Marvin RyderAssistant Professor, Marketing & Entrepreneurship

MBA P715Entrepreneurship

Week 4

Components of the Business Plan Executive Summary

Table of Contents

Product/Market or Service/Market Description

Entrepreneur Profile

Basis of Competitive Advantage

Business/Personal Objectives

Market Analysis Customers – “Top-Down” & “Bottom-up” Analysis Competitors

Customer AnalysisTop Down1) Start with population of “trading area”

Reduce for demographic/psychographic factors

Multiply by usage data

What percent of this amount do you need to capture to meet your objectives for each of your first three years?

2) What other data from secondary data can you present that supports your business concept?

Bottom Up1) Present all survey results – use graphs/tables/charts

2) Use one or two results to re-do the “funnel” from above

NOTE: Estimates from “top down” and “bottom up” never match but lead to “best” and “worst” case estimates

Components of the Business Plan Executive Summary

Table of Contents

Product/Market or Service/Market Description

Entrepreneur Profile

Basis of Competitive Advantage

Business/Personal Objectives

Market Analysis Customers – “Top-Down” & “Bottom-up” Analysis Competitors

Components of the Business Plan Marketing Strategy

Distribution

Pricing/Profit Margins

Promotion/Advertising/Selling Tactics

Manufacturing/Supplier Analysis (Optional)

Information Technology Analysis (Optional)

Organizational Structure and Personnel Requirements

Components of the Business Plan Present Situation and Start-Up Requirements

Define a target opening data. Identify three to five steps to get from “now” to “then.” If a step has costs, list them and note how they will be financed.

Financial Projections Assumptions Three-Year “Most Likely” Income Statements Quarterly Cash Flow Projections for Year One Pro Forma Balance Sheet for End of Year One Break-even Analysis for Year One Sensitivity Analysis on Three-Year Income

Statements – “Best” case/ “ Worst” case

What Bankers Want from Business Plan Reliability of the Borrower

How will money be used? Assets vs. Operating expenses

How likely is business to generate a profit?

Loan repayment schedule

Credit worthiness of business’ customers

Collateral for the loan (or availability of guarantor)

Equity invested by the entrepreneur – D/E ratio

What Investors Want from Business Plan Business concept – pique one’s interest

Cost of independently evaluating business plan

Is this a good substitute for something in the market? Strength of competitive advantage.

Can this be easily substituted in turn? Don’t like to fund intermediate steps or prototypes.

Definition of market niche – does it fill a need?

Certainty of market information

How will sales be made or revenue generated?

What Investors Want from Business Plan Accuracy of competitive analysis – hole in

the market?

Projected profit and return on investment (30%)

Profit growth

Financial investment of the founders

When and how will investment be cashed? – three to five year window

Will any investment be recoverable upon failure?

Any need for future cash investment?