Transcript ENTREPRENEURSHIP A PROCESS PERSPECTIVE Robert A. Baron Scott A. Shane A. Rebecca Reuber Slides Prepared by: Sandra Malach, University of Calgary Copyright © 2008 by Nelson, a.

ENTREPRENEURSHIP
A PROCESS PERSPECTIVE
Robert A. Baron
Scott A. Shane
A. Rebecca Reuber
Slides Prepared by:
Sandra Malach, University of Calgary
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
1
8
Writing an Effective
Business Plan:
Crafting a Roadmap to
Success
Copyright © 2008 by Nelson, a division of Thomson Canada Limited
LEARNING OBJECTIVES
1.
2.
3.
4.
Define a business plan and explain why
entrepreneurs should write one.
Explain how the process of persuasion plays a key
role in business plans and in the success of new
ventures.
Explain why the executive summary is a very
important part of any business plan.
Describe the major sections of a business plan and
the types of information they should include.
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LEARNING OBJECTIVES
5.
6.
7.
Describe the seven deadly sins of business plans –
errors all entrepreneurs should avoid.
Explain why potential investors usually ask
entrepreneurs to give verbal presentations
describing their idea for new products or services
and their company.
Describe the steps entrepreneurs should take to
make their verbal presentations to potential
investors truly excellent.
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“There is a real magic in enthusiasm. It
spells the difference between mediocrity
and accomplishment.”
--Norman Vincent Peale, 1961
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BUSINESS PLAN

A formal, written expression of the
entrepreneur’s vision for converting
ideas into a profitable, going business.

The entry card for serious consideration by
venture capitalists, banks, and other
sources of funding
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BUSINESS PLAN FACTS
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More than 60% of small, new
companies have no business plan.
Writing business plans:


Reduced the chances of failure, and
Increased the rate of new business and
new product development
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MODEL OF BUSINESS PLANNING
Prepare a
relatively
simple plan
Start the
business
Refine the
business plan
Continue to
grow the
business
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BUSINESS PLAN COMPONENTS
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What is the basic idea?
Why is the new product appealing—and to
whom?
How will the idea be realized?
Who are the entrepreneurs?
How much funding is needed? What type of
funding? How will it be used? How will you
realize a return?
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A SUCCESSFUL PLAN

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A serious document prepared by
serious people
Orderly
Succinct
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(40-50 pages, max.)
Persuasive
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EXECUTIVE SUMMARY

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
Your elevator pitch
Provides a brief, clear,
and persuasive
overview of the new
venture
Target 2 to 3 pages
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BUSINESS PLAN SECTIONS
1.
2.
3.
4.
5.
Background and
purpose
Marketing
Competition
Development,
production, and
location
Management
6.
7.
8.
9.
10.
Financial
information
Risk factors
Harvest or exit
Scheduling and
milestones
Appendices
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BACKGROUND, PRODUCT, AND
PURPOSE
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
What is the nature of the idea driving
your company and how did it arise?
What does the product have to offer?
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Why is it unique & valuable
What is the basic corporate
information?
What are the company’s goals?
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MARKET ANALYSIS

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What is the need for the product or
service?
Why would anyone want to buy or use
it?
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MARKET ANALYSIS

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Identify the market
How large is the market?
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What do you know about competitors?
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Is the market growing or shrinking?
Who are they
Anticipated response to new product
Promotion methods
Pricing Strategy
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DEVELOPMENT, PRODUCTION,
AND LOCATION
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Where are the products or services in
the development process?
What are the projected costs and
timetable for making the product or
delivering the service?
What steps have been taken to assure
quality and safety?
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MANAGEMENT TEAM


Many venture capitalists would rather
invest in a first-rate team with a
second-rate idea than a second-rate
team with a first-rate idea.
Critical element for success
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MANAGEMENT TEAM

Do team members have the requisite
experience, expertise, skills and
personal characteristics?
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Past business experience, intelligence,
technical skill
Energy & enthusiasm
Do team members have a good working
relationship?
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FINANCIAL PLANS AND
PROJECTIONS

Proforma balance sheet

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3 years, semi-annual
Proforma income statement
Cash flow statement
Break-even analysis
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CRITICAL RISKS
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Price cutting by competitors
Unforeseen industry trends
Sales projections not achieved
Costs exceed estimates
Schedules not met
Difficulties raising financing
Unforeseen political, economic & social trends
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HARVEST AND EXIT
Think of going out before you
enter


Management succession
Exit strategies

IPO
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SCHEDULING & MILESTONES
1.
2.
3.
4.
Formal
incorporation
Completion of
design
Completion of
prototypes
Hiring of initial
personnel
5.
6.
7.
8.
9.
10.
Product displays
Agreements
Moving into
production
Receipt of orders
First sales
Profitability
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APPENDICES

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
Financial Statements
Financial Projections
Resumes of Founders & Top
Management Team
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THE INTANGIBLES
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The extra “something”
Pay attention to organization, clarity, word
choice, and style
Have good writers read your plan
Revise according to their suggestions
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SEVEN DEADLY SINS
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THE PRESENTATION

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Remember: This is important!
Prepare, prepare, prepare
Choose content carefully
Persuade, don’t overwhelm
Show enthusiasm tempered with reality
Rehearse
Don’t overlook the basics
Respond positively to questions
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