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Developing an Effective Business Plan
"Planning is essential to the success of any undertaking"
1. Realistic goals
Specific, measurable, and set within time.
2. Commitment
Supported by all involved - partners, employees, team members, and family!
3. Milestones
Subgoals in order to evaluate progress.
4. Flexibility
Obstacles should be anticipated and alternative strategies must be formulated.
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Pitfalls to Avoid in Planning
1. No realistic goals
2. Failure to anticipate roadblocks
- don't let objectivity go out the window
3. No commitment or dedication
4. Lack of demonstrated experience
5. No market niche (segment)
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What is a Business Plan?
A written document that details the proposed venture. It must
illustrate current status, expected needs, and projected results
of the new business. Every aspect of the venture needs to be
described - the project, marketing, research and development,
manufacturing, management, critical risks, financing, and
milestones or timetable. The business plan is the
entrepreneur's road map to a successful enterprise.
Could be referred to as a "venture plan", a "loan proposal", or
an "investment prospectus".
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Benefits of a Business Plan:
"If your proposed venture is marginal at best, the business
plan will show you why and may help you avoid paying the
high tuition of business failure. It is far cheaper not to begin
an ill-fated business than to learn by experience what your
business plan could have taught you at a cost of several hours
of concentrated work."
(Joseph R. Mancuso, 1985)
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Developing
A
Well-Conceived
Business Plan
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Who reads the plan?
A professional - lawyer, consultant, banker, investor, potential customer - may
give your plan a "five minute reading".
They' ll focus on the following:
1. Determine the characteristics of the venture and its industry.
2. Determine the financial structure of the plan.
3. Read the latest balance sheet.
4. Determine the quality of the entrepreneur(s) in the venture.
5. Establish the unique features in this venture.
6. Read the entire plan over lightly.
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What's the most important features of the business plan?
• Appearance
• Length
• The cover and the title page
• The executive summary
• The table of contents
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Guidelines to Remember:
Keep the plan respectably short
Organize and package the plan appropriately
Orient the plan toward the future
Avoid exaggeration
Highlight critical risks
Give evidence of an effective entrepreneurial team
Do not over diversify
Identify the target market
Keep the plan written in the third person
Capture the reader's interest
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Elements
of a
Business Plan
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I. The Summary
• a clever snapshot of the complete plan
II. Business Description
a. General description of the venture (product or service)
b. Industry background
c. Company history or background
d. Goals/potential of the venture and milestones (if any)
e. Uniqueness of the product or service
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III. Marketing
a. Research and analysis
1. Target market
2. Market size and trends
3. Competition
4. Estimated market share
b. Marketing plan
1. Market strategy:
sales and distribution
2. Pricing
3. Advertising and promotions
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IV. Research, Design, and Development
a. Development and design plans
b. Technical research results
c. Research assistance needs
d. Cost structure
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V. Manufacturing
a. Location analysis
b. Production needs: facilities and equipment
c. Suppliers/transportation factors
d. Labor supply
e. Manufacturing cost data
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VI. Management
a. Management team: key personnel
b. Legal structure: stock agreements, employment agreements, ownership, etc.
c. Board of directors, advisers, consultants, etc.
VII. Critical Risks
a. Potential problems
b. Obstacles and risks
c. Alternative courses of action
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VIII. Financial
a. Financial forecast
1. Profit and loss
2. Cash flow
3. Break-even analysis
4. Cost controls
b. Sources and use of funds
c. Budgeting plans
d. Stages of financing
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IX. Milestone Schedule
a. Timing and objectives
b. Deadlines/milestones
c. Relationship of events
X. Appendix and/or bibliography
(Kuratko/Hodgetts, 1992)
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Helpful Hints
for
Writing the Business Plan
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Th e Su m m ar y
No m or e t h an t h r ee pages.
Th is is t h e m ost cr u cial par t of y ou r plan becau se it m u st
capt u r e t h e r eader s in t er est .
Wh at , h ow, wh y , wh er e et c. m u st be su m m ar ized.
Com plet e t h is par t aft er . t h e fin ish ed bu sin ess plan h as been
wr itt en .
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The Business Description Segment
The name of the business.
A background of the industry with history of the company (if any) should be
covered here.
The potential of the new venture should be described clearly.
Any unique or distinctive features of the venture should be spelled out.
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The Marketing Segment
Convince investors that sales projections and competition can be met.
Market studies should be used and disclosed.
Identify target market, market position, and market share.
Evaluate all competitors and specifically cover "why" and "how" you will be
better than the competitors.
Identify all market sources and assistance used for this segment.
Demonstrate pricing strategy since your price must penetrate and maintain a
market share to produce profits. Thus "lowest" price it not necessarily the
"best" price.
Identify your advertising plans with cost estimates to validate the proposed
strategy.
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The Research, Design and Development Segment
Provide the advantages of your location.
List the production needs in terms of facilities and equipment.
Describe the access to transportation.
Explain proximity to your suppliers.
Mention the availability of labor in your location.
Provide the estimates of manufacturing costs - be careful, too many
entrepreneurs underestimate their costs.
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The Management Segment
Provide résumés of all key people in the management of the venture.
Carefully describe the legal structure of the venture.
Cover the added assistance of advisers, consultants, and directors.
Provide information on how everyone is to be compensated.
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The Critical Risks Segment
Discuss the potential risks before investors point them out.
Some examples include:
• Price cutting by competitors
• Potentially unfavorable industry-wide trends
• Design or manufacturing cost in excess of estimates
• Sales projections not achieved
• Product development schedule not met
• Difficulties or long lead time encountered in the procurement of parts and
raw materials
• Larger than expected innovation and development costs to stay
competitive
• Alternative courses of action
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The Financial Segment
Provide statements.
Describe the needed sources for your funds and the uses you intend for the
money.
Provide a budget.
Create stages of financing for purposes of allowing evaluation by investors at
various points.
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The Milestone Schedule Segment
Provide a timetable or chart to demonstrate when each phase of the venture is
to be completed. This shows the relationship of events and provides a deadline
for accomplishments.
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Writing
the
Business Plan
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Prewriting
Write or review notes, assemble facts, organize your thoughts, establish your
goals, draft an outline.
Very important stage!
Writing
Don' t go for perfection the first time around.
Just keep going!
Revising
Revise for clarity. Rework your sentences. Take a break and start from a fresh
perspective.
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Editing
Take an objective look at the plan. Does it make sense? Is it convincing? Do I
need more, or less, information? Have I supported my most important
statements? Is it well organized? Is it readable? Style? Tone?
The most crucial and most difficult stage of the process!
Proofreading
Use a spellchecker! Check the grammar. If possible, have somebody else take a
look. Nothing is worse than a sloppy job of proofreading!
Good luck!
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