entrepreneurship (chapter 8)

8/12/2019 Entrepreneurship (Chapter 8)

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Copyright © 2008 by Nelson, a division of Thomson Canada Limited

ENTREPRENEURSHIP

A PROCESS PERSPECTIVERobert A. BaronScott A. Shane

A. Rebecca Reuber

Slides Prepared by:

Sandra Malach, University of Calgary




8

Writing an EffectiveBusiness Plan:

Crafting a Roadmap to

Success

1




LEARNING OBJECTIVES1. Define a business plan and explain why

entrepreneurs should write one.

2. Explain how the process of persuasion plays a keyrole in business plans and in the success of newventures.

3. Explain why the executive summary is a veryimportant part of any business plan.

4. Describe the major sections of a business plan andthe types of information they should include.




LEARNING OBJECTIVES5. Describe the seven deadly sins of business plans –

errors all entrepreneurs should avoid.

6. Explain why potential investors usually askentrepreneurs to give verbal presentationsdescribing their idea for new products or servicesand their company.

7. Describe the steps entrepreneurs should take tomake their verbal presentations to potentialinvestors truly excellent.




―There is a real magic in enthusiasm. Itspells the difference between

mediocrity and accomplishment.‖

--Norman Vincent Peale, 1961




BUSINESS PLAN A formal, written expression of the

entrepreneur’s vision for converting

ideas into a profitable, going business. The entry card for serious consideration by

venture capitalists, banks, and other

sources of funding




BUSINESS PLAN FACTS More than 60% of small, new

companies have no business plan.

Writing business plans:

Reduced the chances of failure, and

Increased the rate of new business and

new product development




Prepare a

relatively

simple plan

Start the

business

Refine the

business plan

Continue to

grow the

business

MODEL OF BUSINESS PLANNING




BUSINESS PLAN COMPONENTS What is the basic idea?

Why is the new product appealing —and towhom?

How will the idea be realized?

Who are the entrepreneurs?

How much funding is needed? What type offunding? How will it be used? How will yourealize a return?




A SUCCESSFUL PLAN A serious document prepared by

serious people

Orderly

Succinct

(40-50 pages, max.)

Persuasive




EXECUTIVE SUMMARY Your elevator pitch

Provides a brief,clear, and persuasiveoverview of the newventure

Target 2 to 3 pages




BUSINESS PLAN SECTIONS1. Background and

purpose

2. Marketing3. Competition

4. Development,

production, andlocation

5. Management

6. Financialinformation

7. Risk factors8. Harvest or exit

9. Scheduling and

milestones10. Appendices




BACKGROUND, PRODUCT, AND

PURPOSE What is the nature of the idea driving

your company and how did it arise?

What does the product have to offer?

Why is it unique & valuable

What is the basic corporate

information?

What are the company’s goals?




MARKET ANALYSIS What is the need for the product or

service?

Why would anyone want to buy or useit?




MARKET ANALYSIS Identify the market

How large is the market? Is the market growing or shrinking?

What do you know about competitors? Who are they

Anticipated response to new product Promotion methods

Pricing Strategy




DEVELOPMENT, PRODUCTION, AND LOCATION

Where are the products or services inthe development process?

What are the projected costs andtimetable for making the product ordelivering the service?

What steps have been taken to assurequality and safety?




MANAGEMENT TEAM

Many venture capitalists would ratherinvest in a first-rate team with a

second-rate idea than a second-rateteam with a first-rate idea.

Critical element for success




MANAGEMENT TEAM

Do team members have the requisiteexperience, expertise, skills and

personal characteristics? Past business experience, intelligence,

technical skill

Energy & enthusiasm Do team members have a good working

relationship?




FINANCIAL PLANS ANDPROJECTIONS

Proforma balance sheet

3 years, semi-annual

Proforma income statement

Cash flow statement

Break-even analysis




CRITICAL RISKS

Price cutting by competitors

Unforeseen industry trends

Sales projections not achieved Costs exceed estimates

Schedules not met

Difficulties raising financing

Unforeseen political, economic & social trends




HARVEST AND EXIT

Think of going out before youenter

Management succession

Exit strategies

IPO




SCHEDULING & MILESTONES

1. Formalincorporation

2. Completion ofdesign

3. Completion ofprototypes

4. Hiring of initialpersonnel

5. Product displays

6. Agreements

7. Moving intoproduction

8. Receipt of orders

9. First sales10. Profitability




APPENDICES

Financial Statements

Financial Projections

Resumes of Founders & TopManagement Team




THE INTANGIBLES

The extra ―something‖

Pay attention to organization, clarity, word

choice, and style Have good writers read your plan

Revise according to their suggestions




SEVEN DEADLY SINS




THE PRESENTATION

Remember: This is important!

Prepare, prepare, prepare

Choose content carefully Persuade, don’t overwhelm

Show enthusiasm tempered with reality

Rehearse Don’t overlook the basics

Respond positively to questions

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