Download Business Plan Workshop

Business Plan Workshop
Foundations of Entrepreneurship
Spring 2013
Why write a business plan?
• Always when a new venture needs outside
funding
• Early in the planning process when you are
looking at a large-scale project
• Later or not at all when you are bootstrapping
Dollinger, 2008
Costs and benefits of planning
• Writing a plan takes considerable time, money, and
energy
• Every plan deals with economic uncertainty and risks
posed to new venture – founders may be
uncomfortable confronting risks and uncertainties and
avoid writing a plan
• Writing the plan helps founders confront risks and
conflicts before they become serious problems
Dollinger, 2008
The plan demonstrates how you
1. Create or add significant value to a customer or end
user
2. Solve a significant problem or meet a significant
need for which someone is willing to pay a premium
3. Have robust market, margin, and money-making
characteristics
4. Have a good fit with the founders, management
team at time of market entry, and the risk/reward
balance
Timmons, 1999
The Business Planning
Process
Start business planning literally when starting to think about a
new venture.
Start organizing information.
Focus on critical aspects of the business model and map to the
typical format.
Keep in mind that the business plan is a “living document”.
W. Bygrave and A. Zacharakis (2007)
Entrepreneurship.
The Business Planning Process
The Story Model
How will stakeholders interpret your plan?
A tagline creates a unifying plot line that organizes
your thinking
Keep your plan as close to “general format” as
possible.
W. Bygrave and A. Zacharakis (2007)
Entrepreneurship.
Sections of a business plan
• There is no sacred order of topics, but most people will want
•
to read the executive summary first
After that, the plan should flow logically in answer to the
reader's natural expectation about what should come next.
o Cover page
o Table of contents
o Executive summary
o Management and organization plan
o Product/service plan
o Marketing plan
o Financial plan
o Operating and control systems plan
o Growth plan
o Appendix (ces)
Source: FastTrac Venture Planning Workbook, 2004
Edition, Kauffman Foundation
The Business Planning Process
The Business Plan/the Cover & Table of Contents
W. Bygrave and A. Zacharakis (2007)
Entrepreneurship.
Business Name
Business Plan
LOGO!
Business plan prepared by
Entrepreneur's name
Entrepreneur's title
Company address
City, state, zip
Phone
Date prepared
Month, Year
Cover page
On cover page
• Logo should be displayed on cover page.
• Logo should be:
•
•
o professional looking
o relevant to business
Also consider adding a picture of the product
If you are going to distribute plan to several different
investors or lender,
o number each plan separately and display this number on
cover page
o include statement such as "The contents of this plan are
proprietary and confidential. It is not to be copied or
duplicated in any way."
o you can ask recipient to sign a non-disclosure agreement,
Source: FastTrac Venture Planning Workbook,
but few will agree to do do
2004 Edition, Kauffman Foundation
Table of contents
•Include sections of the business plan so readers
can find information quickly
•Consider adding tabs to plan for easy referral to
sections of plan
•Include a table of contents for appendix section,
e.g.,"Appendix"
oExhibit A Contracts and agreements
oExhibit A-1 Noncompete agreements
oExhibit A-2 Franchise agreements
oExhibit A-3 Employment contracts
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
The Business Planning Process
The Business Plan/Executive Summary
Write Executive Summary after working
through all the other sections;
Hook the reader (in two pages or less);
Provide compelling information on:
-
Description of opportunity / business
Management team
Business concept and competitive advantage
Status
Funding needs and offering
Exit
W. Bygrave and A. Zacharakis (2007)
Entrepreneurship.
Executive summary
• Provides an overview of the business
• Contains highlights of current stage of development of the
•
•
•
•
•
venture, management team, market and customers for
products or services, marketing plans, how much $ venture
needs, and what kind of financing is required
Write the executive summary last
It should be no more than two to three pages long
Before writing, identify the audience for the plan - to whom
will it be presented and for what purpose?
Write the executive summary in narrative form using
impersonal language
The executive summary should tell the reader what you
want from him/her
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Executive summary sections
1. Business
2. Management
3. Concept
4. Status
5. Funding needs
6. Exit
Example: Spark Parking Executive Summary
Management and organization plan
•Strong management is critical to the success of a
business
•List key management positions with a brief
•
•
description of the primary job duties and
responsibilities assigned to each position
Identify who will fill these positions
If some key positions have not been filled, still
include a brief job description, what types of
business skills and experiences are needed for the
position, and how you will recruit and hire such a
person
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Management and organization plan
•This section must establish the credibility of the
•
•
people on the management team - i.e., their ability to
successfully operate and achieve the outlined goals for
the venture
If any team members lack sufficient experience or
credentials, explain how these deficiencies will be
overcome
You must be able to prove that you have access to
all the management expertise you need to operate
the new venture profitably
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Management and organization plan
Section Titles
•Management team
•Compensation and ownership
•Board of directors / advisory council
•Infrastructure
•Contracts and franchise agreements
•Insurance
•Employee stock option plan and other incentives
•Organization charts
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Product / service plan
• Adequately explain the product so the reader can
•
•
•
•
•
understand it and recognize that the details have been fully
considered and the bugs have been eliminated
Your mindset: What will the reader need to know to
understand and appreciate the venture
Focus on the benefits or value the product creates
Include technical information and specifications in the
appendix
Do not bog down the reader with technical details!
If you plan to subcontract production, you should make the
details of the arrangements clear - convince the reader that
you will get the needed products
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Product / service plan
Section Titles
Purpose of the product or service
Unique features
Stage of development
Future research and development
Trademarks, patents, copyrights, licenses, royalties
Governmental approvals
Product / service limitations
Product / service liability
Related services and spin-offs
Production
Facilities
Suppliers
Environmental factors
•
•
•
•
•
•
•
•
•
•
•
•
•
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Marketing plan
• This section is usually the single most important part of
the plan
• To write a great marketing plan, you must talk to potential
•
•
•
customers, suppliers, and other companies - you must go
into the marketplace and research the industry
This section includes four parts: industry profile, competition,
pricing, and marketing plans - explain how the industry works
as a whole
A product or service has more risk associated with it if the
industry cannot be measured
Many naive entrepreneurs think the market will come to them
- they are wrong!
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Marketing plan
Section Titles
Industry profile
Current size
Growth potential
Geographic locations
Industry trends
Seasonality factors
Profit characteristics
Distribution channels
Basis of competition
Competition profile
Customer profile
Target market profile
Pricing profile
Gross margins
Break-even analysis
Market penetration
Distribution channels
Sales representatives
Direct sales force
Advertising and promotion
Packaging and labeling
Service and warranties
Trade shows
Future markets
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Financial plan
• It is impossible to assemble a meaningful financial plan until
•
•
all other sections have been completed - the amount of
money you need depends on what the business hopes to
accomplish
The financial plan shows the funds required to put the
business plan into action - all activities of the business
plan must be accurately represented in this section
This is the most important section for most readers
Four major sections
Worksheets
Assumptions
Monthly projections
Pro forma financial statements
•
•
•
•
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Financial plan
Worksheets
• Forecast start-up funding and expenditures, sales, inventory,
operating expenses, capital budget, and equity and debt
• Include these in the appendix of the plan
• Monthly projections and pro formas are drive completely by
the worksheet assumptions
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Financial plan
Assumptions
• This section explains how the budget figures were developed
• Each assumption should show the criteria used to determine
the budgeted item - budget items and assumptions are
intimately tied together
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Financial plan
Monthly Projections
• Provide a breakdown of cash flow and profits by month for
three years
• This section includes two of the most important financial
documents for the entrepreneur: monthly cash flow
statement and monthly projected income statement
(before tax)
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Financial plan
Pro Forma Financial Statements
• Pro formas show what the venture will look like for a period
•
of time (income statement) at specific points in time (balance
sheet) and the strength of the venture at those specific
points in time (financial ratios)
Use a template tied to your worksheets and assumptions
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Operating and control systems plan
• Contains three major areas: controlling operations, schedule
or critical path management; and contingency plan
• In controlling operations the entrepreneurs demonstrate that
•
•
they understand the nature and importance of administrative
policies, procedures, and controls
In scheduling, entrepreneurs show their understanding of
their timetable to determine if venture is on target entrepreneurs must recognize the sequence of events that
must take place for the venture to be successful
Contingency plans show that the venture has been
thoroughly planned out and that there are other options if the
venture runs into problems
Not on quiz
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Operating and control systems plan
Section Titles
Administrative policy, procedures, and controls
Receiving orders
Documents and paper flow
Billing customers
Planning chart
Paying suppliers
Product/service
Collecting accounts
development
receivable
Manufacturing
Reporting to management
Financial requirements
Staff development
Marketing flow chart
Inventory control
Market penetration
Handling warranties and
Management and
returns
infrastructure
Monitoring budgets
Risk analysis
Security systems
Salvaging assets
Not on quiz
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Growth plan
• This section forecasts as accurately as possible what will be
•
•
•
•
needed in the future and makes initial plans for
accommodating this forecast
The growth plan section must agree with the multi-year
projections in the financial section
Investors and bankers should understand the plans for
continued expansion of the venture
If entrepreneur is seeking outside money, investors must be
able to see an attractive upside potential
Growth projections should be based on realistic figures that
have been developed while researching the market and the
industry
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Growth plan
Section Titles
•New offerings to market
•Capital requirements
•Personnel requirements
•Exit strategy
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Not on quiz
Business plan appendix
• Include a title page (no section titles in the appendix) for each
•
section of exhibits
Include the following in the appendix:
o Historical financials
o Detailed resumes of management team and key personnel
o All employee contracts, stock option plans, retirement plans,
etc.
o Personal financial statements for each of the principals - use
a standard bank form
o Copies of patents, copyright approvals, or other applications
along with details
o Copies of logos, reference letters, recommendations,
endorsements, market studies, articles from trade journals,
photographs of the product, customer-signed orders or
letters of intent
Source: FastTrac Venture Planning Workbook,
2004 Edition, Kauffman Foundation
Critiquing the plan – General criteria
• Comprehensiveness – use a template to help
• Analysis – resource, industry, competitor and
product analysis; financial projections with
percentages, returns, and comparisons with
analogs
• Reasonableness – assumptions are
comparable to benchmarks and facts
• Writing and presentation – well written and
organized
Dollinger, 2008
Critiquing the plan – Specific criteria
• Management – experience, honesty, integrity
• Resources – rare, valuable, hard to copy,
unique
• Projections and returns – all data must have
solid foundation in reality, yet optimistic enough
to attract investors
• Exit – how and when will investors recoup
money?
Dollinger, 2008
The Business Planning Process
Conclusion
Writing a business plan allows the entrepreneur
to better anticipate instead of react.
Entrepreneurs can get feedback from experts,
including investors, vendors and customers.
Understand that business plan can quickly
become out of date
W. Bygrave and A. Zacharakis (2007)
Entrepreneurship.