Content

Chapter 1: Why write a Business Plan?

Chapter 2: Industry Analysis

Chapter 3: Marketing Plan

Chapter 4: Operation plan and Product Design and Development plan

Chapter 5: Management Team and Company Structure

Chapter 6: Analysis of Financial Projections

Chapter 7: A Successful Business Plan Presentation

Chapter 1
Why write a Business Plan?

1
 Expected Learning Outcomes

1) Define the business plan;

2) Recognize the business plan process;
3) Discuss on reason for writing a business plan;
4) Summarize the types of business.

2
 I. Introduction

Increased interest in the study of entrepreneurship

More than 2,000 colleges and universities
offer entrepreneurship coursework
320 out of every 100,000 adults created
businesses in the United States in 2011.
54 percent of millennials (ages 18–34)
either want to start a business or have
already started one.

3
 The Business Plan

o A written document that carefully explains every aspect of a

new business venture.
o Inside the firm, the business plan is used to develop a road map
o Outside the firm, the business plan introduces potential
investors and other stakeholders to the business opportunities

4
 Reasons for Writing a Business Plan

Two main reasons to write a business plan:

❑ Internal—Forces the founders of the firm to think through

every aspect of their new venture
❑ External—Communicates the merits of a new venture to
outsiders, such as investors and bankers

5
 External Support
Business incubator
▪ An organization that provides physical space and other resources
to new firms in hopes of promoting economic development in a
specific area
▪ Investors rely on the business plan to make decisions on initial
investment
▪ Many investors ask for an executive summary—a short overview
of the business plan—describing the merits of a new venture

6
 Who reads the business plan and what
are they looking for?
Two primary audiences Firm’s employees
➢ Looking for the vision and future of the firm
Investors and other stakeholders
➢ Investors, potential business partners, potential
customers, grant awarding agencies who are being
recruited

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 Guidelines

➢ Structure and style of the business plan

➢ Content of the business plan
➢ Measuring the business plan against your personal
goals and aspirations
➢ Recognizing that elements of the plan may change

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 Structure and Style

✓ Conventional structure 25 to 35 pages in length

✓ Look sharp but not too expensive or flashy

9
 Structure and Style

Elevator speech
A brief, carefully constructed statement, usually 45
seconds to 2 minutes long that outlines the merits of a
business venture or business plan insight feature

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 Elevator speech

Elevator Speech Four steps in an elevator speech (from business plan

insight feature)

1. Describe the opportunity

2. Describe how your product or service meets the opportunity

3. Describe your qualifications

4. Describe your

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 Red Flags
o Founders with none of their own money at risk
o A poorly cited plan
o Defining the market size too broadly
o Overly aggressive financials
o Hiding or avoiding weakness
o Sloppiness in any area
o Too long of a plan

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 Content of the Business Plan

❑Sections
❑Convince the reader that the opportunity is
exciting, feasible, defensible and within the
capabilities of the people who will be launching
the firm

13
 Measuring the Business Plan Against
Your Personal Goals and Aspirations

Venture capital
Venture capitalists aim for 30 to 40% annual return
and total return of 5 to 20 times their original
investment over the life of the investment

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 Venture capital

o Using venture capital involves surrendering equity in the firm

to outsiders in exchange for their investment and accepting
heavy scrutiny
o Some entrepreneurs find it better to launch a firm in a target
market and solicit funds from friends, family, or a lender

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 Recognizing that Elements of the
Business Plan May Change
Corridor principle
Academic principle that states once an entrepreneur starts a
business, he or she begins a journey down a path where
corridors leading to new venture opportunities become
apparent

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 Recognizing that Elements of the Business
Plan May Change
The business plan is a living, breathing document, rather
than something set in stone

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 Recognizing that Elements of the Business
Plan May Change
Write deliberate (but) act emergent
❑ Create a deliberate plan that is a specific blueprint to
follow
❑ Think emergent with a mindset that is open to change and
influenced by the realities of the marketplace Recognizing
that Elements of the Business Plan May Change

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 Types of Business

Four distinct types of businesses

➢ Survival
➢ Lifestyle
➢ Managed growth
➢ Aggressive growth

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 Types of Business

Survival
Provides its owner just enough money to put food
on the table and pay bills
Example:

Handyman, lawn service, part-time childcare

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 Types of Business

Lifestyle
Provides its owner the opportunity to pursue a certain lifestyle
and make a living at it.
Example:
Home-based eBay business, sub shop, single-unit
franchise, clothing boutique, personal trainer

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 Types of Business

Managed growth
Employs 10 or more people, may have several outlets, and may
be introducing new products or services to the market.
Example:
Multi unit franchise, regional restaurant chain, Web retailer (modest
scale)

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 Types of Business

Aggressive growth
Bringing new products and services to the market and has
aggressive growth plans
Example:
Computer software, medical equipment, Web retailer
(large scale), national restaurant chain

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Chapter 2
Industry Analysis

1
 Expected Learning Outcomes

1) Define the industry

2) Identify the Industry Size, Growth rate, and Sales
Projection;
3) Describe the Industry Characteristics; Industry Trends; and
lo ng-term prospects.

2
 Introduction
Industry

A group of firms producing a similar product or service Industries

vary by

▪ Size

▪ Growth-rate structure

▪ Financial characteristics

▪ Attractiveness

3
 Target Market
Target Market
The limited portion of an industry that it goes after or tries to
appeal to at a certain point in time

4
 Industry Definition

A firm’s industry can be defined narrowly or broadly. For

instance, is Prime Adult Fitness in the fitness center industry or
the recreation industry? Is JetBlue in the airline industry or the
transportation industry? The distinction is important because it
defines the scope of a company’s industry analysis and helps
identify its overall sphere of concern.

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Industry Size, Growth Rate, and Sales Projections

▪ Display financial information in a multiyear format

▪ Display your information graphically
▪ Produce information on your industry on a regional or local
basis
▪ Report both positive and negative information on your industry

6
 Industry Size
An industry’s size is normally displayed in dollars over a 3- to 5- year period, as
shown in the Prime Adult Fitness industry analysis in Figure 5-2. Some business
plans also report the number of firms in their industry.

Figure 5-2 Industry Size, Growth Rate, and Sales Projections (Prime Adult Fitness
Business Plan)

Industry Size
2009 2010 2011 2012 2013
Industry Sales $23.7 billion $24.2 billion $24.8 billion $25.3 billion $25.9 billion
#Establishments 32,864 32,820 33,068 33,385 33,527
Employment 536,231 527,086 548,375 561,536 573,328

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 Industry Growth Rate
An industry’s growth rate should be reported on a percentage basis, as shown in
the Prime Adult Fitness industry analysis in Figure 5-2. You should provide an
interpretation of what the numbers mean.

Figure 5-2 Industry Size, Growth Rate, and Sales Projections (Prime Adult Fitness
Business Plan)

Industry Growth Rates

2009 2010 2011 2012 2013
Industry Sales –1.8% 2.2% 2.3% 2.0% 2.5%
Number of
Establishments –1.8% –0.1% 0.8% 1.0% 0.4%
Employment –2.6% –1.7% 4.0% 2.4% 2.1%

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 Industry Sales Projections
Report future sales projections for your industry

Include concrete numbers of anticipated sales and growth rates

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 Industry Characteristics

❑ Industry structure

❑ Nature of the participants in an industry

❑ Key ratios

❑ Key success factors

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 Industry Structure
➢ Concentrated or fragmented
▪ Concentrated industries are dominated by a few large firms
▪ Fragmented industries include a large number of smaller
companies
➢ General attractiveness
▪ A structurally attractive industry has high barriers to entry, no
good substitutes for the product, limited power of supplier,
and limited power of buyers

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 Key Success Factors
Examples
the key success factors in the pet store industry are as follows:
✓ Attractive product presentation
✓ Staff with a clear knowledge of the pet industry
✓ High-traffic and high-visibility location
✓ Effective quality control (pet services must be up to standard
for specific types of animals and breeds)
✓ Offer for sale a range of the most popular pets and pet
supplies at different levels of price and quality

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 Industry Trends
The two types of trends that are the most important to focus on are
environmental trends and business trends. The best place to look for
trend information is industry trade journals, industry-specific
magazines, industry reports from resources such as IBISWorld and
Bizminer, and through talking to industry participants.

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 Environmental Trends

❑ Economic trends

❑ Social trends

❑ Technological advances

❑ Political and regulatory change

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 Business Trends
➢ Profit margins
➢ Innovation
➢ Input costs

15
 Long-term Prospects

Include a brief statement of beliefs regarding long-

term prospects for the industry

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Chapter 3
Marketing Plan

1
 Expected Learning Outcomes
1) Illustrate the difference between the market analysis
section of a business plan and the marketing section.
2) Describe the difference between cost-based pricing and
value-based pricing.
3) Interpret the promotion mix in marketing plan; and
4) Discuss how firms should approach the topic of distribution
and sales.

2
 Introduction

Market Analysis

Breaks the industry

into segments and
specifies a segment
or target market that
the firm will tackle

3
 Market Analysis

❖ Market Analysis

❖ Firm’s target market

❖ Its customers

❖ Its competitors

❖ How it will compete in the marketplace

4
 Market Analysis
❑ Helps define the nature
of the business
❑ Affirms that a company
has a well thought out
target market
❑ Understands its customer
and can generate sales

5
 Market Segmentation

Markets can be segmented by

o Geography
o Demographic variables
o Psychographic variables
o Behavioral variables
o Product type

6
Market Segmentation and Target
Market Selection
Market Segmentation

▪ Homogeneity of needs and wants within the segment

▪ Heterogeneity of needs and wants among the segments
▪ Small differences within segments
▪ Distinct
▪ Size
▪ Profitable

7
 Selecting a Target Market

✓ Once a firm segments its

market, it selects a segment

within the market to target

✓ Focus on a single market

8
 Target Market Size and Trends

❖ Estimate size of similar businesses

❖ Examine industry trends

9
 Buyer Behavior
Decision making
o Who makes the decision to purchase?
• Individuals
• Groups

10
 Involvements

High involvement

Medium involvement

Low involvement

11
 Competitor Analysis

➢ Detailed analysis of a firm’s

competition
➢ Understand positions of major
competitors and the opportunities
that are available to gain a
competitive advantage in one or
more area

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 Direct, Indirect, and Future
Competitors
o Direct competitors
Businesses that offer a product
similar to yours

o Indirect competitors
Businesses that offer close
substitutes to your product

o Future competitors

13
 Competitive Intelligence

❑ The process of gathering information about your

competitors
❑ This requires you to engage in competitive intelligence,
which is the process of gathering information about your
competitors.

14
 Competitive Analysis Grid
Competitive Analysis Grid
A tool for organizing and presenting information you
collect about your competitors

15
 Estimate of Annual Sales and Market Share
➢ Four ways to estimate initial sales
o Contact premier trade associations in your industry
o Find a comparable firm
o Conduct Internet searches
o Use a multiplication method to try to arrive at a
reasonable number

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Chapter 4
Operation plan and Product Design and
Development plan

1
 Expected Learning Outcomes
1) Recognize why operation plan is important in business
plan;
2) Outline how the business will be run and how the product
will be produced;
3) Identify three specific instances in which business’s
location;
4) Interpret the four types of intellectual property issue in a
business plan.

2
 Introduction

▪ Operations section
• How to produce your product or service and run
your business
▪ The status of the development of a product or
service

3
 Operations Plan

How your business will be run and how your product or service will be
produced
o Operating model and procedures
o Business location
o Facilities and equipment
o Operations strategy and plans

4
 Operations Model and Procedures
Objective
Fully understand operational details of launching and running your
business
➢ How inventory will be stored
➢ Production cycle
➢ Bottlenecks
➢ Seasonal production loads
➢ Quality control

5
 Business Location
❑ Geographic location of business
o Proximity to labor force
o Closeness to suppliers
o Access to transportation
o Access to international shipping alternatives
o Proximity to customers
o Access to favorable state and local tax rates
o Access to economic incentives
❑ Proximity to high-quality community

6
 Facilities and Equipment

❖ Identify facilities and equipment

❖ Describe how acquired (purchase, lease)

❖ Facilities of business partners

7
 Operations Strategy and Plans
➢ Strategy issues
o Working with partners

o Approach to quality control

o Production control

o Inventory control

8
Product or Service Development Plan

▪ Development status and tasks

▪ Challenges and risk
▪ Costs
▪ Intellectual property

9
 Development Status and Tasks

Describe the present state of the development of your product

or service

o Product conception

o Prototyping

o Initial production and full production

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 Prototype

A prototype is the first physical depiction of a new product

Prototype
A prototype is the first physical depiction of a
new product

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 Prototype Testing
Prototype and usability testing measures the product’s ease of use and user’s
perception of the experience

12
 Challenges and Risks

Detail any major

design and
development
challenges and risks
that will be involved
in bringing your
product or service to
market
13
 Costs

Budget for remaining design and development work

✓ Costs of labor

✓ Material

✓ Consulting fees

✓ Prototyping

✓ Usability testing

14
 Intellectual Property

Patents, trademarks,

copyrights, or trade

secrets secured relative

to the products you are

developing

15
 Intellectual Property

Intellectual property is any

product of human intellect

that is intangible but has

value in the marketplace

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Chapter 5
Management Team and
Company Structure

1
 Expected Learning Outcomes
1) Recognize the management team and company structure in
business plan;
2) Describe management team skill profile in business plan;
3) Interpret the role of board of director play in management of
a firm.
4) Discuss the purpose of organizational chart.

2
 Introduction

✓ Management team

✓ Board of directors

✓ Board of advisors

✓ Other professionals

✓ Company structure

3
 Management Team
Founder and key management personnel
The management team of a new firm typically consists of the founder or
founders and a handful of key management personnel.

4
 Management Team
❑ Management team personnel

❑ Management team ownership and compensation

❑ Common mistakes to avoid

5
 Management Team Personnel
Brief profile of each member of the management team
▪ Title
▪ Duties and responsibilities
▪ Previous industry and related
experience
▪ Previous successes
▪ Education background

6
 Management Team Ownership and
Compensation
❑ Ownership structure

❑ Compensation
o Options Pool—An inventory of
company stock which is set aside for
future employees
o It is also necessary to fully disclose the
ownership structure of the new venture
and the compensation of the members
of the management team.
.

7
 Common Mistakes
❑ Placing unqualified friends in key management positions
❑ Assuming that previous success in other industries translates to one’s
own industry
❑ Presenting a one-man team philosophy
❑ Hiring top managers without sharing ownership in the firm
❑ Not disclosing management team skill or competency gaps
❑ Vague or unclear plans for filling the skill or competency gaps

8
 Board of Directors
A Board of Directors is a panel of individuals who are elected by a
corporation's shareholders to oversee the management of the firm
A board of directors is a panel of individuals who are elected by a
corporation’s shareholders to oversee the management of the firm.

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Board of Advisors and Other Professionals

➢ Board of Advisors
Panel of experts who are
asked by a firm’s managers to
provide counsel and advice on
an ongoing basis
➢ Other professionals
Attorneys and accountants

10
 Company Structure
Organizational chart
o Graphic representation of how
authority and responsibility are
distributed within a company
o The most effective way to illustrate
how a company will be structured
and the lines of authority and
accountability that will be in place is
to include an organizational chart in
the plan.

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Chapter 6
Analysis of Financial
Projections

1
 Expected Learning Outcomes
1) Illustrate the important of financial plan in business plan;
2) Describe the three pro forma financial statement that should
be included in business plan;
3) Discuss cash flow statement in business plan;
4) Recognize the purpose of ratio analysis;
5) Interpret at least one profitability ratio, one liquidity ratio,
and one overall financial stability ratio.

2
 Introduction
❑ Sources and uses of funds statement
❑ Assumptions sheet
❑ Income statements
❑ Balance sheets
❑ Cash flows
❑ Ratio analysis

3
 Sources and Uses of Funds Statement
The sources and use of funds statement is a document
that lays out specifically how much money a firm needs, where
the money will come from, and what the money will be used for.

Normally, a portion of the startup funds is provided by the

founders or the initial management team; a portion is contributed
by an early investor, such as an angel investor, a friend, or a
family member of one of the founders; and the remainder is
what’s still needed.

4
 Sources and Uses of Funds Statement
An assumptions sheet is an explanation of the most critical
assumption that your financial statements are based on
general information, and no specific sources will be cited to
substantiate the assumption.

For example, if you believe that the U.S. economy will remain
strong, and that’s an underlying assumption driving your sales
projections, then you should state that assumption. In this
instance, you wouldn’t cite a specific source—you’re reflecting
a consensus view.

5
 Financial Statements

A. Income statement
B. Balance sheet
C. Cash flow statement

6
 Financial Statements (Cont.)
A. Income Statement

The three numbers that

receive the most attention
when evaluating an income
statement are the following:

❖ Net sales

❖ Cost of good sold

❖ Operating expenses

7
 Financial Statements (Cont.)

A. Income Statement (Cont.)

▪ Net Sales
Net sales consists of total sales minus allowances for returned goods and
discounts
▪ Cost of Goods Sold
Cost of goods sold includes all the direct costs associated with producing or
delivering a product or service, including the material costs and direct labor.
▪ Operating Expenses
Operating expenses include marketing, utilities, and administrative costs not
directly related to producing a product or
service

8
 Financial Statements (Cont.)
B. Balance Sheet
A balance sheet is a projection
of a firm’s assets, liabilities,
and owner’s equity at a
specific point in time

▪ Assets
o Current assets
o Fixed assets
▪ Liabilities
o Current liabilities
o Long-term liabilities
▪ Owner’s equity

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 Financial Statements (Cont.)
C. Cash Flow
The cash flow statement is divided into three activities: operating activities,
investing activities, and finance activities.
1) Operating activities. Operating activities include net income (or loss),
depreciation, and changes in current assets and current liabilities other
than cash.
2) Investing activities. Investing activities include the purchase, sales, or
investment in fixed assets, such as real estate, equipment, and
buildings.
3) Financing activities. Financing activities include cash raised during the
period by borrowing money, making payments on loans, or paying
dividends
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 One Final Note

❑ Demonstrate the
ability to prepare
financial statements
❑ Break even analysis

11
 Ratio Analysis

❑ Profitability Ratios

❑ Liquidity Ratios

❑ Overall Financial Stability

12
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Chapter 7
A Successful Business
Plan Presentation

1
 Expected Learning Outcomes

1) Recognize how to prepare document for presenting the

business plan;
2) Discuss how to be a good presenter;
3) Identify who are the target audience for presenting the
business plan.

2
 Introduction
o If your business plan piques the interest of an investor or banker, or you enter it into
a business plan competition, you’ll normally be asked to make a verbal presentation
of the plan. On these occasions, you’ll want to be prepared to present the plan with
confidence and poise. If it doesn’t, it can impede your chances of moving forward
and represent a setback in your attempts to get our business off the ground.

o This chapter contains two sections:

▪ The first section focuses on preparing for and making an effective presentation.
▪ The second section of the chapter focuses on the content of the presentation.

o This section is augmented by walking you through a 12-slide PowerPoint

presentation and making recommendations for what to include on each slide.

3
 Preparing for and Delivering an Effective
Business Plan Presentation
The first set of issues to think about after you’ve been asked to make a verbal
presentation of your business plan is how to go about preparing for the task and how
to deliver an effective presentation. How you present yourself and the manner in
which you interact with the people you will be presenting to makes as much
difference as the plan itself. As a result, it’s important that you prepare and deliver
the presentation in an effective manner.
This section covers two topics: preparing for the presentation and effective
presentation techniques.

4
 Preparing for the Presentation
➢ The initial task in preparing for a business plan presentation is to find out as much as
you can about the people you’ll be presenting to. All venture capital firms have
Websites that include lists of their portfolio companies and bios of their partners, and
it’s usually easy to find out the backgrounds of business angels via Web searches and
discrete inquiries.
➢ Knowing this information is important for two reasons:

o First, if you can tie the business you’re proposing into other activities that the
people you’re meeting are involved with, they may see more value in supporting
your efforts.

o The second reason it’s important to learn about the people you’ll be presenting to is
to try to find some type of personal connection with one or more of the individuals
involved.

5
 Preparing for the Presentation (Cont.)
➢ The other tasks involved in preparing for a business plan presentation consist of a hodgepodge of
activities. If an angel group tells you that you’ll have one hour, but 30 minutes of the hour is
reserved for questions and answers, you should carefully time your presentation so it doesn’t last
for more than 30 minutes—no excuses. If that route isn’t practical, it’s always better to dress up,
by wearing formal business attire, than it is to dress down. One of the most common things
they’ll do prior to a presentation is browse the LinkedIn profiles of the people they’ll be meeting
with.
➢ It’s also important to practice your presentation. Many experienced entrepreneurs practice their
presentations several times in front of colleagues and others to time the presentation and get
feedback.
➢ Finally, to the extent that you can, you should try to find out as much as you can about the venue
you’ll be presenting in. But if you’ll be presenting on a stage or to a large audience, which is
sometimes the case in the finals of a business plan competition, then you might want to make the
fonts on your PowerPoint slides larger, for example, and find innovative ways to project to a
larger audience.

6
 Delivering an Effective Presentation
✓ The first thing to consider in making a presentation is who will do the presenting. If
you’re a sole entrepreneur, you’ll obviously be doing the presenting, but if you’re part of
team, the question always arises regarding how many members of the team should talk
during the presentation. This issue is a judgment call, but there is a strong case to be
made for involving as many team members as possible. If you tag team your presentation
and it goes well, it shows that your team members work well together, and there is no one
member of your team who is so dominant that he or she wants all the attention.

✓ The second thing to consider is the proper role of the PowerPoint slides you’re using and
your verbal remarks. Your PowerPoint slides are not meant to tell the story of your
business. You (and your team) should tell the story, and the slides should provide an overall
context and punctuate your remarks. This is a hard rule to follow because the natural
tendency is to try to help the listener by making the slides as complete as possible. In this
instance, the slides should be more complete because they’ll need to tell the story.
7
 Delivering an Effective Presentation (Cont.)
✓ There are many rules of thumb about PowerPoint slides in presentations, and you’ll need to
use your judgment in making various calls. Some experts recommend a 6-6-6 rule when
drafting slides: 6 words per bullet, 6 bullets per page, and no more than 6 text slides in a row
before a visual break (a slide that includes graphs, tables, or illustrations). All kinds of
colorful metaphors are attached to the dangers of trying to fit too many slides into a
presentation or making your slides too dense, including “death by PowerPoint” and
“PowerPoint Poisoning” (coined first by Delbert).
✓ The final and most important advice about delivering an effective presentation is to make it
interesting, upbeat, and heartfelt (to the degree appropriate and fitting). No one wants to
listen to a plodding, boring presentation, no matter how much potential the venture has. The
following is a brief list of techniques that presenters use to try to accomplish this objective:

▪ Tell a personal story or anecdote.

▪ Use humor.
▪ Show passion through hand gestures and excitement in your voice.
▪ Involve the audience by asking for a show of hands on key points.
▪ Demonstrate a prototype of the product.
8
 Preparing the Content of an Effective
Business Plan Presentation

As important as the issues are that were just covered, the presentation has little to no chance
of succeeding if the content is poorly thought out or important elements are missing.

Obviously, you can’t convey everything that’s in a 25- to 35-page business plan in a 20- to 30-
minute presentation. The single biggest mistake that people make in putting together a
business plan presentation is focusing on the areas that excite them the most, rather than the
areas that will help their audience make a decision.

A number of authors, and business plan experts, have recommended templates for business
plan presentations. The templates spell out the number of slides to include, the order in which
to include them, and the content to include on each slide. Although slight variations exist
across authors, there is general consensus about what should be included in a 20- to 30-minute
business plan presentation.

The plan presented here contains 12 slides. Presumably, the people you will be presenting to
will have a copy of your business plan. This is particularly important if you’re participating in
a business plan competition. There may be members of the audience who are hearing your plan
for the first time and may be interested in seeing the entire business plan.

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Sample Business Plan Presentation

10
Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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Sample Business Plan Presentation (Cont.)

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