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Overview of a Business Plan MHR 423 Fall 2003 Purposes of a Business Plan To get equity financing from a third party To get a bank loan To determine what you have to do to launch and grow the business Forms your monthly operational budget Provides specific objectives to achieve

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purposes of a business plan
Purposes of a Business Plan
  • To get equity financing from a third party
  • To get a bank loan
  • To determine what you have to do to launch and grow the business
    • Forms your monthly operational budget
    • Provides specific objectives to achieve
    • Enables you to share the plan with key managers, employees, and prospective advisors
  • Signals whether the business is worth starting
what investors expect to see
What Investors Expect to See
  • An exciting, innovative business concept
  • A proprietary product, or some other competitive advantage
  • A sound revenue model (reflecting demand)
  • Good return on investment
  • The investment deal
  • An exit strategy
what makes a good plan
What Makes a Good Plan?
  • Is the business concept sound?
    • Can the company compete?
    • Will it make money?
  • Can it be understood?
  • Is it realistic?
  • Can we trust the entrepreneur to make it happen?
    • Will s/he be unfazed by failure?
    • Can s/he inspire and lead a team?
  • Does it inspire confidence?
main sections of a plan 1
Main Sections of a Plan (1)
  • What is the business concept?
  • What makes you think people will buy the product/service?
  • Who are your competitors, and can you compete with them?
  • How much do you know about your customers? (Who is your target?)
  • What else can affect your business?
main sections of a plan 2
Main Sections of a Plan (2)
  • Who owns the company and who are the key managers?
    • What experience do they have?
  • How will you organize? What staff will you need?
  • What is your market-entry strategy and marketing plan?
  • What is your operations/production plan?
  • How will you develop your next-generation product?
main sections of a plan 3
Main Sections of a Plan (3)
  • What are your financial assumptions and projections?
    • How much capital will you need?
    • When will you break even?
  • What do you have to do before you can achieve your first revenues?
  • What are the chief risks your business will face?
    • And how will you cope with them?
  • What is the investment deal or loan required?
why is it hard to prepare
Why Is It Hard to Prepare?
  • A lot of information to research
  • Hard to make a case why the business will succeed
  • Hard to write clearly so that an outsider will understand it easily
  • Hard to do it quickly
    • Everything has to mesh together consistently
    • Figures have to be realistic
  • Have to get a team together before going for financing
keep it short and simple
Keep It Short and Simple
  • No fancy colors
  • Simple formatting, font
  • Use consistent headings and subheadings
  • Come to the point – shorter is better
  • Round off dollar figures to nearest 100 or 1,000
    • No decimals ever
    • No dollar signs (in projections)
  • Put important but secondary information in appendices
edit edit edit
Edit, Edit, Edit
  • Write your first draft of any section quickly
  • Be prepared to spend at least as long, if not longer, editing and revising it
    • It’s when the real thinking gets done
  • EVERYONE IN THE GROUP SHOULD BE INVOLVED IN REVISING AND EDITING SECTIONS
    • Develop a way to do this smoothly with as little wasted time as possible
what s required this quarter
What’s Required This Quarter
  • You will write only the major sections of a business plan, not the whole thing
      • Marketing plan
      • Environmental analysis plan (industry, competition, other trends)
      • Financial projections and investment deal
      • Management team
      • Executive Summary
  • You will present and get feedback during the quarter on only the first three items above