7/21/2019 Barringer e4 Ppt 04GE
1/37
Copyright 2012 Pearson Education
Chapter 4
Writing a Business
Plan
Bruce R. Barringer
R. Duane Ireland
4-1
7/21/2019 Barringer e4 Ppt 04GE
2/37
Copyright 2012 Pearson Education
Chapter Objectives1 of 3
1. Eplain the purpose of a business plan.
!. Describe the t"o pri#ar$ reasons for "riting a
business plan.
3. Describe "ho reads a business plan and "hat the$%reloo&ing for.
4. Eplain the difference bet"een a su##ar$ business
plan' a full business plan' and an operational business
plan.(. Eplain "h$ the eecutive su##ar$ #a$ be the #ost
i#portant section of a business plan.
4-2
7/21/2019 Barringer e4 Ppt 04GE
3/37
Copyright 2012 Pearson Education
Chapter Objectives! of 3
). Describe a #ilestone and ho" #ilestones are used in
business plans.
*. Eplain "h$ it%s i#portant to include separate
sections on a fir#%s industr$ and its target #ar&et in abusiness plan.
+. Eplain "h$ the ,-anage#ent ea# and Co#pan$
/tructure0 section of a business plan is particularl$
i#portant.
. Describe the purposes of a ,sources and uses of
funds0 state#ent and an ,assu#ptions sheet.0
4-3
7/21/2019 Barringer e4 Ppt 04GE
4/37
Copyright 2012 Pearson Education
Chapter Objectives3 of 3
12. Detail the parts of an oral presentation of a business
plan.
4-4
7/21/2019 Barringer e4 Ppt 04GE
5/37
Copyright 2012 Pearson Education
hat Is a Business lan5
6 Business lan7 8 business plan is a "ritten narrative' t$picall$ !( to 3(
pages long' that describes "hat a ne" business plans toacco#plish.
6 Dual9:se Docu#ent7 ;or #ost ne" ventures' the business plan is a dual9purpose
docu#ent used both inside and outside the fir#.
4-5
7/21/2019 Barringer e4 Ppt 04GE
6/37
Copyright 2012 Pearson Education
ho Reads the Business lan
7/21/2019 Barringer e4 Ppt 04GE
7/37Copyright 2012 Pearson Education
>uidelines for riting a Business lan1 of (
6 /tructure of the Business lan
7 o #a&e the best i#pression a business plan should follo"
a conventional structure' such as the outline for the
business plan sho"n in the chapter.7 8lthough so#e entrepreneurs "ant to de#onstrate
creativit$' departing fro# the basic structure of the
conventional business plan is usuall$ a #ista&e.
7 $picall$' investors are bus$ people and "ant a plan "herethe$ can easil$ find critical infor#ation.
4-7
7/21/2019 Barringer e4 Ppt 04GE
8/37
Copyright 2012 Pearson Education
>uidelines for riting a Business lan! of (
6 /tructure of the Business lan ?continued@
7 /oft"are ac&ages
6 here are #an$ soft"are pac&ages available that e#plo$ an
interactive' #enu9driven approach to assist in the "riting of a
business plan.
6 /o#e of these progra#s are ver$ helpful. Ao"ever' entrepreneurs
should avoid a boilerplate plan that loo&s as though it ca#e fro# a
,canned0 source.
7 /ense of Ecite#ent6 8long "ith facts and figures' a business plan needs to project a
sense of anticipation and ecite#ent about the possibilities that
surround a ne" venture.
4-8
7/21/2019 Barringer e4 Ppt 04GE
9/37
Copyright 2012 Pearson Education
>uidelines for riting a Business lan3 of (
6 Content of the Business lan
7 he business plan should give clear and concise
infor#ation on all the i#portant aspects of the proposed
venture.7 It #ust be long enough to provide sufficient infor#ation
$et short enough to #aintain reader interest.
7 ;or #ost plans' !( to 3( pages is sufficient.
6 $pes of Business lans7 here are three t$pes of business plans' "hich are sho"n
on the net slide.
4-9
7/21/2019 Barringer e4 Ppt 04GE
10/37
Copyright 2012 Pearson Education
>uidelines for riting a Business lan4 of (
$pes of Business lans
4-10
7/21/2019 Barringer e4 Ppt 04GE
11/37
Copyright 2012 Pearson Education
>uidelines for riting a Business lan( of (
6 Recogniing the Ele#ents of the lan -a$ Change
7 It%s i#portant to recognie that the plan "ill usuall$ change
"hile "ritten.
7e" insights invariabl$ e#erge "hen an entrepreneur or atea# of entrepreneurs i##erse the#selves in "riting the
plan and start getting feedbac& fro# others.
4-11
7/21/2019 Barringer e4 Ppt 04GE
12/37
Copyright 2012 Pearson Education
Outline of Business lan
6 Outline of Business lan
7 8 suggested outline of a business plan is sho"n on the net
several slides.
7 -ost business plans do not include all the ele#ents
introduced in the sa#ple plan "e include the# here for the
purpose of co#pleteness.
7 Each entrepreneur #ust decide "hich ele#ents to include
in his or her plan.
4-12
7/21/2019 Barringer e4 Ppt 04GE
13/37
Copyright 2012 Pearson Education
/ection 1 Eecutive /u##ar$1 of !
6 Eecutive /u##ar$7 he eecutive su##ar$ is a short overvie" of the entire
business plan
7 It provides a bus$ reader "ith ever$thing that needs to be&no"n about the ne" venture%s distinctive nature.
7 8n eecutive su##ar$ shouldn%t eceed t"o single9spacedpages.
4-13
7/21/2019 Barringer e4 Ppt 04GE
14/37
Copyright 2012 Pearson Education
Eecutive /u##ar$
Fe$ Insights
In #an$ instances an investor "ill
as& for a cop$ of a fir#%s eecutive
su##ar$ and "ill as& for a cop$ of the entire plan onl$ if the eecutive
su##ar$ is sufficientl$ convincing.
he eecutive su##ar$' then' is
arguabl$ the #ost i#portantsection of a business plan.
/ection 1 Eecutive /u##ar$! of !
4-14
7/21/2019 Barringer e4 Ppt 04GE
15/37
Copyright 2012 Pearson Education
/ection ! Industr$ 8nal$sis1 of !
6 Industr$ 8nal$sis7 his section should begin b$ describing the industr$ the
business "ill enter in ter#s of its sie' gro"th rate' andsales projections.
7 Ite#s to include in this section6 Industr$ sie' gro"th rate' and sales projections
6 Industr$ structure
6 ature of participants
6 Fe$ success factors6 Industr$ trends
6 =ong9ter# prospects
4-15
7/21/2019 Barringer e4 Ppt 04GE
16/37
Copyright 2012 Pearson Education
Industr$ 8nal$sis
Fe$ Insights
Before a business selects a target
#ar&et it should have a good grasp
of its industr$
7/21/2019 Barringer e4 Ppt 04GE
17/37
Copyright 2012 Pearson Education
/ection 3 Co#pan$ Description1 of !
6 Co#pan$ Description7 his section begins "ith a general description of the
co#pan$.
7 Ite#s to include in this section6 Co#pan$ description
6 Co#pan$ histor$
6 -ission state#ent
6 roducts and services
6 Current status6 =egal status and o"nership
6 Fe$ partnerships ?if an$@
4-17
7/21/2019 Barringer e4 Ppt 04GE
18/37
Copyright 2012 Pearson Education
Co#pan$ Description
Fe$ Insights
hile at first glance this section
#a$ see# less i#portant than the
others' it is etre#el$ i#portant.
It de#onstrates to $our reader that
$ou &no" ho" to translate an idea
into a business.
/ection 3 Co#pan$ Description! of !
4-18
7/21/2019 Barringer e4 Ppt 04GE
19/37
Copyright 2012 Pearson Education
/ection 4 -ar&et 8nal$sis1 of !
6 -ar&et 8nal$sis7 he #ar&et anal$sis brea&s the industr$ into seg#ents and
eros in on the specific seg#ent ?or target #ar&et@ to "hichthe fir# "ill tr$ to appeal.
7 Ite#s to include in this section6 -ar&et seg#entation and target #ar&et selection
6 Bu$er behavior
6 Co#petitor anal$sis
4-19
7/21/2019 Barringer e4 Ppt 04GE
20/37
Copyright 2012 Pearson Education
-ar&et 8nal$sis
Fe$ Insights
-ost start9ups do not service their
entire industr$. Instead' the$ focus
on servicing a specific ?target@
#ar&et "ithin the industr$.
It%s i#portant to include a section in
the #ar&et anal$sis that deals "ith
the behavior of the consu#ers in the
#ar&et. he #ore a start9up &no"s about the consu#ers in its target
#ar&et' the #ore it can tailor its
products or services appropriatel$.
/ection 4 -ar&et 8nal$sis! of !
4-20
7/21/2019 Barringer e4 Ppt 04GE
21/37
Copyright 2012 Pearson Education
/ection ( he Econo#ics of the Business1 of !
6 he Econo#ics of the Business7 his section addresses the basic logic of ho" profits are
earned in the business and ho" #an$ units of a business%sprofits #ust be sold for the business to ,brea& even0 and
then start earning a profit.7 Ite#s to include in this section
6 Revenue drivers and profit #argins
6 ;ied and variable costs
6 Operating leverage and its i#plications6 /tart9up costs
6 Brea&9even chart and calculations
4-21
7/21/2019 Barringer e4 Ppt 04GE
22/37
Copyright 2012 Pearson Education
he Econo#ics of theBusiness
Fe$ Insights
"o co#panies in the sa#e industr$
#a$ #a&e profits in different "a$s.
One #a$ be a high9#argin' lo"
9volu#e business' "hile the other
#a$ be a lo"9#argin' high9volu#e
business. It%s i#portant to chec& to
#a&e sure the approach $ou select
is sound.Co#puting a brea&9even anal$sis
is an etre#el$ useful eercise for
an$ proposed or eisting business.
/ection ( he Econo#ics of the Business! of !
4-22
7/21/2019 Barringer e4 Ppt 04GE
23/37
Copyright 2012 Pearson Education
/ection ) -ar&eting lan1 of !
6 -ar&eting lan7 he #ar&eting plan focuses on ho" the business "ill
#ar&et and sell its product or service.
7 Ite#s to include in this section6 Overall #ar&eting strateg$
6 roduct' price' pro#otions' and distribution
6 /ales process ?or C$cle@
6 /ales tactics
4-23
7/21/2019 Barringer e4 Ppt 04GE
24/37
Copyright 2012 Pearson Education
-ar&eting lan
Fe$ Insights
he best "a$ to describe a start9up%s
#ar&eting plan is to start b$
articulating its #ar&eting strateg$'
positioning' and points of
differentiation' and then tal& about
ho" these overall aspects of the
plan "ill be supported b$ price'
pro#otional #i' and distribution strateg$.
It%s also i#portant to discuss the
co#pan$ sales process.
/ection ) -ar&eting lan! of !
4-24
7/21/2019 Barringer e4 Ppt 04GE
25/37
Copyright 2012 Pearson Education
/ection * Design and Develop#ent lan1 of !
6 Design and Develop#ent lan7 If $ou%re developing a co#pletel$ ne" product or service'
$ou need to include a section in $our business plan thatfocuses on the status of $our develop#ent efforts.
7 Ite#s to include in this section6 Develop#ent status and tas&s
6 Challenges and ris&s
6 rojected develop#ent costs
6 roprietar$ issues ?patents' trade#ar&s' cop$rights' licenses' brandna#es@
4-25
7/21/2019 Barringer e4 Ppt 04GE
26/37
Copyright 2012 Pearson Education
Design and Develop#entlan
Fe$ Insights
-an$ see#ingl$ pro#ising start9ups
never get off the ground because
their product develop#ent efforts
stall or the actual develop#ent of
the product or service turns out to
be #ore difficult than thought.
8s a result' this is a ver$ i#portant
section for businesses developing a co#pletel$ ne" product or service.
/ection * Design and Develop#ent lan! of !
4-26
7/21/2019 Barringer e4 Ppt 04GE
27/37
Copyright 2012 Pearson Education
/ection + Operations lan1 of !
6 Operations lan7 Outlines ho" $our business "ill be run and ho" $our
product or service "ill be produced.
7 8 useful "a$ to illustrate ho" $our business "ill be run isto describe it in ter#s of ,bac& stage0 ?unseen to thecusto#er@ and ,front stage0 ?seen b$ the custo#er@activities.
7 Ite#s to include in this section
6 >eneral approach to operations6 Business location
6 ;acilities and eGuip#ent
4-27
7/21/2019 Barringer e4 Ppt 04GE
28/37
Copyright 2012 Pearson Education
/ection + Operations lan! of !
Operations lan
Fe$ Insights
Hour have to stri&e a careful balance
bet"een adeGuatel$ describing this
topic and providing too #uch
detail.
8s a result' it is best to &eep this
section short and crisp.
4-28
7/21/2019 Barringer e4 Ppt 04GE
29/37
Copyright 2012 Pearson Education
/ection -anage#ent ea# and Co#pan$
/tructure1 of !
6 -anage#ent ea# and Co#pan$ /tructure7 he #anage#ent tea# of a ne" venture t$picall$ consists
of the founder or founders and a handful of &e$#anage#ent personnel.
7 Ite#s to include in this section6 -anage#ent tea#
6 Board of directors
6 Board of advisers
6 Co#pan$ structure
4-29
7/21/2019 Barringer e4 Ppt 04GE
30/37
Copyright 2012 Pearson Education
/ection -anage#ent ea# and Co#pan$
/tructure! of !
-anage#ent ea# andCo#pan$ /tructure
Fe$ Insights
his is a critical section of a
business plan.
-an$ investors and others "ho
read the business plan loo& first at
the eecutive su##ar$ and then go
directl$ to the #anage#ent tea#
section to assess the strength of the
people starting the fir#.
4-30
7/21/2019 Barringer e4 Ppt 04GE
31/37
Copyright 2012 Pearson Education
/ection 12 Overall /chedule1 of !
6 Overall /chedule7 8 schedule should be prepared that sho"s the #ajor events
reGuired to launch the business.
7 he schedule should be in the for#at of #ilestones criticalto the business%s success.
7 Ea#ples of #ilestones6 Incorporating the venture
6 Co#pletion of protot$pes
6 Rental of facilities6 Obtaining critical financing
6 /tarting production
6 Obtaining the first sale
4-31
7/21/2019 Barringer e4 Ppt 04GE
32/37
Copyright 2012 Pearson Education
/ection 12 Overall /chedule! of !
Overall /chedule
Fe$ Insight
8n effectivel$ prepared and
presented schedule can be
etre#el$ helpful in convincing
potential investors that the
#anage#ent tea# is a"are of
"hat needs to ta&e place to launch
the venture and has a plan in
place to get there.
4-32
7/21/2019 Barringer e4 Ppt 04GE
33/37
Copyright 2012 Pearson Education
/ection 11 ;inancial rojections1 of !
6 ;inancial rojections7 he final section of a business plan presents a fir#%s pro
for#a ?or projected@ financial projections.
7 Ite#s to include in this section6 /ources and uses of funds state#ent
6 8ssu#ptions sheet
6 ro for#a inco#e state#ents
6 ro for#a balance sheets
6 ro for#a cash flo"s6 Ratio anal$sis
4-33
7/21/2019 Barringer e4 Ppt 04GE
34/37
Copyright 2012 Pearson Education
/ection 11 ;inancial rojections! of !
;inancial rojections
Fe$ Insights
Aaving co#pleted the earlier
sections of the plan' its eas$ to see
"h$ the financial projections co#e
last.
he$ ta&e the plans $ou%ve
developed and epress the# in
financial ter#s.
4-34
7/21/2019 Barringer e4 Ppt 04GE
35/37
Copyright 2012 Pearson Education
resenting the Business lan to Investors1 of !
6 he Oral resentation7 he first rule in #a&ing an oral presentation is to follo"
directions. If $ou%re told $ou have 1( #inutes' don%t tal&
for #ore than the allotted ti#e.
7 he presentation should be s#ooth and "ell9rehearsed.
7 he slides should be sharp and not cluttered.
6 uestions and ;eedbac& to Epect fro# Investors
7 he s#art entrepreneur has a good idea of the Guestionsthat "ill be as&ed' and "ill be prepared for those Gueries.
4-35
7/21/2019 Barringer e4 Ppt 04GE
36/37
Copyright 2012 Pearson Education
resenting the Business lan to Investors! of !
"elve o"eroint /lides to Include in an Investor resentation
1. itle /lide
!. roble#
3. /olution
4. Opportunit$ and target #ar&et
(. echnolog$
). Co#petition
*. -ar&eting and sales
+. -anage#ent tea#
. ;inancial projections
12. Current status
11. ;inancing sought
1!. /u##ar$
4-36
7/21/2019 Barringer e4 Ppt 04GE
37/37
Copyright 2012 Pearson Education
!"" rights reser#ed$ %o part o& this pu'"ication (ay 'ereproduced) stored in a retrie#a" syste() or trans(itted) in
any &or( or 'y any (eans) e"ectronic) (echanica")photocopying) recording) or other*ise) *ithout the prior*ritten per(ission o& the pu'"isher$ Printed in the +nited
,tates o& !(erica$
Copyright 2012 Pearson Education
4 37