2. Making a Business Plan
A business plan is the written representation
of your vision for your business.
It is the story of your venture written by you.
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3. Making a Business Plan
• Business plans are used by entrepreneurs for various
purposes.
• It can be used to get debt from banks or to get equity
funding from angel investors or venture capitalists.
• It can also be used to attract business partners and key
employees or to make business alliances.
• One of the important uses of the business plan is to clarify
the exact nature of the business to you.
• Often, many lacunae in our business planning come to the
fore only after the plan has been put down in paper.
• So, a business plan also gives us an opportunity to think
through and come up with answers to questions we had
not considered previously
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4. Making a Business Plan
• A business plan must describe the company, its
product, and its entrepreneurial team.
• It must state the money needed by the business
and how it will be spent as well as the objectives
of the business and how they will be achieved.
• The business plan must help the entrepreneur
understand the business and make him/her
confident that the venture’s objectives can be
achieved.
• A well-written business plan is an asset to the
entrepreneur.
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5. Key sections in a Business Plan
• Executive Summery
• The company
• The management team
• The industry and the market
• Operations
• The marketing plan
• Financial Plan
• Risk and contingencies
• Appendices
• Depending upon the business idea, some of these sections can be
dropped, or there can be some entirely different sections too.
A good business plan should not only concentrate on the strengths of the business but also
make a realistic assessment of its risks and shortcomings too. Then only will it make a
convincing presentation of the company’s worth.
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6. FedEx Corporation
• Fred Smith is the son of Frederick C. Smith, the founder of the
Toddle House restaurant chain.
• In 1962, Fred entered Yale University to do his graduation in
economics. While in Yale, he wrote a paper, outlining a concept of a
business based on an overnight delivery service highly reliant on
exchange of information and on predicting volumes. His view was
that the information about the package was as important as the
package itself. His professor was not at all impressed and he
received a ‘C’ for this paper.
• The unappreciated paper led to the birth of Federal Express. Fred
graduated in 1966 and after a stint in the Marines and a couple of
other businesses, he started FedEx Corporation. It commenced
operations in 1973 with 14 aircraft connecting 25 cities in the US.
Currently, FedEx Corporation is a $34 billion enterprise employing
about 2,75,000 people and operating in all major countries of the
world.
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8. Uses of a Business Plan
Equity Funding
• A venture capitalist or an angel investor will very
rarely commit an investment to a start-up
without perusing its business plan.
• The venture capitalist will primarily use the
business plan to gauge risks and forecast growth
prospects.
• The investor will never restrict analysis of the
business to just the business plan but it will
always remain an important reference point.
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9. Uses of a Business Plan
Bank Finance
• A banker obviously concentrates on the ability
of the business to repay the debt and on the
availability of the collateral or other securities.
• Banks look for at least some specific issues to
be addressed in the business plan.
• For example, a bank needs projected balance
sheets and profit and loss accounts for the
first five years.
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10. Uses of a Business Plan
Alliances
• An entrepreneurial firm may need to form
alliances with other firms to reach new markets,
develop new products, or create common
facilities.
• Other firms may want to know more about the
business before committing to any long-term
arrangement.
• Sometimes, a business plan can help convince a
well-established retailer or distributor to commit
to the start-up.
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11. Uses of a Business Plan
Recruitment
• A good business needs support from
experienced top-level employees.
• A business plan will help them understand
what they are getting into.
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12. Uses of a Business Plan
Explain the Business
• A business plan helps in planning.
• While writing the business plan, it is likely that
the entrepreneur was able to detect many
shortcomings in the original business idea and
these shortcomings could be overcome by
thinking through and plugging the gaps.
• Later, this plan can serve as a guide or manual
to help in business and strategy formulation.
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13. Uses of a Business Plan
Miscellaneous Uses
• Very often, an entrepreneur seeks moral
support from friends and family.
• A business plan can be a good way of
presenting your business to your father,
mother, wife and colleagues.
• By going through it, they will have a better
appreciation of what you are setting out to do.
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15. Writing a Business Plan
• Like any other project, writing a business plan
has to be carefully planned and systematically
executed.
• This will improve the quality of the final
business plan and it will also keep things
moving smoothly.
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16. Writing a Business Plan
Define Purpose
• The business Plan will serve its purpose better if its
purpose is spelt out in the very beginning.
• There may be multiple goals in writing the business
plan.
• E.g. The entrepreneur may be planning on using the
business plan to secure bank finance as well as to
attract a major corporation as a strategic partner.
• It is okay to have multiple goals, but some amount of
customizing should be done before placing it in front of
different audiences.
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17. Writing a Business Plan
Collect Information
• All sorts of information about the business and
the industry should be collected.
• List out all the information you already have with
you,
• Figure out the major gaps in information, and
• Go out to get more information.
• Do not rate the quality of this information; just
gather it.
• At this point, the more you can find, the better.
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18. Writing a Business Plan
Write Down Things
• After enough information has been gathered, you can
plan on starting the actual writing.
• Think of a rough structure appropriate for the business
plan and start writing.
• It is important to note down things on paper without
being too particular about sequence and grammar.
• Approach it like a brainstorming session.
• Do not be critical of your efforts.
• Just make sure that you are putting enough thoughts
on paper.
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19. Writing a Business Plan
Prepare a Rough Draft
• Now it is time to give shape to your business plan and make
it concrete.
• Correct grammatical mistakes and break up the written
account into meaningful sections.
• Compare your writing to your intended outline and make
necessary changes.
• As your work progresses, you need to make a note of what
else needs to be added.
• For some topics, more information will be needed.
• At this stage of writing process, you are going to decide on
the level of detail necessary to be included in the business
plan.
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20. Writing a Business Plan
Do Financial Analysis
• The numbers will continue to be important.
• After all costs and revenue estimates have been
arrived at, pro-forma financial statements are to
be drafted.
• That will lead to sensitivity analysis, the ROI
calculation, the break-even analysis, and the
other financial ratios.
• The numbers should be realistic and consistent.
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21. Writing a Business Plan
Finalize the Plan
• Finalizing the business plan is certainly a hard job.
• Language and spellings have to be checked, the numbers
have to be scrutinized and formatting has to be completed.
• The business plan should not be ornate but should have a
professional look about it.
• Set a deadline for completing it and adhere to the deadline.
• One good way to enforce a deadline is to tell some people
that you will be showing them the business plan by a
certain date. Then it will be hard for you to ignore the
deadline.
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22. Writing a Business Plan
Get the Plan Reviewed
• Do not review your business plan yourself.
• Ask someone else to do it.
• It could be a family member, a friend, or a
professional acquaintance.
• Even better would be if you could get a
number of people to do it.
• .............
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23. Writing a Business Plan
Get the Plan Reviewed
• Even better would be if you could get a
number of people to do it.
• After getting comments on your paln, you
should incorporate only those suggestions
that you find convincing.
• After all, this is your business plan!!!
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26. Business Plan Archive
• The Business Plan Archive is a unique resource for budding
entrepreneurs. (http://www.businessplanarchive.org)
• It is a joint initiative of the Library of Congress, the Center for
History and New Media, and the University of Maryland Libraries.
• The Archive collects and preserves business plans and other
planning documents from the dot com boom, so that future
generations will be able to learn from this remarkable period in the
history of technology and entrepreneurship.
• The Archive is built by the voluntary contributions by entrepreneurs
and managers of that time.
• Because some of the material may contain proprietary information,
contributors retain a lot of control on how the information is
treated and who is allowed access to the material.
• It also provide researchers to take a closer look at the crash and find
lessons for the future generations of entrepreneurs.
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27. Business-Plan Competitions
• There are literally hundreds of business-plan
competitions being organized by business
schools and other technical education centres
in India and abroad.
• Some of the better known business-plan
competitions are listed here.....
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28. Business-Plan Competitions
• Some of the better known business-plan
competitions are listed here.....
• National Level
1) Eureka: E-cell at IIT Bombay
2) Anveshan: Centre for Innovation, Incubation and
Entrepreneurship(CIIE) at IIM Ahemedabad.
3) BZZWings: IIM Bangalore
4) Ananya: Xavier Institute of Management,
Bhubaneshwar
5) Lock, Stock and Barrel: S.P. Jain Institute of
Management Studies, Mumbai
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29. Business-Plan Competitions
• Some of the better known business-plan competitions
are listed here.....
• International Level
1) DFJ Venture Challenge: Draper Fisher Jurvetson
2) Berkley Business Plan Competition: Hass School of
Business, UC, Berkley
3) USF-PSI: University of San Francisco
4) HKUST IBPC: Hong Kong University of Science and
Technology
Note: Often, business-plan competitions are discontinued or re-launched with a different name.
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30. Data Collection
• A business plan is no good if does not include a lot of data.
• In that case, financiers who will read the business plan, will
look elsewhere for additional information about the
business.
• It will really look bad if they are able to come across a lot of
critical information that has not been included in the
business plan.
• They might think that you have not researched the business
properly and will doubt your ability to run the business.
• They might think that you wilfully withheld information in
order to mislead them.
• None of the above scenarios is desirable...
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31. Data Collection
• If all the data listed below is collected early in the
business plan writing process, the writing does
not have to be regularly interrupted for lack of
information.
• Company Details
• Management
• Industry and Competitions
• Operations
• Marketing and Sales
• Financial Information
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32. Data Collection
• Company Details:
1) Documents relating to formation
2) Shareholding Details
3) Permits and Registrations
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33. Data Collection
• Management:
1) Organization chart
2) Details of key employees
3) Consultants and advisors
4) Compensation and other employee agreements
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34. Data Collection
• Industry and Competitions:
1) Market Statistics from secondary sources
2) Reports on trends, etc.
3) Competitor data
4) Customer surveys
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35. Data Collection
• Operations:
1) Product specifications
2) Contracts and purchase orders for raw materials
3) Competitive advantages
4) Details of intellectual property(Patent, licence, and
trademarks)
5) Regulatory approvals
6) Industry standards as per regulations
7) Plant layout and operations plan
8) Research and development plans
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36. Data Collection
• Marketing and Sales
1) Marketing Plan
2) Advance orders, if any
3) Marketing materials
• Financial Information
1) Data on fixed and variable costs to be incurred
2) Financial forecasts
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37. Data Collection
• This is not an exhaustive list but is only
indicative of the kind of information that
may be needed.
• Other data may also be required, depending
upon the requirements of your company or
the orientation of the business plan.
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38. Kinds of Business Plans
• Common Question:
What should be the ideal length of the business
plan?
Well, there is no ideal length.
It depends on business idea and also on main
purpose of writing the plan.
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39. Kinds of Business Plans
• Broadly, there are five versions of business
plans for an entrepreneur to choose from:
• Summary plan
• Executive summary
• Full business plan
• Operational business plan
• Oral presentation
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40. Kinds of Business Plans
Summary Plan
• A ten to fifteen page summary plan can be used by an
entrepreneur interested in testing the investment
waters; on finding sufficient interest from the investors,
a more comprehensive business plan can be
assembled.
• A summary plan may also be appropriate for
entrepreneurs with a proven track record.
• In case of seasoned entrepreneurs with a history of
success, a venture capitalist may not require as much
information from the entrepreneur in the early stages
as from an inexperienced first-time entrepreneur.
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41. Kinds of Business Plans
Summary Plan
• The summary business plan should include
enough information to convince potential
investors that
1) The business idea is sound and viable;
2) The entrepreneurial team is committed and capable to
make the business idea a success; and
3) The team has studied the market and has understood the
business.
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42. Kinds of Business Plans
Executive Summary
• Instead of summary plan, an entrepreneur may use just an executive
summary, of not more than three pages.
• It only serves to introduce the business and the entrepreneurial team to
the reader.
• The entrepreneur expects that a summary plan will lead to the full
business plan being called upon.
Single-page Snapshot
• An interesting variation of executive summary is a single-page snapshot.
• One has to be very careful before crafting a single page attempting to
describe the entire business idea.
• Only selective highlights can be presented and these highlights may not be
able to properly address the concerns of the readers.
• None the less, it is a great presentation tool if done properly.
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43. Kinds of Business Plans
Full Business Plan
• If you are planning on raising a lot of money, a 30 to 40
page full business plan is very useful aid.
• It helps clarify complicated business models and
complex operations to potential financiers.
• It contains all relevant and some irrelevant information
about the proposed business.
• It is enriched by a number of exhibits, which present
market analysis, financial and sales forecasts, and
technical reports.
• All assumptions, risks, and critical factors are laid out in
this business plan for the reader to evaluate.
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44. Kinds of Business Plans
Operational Business Plan
• An operational business plan becomes important once
operations commence.
• This business plan is envisaged as a source of guidance to
managers and other employees.
• It serves as a manual on company operations.
• It helps managers understand the goals of the company
and directs them towards their role in achieving the goals.
• The operational business plan can be very lengthy, maybe
even 100 pages and it is likely to have a number of detailed
exhibits.
• It may also be a good idea to keep revising the operational
business plan from time to time.
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45. Kinds of Business Plans
Oral Presentation
• It is a very good idea to plan an oral
presentation in which you summarize the
business plan and present its significant
points.
• A twenty minute oral presentation will suffice.
• The presentation should be carefully
structured and a script can be prepared.
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46. Key sections in a Business Plan
• Executive Summery
• The company
• The management team
• The industry and the market
• Operations
• The marketing plan
• Financial Plan
• Risk and contingencies
• Appendices
• Depending upon the business idea, some of these sections can be
dropped, or there can be some entirely different sections too.
A good business plan should not only concentrate on the strengths of the business but also
make a realistic assessment of its risks and shortcomings too. Then only will it make a
convincing presentation of the company’s worth.
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47. Importance of Executive Summary
• An executive summary is not an abstract of the business plan and it
is certainly not a preface.
• It is designed to be complete yet concise business plan by itself.
• In a number of B-plan competitions around the world, the finalists
are short-listed on the basis of their executive summary.
• A full business plan is required to be submitted only by the short-listed
finalists.
• There are some entrepreneurs who first make the executive
summary and then use that as a base for making a detailed
business plan.
• Then there are others who first make the detailed business plan
and then summarize the important points to make an executive
summary.
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48. Importance of Executive Summary
• Include the key strengths of the business: Why you
feel that the business will be successful.
• Reasons could be: competent management team,
location advantages, proprietary intellectual property,
and many other such factors.
• State some obvious risks and then outline the steps
you are taking to mitigate the risks.
• Include numbers: If there are some dramatic cost
advantages, then that should be presented in detail.
• If the projections are very attractive, they should be
presented and explained in detail.
• It should be able to capture the attention of the
reader.
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50. Description of the Business
• History:
• A start-up is unlikely to have a history of any
significance but it might be relevant to
mention some details of the origin of the
business idea such as what led to the idea,
when was the company formed and who were
the initial supporters.
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51. Description of the Business
• Current Status:
• Many times, some efforts would have already made
towards establishing the company.
• The company may be registered, land may have been
acquired, some amount of product development may
have been carried out, and some key employees may
already be in place.
• The fact that operations have already started can also
serve to demonstrate commitment on the part of the
entrepreneurs.
• This subsection will have comprehensive details about
current status of the organization, including its legal
entity, place of operation, current size, etc.
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52. Description of the Business
• Future: (Projections should be realistic)
• Most important subsection to the reader.
• Give the reader a sense of direction the company is
going to take in the coming years.
• The company’s future should make sense with
reference to the history of the industry and the
capabilities of the start-up.
• A company that projects sales increase of 50 %
annually for the coming three years does not make a
very convincing case if the start-up is not able to
articulate any great competitive advantage and during
the previous ten years, industry sales have never gone
up more than 10% in a particular year.
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53. Project Report by Consultants
• Chartered accountants and other consultants
in cities across India offer project-report
making as a service.
• Often, it does not just involve writing a project
report or a business plan but also involves
presenting the report or plan to the bank and
getting the loan sanctioned.
• The consultants may charge a fixed rate, a
success fee, or a mix of both.(usually, the
success fee is about 2 percent)
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54. Project Report by Consultants
• The consultants may charge a fixed rate, a
success fee, or a mix of both.(usually, the
success fee is about 2 percent)
• Sometimes, the success fee can go up to 10
percent or more.
• In such cases, it is clear to both the consultant
and the client that the business plan is not
good and that the entrepreneur has no
intention of seriously doing the business.
•
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55. The Management Team
• While gauging the viability of the start-up, financiers and venture
capitalists focus special attention on the entrepreneur.
• They look for the following characteristics from the entrepreneur:
– Technical and professional qualifications
– Quality work experience
– Experience in the relevant sector
– Reputation in the business community
– Moral integrity
– Financial capacity
– Networking with other vital people in the industry
• They are certainly unlikely to find all of the above traits in a single
entrepreneur, but every entrepreneur can have his/her own way of
prioritizing the above qualities
• This section should present all the strengths of the entrepreneur.
• It is good to include a short summary bio-data as a paragraph and
then include a detailed CV as an exhibit.
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56. The Management Team
• This section should present all the strengths of the entrepreneur.
• If more than one entrepreneur involved in the start-up, all should
find mention in this section.
• In case of some senior employees with good experience in the
sector, they should also be pointed out.
• This section can declare any distinguished external consultants
being engaged by the company to help with specific activities.
• In case of private-limited company, it may be relevant to talk about
the constituents of the formal board of directors.
• It should include the roles and responsibilities of various people in
the organization(organization chart as an exhibit).
• Compensation packages being offered to key members of the
management (linked to the long-term well being of the venture).
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60. B-Plan Software
• There is a number of software programs that aid you in making a business
plan.
• Many of these such as the Business Plan Workbook, Fast Track Business
Plan, and the Ultimate Business Plan Starter are available free on the Net.
• One of the leaders in this field is Business Plan Pro by Palo Alto Software.
• Currently, the company sells a standard version for $99 and a premium
version for about twice of this price.
• Critics of B-Plan software claim that using such a software product tends
to standardize B-Plans and their individuality is lost.
• On the other hand, this software will give you access to over 500 sample
business plans and over 9000 industry profiles.
• I f not anything else, it certainly adds to the perspective of the
entrepreneur.
• Also, using a template means you are less likely to omit any important
aspects of the B-Plan.
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