Chapter FourDeveloping a Business Plan:

Creating a Roadmap for Success

Introduction Everyone considering a small business start-

up needs to develop a formal plan to ensure the success of the venture, and to introduce the enterprise to potential financing sources.

To be successful, business plans must follow a very structured format including specific sections that together answer most of the questions on the mind of prospective investors.

Do not necessarily write it in the order in which it will ultimately be formatted.

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Why Develop a Business Plan? Most people who want to go into business for

themselves need to borrow money. No bank will loan funds without a detailed business plan.

Creating a business plan forces the owner-to-be to answer these questions: Where am I going? How will I get there? What opportunities and problems will I run

into along the way? How will I deal with them?

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Importance Business planning forces entrepreneurs

to analyze all aspects of their venture and to prepare an effective strategy to deal with uncertainties that may arise.

The business plan can provide a number of specific benefits for entrepreneurs who undertake the challenge of developing this formal document.

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Specific Benefits Benefits include:

Critical analysis Assumption scrutiny Operational strategies Measurable benchmarks Communications tool

Readers of a business plan expect it to have two important qualities: It must be in order It must be complete.

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Preparing the Business Plan Create a professional image Carefully evaluate it before handing it over to a potential investor

Keep it current – make revisions as necessary

Elements of a Business Plan Title page (1 pg.) Table of contents (1-2 pgs.) Executive Summary (1-2 pgs.) Business Description (2-6 pgs.) Marketing (3-8 pgs.) Research, Design, and Development (0-4 pgs.) Location (1-3 pgs.) Management (1-3 pgs.) Critical Risks (1-3 pgs.) Financial Forecasting (3-6 pgs.) Milestone Schedule (1-2 pgs.) Appendix (logo, press release, resume, other)

Important note: The appendix of the textbook (471-513) includes a sample business plan that follows this format).

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Title Page (1 page) Typically contains the following

information: Company name (with logo) Contact information (owner names, company

address, telephone and fax numbers, e-mail and website address)

Date this version of the plan was completed Proprietary statement Securities disclaimer

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Table of Contents(1-2 pages) Put major section headings in boldface,

all caps type using roman numerals Put subheads in regular type and list

page numbers Include page numbers for every

component, including financial statements and appendices.

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Table of Contents Format

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Executive Summary (1-2 pages) The executive summary is a short

description of the venture should be the first information the reader encounters.

Consider the following ideas when developing the executive summary: Keep it short Answer all the fundamental questions Write it last

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Business Description (2-6 pgs.) The business description section contains a

more comprehensive account of the venture. Start with a concise one-sentence definition

of what the business will do. Remember the following when describing the

business: Identify the business by name Provide some background on the industry Clearly describe the potential of the new

venture Spell out any distinctive features

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Marketing (3-8 pgs.) The marketing section is divided into two major

parts. The first part covers research and analysis. The second part is the marketing plan.

There are several things to achieve in this very important section of the business plan: Convince skeptical investors Use and disclose market studies Identify the target market Evaluate the competition Demonstrate pricing strategy Detail advertising plans

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Research, Design & Development (0-4 pgs.) The research, design, and development section

includes developmental research leading to a product’s design.

Pertinent specifically to manufacturing businesses. If your business is a retail or service firm, you can

omit this section. If this is the case, your grade for this section will come from the marketing section (i.e. your points from the marketing section will count double.)

Consider the following when preparing this section: Detail all costs Tell what work is already done Acknowledge outside help

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Location (1-3 pgs.) Proximity to suppliers, availability of

transportation (for shipping and receiving), and labor supply are issues that should be addressed in this section.

You do not need an exact address; detail the selected city/state for your business location.

Some of the information to be presented in this section includes: Describe the advantages List the production needs Estimate the production costs

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Management (1-3 pgs.) This section should introduce all the

managers and key employees, emphasizing their experiences and what they bring to the venture.

The management section should include the following: Introduce the leadership Describe the legal structure Outline compensation

Critical Risks (1-3 pgs.) In preparing a business plan the goal

should not be to minimize risks, but to anticipate them.

Remember the following when preparing this section: Discuss risks before investors point

them out Provide alternative courses of action

Financial Forecasting (3-6 pgs.) Obtaining financing always has

depended on fair and reasonable budgeting and forecasting.

Include the following in the financial forecasting section: Provide start up summary (detail

sources of capital and start up expenses)

Cash flow statement Break-even analysis

Start Up Summary Example

Excerpted from the Twirl Boutique business plan.

Milestone Schedule (1-2 pgs.) This segment of the business plan

requires the determination of objectives and the timing of their accomplishment.

Develop a timetable or chart to demonstrate when each phase of the venture is to be completed.

Milestone Schedule Example

http://www.bplans.com/specialty_gifts_business_plan/strategy_and_implementation_summary_fc.cfm

Appendix The appendix includes valuable

informationnot contained in other sections. For your

classproject, it must include:

An original company logo/word mark Press release announcing new business Resume(s) of the owner(s)

Logos and Word marks A logo is a graphic mark or emblem commonly

used by commercial enterprises, organizations and even individuals to aid and promote instant public recognition. In plainer words, a logo is a symbol that represents a company.

A word mark is a standardized graphic representation of the name of a company, institution, or product name used for purposes of identification and branding. A word mark is usually a distinct text-only typographic treatment.

Sometimes, logos and word marks are used together.

Logo Examples

Word Mark Examples

Logos with Word Mark Examples

The Pantone Matching System (PMS) is a proprietary color space used in a variety of industries, primarily printing, though sometimes in the manufacture of colored paint, fabric, and plastics.

Pantone Matching System

Allows for uniformity of colors in the printing process.

Using specific PMS colors allows you to maintain the integrity of your logo design.

Importance of the PMS System

Press Release A press release (also known as a news release,

media release, or press statement) is a written or recorded communication directed at members of the news media for the purpose of announcing something claimed as having news value

Focus on story (“news value”) rather than promotion Always written in third person Body of release should be more than one paragraph,

but typically five or less paragraphs in total Try to always include a quote from an actual person End with ### to indicate where the press release ends

Press Release Template

Business Plan Project Specifics Due in class on Wednesday, December 1 Printed on 8.5 x 11” paper with 1-inch margins Use12-point Times New Roman or Arial font Graphics or charts need to be pasted within

the document Must turn in a hard copy Maximum 250 points Required components are listed on pages

113-115 of the textbook Length can range from around 15 to 30 pages

total (plus appendices)

Business Plan Project Grading Rubric

Distinguished Proficient Apprentice NoviceExecutive Summary 14 - 15 points 12 - 13 points 10 - 11 points 0 - 9 points

Business Description Segment

23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Marketing Segment (x 2 for plans without R&D section) 23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 pointsResearch, Design and Development Segment

23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Location Segment 23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Management Segment 23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 pointsCritical Risks Segment 23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Financial Segment 23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Milestone Schedule Segment

23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Appendix Segment 23 - 25 points 20 - 22 points 17 - 19 points 0 - 16 points

Effectiveness 9 - 10 points 7 - 8 points 5 to 6 points 0 to 4 points

Business Plan Presentation Presentations will take place during class on

December 6 & 8 Students/groups will have 8-10 minutes to

present The goal is to explain your business in a

compelling way, imaging that other students are potential investors

Maximum 50 points After all presentations, students will vote on

the most convincing presentation and the winning student/group will receive a prize

Business Plan Presentation1. Introductory Slide (with elevator pitch) (1 minute)2. Product/Service Slide (1-2 minutes)3. Strategy Slide (2-3 minutes)4. Risk Slide (1-2 minutes)5. Financial Slide (2-3 minutes) 6. Summary Slide (1 minute)

Elevator Pitch An elevator pitch is an action-oriented

description of your business that is somewhat longer than a vision statement or tagline

Approximately 30 seconds, 100 words or less Four success factors: the hook, the purpose,

the what and where, and the delivery. Hook: Something about your product/service people

will remember Purpose: How does your product/service serve the

customer What/Where: Tell where your business “is at”. For

start-ups, state what you are seeking (i.e. funding) Delivery: Sound conversational and not memorized