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Chap008us230
- 1. 8 Business Plans: Seeing Audiences and Your Business Clearly McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
- 4. Chapter 8 Starting Small and Building Up 8-
- 11. Chapter 8 8-
Editor's Notes
- A business plan explains to others why you are in business. It helps you with legitimacy concerns when dealing with banks, lenders, investors, etc… and can be used internally to focus efforts in the correct areas.
- Start at the top and work your way down. Each is discussed in turn.
- Kodak:” To be the best in the picture business” It helps define what your company is striving towards. Why you exist. It is a guide and a goal.
- Second step, imagine you’re caught on the 10 th floor going down in an elevator with a venture capitalist. Now quick, convince him to invest in 30 seconds or less. Who are you? why is what you offer needed and different? Why should he meet with you and discuss this further? This makes a good thing to practice in class.
- Example The 30-Second Business Plan “ E levator pitch"--a carefully prepared, well-rehearsed summary of who you are, what you do and why you are better at it than anyone else Verbal equivalent of your business card, but it needs to say much, much more, and it needs to say it very quickly The three biggest mistakes people make in their elevator pitches are: describing skills rather than purpose failing to tell an interesting story forgetting to rehearse and prepare Practice, practice, practice - You never know when you will need your elevator pitch
- Most readers will look to the executive summary for a good complete summary of your business. There is not room for all the details at this level but it should give a complete overview of all important areas.
- A complete classic business plan totals about 40 pages. There is a page breakdown on the next slide. It should have a cover sheet and be professionally printed.
- There need to be a reason for someone to open your plan and read it. Bankers, VCs, and angels receive hundreds of plans, why should they investigate yours further?
- Who are you? Why are you in business? Where are you going?
- Patents should be mentioned here whether received or just applied for. Pictures with descriptions are helpful especially for unique products with which the reader may not be familiar.
- Who is your market? Where are they? How do they purchase? How can you fill their needs?
- It’s a technicality. But are you a partnership? Corporation? S-corp? DBA?
- You, the entrepreneur, are the key. You have the passion. You have the desire, the vision, the idea. Now sell it. What have you done? Awards won? Contracts signed? Have you had past successes which may not be applicable to this product but to your overall success rate? Give them a reason to trust you, believe in you, invest in you.
- Again, this is technical information but it does lend legitimacy to your organization.
- Pictures are also helpful at this stage.
- There are approximately 4 pages here. Your assumptions include economics of your geographic area (we don’t plan on recessions, unless we’re in one). You may have made assumptions about market size, initial sales, etc… Page 2: What is the deal you want? Do you want an active partner, a silent investor, a loan, or someone to buy you out. What are you looking for? Pages 3 and 4 are estimated income statements based on the assumptions from page 1. Lesser assumptions are on the last page.
- Cash flow is a killer to startups. A profit on paper only won’t help you pay the bills. So how will you handle late payments by customers?
- Appendices differ for different plans. You may or may not have and or need each of these. Make sure anything you include increases your legitimacy and builds confidence in you and your plan.
- These are risks your potential investors may point out. It is typical, because we believe in ourselves and our plans, to overstate what we can do. We become overly optimistic. If pointed out, your plan can be corrected for these problems.
- If you have a circle of trusted advisors have them look over the plan first. They may be able to help you identify the risks, and correct for them, before presenting to investors.
- Keep it concise and on key points. Remember to convey your passion, to SELL you idea and yourself.