Lect 7

Dr Tasweer Hussain Syed

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.
6. Explain why the executive summary may be the most
important section of a business plan.
7. Detail the parts of an oral presentation of a business
plan.
 Establishing (Sanity and focus) of new industrial
venture, business or organization.
 Gather knowledge and compelling information
 Facilitate framework for better business decisions
 Launching a new product or service
 Adding a new product line
 Creating new internal policies
 Creating new external network – strategic alliances
 Convince banks /investors that on worth of investment
 Serves as base for counselling by coops and partners
 Developing an annual budget
 Creating or revising a financial plan
 Preparing a marketing plan
 To attract key employees /potential employees
 Define and refine company strategy
 Acquisitions and mergers
 There are two primary audience for a firm’s business plan.

Audience What They are Looking For

A Firm’s A clearly written business plan, which articulates the

Employees vision and future plans of the firm, helps the employees of
Internal a firm operate in sync and move forward in a consistent
and purposeful manner.
Stakeholders
A firm’s business plan must make the case that the firm has
Investors and a good use of an investor’s funds or the attention of other
other External external stakeholders. The key is to include facts generated
Stakeholders through a properly conducted feasibility analysis. A
business plan should not be based strictly on what an
entrepreneur or team of founders “thinks” will happen.
 Structure of the Business Plan
 Outline BP: - makes the best impression,
 Innovative Changes: -entrepreneurs want to demonstrate
creativity in everything, usually a mistake to depart from
the basic structure of the conventional business plan format
 Typically, investors are busy people and need a quick info
on critical information of a plan
 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.
▪ Entrepreneurs should avoid a boilerplate (traditional) plan that looks
as it comes from a “canned” (ready made) source.
 Sense of Excitement:
▪ Along with facts and figures, a business plan must project a sense of
excitement about the possibilities that surround a new venture.
 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 are sufficient.
 Types of Business Plans
 There are three types of business plans, which are shown on
the next slide.
 Outline of Business Plan
 Suggested outline - business plan is shown on the next few slides

 All elements of BP are not essential

 Entrepreneurs decide contents on case to case basis

Business Plan Outline (Sections I and II)
(continued) Business Plan Outline (Sections III and IV)
(continued) Business Plan Outline (Sections V and VI)
(continued) Business Plan Outline (Sections VII and VIII)
(continued) Business Plan Outline (Sections IX and X)
1. Cover page (1)
2. Table of contents (2)
3. Executive summary (3)
4. The company (7)
5. The market (5 – concept statement)
6. The product / service (4 and both)
7. Sales and promotion (6)
8. Finances (8)
9. Appendix (9)
 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 venture’s 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.
 The Business
 A business is defined as an opportunity to earn VALUE
 Entrepreneurial idea to solve problem, address need &/or fulfil
desire and then describe how the business plans to address it
 The description of the opportunity should be followed by a brief
history of the company, along with the company’s mission
statement and objectives
 An explanation of the company’s competitive advantage and a brief
description of the business model to follow
 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 doesn’t “pass muster,” most investors won’t
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.
 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.
 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 industry’s
profitability.
 The firm’s target market should be discussed next, along
with an analysis of how it will compete in that market.
 Marketing Plan
 This marketing plan should immediately follow the industry
analysis and should provide details about the new firm’s
products or services.
 After reading this section of the plan, an investor should be
confident that the firm’s 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.
 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.
 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.
 Financial Plan (continued)
 The financial projections should include three to five years
of pro forma income statements, balance sheets, and
statements of cash flows.
 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.
 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.
The 10 Most Important Questions a Business Plan Should Answer
 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.
 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 shouldn’t last more than
30 minutes.
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