Objectives

2. Objectives • 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. Fundamental of Entrepreneurship

3. Topics covered • What is a business plan? • Pitfall to avoid in planning • Benefits of business plan • Developing a business plan • Elements of a business plan Fundamental of Entrepreneurship

4. A Business Plan Is… • 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. Fundamental of Entrepreneurship

5. A Business Plan • 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. Fundamental of Entrepreneurship

6. A Business Plan:Two Essential Functions • 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. Fundamental of Entrepreneurship

7. A Business Plan • 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. Fundamental of Entrepreneurship

8. Why Take the Time to Build a Business Plan? • 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! Fundamental of Entrepreneurship

9. Covering the Bases in a Business Plan • Key people • Promising opportunity • Business context • Risks and rewards Fundamental of Entrepreneurship

10. Key Elements of a Business Plan • Executive summary • Mission statement • Company history • Business and industry profile • Business strategy • Description of products/services Fundamental of Entrepreneurship

11. Features vs. Benefits • 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”). Fundamental of Entrepreneurship

12. Marketing Strategy • 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 Fundamental of Entrepreneurship

13. Key Elements of a Business Plan • Marketing strategy • Competitor analysis • Owners’ and managers’ résumés • Plan of operation • Financial forecasts • Request for fund Fundamental of Entrepreneurship

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

15. Financial Forecasts • Three forecasts • Pessimistic • Most Likely • Optimistic • Realistic! • Include assumptions on which forecasts are based Fundamental of Entrepreneurship

16. Tips on Preparinga Business Plan • 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. Fundamental of Entrepreneurship

17. Tips on Preparinga Business Plan • 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. Fundamental of Entrepreneurship

18. Tips on Preparinga Business Plan • Always include cash flow projections. • Keep your plan “crisp” – between 25 and 50 pages long. • Tell the truth – always. Fundamental of Entrepreneurship

19. Your Plan Must Pass Three Tests • 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. Fundamental of Entrepreneurship

20. Presenting the Plan • 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. Fundamental of Entrepreneurship

21. Presenting the Plan • 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. Fundamental of Entrepreneurship

22. Presenting the Plan • 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. Fundamental of Entrepreneurship

23. Presenting the Plan • 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. Fundamental of Entrepreneurship

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