It is important to remember that the business plan should be
based on realistic projections.
If it is not and the company gets funding or financing, there will
most certainly be a day of reckoning. Investors and bankers hold
entrepreneurs accountable for the numbers in their projections.

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Exploring Each Section of the Plan

(10 of 10)

Critical Risk Factors

Although a variety of potential critical risks may exist, a
business should tailor this section to depict its truly critical
risks.

Appendix
Any material that does not easily fit into the body of a
business plan should appear in an appendix. Examples of
materials that might appear in the Appendix include:
Resumes of the top management team members, photos or
diagrams of product or product prototypes, certain financial data,
and market research projections.
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Putting It All Together

Table 9.3
The 10 Most Important Questions a Business Plan Should Answer

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Presenting the Business Plan to Investors

(1 of 3)

Making a Presentation to Investors

If the business plan successfully elicits the interest of
potential investors, the next step is to meet with the
investor and present the plan in person.
The first meeting with an investor is generally very short,
about one hour. The investor will typically ask the firm to
make a 20- to 30- minute presentation using PowerPoint
slides and use the rest of the time to respond to questions.
If the investor is impressed and wants to learn more about
the venture, the firm will be asked back for a second
meeting.
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Presenting the Business Plan to Investors

(2 of 3)

Tips on Making an Oral Presentation to Investors

When asked to meet with an investor, the founders or a new
venture should prepare a set of PowerPoint slides that will
fill the time slot permitted.
The presentation should be smooth and well rehearsed.
The slides should be sharp and not cluttered with material.
The first rule in making an oral presentation is to follow
instructions. If an investor tells an entrepreneur that he or she has
one hour and that the hour will consist of a 30-minute presentation
and a 30-minute question-and-answer period, the presentation
shouldnt last more than 30 minutes.

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Presenting the Business Plan to Investors

(3 of 3)
The most important issues to cover in a PowerPoint presentation to investors
(including recommendations for the number of slides to use for each topic)

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