The document discusses the importance of developing a business plan for new ventures. It outlines the key components of an effective business plan, including an executive summary, description of the business and products/services, competitive analysis, marketing strategy, management team, and financial projections. Developing a thorough business plan helps entrepreneurs effectively organize and plan their venture, assess feasibility, and secure financing from investors or lenders. Regular monitoring and updates to the plan are also important as the business evolves.

1. Business Plan Development February 25, 2011 Dr. Dawn G. Gregg Interim Administrative Director & Associate Professor Bard Center for Entrepreneurship

2. Agenda Importance of Planning Value of the Business Plan Information Needs Business Plan Structure Implementing the Plan Why Business Plans Fail

3. Importance of Planning Plans: provide guidance and structure to management in a rapidly changing market environment. Extremely important in early stages of a new venture.

4. Importance of Planning Become finalized as entrepreneur has a better sense of: Market. Product or services to be marketed. Management team. Financial needs of the venture. Helps meet short-term or long-term business goals.

5. The Business Plan Written document describing all relevant internal and external elements, and strategies for starting a new venture. A road map for the business. An integration of functional plans. Addresses short-term and long-term decision making for the first three years.

6. Value of the Business Plan Valuable to the entrepreneur, potential investors, or even new personnel. It is important to these people because: Helps determine viability of the venture in a designated market. Provides guidance to the entrepreneur in organizing his or her planning activities. Serves as an important tool in helping to obtain financing.

7. Value of the Business Plan The thinking process required to complete the plan is a valuable experience for the entrepreneur. Provides a self-assessment by the entrepreneur. Forces the entrepreneur to bring objectivity to the idea. Helps consider obstacles that might prevent the venture from succeeding. Similar to role playing. Allows to plan ways to avoid such obstacles.

8. Evaluating the Plan The business plan must address: Strengths of management and personnel. Product or service. Available resources. Entrepreneur prepares a first draft of the business plan from a personal viewpoint but also consider Lenders & Investors

9. Lenders and Investors Lenders: Primarily interested ability of the new venture to pay back the debt. Banks: Want facts with an objective analysis.

10. Lenders and Investors Investors, particularly venture capitalists, have different needs: Place more emphasis on the entrepreneur’s character Spend much time conducting background checks. Investors will also demand high rates of return.

11. Information Needs Before you begin writing your plan, consider four questions: What service or product does your business provide and what needs does it fill? Who are the potential customers for your product or service and why will they purchase it from you? How will you reach your potential customers? Where will you get the financial resources to start or run your business.

12. Feasibility Study Information for a feasibility study should focus on: Marketing. Finance. Production.

13. Operations Information Needs Entrepreneur may need information on: Location Manufacturing operations Raw materials Equipment Labor skills Space Overhead

14. Business Plan Sections Table of Contents Executive Summary Business Description & Vision Competitive Analysis Description of Products and Services Marketing & Sales Strategy Organization & Management Financial Management Appendices

15. Executive Summary Most important section of the plan. Should be written last. Provides an enthusiastic snapshot of your company, explaining who you are, what you do and why. Should be less than 2 pages.

16. Description of Venture Provides complete overview of the product(s), service(s), and operations: Mission statement. Important factors that provide a clear description and understanding of the business venture. Product(s) or service(s). Location and size of the business. Personnel and office equipment needed. Background of the entrepreneur(s). History of the venture.

17. Competitive Analysis Environmental analysis: assessment of external uncontrollable variables that may impact the business plan. Examples: Economy, culture, technology, legal concerns, Industry analysis: reviews industry trends and competitive strategies. Examples: Industry demand, competition

18. Critical Issues for Competitive Analysis How will your business operation be better than this? Are the sales of each of your major competitors growing, declining, or steady? What are the strengths and weaknesses of each of your competitors? What trends are occurring in your specific market area? What is the profile of your customers? How does your customer profile differ from that of your competition?

19. Critical Issues for Competitive Analysis What are the major economic, technological, legal, and political trends on a national and an international level? What are total industry sales over the past five years? What is anticipated growth in this industry? How many new firms have entered this industry in the past three years? What new products have been recently introduced in this industry? Who are the nearest competitors?

20. Description of Products & Services Identify and describe all products and services. Identify and explain product pricing. Describe how your products and services are competitive. Reference applicable graphics and brochures (in Appendix).

21. Marketing & Sales Strategy Research is the foundation of marketing. Who are my customers and potential customers? Where do they live? Am I offering the kinds of goods or services they want at the best place, at the best time, and in the right amounts? Are my prices consistent with what buyers view as the product's value?

22. Marketing & Sales Strategy Describes market conditions and strategy related to how the product(s) and service(s) will be distributed, priced, and promoted. Describes: Marketing research evidence. Specific forecasts for a product(s) or service(s). Budget and appropriate controls needed for marketing strategy decisions.

23. Marketing & Sales Strategy This section of the plan could include a SWOT analysis to summarize your Strengths, Weaknesses, Opportunities and Threats that could influence your marketing strategy. Strengths Weaknesses Opportunities Threats

24. Marketing & Sales Strategy A marketing strategy built with the marketing mix -- 4Ps : pricing promotion products place Potential investors regard the marketing plan as critical to the success of the new venture.

25. Organization & Management Description of how the company is organized. Legal form of ownership. Explanation of how things get done. Required licenses and permits. Bio description of key company managers.

26. Assessment of Risk Identifies potential hazards and alternative strategies to meet business plan goals and objectives. Assessment of risk should be based on: Potential risks to the new venture. Discussion of what might happen if risks become reality. Strategy employed to prevent, minimize, or respond.

27. Assessment of Risk Major risks for a new venture could result from: Competitor’s reaction. Weaknesses in marketing/ production/ management team. New advances in technology.

28. Financial Plan Projections of key financial data that determine economic feasibility and necessary financial investment commitment. Three financial areas: Summarize the forecasted sales and the appropriate expenses for at least the first three years. Cash flow figures for three years. Projected balance sheet.

29. Financial Plan Balance Sheet Assets - Liabilities = Net Worth Measures business value Snapshot in time

30. Financial Plan Income Statement Revenue – Expenses = Profit/Loss Measures how a business has performed over a specific period of time

31. Financial Plan Cash Flow Statement Monthly statement of cash on hand, incoming cash and expenses. Used to determine projected working capital availability and shortages.

32. Financial Plan For a New Business Estimate of start-up costs Projected balance sheet (1 year forward) Projected income statement (1 year forward) Projected cash flow statement (12 months forward)

33. Financial Plan For an Existing Business Balance sheets (last 3 years) Income statements (last 3 years) Cash flow statement (12 months)

34. Appendix Company brochures Resumes of key employees List of business equipment Copies of press articles and advertisements (if available) Pictures of your business location and products Information and/or data supporting the growth of your industry and/or products Key business agreements, such as lease, contracts, etc.

35. Implementing the Business Plan Implementation of the strategy contain control points to: Ascertain progress. Initiate contingency plans if necessary.

36. Implementing the Business Plan Without good planning: Entrepreneur is likely to pay an enormous price. Employees will not understand the company’s goals. Businesses fail due to entrepreneur’s inability to plan effectively.

37. Measuring Plan Progress Entrepreneur should frequently check on: Profit and loss statement. Cash flow projections. Inventory control. Production control. Quality control. Sales control. Disbursements. Web site control.

38. Updating the Plan Entrepreneurs must: Be sensitive to changes in the company, industry, and market. Determine what revisions are needed If changes are likely to affect the business plan. Helps entrepreneurs: Maintain reasonable targets and goals Keep the new venture on a course to high probability of success.

39. Why Business Plans Fail Goals set by the entrepreneur are unreasonable. Goals are not measurable. Entrepreneur has not made a total commitment to the business. Entrepreneur has no experience in the planned business. Entrepreneur has no sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or service.

40. Sources Hisrich, Robert, Peters, Michael and Shepherd, Dean (2007). Entrepreneurship , 7th edition, Irwin/McGraw-Hill, New York, New York. FDIC Small Business Resources, “Developing a Marketing Plan” available at: http://www.fdic.gov/about/diversity/sbrp/index.html Small Business Administration, “How To Write A Business Plan” available at: http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writing-business-plan