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Chapter 5

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  1. Lecture NotesBENTR2101/BBE2213/BBE2114| Fundamental of EntrepreneurshipPrepared by : Zahir Osman

  2. Chapter 5

  3. Fundamental of Entrepreneurship Explain why every entrepreneur should create a business plan. Describe the elements of a solid business plan. Explain the three tests every business plan must pass. Understand the keys to making an effective business plan presentation. Explain the "5 Cs of Credit" and why they are important to potential lenders and investors reading business plans.

  4. Fundamental of Entrepreneurship What is a business plan? Pitfall to avoid in planning Benefits of business plan Developing a business plan Elements of a business plan

  5. Fundamental of Entrepreneurship a systematic evaluation of a venture’s chances for success. a way to determine the risks facing a venture. a game plan for managing a business successfully. a tool for comparing actual and target results. an important tool for attracting capital.

  6. Fundamental of Entrepreneurship A written summary of: an entrepreneur’s proposed business venture its operational and financial details its marketing opportunities and strategy its managers’ skills and abilities. A Business Plan

  7. Fundamental of Entrepreneurship Guiding the company by charting its future course and defining its strategy for following it. 2. Attracting lenders and investors who will provide needed capital.

  8. Fundamental of Entrepreneurship A plan is a reflection of its creator. Sometimes the primary benefit of preparing a plan is the realization that a business idea just won’t work! The real value in preparing a plan is not as much in the plan itself as it is in the process of creating it.

  9. Fundamental of Entrepreneurship Although building a plan does not guarantee success, it does increase your chances of succeeding in business. A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t attempt the trip without a map!

  10. Fundamental of Entrepreneurship Key people Promising opportunity Business context Risks and rewards

  11. Fundamental of Entrepreneurship Executive summary Mission statement Company history Business and industry profile Business strategy Description of products/services

  12. Fundamental of Entrepreneurship Feature – a descriptive fact about a product or service (“an ergonomically designed, more comfortable handle”). Benefit – what a customer gains from the product or service feature (“fewer problems with carpal tunnel syndrome and increased productivity”).

  13. Fundamental of Entrepreneurship Prove that a market exists Show customer interest Document market claims with research Business prototyping Describe target customers Advertising and promotion Market size and trends Location analysis Pricing Distribution

  14. Fundamental of Entrepreneurship Marketing strategy • Competitor analysis • Owners’ and managers’ résumés • Plan of operation • Financial forecasts • Request for fund

  15. Fundamental of Entrepreneurship Projected financial statements Monthly for one year Quarterly for next two Income statement Balance sheet Cash Flow Capital expenditures

  16. Fundamental of Entrepreneurship Three forecasts Pessimistic Most Likely Optimistic Realistic! Include assumptions on which forecasts are based

  17. Fundamental of Entrepreneurship Rid your plan of all spelling and grammatical errors. Make your plan visually appealing. Leave ample “white space” in margins. Make sure your plan has an attractive cover. (First impressions are crucial.) Include a table of contents to allow readers to navigate your plan easily.

  18. Fundamental of Entrepreneurship Write in a conversational style and use “bullets.” Support claims with facts and avoid generalizations. Avoid overusing industry jargon. Make it interesting! Use spreadsheets to generate financial forecasts.

  19. Fundamental of Entrepreneurship Always include cash flow projections. Keep your plan “crisp” – between 25 and 50 pages long. Tell the truth – always.

  20. Fundamental of Entrepreneurship The Reality Test- proving that : A market really does exist for your product or service. You can actually build or provide it for the cost estimates in the plan. The Competitive Test- evaluates: A company’s position relative to its customers. Management’s ability to create a company that will gain an edge over its rivals. The Value Test– proving that: A venture offers investors or lenders an attractive rate of return or a high probability of repayment.

  21. Fundamental of Entrepreneurship Prepare! Demonstrate enthusiasm, but don’t be overemotional. Start by communicating the dynamic opportunity your business idea offers. “Hook” investors quickly with an up-front explanation of the venture, its opportunities, and its benefits to them. Presenting the Plan

  22. Fundamental of Entrepreneurship Use visual aids. Hit the highlights; focus on the details later. Keep your presentation “crisp” – 2 or 3 major points. Avoid overloading your audience with technological jargon. Presenting the Plan

  23. Fundamental of Entrepreneurship Answer every lender or investor’s question: “What’s in it for me?” Close by reinforcing the nature of the opportunity. Be prepared (with details) for questions investors are likely to ask. Presenting the Plan

  24. Fundamental of Entrepreneurship Learn to read the pattern of investors’ questions and address the issues that concern them. Follow up with every investor to whom you make your presentation. Presenting the Plan

  25. Fundamental of Entrepreneurship Capital The "5 Cs" of Credit • Capacity • Collateral • Character • Conditions