Learning ResourcesPlease read and view this weeks Learning Re.docx

Learning Resources
Please read and view this week's Learning Resources before you
complete the Discussion.
Reading
· Course Text: Entrepreneurship:
Hisrich, R.D., Peters, M.P., & Shepherd, D.A. (2013).
Entrepreneurship (Laureate Custom Education). New York:
McGraw-Hill Irwin.
Chapter 4, "Creativity and the Business Idea"
In this chapter, you will learn to identify various sources of
ideas for new ventures as well as the methods available for
generating new venture ideas. Creativity is an important feature
of entrepreneurship and it plays a vital role in problem solving.
You will examine the importance of innovation and the aspects
of the product planning and development process. Technology is
changing rapidly and has affected the entrepreneurial process.
You will discover the features of e-commerce and the process of
starting an e-commerce business.
Focus on the definitions provided throughout the chapter.
Review and think about the examples and anecdotes provided in
the chapter that illustrate the major ideas being conveyed.
Reflect on the role that the Internet plays on your abilities to do
work, complete research, etc. Do you think that the Internet can
be a source of advantage for one firm over other firms? Or do
you think that it is a necessity just to be able to compete in
today's business environment?
Chapter 7, "The Business Plan: Creating and Starting the

Venture"
In this chapter, you will define what a business plan is, who
prepares it, who reads it, and how it is evaluated. It is important
to understand the scope and value of such plans to all
stakeholders as well as to be able to identify the sources for
each section of the business plan. You will learn the value of
the Internet as a source of information as well as a marketing
tool. Finally, you will preview examples of business plans and
step-by-step explanations as to how you would go about
creating such a plan.
the chapter that illustrate the major ideas being conveyed.
Consider the amount of time and resources that must be used to
develop a business plan. Given these factors, as well as the
difficulties of predicting the future, is a business plan useful?
What do you believe constitutes an excellent business plan?
· Case Study:"Euro Disney: Bungling a Successful Format"
Management Mistakes and Successes, 10th Edition by Hartley,
R. Copyright 2011 by John Wiley & Sons, Inc. Reprinted by
permission of John Wiley & Sons, Inc. via the Copyright
Clearance Center.
In this case study, you will examine the history of the Disney
Company's decision to build an amusement park in France
despite the failure of previous amusement parks to remain open.
This case presents the steps that the company undertook during
the research and development stages as well as its thought
process and justification for the construction of Euro Disney.
You will learn the results of the venture along with the mistakes
that the organization made that could have possibly been
avoided.

the chapter that illustrate the major ideas being conveyed. Think
of large, well-established companies and their attempts to
expand into new ventures. What has been the result of these
ventures?
References
Entrepreneurship (Laureate Custom Education). New York:
McGraw-Hill Irwin.
References
Entrepreneurship (Laureate Custom
Education). New York: McGraw-Hill Irwin.
Custom Create Edition
LAUREATE
EDUCATION INC
196 -1 Entrepreneurship
THE BUSINESS PLAN: CREATING AND
STARTING THE VENTURE

1
To define what the business plan is, who prepares it, who reads
it, and how it is
evaluated.
2
To understand the scope and value of the business plan to
investors, lenders, employees,
suppliers, and customers.
3
To identify information needs and sources for each critical
section of the business plan.
4
To enhance awareness of the value of the Internet as an
information resource and
marketing tool.
5
To present examples and a step-by-step explanation of the
business plan.
6
To present helpful questions for the entrepreneur at each stage
of the planning process.
7
To understand how to monitor the business plan.
I

___________ Ent~:?...':~n-~~s_h~_'__~~~h_th_E~i-tio_o -~-7-
__ _
OPENING PROFILE
BELINDA GUADARRAMA
The business plan, although it is often criticized as being
"dreams of glory," is
probably the single most important document to the
entrepreneur at the start-up
stage. Potential investors are not likely to consider investing in
a new venture until
the business plan has been completed. In addition, the business
plan helps the en-
trepreneur maintain perspective as to what needs to be
accomplished.
• • The development and preparation of a business plan
can entail many obstacles and takes a strong commitment
by an entrepreneur before it can actually be completed and then
implemented. No
one knows this better than Belinda Guadarrama, the president
and CEO of GC Micro
Corporation. Her company supplies computer hardware and
software to Fortune 1000
companies as well as the defense and aerospace industry.

As the entrepreneur of this now multi-million-dollar company,
Belinda has been
recognized by two Hispanic organizations-the U.S. Hispanic
Chamber of Commerce
and the Latin Business Association-as Hispanic Businesswoman
of the Year 2002.
Her firm has been consistently ranked among the 500 largest
Hispanic-owned
companies, and in 2008 it received the Boeing Performance
Excellence Award and
the U.S. Department of Agriculture Woman-Owned Business
Contractor of the Year
award.
Although today she is a successful entrepreneur, the journey
was a long and ardu-
ous process with a number of highs and lows. After graduating
from Trinity University
and taking a number of graduate courses at the University of
Texas at Austin, she be-
gan working for the Texas attorney general as the director of
personnel and training.
She later moved to California during the 1980s technology
boom to work for a mail-

order software company. Like many others, she arrived at work
one day to find a note
on the door indicating that the business was closed.
At that point Belinda made the decision to start her own
business. She felt it was a
great time to take some risks since she had no job and limited
prospects. In 1986, with
a few former co-workers, she launched GC Micro Corporation.
To raise initial capital
and money for other expenses while a business plan was being
developed, she sold
her house and cashed in her retirement money. She made a
conscious decision at this
187
I
198 I Entrepreneurship :..-.---'--··-·-'--+ ----··--··-- ··--·-- ----
188 PART 3 FROM THE OPPORTUNITY TO THE BUSINESS
PLAN
point to put everything on the line. Eventually, with business
plan in hand, she began
knocking on doors to try to raise money for the start-up. It was
then that she began

to face some of the lows in the entrepreneurial process as she
incurred one rejection
after another. She could not even get a bank to lend her $5,000
to keep going. Fortu-
nately, she persisted until she came upon the Small Business
Admin istration (SBA) loan
program that guarantees a large percentage of a loan through a
local participating
bank. After submitting her plan through this program, she
received her first loan
from a local bank.
Raising the start-up capital was only one of the early obstacles
that she overcame.
Being a woman and a Latina, she had to overcome many
negative stereotypes. In one
meeting with a potential client she was told that as a minority
woman she did not
have sufficient management qualifications to represent its
product line and was hence
turned down. However, her hard work and persistence paid off,
and at the end of the
first year of business the company attained revenue of
$209,000. With this success, the
client that had turned her down changed its mind and she

became an authorized
dealer for its products.
Other success followed, and soon she was pursuing contracts
with the U.S. Depart-
ment of Defense. In researching this market, she discovered that
many government
contractors are required to include a percentage of minority-
owned businesses as
subcontractors. She also discovered that there were not enough
minority-owned
businesses, presenting great opportunities for her venture.
However, as she contin-
ued to investigate her opportunities she found she was blocked
from records to
which she had previously had access. She decided to pursue this
in court, knowing
that this could put her entire business on the line. Subsequently,
the case GC Micro
Corporation v. the Defense Logistics Agency reached the courts
and then dragged on
for several years. During this time her business was in jeopardy
since many companies
stated they would no longer work with her. Eventually she won
her case. Her reputa-

tion as someone not afraid to take a stand and with strong
leadership skills spread
throughout the industry.
The company has become one of the few just-in-time (JIT)
system contract suppli-
ers. In 2003 the company received the JIT Supplier Partnership
Award. Guadarrama's
entrepreneurial skills have also spilled over to civic-minded
activities, supporting
such programs as the California Latino-Chicano High School
Drop-Out Prevention
Program, the Canal Community Alliance, the Ochoa Migrant
Farm Workers Camp,
and the Gilroy YMCA. Belinda's success is a tribute to her
strong entrepreneurial
character. She was not afraid of the hard work required to plan
her business-and
she was not afraid to stand up for what she felt was right. Her
commitment to the
community has made her an inspiration to many other Hispanic
businessmen and
women.
GC Micro Corporation now has 14 warehouses across the United

States and is an
authorized dealer for about 200 manufacturers such as Sun
Microsystems, IBM,
Hewlett-Packard, St orage Tek, Cisco, Dell, Apple, and Sony.
Now with 30 employees,
sales revenue has reached $35 million.1
t describing all
elements and
CHAPTER 7
THEBUSINESSPLAN:CREATINGANDSTARTINGTHEVENTU
RE 189
PLANNING AS PART OF THE BUSINESS OPERATION
Before we begin a discussion of the business plan, it is
important for the reader to un-
derstand the different types of plans that may be part of any
business operation. Plan-
ning is a process that never ends for a business. It is extremely
important in the early
stages of any new venture when the entrepreneur will need to
prepare a preliminary
business plan. The plan will become finalized as the
entrepreneur has a better sense of
the market, the product or services to be marketed, the
management team, and the finan-
cial needs of the venture. As the venture evolves from an early
start-up to a mature busi-
ness, planning will continue as management seeks to meet its

short-term or long-term
business goals.
For any given organization, it is possible to find financial plans,
marketing plans, hu-
man resource plans, production plans, and sales plans, to name a
few. Plans may be
short-term or long-term, or they may be strategic or operational.
Plans will also differ in
scope depending on the type of business or the anticipated size
of the start-up operation.
Even though they may serve different functions, all these plans
have one important pur-
pose: to provide guidance and structure to management in a
rapidly changing market
environment.
WHAT IS THE BUSINESS PLAN?
The business plan is a written document prepared by the
entrepreneur that describes all the
relevant external and internal elements involved in starting a
new venture. It is often an
integration of functional plans such as marketing, finance,
manufacturing, and human re-
sources. As in the case of Belinda Guadarrama, it addresses the
integration and coordina-
tion of effective business objectives and strategies when the
venture contains a variety of
products and services. It also addresses both short-term and
long-term decision making for
the first three years of operation. Thus, the business plan-or, as
it is sometimes referred to,
the game plan or road map-answers the questions, Where am I
now? Where am I going?
and How will I get there? Potential investors, suppliers, and
even customers will request or

require a business plan.
If we think of the business plan as a road map, we might better
understand its signifi-
cance. Let's suppose you were trying to decide whether to drive
from Boston to Los Angeles
(mission or goal) in a motor home. There are a number of
possible routes, each requiring
different time frames and costs. Like the entrepreneur, the
traveler must make some impor-
tant decisions and gather information before preparing the plan.
The travel plan would consider external factors such as
emergency car repair, weather
conditions, road conditions, sights to see, and available
campgrounds. These factors are
basically uncontrollable by the traveler but must be considered
in the plan, just as the en-
trepreneur would consider external factors such as new
regulations, competition, social
changes, changes in consumer needs, or new technology.
On the other hand, the traveler does have some idea of how
much money is available;
how much time he or she has; and the choices of highways,
roads, campgrounds, sights,
and so forth. Similarly, the entrepreneur has some control over
manufacturing, marketing,
and personnel in the new venture.
The traveler should consider all these factors in determining
what roads to take, what
campgrounds to stay in, how much time to spend in selected
locations, how much time and
money to allow for vehicle maintenance, who will drive, and so
on. Thus, the travel plan re-

sponds to three questions: Where am I now? Where am I going?
and How do I get there?
Then the traveler in our example-or the entrepreneur, the
subject of our book-will be
· 200 I '"'"'""'""h'' ----~ .. ----W-~------------··-------------
PLAN
able to determine how much money will be needed from
existing sources or new sources to
achieve the plan.
We saw in the opening example of this chapter how Belinda
Guadarrama used the busi-
ness plan to address these questions. The functional elements of
the business plan are
discussed here but are also presented in more detail in the
chapters that follow.
WHO SHOULD WRITE THE PLAN?
The business plan should be prepared by the entrepreneur;
however, he or she may consult
with many other sources in its preparation. Lawyers,
accountants, marketing consultants,
and engineers are useful in the preparation of the plan. Some of
these needed sources
can be found through services offered by the Small Business
Administration (SBA),
the Senior Corps of Retired Executives (SCORE), small-
business development centers
(SBDCs), universities, and friends or relatives. The Internet
also provides a wealth of

information as well as actual sample templates or outlines for
business planning. Most
of these sources are free of charge or have minimal fees for
workshop attendance or to
purchase or download any information. In many instances
entrepreneurs will actually
hire or offer equity (partnership) to another person who might
provide the appropriate
expertise in preparing the business plan as well as become an
important member of the
management team.
To help determine whether to hire a consultant or to make use
of other resources, the
entrepreneur can make an objective assessment of his or her
own skills. Table 7.1 is an
illustration of a rating to determine what skills are lacking and
by how much. For exam-
ple, a sales engineer designed a new machine that allows a user
to send a 10-second per-
sonalized message in a greeting card. A primary concern was
how best to market the
machine: as a promotional tool a firm could use for its
distributors, suppliers, sharehold-
ers, or employees; or as a retail product for end users. This
entrepreneur, in assessing his
skills, rated himself as excellent in product design and sales,
good in organizing, and
only fair or poor in the remaining skills. To supplement the
defined weaknesses, the
entrepreneur found a partner who could contribute those skills
that were lacking or weak.
Through such an assessment, the entrepreneur can identify what
skills are needed and
where to obtain them.

[ TABLE 7.1 Skills Assessment
Skills
Accounting/taxes
Planning
Forecasting
Marketing research
Sales
People management
Product design
Legal issues
Organizing
Excellent Good Fair Poor
I
Entrepreneurship, Eighth Edition I 201 --------------------------·--
---·-------·- ---- --- --·------r~---
CHAPTER 7 THE BUSINESS PLAN: CREATING AND
STARTING THE VENTURE 191
SCOPE AND VALUE OF THE BUSINESS PLAN-
WHO READS THE PLAN?
The business plan may be read by employees, investors,

bankers, venture capitalists, suppli-
ers, customers, advisors, and consultants. Who is expected to
read the plan can often affect
its actual content and focus. Since each of these groups reads
the plan for different purposes,
the entrepreneur must be prepared to address all their issues and
concerns. In some ways, the
business plan must try to satisfy the needs of everyone, whereas
in the actual marketplace
the entrepreneur's product will be trying to meet the needs of
selected groups of customers.
However, there are probably three perspectives that should be
considered in prepar-
ing the plan. First is the perspective of the entrepreneur, who
understands better than any-
one else the creativity and technology involved in the new
venture. The entrepreneur must
be able to clearly articulate what the venture is all about.
Second is the marketing perspec-
tive. Too often, an entrepreneur will consider only the product
or technology and not
whether someone would buy it. Entrepreneurs must try to view
their business through the
eyes of their customer. This customer orientation is discussed
further in Chapter 8. Third,
the entrepreneur should try to view his or her business through
the eyes of the investor.
Sound financial projections are required; if the entrepreneur
does not have the skills to pre-
pare this information, then outside sources can be of assistance.
2
The depth and detail in the business plan depend on the size and
scope of the proposed
new venture. An entrepreneur planning to market a new high-

tech machine will need a
comprehensive business plan, largely because of the nature of
the product and market. An
entrepreneur who plans to open a retail clothing store will not
need the comprehensive cov-
erage required by a new high-tech machine manufacturer. A new
e-commerce business,
however, may require a very different focus, particularly on
how to market the Web site that
will offer the goods and services. Thus, differences in the scope
of the business plan may
depend on whether the new venture is a service, involves
manufacturing, or is a consumer
good or industrial product. The size of the market, competition,
and potential growth may
also affect the scope of the business plan.
The business plan is valuable to the entrepreneur, potential
investors, or even new per-
sonnel, who are trying to familiarize themselves with the
venture, its goals, and objectives.
The business plan is important to these people because:
• It helps detemilne the viability of the venture in a designated
market.
• It provides guidance to the entrepreneur in organizing his or
her planning activities.
• It serves as an important tool in helping to obtain financing.
Potential investors are very particular about what should be
included in the business
plan. Even if some of the information is based on assumptions,
the thinking process re-
quired to complete the plan is a valuable experience for the

entrepreneur since it forces him
or her to assess such things as cash flow and cash requirements.
In addition, the thinking
process takes the entrepreneur into the future, leading him or
her to consider important issues
that could impede the road to success.
The process also provides a self-assessment by the entrepreneur.
Usually, he or she feels
that the new venture is assured of success. However, the
planning process forces the entre-
preneur to bring objectivity to the idea and to reflect on such
questions as: "Does the idea
make sense? Will it work? Who is my customer? Does it satisfy
customer needs? What kind
of protection can I get against imitation by competitors? Can I
manage such a business?
Whom will I compete with?" This self-evaluation is similar to
role playing, requiring the en-
trepreneur to think through various scenarios and consider
obstacles that might prevent the
I
-- 202 ~ -'""''~"""~;,_
AS SEEN IN BUSINESSWEEK
DON'T EXPECT A FEE FOR MAKING AN INTRODUCTION
Q: I'm an independent record producer. About
30 years ago, I introduced a close friend to a record-
ing artist, and we all became friends and produced
a song together. We lost touch with the artist, who

is now a millionaire, but recently my friend con-
tacted him, and they plan to form a partnership.
Since I introduced them initially, do I deserve any
monetary compensation from their joint venture?
-R.B., Manasquan, N.J.
A: The compensation you're asking about might
be termed a "finder's fee," in which an individual
gets a flat fee or a percentage of a business deal that
he or she helped arrange, typically by making an in-
troduction. "A finder's fee is associated with the per-
formance of some type of service. The finder acts as
an agent and thus is entitled to a fee for perform-
ance," says Robert Chell, a longtime business consult-
ant in Indian Wells, Calif.
However, in your case, that introduction took place
30 years ago, and then the parties lost touch. After
many years passed, your friend took it upon him-
self to reestablish contact with the (apparently
now-successful) recording artist and form a new
partnership.
Since you didn't make the introduction this time-
the parties already knew each other, and you weren't
asked to be a conduit-it is pretty tough to make the
case that you deserve compensation from their joint
venture, Chell says: "If you'd done something spe-
cific this time-maybe. But in this case, maybe not."
Other experts agreed. "If the business relationship
began and ended with the production of the song
way back in 1979, then an expectation of some re-
ward, monetary or otherwise, is not in order," says
Sheldon Kopin, president of JBS Associates, a man-

agement consulting firm in Cincinnati.
Source; Reprinted from September 15, 2009, issue of Business
Week
by special permission, copyright © 2009 by The McGraw-Hill
Com-
panies, Inc., from "Don't Expect a Fee for Making an
Introduction"
by Karen E. Klein, www.businessweek.com/smallbiz.
venture from succeeding. The process allows the entrepreneur to
plan ways to avoid such
obstacles. It may even be possible that, after preparing the
business plan, the entrepreneur
will realize the obstacles cannot be avoided or overcome.
Hence, the venture may be ter-
minated while still on paper. Although this certainly is not the
most desirable conclusion,
it would be much better to terminate the business endeavor
before investing further time
and money.
192
HOW DO POTENTIAL LENDERS AND INVESTORS
EVALUATE THE PLAN?
As stated earlier, there are a number of cookie-cutter or
computer-generated software packages
or samples on the Internet that are available to assist the
entrepreneur in preparing a busi-
ness plan. These sources, however, should be used only to assist
in its preparation, since the
business plan should address the needs of all the potential
readers or evaluators and should
reflect the strengths of management and personnel, the product
or service, and available

resources. There are many different ways to present a quality
business plan and thus any at-
tempt to imitate or fit your strategy and objectives into a
cookie-cutter approach could have
very negative results. The plan needs to focus on the above-
mentioned factors and should
ultimately consider its purpose.
It is conceivable that the entrepreneur will prepare a first draft
of the business plan from his
or her own personal viewpoint without consideration of the
constituencies that will ultimately
'""'Pre"'""h;p, E;gh<h Ed•;o, I ------- - ---- ·-·-· --·- --· --+ 203
read and evaluate the plan's feasibility. As the entrepreneur
becomes aware of who will
read the plan, appropriate changes will be necessary. For
example, one constituency may
be suppliers, who may want to see a business plan before
signing a contract to produce
either components or finished products or even to supply large
quantities of materials on
consignment. Customers may also want to review the plan
before buying a product that
may require significant long-term commitment, such as a high-
tech telecommunications
system. In both cases the business plan should consider the
needs of these constituencies,
who may pay more attention to the experience of the
entrepreneur(s) and his or her projec-

tion of the marketplace.
Another group that may evaluate the plan are the potential
suppliers of capital. These
lenders or investors will likely vary in terms of their needs and
requirements in the
business plan. For example, lenders are primarily interested in
the ability of the new
venture to pay back the debt including interest within a
designated period of time.
Banks want facts with an objective analysis of the business
opportunity and all the poten-
tial risks inherent in the new venture. It is also important that,
along with a solid busi-
ness plan, the entrepreneur develop a strong personal
relationship with the loan officer
of the bank.
The story of Peter Pap, a successful dealer in oriental rugs,
provides a good example of
how lenders may evaluate a business plan. He needed additional
financing to buy more rugs
but was frustrated by the fact that banks would not lend him
funds using his existing inven-
tory of oriental rugs as collateral. He discovered that Fortune
Small Business supported
small businesses with a group of consultants that could help him
with his plan and his
attempt to get additional financing. These consultants from
banking and accounting firms
recommended that he modify his Web site, increase his
advertising, and hire a marketing
manager. He discovered that it was not the collateral that was
the issue but his business plan
that lacked any basis for how the loan would be used. Now with
changes in his business

plan and advice from one of the banking consultants he is
considering approaching the
Small Business Administration for a 7 A project loan to expand
his business. This is a loan
guaranteed by the SBA but actually provided by a federal bank.
3
Typically, lenders focus on the four Cs of credit: character, cash
flow, collateral, and eq-
uity contribution. Basically, what this means is that lenders
want the business plan to reflect
the entrepreneur's credit history, the ability of the entrepreneur
to meet debt and interest
payments (cash flow), the collateral or tangible assets being
secured for the loan, and the
amount of personal equity that the entrepreneur has invested.
Investors, particularly venture capitalists, have different needs
since they are providing
large sums of capital for ownership (equity) with the
expectation of cashing out within five
to seven years. Investors often place more emphasis on the
entrepreneur's character than
lenders do, and often spend much time conducting background
checks. This is important
not only from a financial perspective but also because the
venture capitalist will play an im-
portant role in the actual management of the business. Hence,
investors want to make sure
that the entrepreneur is compliant and willing to accept this
involvement. These investors
will also demand high rates of return and will thus focus on the
market and financial
projections during this critical five- to seven-year period.
In preparing the business plan, it is important for entrepreneurs

to consider the needs of
external sources and not merely provide their own perspective.
This will keep the plan from
being an internalized document that emphasizes only the
technical advantages of a product
or market advantages of a service, without consideration of the
feasibility of meeting
market goals and long-term financial projections.
Entrepreneurs, in sharing their business plan with others, often
become paranoid, fear-
ing that their idea will be stolen by one of the external readers.
Most external advisors and
~204 __ j Entrepreneurship
• ETHICS
PROTECTING YOUR BUSINESS IDEA
One of the serious concerns that entrepreneurs voice
relates to how to protect their business ideas, when
they are also advised to share their business plans
with many friends and associates. Since these plans
provide comprehensive discussion of the new ven-
ture, the concern is understandable. Most individuals
who are asked to comment and review a business
plan would act in an ethical and professional manner
in providing any advice to entrepreneurs. However,
there are also many examples of situations in which a
family member, friend, or business associate has been
accused of "stealing" an idea.
The best strategy for an entrepreneur, outside of

seeking the advice of an attorney, is to ask all readers
who are not representing a professional firm (such as
a venture capitalist) to sign a noncompete or nondis-
closure agreement. An example of such an agreement
can be found in Chapter 6. Those representing a pro-
fessional organization (such as a bank or venture capi-
talist) need not be asked to complete a nondisclosure
form since they would be insulted and would be in-
clined to reject the venture before they had even
read the plan.
194
potential investors are bound by a professional code of ethics,
and the entrepreneur should
not be deterred from seeking external advice (see Ethics box).
PRESENTING THE PLAN
Often, colleges and universities or locally sponsored business
meetings offer an opportu-
nity for selected entrepreneurs to present their business plans in
a competitive and struc-
tured setting. Typically, each selected entrepreneur is asked to
present the highlights of his
or her business plan in a defined time frame. The entrepreneur
is expected to "sell" his or
her business concept in this designated period of time. This
implies that the entrepreneur
must decide what to say and how to present the information.
Typically the entrepreneur will
focus on why this is a good opportunity, providing an overview
of the marketing program
(how the opportunity will convert to reality) and the results of
this effort (sales and profits).
Concluding remarks might reflect the recognized risks and how
the entrepreneur plans to

address them.
Audiences at these presentations usually include potential
investors who are given an
opportunity to ask pointed questions regarding any of the
strategies conveyed in the busi-
ness plan presentation. After the completion of all the scheduled
business plan presenta-
tions, a winner is usually declared, with a financial reward that
can range from $10,000 to
$50,000. The benefit of these competitions is not necessarily the
financial award since there
can be only one winner. However, since the audience is made up
of professional investors,
there is always the opportunity for any one of the business plans
presented to attract the
attention of a venture capitalist or private investor. This interest
may result in further nego-
tiations and perhaps a future investment in the new venture. The
number of schools that
sponsor these business plan competitions seems to be growing
significantly, and often the
schools will advertise, requesting that interested entrepreneurs
submit an application for
participation in the competition.4
Some investors describe these presentations as elevator pitches,
since they are anal-
ogous to an entrepreneur getting on an elevator with one or
more investors and trying to
persuade them that his or her business concept is a good
investment before the elevator
reaches its final destination. Even for those who do not win a
prize, the opportunity to
present a plan and then make adjustments in the plan based on
the feedback is a great

learning experience.
Eomp""'""hlp, Eighth""'"' I 205 -~-·----····---- --~- ----- ----- ---
----------------- ----------- --- --·· - -- ---- -----------~ ------~---'
INFORMATION NEEDS
Before committing time and energy to preparing a business
plan, the entrepreneur should
do a quick feasibility study of the business concept to see
whether there are any possible
barriers to success. The information, obtainable from many
sources, should focus on mar-
keting, finance, and production. The Internet, discussed later in
the chapter, can be a valu-
able resource for the entrepreneur. Before beginning the
feasibility study, the entrepreneur
should clearly define the goals and objectives of the venture.
These goals help define what
needs to be done and how it will be accomplished. These goals
and objectives also provide
a framework for the business plan, marketing plan, and financial
plan.
Goals and objectives that are too general or that are not feasible
make the business plan
difficult to control and implement. For example, an
entrepreneur starting a sporting goods
store that specialized in offbeat sports (e.g., rollerblading,
skateboarding, and snowboarding)
developed a business plan that called for six stores to be opened
by year 2 of the start-up.

A friend and business confidant read the plan and immediately
asked the entrepreneur to
explain how and where these stores would be located. Not
having a clear understanding of
the answers to these questions suggested to the entrepreneur
that his business objectives
needed to be much more reasonable and that they needed to be
clarified in the marketing and
strategy segments of the plan. The business associate explained
to the entrepreneur that a
business plan is similar to building a house, in that it is
necessary that each step in the process
be related to the goals and objectives or outcome of the
construction. From this experience
the entrepreneur rewrote the business plan to reflect more
reasonable goals and objectives.
Jay Jackson determined, while managing an audiovisual
distribution business in South-
east Asia, that there may be a market for custom-made teak
furniture. He and his wife JL
decided to launch a furniture importing business in the United
States by having teak furni-
ture manufactured in Indonesia that would be produced from
teak walls and floors that
were being ripped out of homes destined for renovation or
demolition. The business de-
pended on gathering potential customers from trade shows.
However, potential customers
at these trade shows did not seem enthusiastic and saw this
product as just another furniture
company. By talking to these customers in greater depth, they
found that they were most
intrigued by the concept of recycling the teak wood. It also
appeared from these discussions
that the more upscale consumer interested in ecofriendly

products would be the best target
market. As a result of listening to their customers, the Jacksons
refocused their business plan
objectives to appeal to a more upscale customer interested in
ecofriendly products. In addition,
they modified their intended offerings to focus on house and
garden furniture. They then
proceeded to identify nontraditional, unique trade shows that
would include their target
market such as a collector antique trade show. The attendees at
these shows matched their
target market and soon business took off. They now expect to
exceed sales of $1 rnillion.5
From the first example, we can see the importance of feasible,
well-defined goals and ob-
jectives in the business plan. In the second example, we note
that a well-defined business
strategy based on market information can provide a more
effective focus of the business
model. Once this solid foundation is in place, strategy decisions
can then be established
that will allow the company to achieve those goals and
objectives.
Market Information
One of the initial pieces of information needed by the
entrepreneur is the market potential
for the product or service. To ascertain the size of the market, it
is first necessary for the en-
trepreneur to define the market. For example, is the product
most likely to be purchased by
men or women? People of high income or low income? Rural or
urban dwellers? Highly

l
206 l Entrepreneurship
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196 PART 3 FROM THE OPPORTUNilYTO THE BUSINESS
PLAN
educated or less educated people? A well-defined target market
will make it easier to pro-
ject market size and subsequent market goals for the new
venture. For example, let's assume
that an entrepreneur in the Boston area notes the success of
businesses such as Au Bon Pain
and Panera Bread Company and thus is considering launching a
food business that offers
the convenience of "fast food" but with the taste of a sit-down
restaurant. With a huge
tourism trade the entrepreneur decides on a mobile (food cart)
crepe business that will in-
clude a number of carts situated in high-traffic areas.
To build a strong marketing plan with reasonable and
measurable market goals and ob-
jectives the entrepreneur will need to gather information on the
industry and market. Most
entrepreneurs have difficulty with this stage and do not often
know where to begin. The
best way to start is to first visualize this process as an inverted
pyramid (see Figure 7.1).
This means that we start with very broad-based data and
information and work down until
we can develop a positioning strategy and quantifiable goals

and objectives. All this infor-
mation can then be used in the industry analysis and marketing
planning sections of the
business plan that are discussed later in this chapter. (Also see
Chapter 8.)
As noted in Figure 7.1, we begin the process by evaluating
general environmental trends.
This would include household income trends, population shifts,
food consumption habits
FIGURE 7.1 An Upside-Down Pyramid Approach to Gathering
Market Information
General environmental and demographic trends
National food industry trends
Local environmental and
demographic trends
Local food industry trends
Local competition
strengths and
weaknesses
'"'"~'""'""h;p, Bghth Ed;tioo I 20 7 ---- -- ---- --- ------ -- --·· --
--- --- --- --+ - ---- --
and trends, travel, and employment trends. This information can

be found in sources such as
the U.S. Census Bureau, Bureau of Labor Statistics, Forrester,
Reuter Business Insights, and
Statistical Abstracts, to name a few. These sources are available
in the local college or uni-
versity library. Some sources such as the U.S. Census Bureau
can be found online or in the
local community library. Table 7.2 provides a partial list of
sources that can be considered
for typical census-related data. Forrester and Business Insights
are private services and can
be obtained from libraries or by purchasing specific reports on
your industry or market.
TABLE 7.2 Sources of Data on Environmental Trends, Industry
Trends,
Financial Ratios, and Other Benchmarks
Source Description
1. U.S. Census (www.census.gov)
A. U.S. Population Projections for 2010 Projections of
population by area.
B. Service Annual Survey Estimates in dollar volume of receipts
in
selected service industries. Also includes
year-to-year ratios.
c. County Business Patterns Economic data of small areas by
industry for
analyzing market potential, budgeting, and
forecasting.
D. Statistical Abstracts Statistics on social and economic
variables at

national, state, and metropolitan levels.
E. Annual Survey of Manufactures Statistics such as industry
outputs, inputs,
and operating data on manufacturing
activity, by industry groups.
F. Current Industrial Reports Regular reports measuring
production and
shipments of wide range of products.
2. Industry and Market Data
A. Encyclopedia of American Industries Industry trends and
market data compiled
on all SIC-coded firms.
B. Standard & Poor's (NetAdvantage Wide array of industry and
market survey
and Market Insight) data on private and public firms.
c. Stat-USA (U.S. Department of A large database of financial
and trade
Commerce) information. Also provides financial and
operating ratios.
D. Market Share Reporter Compilation of market share statistics
across
array of products and services.
E. RDS TableBase Provides market share, ran kings, industry/
product forecasts.
F. Other sources on industry or market trends are MarketLine,
Forrester, lnvestext,
and Mintel Reports. These reports may be purchased or accessed

through a
university library.
3. Financial and Industry Operating Ratios
A. RMA eStatement Studies (Robert Compilation of 150,000
financial statements
Morris Associates) of banking customers with ratios and
benchmarks.
B. Almanac of Business and Industrial Historical compilation of
financial data on
Financial Ratios (Leo Troy) 4.7 million companies.
c. Industry Norms and Key Ratios Ratios and financial
percentages of over
(Dun & Bradstreet) 1 million financial statements.
D. Financial Studies of the Small Business Ratios of 70
business categories for over 3,000
companies earning less than $1 million.
E. Bizminer (www.bizminer.com) Local and regional market
research reports,
financial ratios on over 16,000 products and
services in 300 U.S. markets. Most cost less
than $100.
20s I '"'~'~"'""h'' ~- -· --t--------···------- -··---·-----·----------·---
-------··---------·--------------
PLAN

The next step is the assessment of trends in the national food
service industry. We
would look for data on total food sales and commercial
restaurant sales by type of restau-
rant. This information can be found in such sources as Dun and
Bradstreet's AllBusiness,
Standard & Poor's (S&P's) Market Insight, and S&P's
NetAdvantage. Standard and
Poor's also provides very specific data on the food industry such
as in its Industry Sur-
veys: Restaurants and the National Restaurant Association. Also
see Table 7.2 for more
in-depth information on some of the important sources of
information that can be used in
this analysis.
Notice that the first two stages in Figure 7.1 focus on the
national market, and the next
two stages consider trends in the local market where the
business will be located. This con-
sists of general local economic trends and an assessment of the
local food service industry.
The sources may include the same ones mentioned above except
data related only to the
local market would be considered. In addition, the state of
Massachusetts publishes data on
tourism (the Massachusetts Travel Industry Report) and
economic trends (U.S. Census
Bureau). Also implicit in this local food service industry
analysis is the regulatory environ-
ment. Each state has distinct regulations regarding alcohol and
food delivery license
requirements. These data can also be found online or in your
local library.
The final step is an analysis of the local competitive

environment. In this example the
entrepreneur would need to identify any restaurants, food
stands, or push-cart food services
that could be competitors. This list can be found in the yellow
pages, local town hall (food
license bureau), or through observation. Each local competitor's
strengths and weaknesses
should be assessed. This can be judged by using marketing
research (discussed in Chap-
ter 8); evaluating the competitors' Web sites, advertising,
menus, and locations; and review-
ing any published articles that have appeared in the local media.
A spreadsheet can then be
prepared with the list of competitors in the first column,
followed by columns devoted to
their strengths and weaknesses.
Once all this analysis has been completed, the entrepreneur is
ready to clarify the prod-
uct or service offering, actual market positioning in the
competitive environment, and mar-
ket objectives. These are part of the marketing plan and are
discussed in more detail in
Chapter 8. These data, in addition to contributing to the
preparation of the marketing plan,
lay the groundwork for the financial projections and forecasts
discussed in Chapter 10.
Operations Information Needs
The relevance of a feasibility study of the manufacturing
operations depends on the nature
of the business. Most of the information needed can be obtained
through direct contact with
the appropriate source. The entrepreneur may need information
on the following:

• Location. The company's location and its accessibility to
customers, suppliers, and
distributors need to be determined.
• Manufacturing operations. Basic machine and assembly
operations need to be
identified, as well as whether any of these operations would be
subcontracted and to
whom.
• Raw materials. The raw materials needed and suppliers'
names, addresses, and costs
should be determined.
• Equipment. The equipment needed should be listed, with its
cost and whether it will be
purchased or leased.
• Labor skills. Each unique skill needed, the number of
personnel required for each
skill, pay rate, and an assessment of where and how these skills
will be obtained
should be determined.
'""'P""""h;p, E;gh<h Ed•;oo I 209
-----· ----·--·--------- --------- -----·------···---- --- -- - -------··---
------- --------~----
• Space. The total amount of space needed should be
determined, including whether the

space will be owned or leased.
• Overhead. Each item needed to support manufacturing-such as
tools, supplies,
utilities, and salaries-should be determined.
Most of the preceding information should be incorporated
directly into the business plan.
Each item may require some research, but this information is
necessary to those who will
assess the business plan and consider funding the proposal.
FINANCIAL INFORMATION NEEDS
Before preparing the financial section of the business plan, the
entrepreneur will need to
prepare a budget that includes a list of all possible expenditures
in the first year and a list
of all revenue sources, including sales and any external
available funds. Thus the budget
includes capital expenditures, direct operating expenses, and
cash expenditures for nonex-
pense items. The revenue from sales must be forecast from
market data, as discussed
earlier. Forecasting is discussed in more detail in Chapter 8. To
prepare the actual budget
(see Chapter 10) the entrepreneur will need to identify
benchmarks in the industry that can
be used in preparing the final pro forma statements in the
financial plan. These benchmarks
or norms establish reasonable assumptions regarding
expenditures based on industry his-
tory and trends. This is a very acceptable method to arrive at the
necessary projected costs
for the new venture.
We return to our crepe business example. In projecting his costs

for operating the
business, our entrepreneur might choose to consider the many
secondary sources that
provide percentage norms for such costs. For example, these
sources would provide per-
centage norms in the industry for such costs as food, beverages,
equipment, personnel,
and licenses. Expenditures such as rent, utilities, insurance, and
personnel costs can also
be ascertained from newspapers or advertisements, or from
phone conversations with
real estate agents, insurance agents, equipment suppliers, and
the utility companies in
the area.
The benchmarks or financial ratios needed to prepare financial
statements can be found
in such sources as Financial Studies of the Small Business
(Financial Research Associates),
Industry Norms and Key Business Ratios (Dun & Bradstreet),
Annual Statement Studies
(Robert Morris Associates), RMA eStatement Studies, and the
Almanac of Business and
Financial Ratios (Leo Troy). More detailed information on the
services these sources pro-
vide can be found in Table 7.2. It is also possible to find
benchmarks by reviewing lOK
reports of similar public competitors. Trade associations and
trade magazines also may
publish valuable data that can supplement the preceding sources
to prepare the financial
statements in the business plan. These pro forma statements will
need to be prepared
monthly in the first year and then either quarterly or annually
for the next two years. Some
investors require five-year projections, so the entrepreneur may

need to clarify exactly what
is needed by those who review the business plan.
USING THE INTERNET AS A RESOURCE TOOL
The changing world of technology offers new opportunities for
entrepreneurs to be able
to access information for many business activities efficiently,
expediently, and at very little
cost. The Internet can serve as an important source of
information in the preparation of
the business plan for such segments as the industry analysis,
competitor analysis, and
measurement of market potential, to name a few. Entrepreneurs
will also find the Internet
_ 210~~~ Entrepreneurship
PLAN
a valuable resource in later-stage planning and decision making.
Besides being a business
intelligence resource, the Internet also provides opportunities
for marketing strategy;
through its Web site, a firm can provide information on the
company, its products and
services, and ordering instructions.
According to data published by the Department of Commerce,
online sales have con-
tinued to increase in spite of the economic downturn. In the
third quarter of 2008 online
sales were up 6 percent over the same period one year earlier.
E-commerce sales reached

$34.4 billion in the third quarter of 2008. Although online retail
sales accounts for only
3.4 percent of all retail sales, it continues to grow each year as
more and more consumers
enjoy the benefit of ordering products from their home. 6
An entrepreneur in the process of writing a business plan can
also access one of the pop-
ular search engines: Google, Yahoo! , MSN, AOL, or Ask
Jeeves. Simply conducting a
search of a topic (for example, "online sporting goods") may
reveal several Web sites, arti-
cles, or sources of information to assist the entrepreneur in
writing the business plan. Use
of these searches has grown about 20 percent over the past two
years, depending on the
search engine?
An entrepreneur should access competitors' Web sites to gain
more knowledge about
their strategy in the marketplace. Internet service is not costly
and is an important vehicle
for the entrepreneur to gather information about the market,
competition, and customers as
well as to distribute, advertise, and sell company products and
services.
In addition to accessing Web sites, the entrepreneur can also
investigate social networks ,
blogs, and discussion groups. Discussion groups such as Yahoo!
Groups and Usenet are the
most noteworthy, although many Web sites also have discussion
groups associated with
them. Blogs refer more to talking to or about something rather
than creating a dialogue.
Social networks are Web sites where those with similar interests

can communicate using
such sites as MySpace, Bebo, or Facebook. These sites may
serve many uses depending on
the needs of the entrepreneur. Using Usenet, which represents
the news groups on the Inter-
net, the entrepreneur can use keywords to identify the most
appropriate newsgroups. These
newsgroups represent potential customers who can be asked
specific questions on their
needs, competitive products, and potential interest in the new
venture's products and ser-
vices. Individuals who are members of the newsgroups will then
respond to these ques-
tions, providing valuable information to the entrepreneur.
Compared with alternative sources the entrepreneur need only
make a small investment
in hardware and software to be ready to use these online
services. With its continuous im-
provements and modifications, the Internet will continue to
provide invaluable opportuni-
ties for the entrepreneur in planning the start-up or the growth
of a venture.
WRITING THE BUSINESS PLAN
The business plan could take hundreds of hours to prepare,
depending on the experience
and knowledge of the entrepreneur as well as the purpose it is
intended to serve. It should
be comprehensive enough to give any potential investor a
complete picture and understand-
ing of the new venture, and it should help the entrepreneur
clarify his or her thinking about
the business.
Many entrepreneurs incorrectly estimate the length of time that

an effective plan will
take to prepare. Once the process has begun, however, the
entrepreneur will realize that it
is invaluable in sorting out the business functions of a new
venture.
The outline for a business plan is illustrated in Table 7.3. Each
of the items in the out-
line is detailed in the following paragraphs of this chapter. Key
questions in each section
are also appropriately detailed.
'""'P~"'""h;p, E;gh•h Ed;tioo I 211 -·-- --------- ~-- --- ·- ----- ---
- ------ --- -·+-----
TABLE 7.3 Outline of a Business Plan
I. Introductory Page
A. Name and address of business
B. Name(s) and address(es) of principal(s)
C. Nature of business
D. Statement of financing needed
E. Statement of confidentiality of report
II. Executive Summary-Two to three pages summarizing the
complete business plan
Ill. Industry Analysis
A. Future outlook and trends
B. Analysis of competitors
C. Market segmentation

D. Industry and market forecasts
IV. Description of Venture
A. Prod uct(s)
B. Service(s)
C. Size of business
D. Office equipment and personnel
E. Background of entrepreneur(s)
V. Production Plan
A. Manufacturing process (amount subcontracted)
B. Physical plant
C. Machinery and equipment
D. Names of suppliers of raw materials
VI. Operations Plan
A. Description of company's operation
B. Flow of orders for goods and/or services
C. Technology utilization
VII . Marketing Plan
A. Pricing
B. Distribution
C. Promotion
D. Product forecasts
E. Controls
VIII. Organizational Plan
A. Form of ownership
B. Identification of partners or principal shareholders
C. Authority of principals
D. Management team background
E. Roles and responsibilities of members of organization
IX. Assessment of Risk
A. Evaluate weakness(es) of business

B. New technologies
C. Contingency plans
X. Financial Plan
A. Assumptions
B. Pro forma income statement
C. Cash flow projections
D. Pro forma balance sheet
E. Break-even analysis
F. Sources and applications of funds
XI. Appendix (contains backup material)
A. Letters
B. Market research data
C. Leases or contracts
D. Price lists from suppliers
~
21 2 l Entrepreneurship
·--· ---- --·----·--- ------·-· --- - ·--- ----- ---~-- ----~-- ---·-------
·· -·-----------· ----------------
1
PLAN
Introductory Page
This is the title or cover page that provides a brief summary of
the business plan's contents.
The introductory page should contain the following:

The name and address of the company.
The name of the entrepreneur(s), telephone number, fax number,
e-mail address, and
Web site address if available.
A paragraph describing the company and the nature of the
business.
The amount of financing needed. The entrepreneur may offer a
package (e.g., stock
or debt). However, many venture capitalists prefer to structure
this package in their
own way.
A statement of the confidentiality of the report. This is for
security purposes and is
important for the entrepreneur.
This title page sets out the basic concept that the entrepreneur is
attempting to develop.
Investors consider it important because they can determine the
amount of investment
needed without having to read through the entire plan. An
illustration of this page can be
found in Table 7.4.
Executive Summary
This section of the business plan is prepared after the total plan
is written. About two to
three pages in length, the executive summary should stimulate
the interest of the potential
investor. This is a very important section of the business plan
and should not be taken
lightly by the entrepreneur since the investor uses the summary

to determine if the entire
business plan is worth reading. Thus, it should highlight in a
concise and convincing
manner the key points in the business plan.
[ TABLE 7.4 Sample Introductory Page
KC CLEANING SERVICE
OAK KNOLL ROAD
BOSTON, MA 02167
(617) 969-0010
www.cleaning.com
Co-owners: Kimberly Peters, Christa Peters
Description of Business:
This business will provide cleaning service on a contract basis
to small and medium-sized
businesses. Services include cleaning of floors, carpets,
draperies, and windows, and regular
sweeping, dusting, and washing. Contracts will be for one year
and will specify the specific
services and scheduling for completion of services.
Financing:
Initial financing requested is a $100,000 loan to be paid off
over six years. This debt will cover
office space, office equipment and supplies, two leased vans,
advertising, and selling costs.
This report is confidential and is the property of the co-owners
listed above. It is intended for
use only by the persons to whom it is transmitted, and any

reproduction or divulgence of any
of its contents without the prior written consent of the company
is prohibited.
!
I
I
I
'"'"'""'""hip, Eighth Editioo I 213 ------·- --- ~----- --~·-· ----·---
--- --------- ------·-- ---- --------- ·------+-- -------
<;;;...<:::o:s::::JCUt' of external
llable variables
Generally the executive summary should address a number of
issues or questions that
anyone picking up the written plan for the first time would want
to know. For example:
What is the business concept or model?
How is this business concept or model unique?
Who are the individuals starting this business?
How will they make money and how much?

If the new venture has a strong growth plan and in five years
expects to be positioned for
an initial public offering (IPO), then the executive summary
should also include an exit
strategy. If the venture is not initially expecting this kind of
growth, the entrepreneurs
should avoid any discussion of an exit strategy in the executive
summary.
Any supportive evidence, such as data points from marketing
research or legal docu-
ments or contracts that might strengthen the case on the
preceding issues, also should be in-
cluded. Under no circumstances should the entrepreneur try to
summarize every section of
the plan, especially since the emphasis placed on the preceding
issues depends on who is
reading the plan.
It should be remembered that this section is only meant to
highlight key factors and mo-
tivate the person holding the plan to read it in its entirety. Key
factors for some plans might
be the people involved. For example, if one of the entrepreneurs
has been very successful
in other start-ups, then this person and his or her background
needs to be emphasized. If the
venture has a contract in hand with a large customer, then this
would be highlighted in the
executive summary. It is similar to the opening statement a
lawyer might make in an impor-
tant court trial or the introductory statements made by a
salesperson in a sales call.
Environmental and Industry Analysis

It is important to put the new venture in a proper context by
first conducting an
environmental analysis to identify trends and changes occurring
on a national and inter-
nationallevel that may impact the new venture. This process was
described earlier in
this chapter. Examples of these environmental factors are:
Economy. The entrepreneur should consider trends in the GNP,
unemployment by
geographic area, disposable income, and so on.
Culture. An evaluation of cultural changes may consider shifts
in the population by
demographics, for example, the impact of the baby boomers or
the growing elderly
population. Shifts in attitudes, such as "Buy American," or
trends in safety, health, and
nutrition, as well as concern for the environment, may all have
an impact on the
entrepreneur's business plan.
Technology. Advances in technology are difficult to predict.
However, the entrepreneur
should consider potential technological developments
determined from resources
committed by major industries or the U.S. government. Being in
a market that is
rapidly changing due to technological development will require
the entrepreneur to
make careful short-term marketing decisions as well as to be
prepared with
contingency plans given any new technological developments
that may affect his or
her product or service.

Legal concerns. There are many important legal issues in
starting a new venture; these
were discussed in Chapter 6. The entrepreneur should be
prepared for any future
legislation that may affect the product or service, channel of
distribution, price, or
l
214 j Entrepreneurship
--·---'-·---;-~;-- ·----r-------------------- --------- ------ ------- -----
------------------- -- ·--~---- ----· ·- ------
204 PART 3
FROMTHEOPPORTUNITYTOTHEBUSINESSPLAN
industry analysis
Reviews industry trends
and competitive strategies
promotion strategy. The deregulation of prices, restrictions on
media advertising (e.g.,
ban on cigarette ads or requirements for advertising to
children), and safety regulations
affecting the product or packaging are examples of legal
restrictions that can affect any
marketing program.
All the preceding external factors are generally uncontrollable.
However, as indicated,
an awareness and assessment of these factors using some of the
sources identified can pro-

vide strong support for the opportunity and can be invaluable in
developing the appropriate
marketing strategy.
As stated earlier (see Figure 7.1), this process can be visualized
as an upside-down pyra-
mid leading to specific market strategy and objectives. Once an
assessment of the environ-
ment is complete, the entrepreneur should conduct an industry
analysis that will focus on
specific industry trends. Some examples of these factors are:
Industry demand. Demand as it relates to the industry is often
available from published
sources. Knowledge of whether the market is growing or
declining, the number of new
competitors, and possible changes in consumer needs are all
important issues in trying
to ascertain the potential business that might be achieved by the
new venture. The
projected demand for the entrepreneur's product or service will
require some additional
marketing research, which will be discussed in Chapter 8.
Competition. Most entrepreneurs generally face potential threats
from larger corporations.
The entrepreneur must be prepared for these threats and should
be aware of who the
competitors are and what their strengths and weaknesses are so
that an effective marketing
plan can be implemented. Most competitors can be easily
identified from experience,
trade journal articles, advertisements, Web sites, or even the
yellow pages.
There are numerous sources that the entrepreneur can consult to

attain general industry
and competitive data for inclusion in this part of the business
plan. Some of these were
mentioned earlier in this chapter (also review Table 7.2), in
relation to our discussion of the
gathering of market information. Many of these sources can be
found in local or university
libraries. They include: Encyclopedia of American Industries,
Encyclopedia of Emerging
Industries, Standard and Poor's Industry Surveys, MarketLine
Business Information Cen-
tre, Forrester, Investext Plus, and Mintel Reports. Each of these
sources focuses on differ-
ent types of industries or markets and can be easily evaluated as
to their benefit either by an
online search (such as Google) or by a visit to a local library.
Most of these sources also
provide published reports that are available for purchase.
The last part of the business plan's industry analysis section
should focus on the specific
market, which would include such information as who the
customer is and what the busi-
ness environment is like in the specific market and geographic
area where the venture will
compete. Thus, any differences in any of the preceding
variables that reflect the specific
market area in which the new venture will operate must be
considered. This information is
particularly significant to the preparation of the marketing plan
section of the business plan,
which is discussed in Chapter 8.
In addition to the numerous industry sources given, there are
also many market databases
that can be researched for relevant data to incorporate into this

section of the business plan.
Market share and size of market often can be assessed from
databases such as: TableBase
and Business & Industry, Market Share Reporter, Economic
Census, County Business Pat-
terns, Current Industrial Reports, Service Annual Survey, and
Monthly Retail and Food Ser-
vice Sales and Inventories. More specific data on demographic
trends and possible target
market numbers can be found in: Profiles of General
Demographic Characteristics 2000
Census/Population, Population Projections (projections for 20IO
available), Mediamark
'"'"P''"'""h;p, E;gh<h ""'•" I 215 -- ---~···-- ·----------------- --.
~---- ------ ·--- ---------- .--- ------ -- -·· ·---------·-·----- ---------
- --+-- -------.
· tion of the
re Provides
lete overview of the
(s) , service(s), and
·ons of a new
TABLE 7.5 Critical Issues for Environmental and Industry
Analysis
1. What are the major economic, technological, legal, and
political trends on a national

and an international level?
2. What are total industry sales over the past five years?
3. What is anticipated growth in this industry?
4. How many new firms have entered this industry in the past
three years?
5. What new products have been recently introduced in this
industry?
6. Who are the nearest competitors?
7. How w ill your business operation be better than this?
8. Are the sales of each of your major competitors growing,
declining, or steady?
9. What are the strengths and weaknesses of each of your
competitors?
10. What trends are occurring in your specific market area?
11. What is the profile of your customers?
12. How does your customer profile differ from that of your
competition?
Reporter, and Lifestyle Market Analyst. Finally, state-by-state
population, demographic, and
housing data usually are available from each state's Web site.
A list of some key questions the entrepreneur should consider
for this section of the
business plan is provided in Table 7.5.

Description of Venture
The description of the venture should be detailed in this section
of the business plan. This
will enable the investor to ascertain the size and scope of the
business. This section should
begin with the mission statement or company mission of the
new venture. This statement
basically describes the nature of the business and what the
entrepreneur hopes to accom-
plish with that business. This mission statement or business
definition will guide the firm
through long-term decision making. Mter the mission statement,
a number of important
factors that provide a clear description and understanding of the
business venture should
be discussed. Key elements are the product(s) or service(s), the
location and size of the
business, the personnel and office equipment that will be
needed, the background of the
entrepreneur(s), and the history of the venture. Table 7.6
summarizes some of the impor-
tant questions the entrepreneur needs to answer when preparing
this section of the busi-
ness plan.
The location of any business may be vital to its success,
particularly if the business is re-
tail or involves a service. Thus, the emphasis on location in the
business plan is a function
of the type of business. In assessing the building or space the
business will occupy, the en-
trepreneur may need to evaluate such factors as parking; access
from roadways to facility;
and access to customers, suppliers, distributors, delivery rates,
and town regulations or zon-

ing laws. An enlarged local map may help give the location
some perspective with regard
to roads, highways, access, and so forth.
Recently an entrepreneur considered opening a new doughnut
shop at a location diago-
nally across from a small shopping mall on a heavily traveled
road. Traffic counts indicated
a large potential customer base if people would stop for coffee,
and so on, on their way to
work. Mter enlarging a local map, the entrepreneur noted that
the morning flow of traffic
216 I Entrepreneurship
,.._-.;......~ ____ , _______________________ ----------------
···---------------------------------------------------------------
PLAN
TABLE 7.6 Describing the Venture
I
1. What is the mission of the new venture?
2. What are your reasons for going into business?
3. Why will you be successful in this venture?
4. What development work has been completed to date?
5. What is your product(s) and/or service(s}?
6. Describe the product(s) and/or service(s), including patent,

copyright, or trademark status.
7. Where will the business be located?
8. Is your building new? old? in need of renovations? (If
renovation is needed, state costs.)
9. Is the building leased or owned? (State the terms.)
10. Why is this building and location right for your business?
11. What office equipment will be needed?
12. Will equipment be purchased or leased?
13. What experience do you have and/or will you need to
successfully implement the
business plan?
required drivers to make a left turn into the doughnut shop,
crossing the outbound lane. Un-
fortunately, the roadway was divided by a concrete center strip
with no break to allow for a
left-hand turn. The only possibility for entry into the shop
required the customer to drive
down about 400 yards and make aU-turn. It would also be
difficult for the customer to get
back on the roadway traveling in the right direction. Since the
town was unwilling to open
the road, the entrepreneur eliminated this site from any further
consideration.
This simple assessment of the location, market, and so on, saved
the entrepreneur from
a potential disaster. Maps that locate customers, competitors,
and even alternative locations

for a building or site can be helpful in this evaluation. Some of
the important questions that
might be asked by an entrepreneur are as follows:
How much space is needed?
Should I buy or lease the building?
What is the cost per square foot?
Is the site zoned for commercial use?
What town restrictions exist for signs, parking, and so forth?
Is renovation of the building necessary?
Is the facility accessible to traffic?
Is there adequate parking?
Will the existing facility have room for expansion?
What is the economic and demographic profile of the area?
Is there an adequate labor pool available?
What are local taxes?
Are sewage, electricity, and plumbing adequate?
If the building or site decision involves legal issues, such as a
lease, or requires town
variances, the entrepreneur should hire a lawyer. Problems
relating to regulations and

tion plan Details
the product(s) will
l
Entrepreneurship, Eighth Edition + 217
---------- ·-----·------- ---~-
TABLE 7.7 Production Plan
1. Will you be responsible for all or part of the manufacturing
operation?
2. If some manufacturing is subcontracted, who will be the
subcontractors? (Give names
and addresses.)
3. Why were these subcontractors selected?
4. What are the costs of the subcontracted manufacturing?
(Include copies of any written
contracts.)
5. What will be the layout of the production process? (Illustrate
steps if possible.)
6. What equipment will be needed immediately for
manufacturing?
7. What raw materials will be needed for manufacturing?
8. Who are the suppliers of new materials and what are the

appropriate costs?
9. What are the costs of manufacturing the product?
10. What are the future capital equipment needs of the venture?
If a Retail Operation or Service:
1. From whom will merchandise be purchased?
2. How will the inventory control system operate?
3. What are the storage needs of the venture and how will they
be promoted?
4. How will the goods flow to the customer?
5. Chronologically, what are the steps involved in a business
transaction?
6. What are the technology utilization requirements to service
customers effectively?
leases can be avoided easily, but under no circumstances should
the entrepreneur try to
negotiate with the town or a landlord without good legal advice.
Production Plan
If the new venture is a manufacturing operation, a production
plan is necessary. This
plan should describe the complete manufacturing process. If
some or all of the manu-
facturing process is to be subcontracted, the plan should
describe the subcontractor(s),
including location, reasons for selection, costs, and any
contracts that have been com-

pleted. If the manufacturing is to be carried out in whole or in
part by the entrepreneur,
he or she will need to describe the physical plant layout; the
machinery and equipment
needed to perform the manufacturing operations; raw materials
and suppliers' names,
addresses, and terms; costs of manufacturing; and any future
capital equipment needs.
In a manufacturing operation, the discussion of these items will
be important to any
potential investor in assessing financial needs.
Table 7. 7 summarizes some of the key questions in this section
of the business plan.
If the new venture does not include any manufacturing
functions, this section should be
eliminated from the plan.
Operations Plan
All businesses-manufacturing or nonmanufacturing-should
include an operations plan
as part of the business plan. This section goes beyond the
manufacturing process (when
the new venture involves manufacturing) and describes the flow
of goods and services
_218 _J Entrepreneurship
PLAN
marketi11g pla11
Describes market

conditions and strategy
related to how the
product(s) and service(s)
will be distributed,
priced, and promoted
orga11izatiollal pla11
Describes form of
ownership and lines of
authority and
responsibility of members
of new venture
from production to the customer. It might include inventory or
storage of manufactured
products, shipping, inventory control procedures, and customer
support services. A non-
manufacturer such as a retailer or service provider would also
need this section in the
business plan to explain the chronological steps in completing a
business transaction. For
example, an Internet retail sports clothing operation would need
to describe how and
where the products offered would be purchased, how they would
be stored, how the in-
ventory would be managed, how products would be shipped,
and, importantly, how a
customer would log on and complete a transaction. In addition,

this would be a conven-
ient place for the entrepreneur to discuss the role of technology
in the business transac-
tion process. For any Internet retail operation, some explanation
of the technology
requirements needed to efficiently and profitably complete a
successful business transac-
tion should be included in this section.
It is important to note here that the major distinction between
services and manufactured
goods is services involve intangible performances. This implies
that they cannot be
touched, seen, tasted, heard, or felt in the same manner as
manufactured products. Airlines,
hotels, car rental agencies, theaters, and hospitals, to name a
few, rely on business delivery
or quality of service. For these firms, performance often
depends on location, facility lay-
out, and personnel, which can, in tum, affect service quality
(including such factors as re-
liability, responsiveness, and assurance). The process of
delivering this service quality is
what distinguishes one new service venture from another and
thus needs to be the focus of
an operations plan. Some key questions or issues for both the
manufacturing and nonman-
ufacturing new venture are summarized in Table 7.7.
Marketing Plan
The marketing plan (discussed in detail in Chapter 8) is an
important part of the business
plan since it describes how the product(s) or service(s) will be
distributed, priced, and pro-
moted. Marketing research evidence to support any of the
critical marketing decision strate-

gies as well as for forecasting sales should be described in this
section. Specific forecasts
for a product(s) or service(s) are indicated to project the
profitability of the venture. The
budget and appropriate controls needed for marketing strategy
decisions are also discussed
in detail in Chapter 8. Potential investors regard the marketing
plan as critical to the suc-
cess of the new venture. Thus, the entrepreneur should make
every effort to prepare as com-
prehensive and detailed a plan as possible so that investors can
be clear as to what the goals
of the venture are and what strategies are to be implemented to
effectively achieve these
goals. Marketing planning will be an annual requirement (with
careful monitoring and
changes made on a weekly or monthly basis) for the
entrepreneur and should be regarded
as the road map for short-term decision making.
Organizational Plan
The organizational plan is the part of the business plan that
describes the venture's form of
ownership-that is, proprietorship, partnership, or corporation. If
the venture is a partnership,
the terms of the partnership should be included. If the venture is
a corporation, it is important
to detail the shares of stock authorized and share options, as
well as the names, addresses, and
resumes of the directors and officers of the corporation. It is
also helpful to provide an organ-
ization chart indicating the line of authority and the
responsibilities of the members of the or-
ganization. Table 7. 8 summarizes some of the key questions the
entrepreneur needs to answer
in preparing this section of the business plan. This information

provides the potential investor
with a clear understanding of who controls the organization and
how other members will
'"'"'""'"""'' E;gh<h Ed;tloo I 219 · - , ___ -- -- -- -· ----- ---- -----
· ·-- ---- -------·-- ----- --~ ·------- -- ------ --- ~ -·--i--------
entofrisk
- potential
plan goals and
e economic
- and necessary
j TABLE 7.8 Organization Structure
1. What is the form of ownership of the organization?
2. If a partnership, who are the partners and what are the terms
of agreement?
3. If incorporated, who are the principal shareholders and how
much stock do they own?
4. How many shares of voting or nonvoting stock have been
issued and what type?
5. Who are the members of the board of directors? (Give names,
addresses, and resumes.)

6. Who has check-signing authority or control?
7. Who are the members of the management team and what are
their backgrounds?
8. What are the roles and responsibilities of each member of the
management team?
9. What are the salaries, bonuses, or other forms of payment for
each member of the
management team?
interact in performing their management functions. Chapter 9
provides more detail on this
part of the business plan.
Assessment of Risk
Every new venture will be faced with some potential hazards,
given its particular industry and
competitive environment. It is important that the entrepreneur
make an assessment of risk in
the following manner. First, the entrepreneur should indicate
the potential risks to the new ven-
ture. Next should be a discussion of what might happen if these
risks become reality. Finally,
the entrepreneur should discuss the strategy that will be
employed to either prevent, minimize,
or respond to the risks should they occur. Major risks for a new
venture could result from a
competitor's reaction; weaknesses in the marketing, production,
or management team; and
new advances in technology that might render the new product
obsolete. Even if these factors
present no risks to the new venture, the business plan should
discuss why that is the case.

Financial Plan
Like the marketing, production, and organization plans, the
financial plan is an important
part of the business plan. It determines the potential investment
commitment needed for the
new venture and indicates whether the business plan is
economically feasible. (The finan-
cial plan is discussed in more detail in Chapter 10.)
Generally, three financial areas are discussed in this section of
the business plan. First,
the entrepreneur should summarize the forecasted sales and the
appropriate expenses for at
least the first three years, with the first year's projections
provided monthly. The form for
displaying this information is illustrated in Chapter 10. It
includes the forecasted sales, cost
of goods sold, and the general and administrative expenses. Net
profit after taxes can then
be projected by estimating income taxes.
The second major area of financial information needed is cash
flow figures for three
years, with the first year's projections provided monthly. Since
bills have to be paid at dif-
ferent times of the year, it is important to determine the
demands on cash on a monthly ba-
sis, especially in the first year. Remember that sales may be
irregular, and receipts from
customers also may be spread out, thus necessitating the
borrowing of short-term capital to
meet fixed expenses such as salaries and utilities. A form for
projecting the cash flow needs
for a 12-month period can be found in Chapter 10.

220 I '"'"'""'""h;p ;;__ ___ ..._ ___ . --+--------- ----· ------ -----
·----·-·· --·-·--·---------·--·---------------- ···----·--·--- --··-- ------
-- --------
AS SEEN IN BUSINESSWEEK
ELEVATOR PITCH FOR PERFECT DINNER
A relative who has been very successful in the restau-
rant business has recently sold his restaurant for a
huge profit and is looking for a good investment for
some of his funds. He knows that you are a good re-
source since, as a struggling entrepreneur in your
own right, you try to maintain an awareness of other
start-ups in the area. Would you consider introducing
your uncle to Karen and Jill after reading about their
unique idea?
and order ahead before exiting Oak Station on the
Green Line.
The business was founded by Karen Gruber, 48,
who formerly handled the Kraft cheese account at ad
agency J. Walter Thompson, and Jill Haas, 47, a one-
time food scientist at Kraft Foods. The Perfect Dinner
broke even with $500,000 in revenue last year-the
average check is $41-and is looking at 8% to 10%
growth this year, Gruber says. The pair, who started
the venture with $250,000 from friends, family, and
their own savings, is now trying to drum up $700,000
to open two more sites this fall.
Forget Boston Market or the prepared-foods sec-
tion of Jewel or Whole Foods. In Oak Park, there's the

Perfect Dinner, a kitchen that prepares "home-style"
take-out and delivered meals. The startup is aimed
mostly at "EI" riders, who can go online to scope
out the shop's menu of eight to 10 daily entrees
Source: Reprinted from May 16, 2008 issue of Business Week
by
special permission, copyright© 2008 by The McGraw-Hill
Compa-
nies, Inc., from ''Perfect Dinner" by Howard Wolinsky, from
"America's
Most Promising Startups," www.businessweek.com/smallbiz.
210
The last financial item needed in this section of the business
plan is the projected bal-
ance sheet. This shows the financial condition of the business at
a specific time. It summarizes
the assets of a business, its liabilities (what is owed), the
investment of the entrepreneur and
any partners, and retained earnings (or cumulative losses). A
form for the balance sheet is
included in Chapter 10, along with more detailed explanations
of the items included. Any
assumptions considered for the balance sheet or any other item
in the financial plan should
be listed for the benefit of the potential investor.
Appendix
The appendix of the business plan generally contains any
backup material that is not nec-
essary in the text of the document. Reference to any of the
documents in the appendix
should be made in the plan itself.

Letters from customers, distributors, or subcontractors are
examples of information that
should be included in the appendix. Any documentation of
information-that is, secondary
data or primary research data used to support plan decisions-
should also be included.
Leases, contracts, or any other types of agreements that have
been initiated also may be in-
cluded in the appendix. Finally, price lists from suppliers and
competitors may be added.
USING AND IMPLEMENTING THE BUSINESS PLAN
The business plan is designed to guide the entrepreneur through
the first year of operations.
It is important that the implementation of the strategy contain
control points to ascertain
progress and to initiate contingency plans if necessary. Some of
the controls necessary in
manufacturing, marketing, financing, and the organization are
discussed in subsequent
chapters. Most important to the entrepreneur is that the business
plan not end up in a drawer
somewhere once the financing has been attained and the
business launched.
There has been a tendency among many entrepreneurs to avoid
planning. The reason of-
ten given is that planning is dull or boring and is something
used only by large companies.
'""'"~"'""";p, Eigh<h Ed;t;o, I 221 ----------- ----·-·- ~--- ----·----
-------~---·-- --- ------ ---------- --------··---- ------ -- -- -t- ----~ -

This may be an excuse; perhaps the real truth is that some
entrepreneurs are afraid to plan. 8
Planning is an important part of any business operation.
Without good planning, the entre-
preneur is likely to pay an enormous price. All one has to do is
consider the planning done
by suppliers, customers, competitors, and banks to realize that it
is important for the entre-
preneur. It is also important to realize that without good
planning the employees will not
understand the company's goals and how they are expected to
perform in their jobs.
Bankers are the first to admit that few business failures result
from a lack of cash but, in-
stead, that businesses fail because of the entrepreneur's inability
to plan effectively. Intelli-
gent planning is not a difficult or impossible exercise for the
inexperienced entrepreneur.
With the proper commitment and support from many outside
resources, such as those
shown in Table 7 .2, the entrepreneur can prepare an effective
business plan.
In addition, the entrepreneur can enhance effective
implementation of the business plan
by developing a schedule to measure progress and to institute
contingency plans. These fre-
quent readings or control procedures will be discussed next.
Measuring Plan Progress
During the introductory phases of the start-up, the entrepreneur
should determine the points

at which decisions should be made as to whether the goals or
objectives are on schedule.
Typically, the business plan projections will be made on a 12-
month schedule. However,
the entrepreneur cannot wait 12 months to see whether the plan
has been successfully
achieved. Instead, on a frequent basis (i.e., the beginning of
each month) the entrepreneur
should check the profit and loss statement; cash flow
projections; and information on in-
ventory, production, quality, sales, collection of accounts
receivable, and disbursements for
the previous month. Company Web sites should also be assessed
as part of this process.
This feedback should be simple but should provide key
members of the organization with
current information in time to correct any major deviations from
the goals and objectives
outlined. A brief description of each of these control elements is
given here:
• Inventory control. By controlling inventory, the firm can
ensure maximum service to
the customer. The faster the firm gets back its investment in raw
materials and finished
goods, the faster that capital can be reinvested to meet
additional customer needs.
• Production control. Compare the cost figures estimated in the
business plan with day-
to-day operation costs. This will help to control machine time,
worker hours, process
time, delay time, and downtime cost.
• Quality control. This will depend on the type of production
system but is designed to

make sure that the product performs satisfactorily.
• Sales control. Information on units, dollars, specific products
sold, price of sales,
meeting of delivery dates, and credit terms is useful to get a
good perspective of the
sales of the new venture. In addition, an effective collections
system for accounts
receivable should be set up to avoid aging of accounts and bad
debts.
• Disbursements. The new venture should also control the
amount of money paid out.
All bills should be reviewed to determine how much is being
disbursed and for what
purpose.
• Web site control. With more and more sales being supported
or garnered from a
company's Web site, it is very important to continually evaluate
the Web site to
ascertain its effectiveness in meeting the goals and objectives of
the plan. There are
many services and software packages available to assist the
entrepreneur in this
process. These service companies and software alternatives are
too numerous to
mention here but can easily be identified from an Internet
search.9
222 I '"'"P""'""h;p ··---~+------------- --- ---
PLAN

IN REVIEW
SUMMARY
Updating the Plan
The most effective business plan can become out-of-date if
conditions change. Environmental
factors such as the economy, customers, new technology, or
competition- and internal factors
such as the loss or addition of key employees-can all change the
direction of the business
plan. Thus, it is important to be sensitive to changes in the
company, industry, and market. If
these changes are likely to affect the business plan, the
entrepreneur should determine what re-
visions are needed. In this manner, the entrepreneur can
maintain reasonable targets and goals
and keep the new venture on a course that will increase its
probability of success.
WHY SOME BUSINESS PLANS FAIL
Generally, a poorly prepared business plan can be blamed on
one or more of the following
factors:
• Goals set by the entrepreneur are unreasonable.
• Objectives are not measurable.
• The entrepreneur has not made a total commitment to the
business or to the family.
• The entrepreneur has no experience in the planned business.
• The entrepreneur has no sense of potential threats or

weaknesses to the business.
• No customer need was established for the proposed product or
service.
Setting objectives requires the entrepreneur to be well informed
about the type of business
and the competitive environment. Objectives should be specific
and not so mundane as to
lack any basis of control. For example, the entrepreneur may
target a specific market share,
units sold, or revenue. These objectives are measurable and can
be monitored over time.
In addition, the entrepreneur and his or her family must make a
total commitment to the
business to be able to meet the demands of a new venture. For
example, it is difficult to op-
erate a new venture on a part-time basis while still holding onto
a full-time position. And it
is also difficult to operate a business without an understanding
from family members as
to the time and resources that will be needed. Lenders or
investors will not be favorably
inclined toward a venture that does not have full-time
commitment.
Generally, a lack of experience will result in failure unless the
entrepreneur can either
attain the necessary knowledge or team up with someone who
already has it. For example,
an entrepreneur trying to start a new restaurant without any
experience or knowledge of the
restaurant business would be in a disastrous situation.
The entrepreneur should also document customer needs before

preparing the plan. Cus-
tomer needs can be identified from direct experience, letters
from customers, or marketing
research. A clear understanding of these needs and how the
entrepreneur's business will
effectively meet them is vital to the success of the new venture.
This chapter has established the scope and value of the business
plan and has outlined the
steps in its preparation. The business plan may be read by
employees, investors, lenders,
suppliers, customers, and consultants. The scope of the plan
will depend on who reads it,
the size of the venture, and the specific industry for which the
venture is intended.
I
Entrepreneurship, Eighth Edition -{--2-~-~
The business plan is essential in launching a new venture. The
result of many hours
of preparation will be a comprehensive, well-written, and well-
organized document
that will serve as a guide to the entrepreneur and as an
instrument to raise necessary
capital and financing.
Before beginning the business plan, the entrepreneur will need
information on
the market, manufacturing operations, and financial estimations.
This process can be

viewed as an upside-down pyramid, beginning with a very
broad-based analysis
down to specific market positioning and the determination of
specific goals and
objectives. The Internet represents a low-cost service that can
provide valuable infor-
mation on the market, customers and their needs, and
competitors. This information
should be evaluated based on the goals and objectives of the
new venture. These
goals and objectives also provide a framework for setting up
controls for the busi-
ness plan.
The chapter presents a comprehensive discussion and outline of
a typical business
plan. Each key element in the plan is discussed, an information-
gathering process is
described, and examples are provided. Control decisions are
presented to ensure the
effective implementation of the business plan. In addition, some
insights as to why
business plans fail are discussed.
SEARCH TASKS
1. Approximately how many books have been written on "how
to write a business
plan"? How many software packages are there that aim to help
entrepreneurs
write a business plan? Use data to back up your estimates. Why
are there so
many?
2. Find five business plans. What are the common topics
covered across all five plans?

What are the differences? Choose the one that you believe is the
best written and
then describe why you believe it is better than the others.
3. Speak to five entrepreneurs and find out why they have (or do
not have) a
business plan. For those who do have a business plan, find out
when it was
written, the purpose for which it was created, and whether it has
been used
and/or kept up-to-date.
ASS DISCUSSION
1. Given the difficulties in accurately predicting the future, is a
business plan
useful?
2. What makes an excellent business plan?
3. Would the entrepreneur be better off spending more time
selling his or her
product rather than investing so much time in writing a business
plan?
4. If a business plan is to be used to raise capital, then why
would the entrepreneur
want to advertise the firm's major r isks by detailing them in the
business
plan?
5. What is the purpose of the business plan if the audience is (a)
the entrepreneur,
(b) an investor, or (c) a key supplier? How might the plan be
adapted for these
different audiences? Or do you believe that it is better to simply

have one business
plan that serves all audiences?
224 I '"'~'~"'""h;p ~---------------------------··---·----- ------···----
--------------- ··--···--·· --·--·-···---·-----------------·--··-
PLAN
SELECTED READINGS
Babaei, Ari. (November 2008). Plan for the Worst. Fortune
Small Business, vol. 18,
no. 9, p. 72.
Contingency planning should be an important function of the
entrepreneur. Most
entrepreneurs and small-business owners lack experience in
hiring people and often
end up making a poor choice. Preparation in making bad
decisions should be
reflected in a plan so the entrepreneur will know what action to
take when poor
decisions are made. In addition, other staff members should also
be involved and be
aware of any contingency plan.
Burmeister, Paul. (March 2003). What to Present to Venture
Capitalists. Strategic
Finance, pp. 36-39.
This article describes some of the key aspects of each section of
the business plan
that should be presented to venture capitalists. It also

emphasizes the importance
of the format and the presentation of the business plan.
Chiagouris, Larry; and Brant Wansley. (September/October
2003). Start-Up Marketing.
Marketing Management, vol. 12, no. 5, pp. 38-43.
This paper reflects on the experience of the authors as
consultants and executives
and develops insight as to marketing practices that make a
difference for a start-up
company. They report that the executives of these firms,
representing a wide vari-
ety of industries, all created formal marketing and business
plans to obtain financ-
ing for their ventures. Many also regarded monitoring
competitor activity and
industry trends as essential to success.
Clarke, Geri. (Summer 2005). International Marketing
Environment Analysis. Marketing
Review, pp. 159-73.
This paper proposes a framework for international industry and
environmental
analysis. The authors argue that international market analysis is
lacking and that
domestic environmental audits are not sufficient in the more
complicated interna-
tional markets.
Duffy, Bobby; Kate Smith; George Terhanian; and John Bremer.
(2005). Comparing
Data from Online and Face-to-Face Surveys. International
Journal of Market Research,
vol. 47, no. 6, pp. 615-39.

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