Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter
Develop a Business Plan 3.1 Why a Business Plan is Important3.2 What Goes into a Business Plan?3.3 How to Create an Effective
Business Plan
3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 2
Ideas in Action
Passion for graffiti art turned into a business. Prior to requesting financing from a bank,
you should prepare the “five c’s.” Character - are you honest and dependable? Capacity - can you earn enough $ to pay back loans? Capital - do you have enough $ on hand to pay bills? Collateral - do you have values to back up your loans? Conditions - do you have potential to continue earning $?
Turning an Idea into a Business (p.63)
Chapter 3Slide 3
Lesson 3.1
Why a Business Plan is Important
GoalsExplain the purpose of writing a good
business plan.Describe the importance of a
business plan.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 4
The Business Plan business plan
a written document that describes all the steps necessary for opening and operating a successful business
A business plan will: describe your ideas to investors serve as a guide for you as you start your
business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 5
Purposes of a Business Plan
A business plan: explains the idea behind your business
how your product/service will be produced & sold sets specific objectives and how you will
achieve them describes the experience of the people who
will run the business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 6
Purposes of a Business Plan A business plan helps obtain finances:
Convinces investors that your business idea is solid Products must be newer, better, or less expensive then
those previously available Showing how you will retain customers
Short-, Medium-, & Long-terms sales projections should show profitability
Background & Experience must convince investors that you are capable for running the business.
3.1
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 7
What are the three main purposes of a business plan?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 8
Importance of a Business Plan
A business plan:
1. makes you think about all aspects of your business2. may help you secure financing3. helps you communicate your ideas to others4. can serve as a tool for managing your business
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 9
Why is a business plan important to an entrepreneur?
Chapter 3Slide 10
Lesson 3.2
What Goes into a Business Plan? Goals List and describe the basic elements of
a business plan. Describe how to pull a business plan
together.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 11
Basic Elements of a Business Plan
The three basic components of a business plan are: introductory materials the main body the appendix
All business plans will differ but should contain the same basic information.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 12
Business Plan Layout
Body ElementsIntroductionMarketingFinancesOperationsConcluding Statements
Appendix
Intro ElementsTitle PageTable of ContentsCover LetterStatement of PurposeExecutive Summary
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 13
The main body of a business plan contains the bulk of the information about the business idea including: Introduction Marketing Financial Management Operations Concluding Statement
5 Elements of the Main Body
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 14
Main Body - Introduction
Introduction should contain following info:
A detailed description of business goals short, medium, and long-term goals
Legal structure of business, including ownership sole proprietor, partnership, or corporation
Your applicable skills and experience paid, volunteer, and hobbies
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 15
The competitive advantages of your business Performance Quality Reliability Distribution Price Promotion Public image or reputation
Main Body - Introduction
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 16
Main Body - Marketing The marketing section of the business
plan should describe: Products/Services Market Industry Location
Described on next slide
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 17
Products/Services Describe products/services Explain how they differ from existing products Highlight unique features Explain the customer benefits
Market Who is your market? How large is the market? How do you plan to enter the market? How will you deal with competition?
3.2
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 18
Industry Growth potential Economic trends Technology impacts Forecast for the industry growth External factors that affect the business
High competition or lack of suppliers
Location Location to competition Location to target market Availability of parking & other shopping
3.2
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 19
Main Body – Financial Management
Helps determine your financial needs. Consists of 3 elements
1. Identification of Risks It is reassuring to lenders to know that you
have proactively defined risks and that you have a plan for dealing with them.
3.2
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 20
2. Financial Statements pro forma financial statement: a financial statement
based on projected revenues and expenses
3. Funding Request and Return on Investment personal investment loan based financing (borrowing) plan for how the funding will be used anticipated return on investment (ROI)
Main Body – Financial Management
3.2
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 21
Operations
Daily Business Management Staffing
hiring and personnel procedures Facilities
buy or lease Equipment
production and delivery equipment
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 22
Concluding Statement Summarize goals and objectives.
Emphasize your commitment to the success of your business.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 23
List the elements of the main body of a business plan and explain why each one is important.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 24
Complete the Business Plan
Introductory elements1. Title Page2. cover letter
a letter that introduces and explains an accompanying document or set of documents
3. Table of Contents4. Statement of Purpose
a brief explanation of why you are asking for a loan and what you plan to do with the money
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 25
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 26
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 27
5. Executive Summary A short restatement of the report An executive summary should:
compel the reader to continue reading describe your business concept include financial projections identify physical needs state the requested loan value
Complete the Business Plan
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 28
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 29
includes supporting documents that provide additional information to support the body of the report
Put It All Together The business plan should be:
neat attractive well-organized inviting to read
Appendix
Complete the Business Plan
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 30
Why should you include supporting documents in your business plan?
Chapter 3Slide 31
Lesson 3.3
How to Create an Effective Business Plan
Goals Describe resources available for
researching your business plan. Name common mistakes to avoid in
business planning.
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 32
Research the Business Plan Convince readers you have a practical
business idea by including information and data from objective resources and showing solid evidence.
Most entrepreneurs spend 50 to 100 hours developing their business plan.
Process requires: Patience, Research, Thought, Great Deal of Writing and Editing
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 33
Community, Government, & Professional Resources
1. Small Business Administration (SBA) an independent government agency helps Americans develop new businesses
2. Small Business Development Centers (SBDC) a cooperative effort of the private sector, the educational
community, and federal, state, and local governments provides free, individualized help for business plan
development for those who cannot afford private consultant
3.3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 34
3. Service Corps of Retired Executives (SCORE) retired executives provide free, confidential
advice to entrepreneurs either in person or over the Internet both short-term and long-term assistance is available
4. Chamber of Commerce provides information on local business trends
Community, Government, & Professional Resources
3.3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 35
5. Trade Associations organizations that are comprised of professionals in a
specific industry provide educational and networking opportunities
6. Professional Consultants experts who will provide business assistance for a fee
7. Financial Institutions Bankers and Accountants can provide information about
loans and financial statements.
Community, Government, & Professional Resources
3.3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 36
Print Resources library (books on business development) magazines (trade and small business) government documents (publications)
Provide information similar to library information Industry specific websites Websites targeted to entrepreneurs and small
business owners
Online Resources
3.3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
People Resources Small Business Development Centers
One-on-One Assistance Inexpensive workshops
SCORE’s Volunteer Executives Free confidential advice
Professional Consultants Confidential advice at a cost
Chapter 3Slide 37
3.3
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 38
What are some of the resources that are available to help you develop your business plan?
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 39
Mistakes in Business Planning
Avoid making the following mistakes: Unrealistic financial projections An undefined target market Poor research Ignored competition Inconsistencies in the Business Plan
Entrepreneurship: Ideas in Action© Cengage Learning/South-Western
Chapter 3Slide 40
List some common mistakes that are made in business planning.
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