This document provides an overview of preparing a business plan, including: - The importance of testing business models through business prototyping before fully committing resources. - Key elements of a business plan such as an industry analysis, product/service feasibility, financial feasibility, and the five forces model for analyzing industry competition. - Guidelines for writing an effective business plan, including following a conventional structure, balancing facts with excitement, and recognizing the plan may change as insights emerge.

1. ABDM4233 ENTREPRENEURSHIP
Preparing
a
Business Plan
by
Stephen Ong
Principal Lecturer (Specialist)
Visiting Professor, Shenzhen

2. Business Prototyping
 Entrepreneurs test their business
models on a small scale before
committing serious resources to
launch a business that might not work.
 Recognizes that a business idea is a
hypothesis that needs to be tested
before taking it full scale.
4-2

3. Elements of a Feasibility Analysis
Industry and Product or Service
Market Feasibility Feasibility
Financial
Feasibility
4-3

4. Elements of a Feasibility Analysis
Industry and Product or Service
Market Feasibility Feasibility
Financial
Feasibility
4-4

5. Five Forces Model
Potential
Entrants
Threat of
New Entrants
Bargaining Power
Industry
of Suppliers Bargaining Power
Competitors
of Buyers
Suppliers Buyers
Rivalry among
existing firms
Threat of Substitute
Products or Services
Substitutes
4-5

6. Five Forces Matrix
4-6

7. Elements of a Feasibility Analysis
Industry and Product or Service
Market Feasibility Feasibility
Financial
Feasibility
4-7

8. What Is a Business Plan?
 Business Plan
 A business plan is a written narrative, typically 25 to 35
pages long, that describes what a new business plans to
accomplish.
 Dual-Use Document
 For most new ventures, the business plan is a dual-
purpose document used both inside and outside the
firm.
4-8

9. Who Reads the Business Plan—And
What Are They Looking For?
There are two primary audiences for a firm’s business plan
Audience What They are Looking For
A Firm’s A clearly written business plan helps the
Employees employees of a firm operate in sync and move
forward in a consistent and purposeful manner.
Investors and A firm’s business plan must make the case that the
other external firm is a good use of an investor’s funds or the
stakeholders attention of others.
4-9

10. Guidelines for Writing a Business Plan
1 of 5
 Structure of the Business Plan
 To make the best impression a business plan should
follow a conventional structure, such as the outline for
the business plan shown in the chapter.
 Although some entrepreneurs want to demonstrate
creativity, departing from the basic structure of the
conventional business plan is usually a mistake.
 Typically, investors are busy people and want a plan
where they can easily find critical information.
4-10

11. Guidelines for Writing a Business Plan
2 of 5
 Structure of the Business Plan (continued)
 Software Packages
 There are many software packages available that employ an
interactive, menu-driven approach to assist in the writing of a
business plan.
 Some of these programs are very helpful. However,
entrepreneurs should avoid a boilerplate plan that looks as
though it came from a “canned” source.
 Sense of Excitement
 Along with facts and figures, a business plan needs to project a
sense of anticipation and excitement about the possibilities that
surround a new venture.
4-11

12. Guidelines for Writing a Business Plan
3 of 5
 Content of the Business Plan
 The business plan should give clear and concise
information on all the important aspects of the
proposed venture.
 It must be long enough to provide sufficient
information yet short enough to maintain reader
interest.
 For most plans, 25 to 35 pages is sufficient.
 Types of Business Plans
 There are three types of business plans, which are
shown on the next slide.
4-12

13. Guidelines for Writing a Business Plan
4 of 5
Types of Business Plans
4-13

14. Guidelines for Writing a Business Plan
5 of 5
 Recognizing the Elements of the Plan May Change
 It’s important to recognize that the plan will usually
change while written.
 New insights invariably emerge when an entrepreneur
or a team of entrepreneurs immerse themselves in
writing the plan and start getting feedback from others.
4-14

15. The Business Plan
 A written summary of:
 An entrepreneur’s proposed business
venture
 The operational and financial details
 The marketing opportunities and strategy
 The managers’ skills and abilities.
 A business plan is the best insurance against
launching a business destined to fail or
mismanaging a potentially successful
company.
4 - 15

16. The Business Plan:
Two Essential Functions
1. 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.
4 - 16

17. A Plan Must Pass Three Tests
1. 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.
2. The Competitive Test – evaluates:
 A company’s position relative to its competitors.
 Management’s ability to create a company that
will gain an edge over its rivals.
3. The Value Test – proving that:
 A venture offers investors or lenders an attractive
rate of return or a high probability of repayment.
4 - 17

18. 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!
4 - 18

19. Key Elements of a Business Plan
 Title Page and Table of Contents
 Executive Summary
 Vision and Mission Statement
 Company History
 Business and Industry Profile Our
Business
Plan
4 - 19

20. FIGURE 4.3
Mission, Goals
and Objectives
4 - 20

21. Key Elements of a Business Plan
 Title Page and Table of Contents
 Executive Summary The
Business
Plan
 Mission Statement
 Company History
 Business and Industry Profile
 Business Strategy
 Description of Products/Services
4 - 21

22. 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”
4 - 22

23. Key Elements of a Business Plan
(continued)
 Marketing Strategy The
Business
Plan
 Document market claims
 Show customer interest
 Competitor Analysis
 Description of Management Team
 Plan of Operation
Our
Business
Projected Financial Statements
Plan

 Loan or Investment Proposal
4 - 23

24. Guidelines for Preparing
a Business Plan
 Remember: No one can create your plan for
you.
 Potential lenders want to see financial
projections, but they are more interested in
the strategies for reaching those projections.
 Show how you plan to set your business
apart from competitors; don’t fall into the
“me too” trap.
 Identify your target market and offer
evidence that customers for your product or
service exist.
4 - 24

25. Tips on Preparing
a Business Plan
 Make sure your plan has an attractive
cover. (First impressions are crucial.)
 Rid your plan of all spelling and
grammatical errors.
 Make your plan visually appealing.
 Include a table of contents to allow
readers to navigate your plan easily.
 Make it interesting.
4 - 25

26. Tips on Preparing
a Business Plan
(continued)
 Your plan must prove that the business will
make money (not necessarily immediately,
but eventually).
 Use spreadsheets to generate financial
forecasts.
 Always include cash flow projections.
 Keep your plan “crisp” – between 25 and 40
pages long.
 Tell the truth – always.
4 - 26

27. The “5 Cs” of Credit
 Capital
 Capacity
 Collateral
 Character
 Conditions
4 - 27

28. Outline of Business Plan
 Outline of Business Plan
 A suggested outline of a business plan is
shown on the next several slides.
 Most business plans do not include all the
elements introduced in the sample plan;
we include them here for the purpose of
completeness.
 Each entrepreneur must decide which
elements to include in his or her plan.
4-28

29. Section 1: Executive Summary
1 of 2
 Executive Summary
 The executive summary is a short
overview of the entire business plan
 It provides a busy reader with everything
that needs to be known about the new
venture’s distinctive nature.
 An executive summary shouldn’t exceed
two single-spaced pages.
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30. Section 1: Executive Summary
2 of 2
Key Insights
• In many instances an investor will
ask for a copy of a firm’s executive
Executive Summary summary and will ask for a copy of
the entire plan only if the executive
summary is sufficiently
convincing.
• The executive summary, then, is
arguably the most important
section of a business plan.
4-30

31. Section 2: Industry Analysis
1 of 2
 Industry Analysis
 This section should begin by describing the industry the
business will enter in terms of its size, growth rate, and
sales projections.
 Items to include in this section:
 Industry size, growth rate, and sales projections
 Industry structure
 Nature of participants
 Key success factors
 Industry trends
 Long-term prospects
4-31

32. Section 2: Industry Analysis
2 of 2
Key Insights
• Before a business selects a target
market it should have a good grasp
Industry Analysis of its industry—including where its
promising areas are and where its
points of vulnerability are.
• The industry that a company
participates in largely defines the
playing field that a firm will
participate in.
4-32

33. Section 3: Company Description
1 of 2
 Company Description
 This section begins with a general description of the
company.
 Items to include in this section:
 Company description
 Company history
 Mission statement
 Products and services
 Current status
 Legal status and ownership
 Key partnerships (if any)
4-33

34. Section 3: Company Description
2 of 2
Key Insights
• While at first glance this section
may seem less important than the
Company Description others, it is extremely important.
• It demonstrates to your reader that
you know how to translate an idea
into a business.
4-34

35. Section 4: Market Analysis
1 of 2
 Market Analysis
 The market analysis breaks the industry into segments
and zeros in on the specific segment (or target market)
to which the firm will try to appeal.
 Items to include in this section:
 Market segmentation and target market selection
 Buyer behavior
 Competitor analysis
4-35

36. Section 4: Market Analysis
2 of 2
Key Insights
• Most start-ups do not service their
entire industry. Instead, they focus
Market Analysis on servicing a specific (target)
market within the industry.
• It’s important to include a section in
the market analysis that deals with
the behavior of the consumers in the
market. The more a start-up knows
about the consumers in its target
market, the more it can tailor its
products or services appropriately.
4-36

37. Section 5: The Economics of the Business
1 of 2
 The Economics of the Business
 This section addresses the basic logic of how profits are
earned in the business and how many units of a
business’s profits must be sold for the business to
“break even” and then start earning a profit.
 Items to include in this section:
 Revenue drivers and profit margins
 Fixed and variable costs
 Operating leverage and its implications
 Start-up costs
 Break-even chart and calculations
4-37

38. Section 5: The Economics of the Business
2 of 2
Key Insights
• Two companies in the same industry
may make profits in different ways.
The Economics of the One may be a high-margin, low
Business -volume business, while the other
may be a low-margin, high-volume
business. It’s important to check to
make sure the approach you select
is sound.
• Computing a break-even analysis
is an extremely useful exercise for
any proposed or existing business.
4-38

39. Section 6: Marketing Plan
1 of 2
 Marketing Plan
 The marketing plan focuses on how the business will
market and sell its product or service.
 Items to include in this section:
 Overall marketing strategy
 Product, price, promotions, and distribution
 Sales process (or Cycle)
 Sales tactics
4-39

40. Section 6: Marketing Plan
2 of 2
Key Insights
• The best way to describe a start-up’s
marketing plan is to start by
Marketing Plan articulating its marketing strategy,
positioning, and points of
differentiation, and then talk about
how these overall aspects of the
plan will be supported by price,
promotional mix, and distribution
strategy.
• It’s also important to discuss the
company sales process.
4-40

41. Section 7: Design and Development Plan
1 of 2
 Design and Development Plan
 If you’re developing a completely new product or
service, you need to include a section in your business
plan that focuses on the status of your development
efforts.
 Items to include in this section:
 Development status and tasks
 Challenges and risks
 Projected development costs
 Proprietary issues (patents, trademarks, copyrights, licenses,
brand names)
4-41

42. Section 7: Design and Development Plan
2 of 2
Key Insights
• Many seemingly promising start-ups
never get off the ground because
Design and Development their product development efforts
Plan stall or the actual development of
the product or service turns out to
be more difficult than thought.
• As a result, this is a very important
section for businesses developing a
completely new product or service.
4-42

43. Section 8: Operations Plan
1 of 2
 Operations Plan
 Outlines how your business will be run and how your
product or service will be produced.
 A useful way to illustrate how your business will be run
is to describe it in terms of “back stage” (unseen to the
customer) and “front stage” (seen by the customer)
activities.
 Items to include in this section:
 General approach to operations
 Business location
 Facilities and equipment
4-43

44. Section 8: Operations Plan
2 of 2
Key Insights
• Your have to strike a careful balance
between adequately describing this
Operations Plan topic and providing too much
detail.
• As a result, it is best to keep this
section short and crisp.
4-44

45. Section 9: Management Team and
Company Structure
1 of 2
 Management Team and Company Structure
 The management team of a new venture typically
consists of the founder or founders and a handful of key
management personnel.
 Items to include in this section:
 Management team
 Board of directors
 Board of advisers
 Company structure
4-45

46. Section 9: Management Team and
Company Structure
2 of 2
Key Insights
• This is a critical section of a
business plan.
Management Team and • Many investors and others who
Company Structure read the business plan look first at
the executive summary and then go
directly to the management team
section to assess the strength of the
people starting the firm.
4-46

47. Section 10: Overall Schedule
1 of 2
 Overall Schedule
 A schedule should be prepared that shows the major
events required to launch the business.
 The schedule should be in the format of milestones
critical to the business’s success.
 Examples of milestones:
 Incorporating the venture
 Completion of prototypes
 Rental of facilities
 Obtaining critical financing
 Starting production
 Obtaining the first sale
4-47

48. Section 10: Overall Schedule
2 of 2
Key Insight
• An effectively prepared and
presented schedule can be
Overall Schedule extremely helpful in convincing
potential investors that the
management team is aware of
what needs to take place to launch
the venture and has a plan in
place to get there.
4-48

49. Section 11: Financial Projections
1 of 2
 Financial Projections
 The final section of a business plan presents a firm’s
pro forma (or projected) financial projections.
 Items to include in this section:
 Sources and uses of funds statement
 Assumptions sheet
 Pro forma income statements
 Pro forma balance sheets
 Pro forma cash flows
 Ratio analysis
4-49

50. Section 11: Financial Projections
2 of 2
Key Insights
• Having completed the earlier
sections of the plan, its easy to see
Financial Projections why the financial projections come
last.
• They take the plans you’ve
developed and express them in
financial terms.
4-50

51. Presenting the Business Plan to Investors
1 of 2
 The Oral Presentation
 The first rule in making an oral presentation is to
follow directions. If you’re told you have 15 minutes,
don’t talk for more than the allotted time.
 The presentation should be smooth and well-rehearsed.
 The slides should be sharp and not cluttered.
 Questions and Feedback to Expect from Investors
 The smart entrepreneur has a good idea of the
questions that will be asked, and will be prepared for
those queries.
4-51

52. Presenting the Business Plan to Investors
2 of 2
Twelve PowerPoint Slides to Include in an Investor Presentation
1. Title Slide 7. Marketing & Sales
2. Problem 8. Management Team
3. Solution 9. Financial projections
4. Opportunity & 10. Current status
Target Market 11. Financing sought
5. Technology 12. Summary
6. Competition

53. Presenting the Plan
 Demonstrate enthusiasm, but don’t be
overemotional.
 Know your audience thoroughly.
 “Hook” investors quickly with an up-
front explanation of the venture, its
opportunities, and its benefits to them.
 Hit the highlights; focus on
the details later.
 Keep your presentation
simple – 2 or 3 major points.
4 - 53

54. Presenting the Plan
(continued)
 Avoid overloading your audience with
technological jargon.
 Use visual aids.
 Close by reinforcing the nature of the
opportunity.
 Be prepared (with details) for potential
investors’ questions.
 Follow up with every investor to whom
you make your presentation.
4 - 54

55. The 360° CUBE Pitch
Six Posters in a 6 minute Investor Pitch
SOCIAL MARKETING
PROBLEM & SALES
VISION & OPERATIONS TEAM
MISSION & KEY PARTNERS
BUSINESS FINANCIAL
MODEL MILESTONES

56. Conclusion
 There are no guarantees for success.
 Creating a business plan will be valuable
primarily because of the process itself.
 The business planning process may
provide insight to increase the chances
for success.
 The business plan: Entrepreneurs
benefit; lenders and investors demand it!
4 - 56

57. Social Enterprise Business
Plan
APPENDIX II
4 - 57

58. Purpose of a business plan
 If the business model is a blueprint, the
plan provides the detail
 A business plan communicates to key
stakeholders, and can be widely
disseminated
 It summarizes how objectives will be
met
 As an action plan, requires the
entrepreneur to execute
4 - 58

59. Internal and external audiences
for the business plan
 External
 Funders
 Government
 Community
 Internal
 The social entrepreneur
 Actual and potential staff and volunteers
 Board members
4 - 59

60. Business plan contents
1. Business plan summary
2. Description of the enterprise
3. The team
4. The market and industry
5. Marketing and fundraising
6. The financial plan
7. Goals, and objectives, with a timeline
8. Risk assessment
9. Supporting documents
4 - 60

61. 1. Business plan summary
 One page only, answering key questions:
 What is the venture?
 Why is it new and important?
 Who will benefit from it, and how?
 How (in general terms) will the idea be
executed?
 Who is the social entrepreneur, and what
unique skill, service, or background does he or
she (or they) bring to the venture?
 What kind of support for the enterprise is
needed, and how much of it?
 What will constitute success?
 The summary is usually written last
4 - 61

62. 2. Description of the
enterprise
 The idea, and why it is an authentic
opportunity
 The mission statement
 Definition of value, and how it is to be
measured
 Key innovations or adaptations
 Competitive advantage
 The social enterprise’s legal structure
 Current status of enterprise
4 - 62

63. 3. The team
 Management
 Board
 Advisors
 Early donors
4 - 63

64. 4. The market and industry
 Industry description
 Target market
 Expected position and share in target
market
4 - 64

65. 5. Marketing and fundraising
 Fundraising targets and strategies
 Personal relationships
 Direct mail
 Media
 Virtual means
 Grant-writing plans
 Pricing plans
 For-profit activities
 Marketing
4 - 65

66. 6. The financial plan
 Financial needs for 3-5 years
 Financial projections
 Income statements
 Cash-flow projections
 Balance sheets
4 - 66

67. 7. Goals and objectives, with a
timeline
 Definition of success
 Intermediate goals and success
measures
 Evidence that goals can be achieved
4 - 67

68. 7. Goals and objectives, with a
timeline (continued)
 Timeline
 Start of the enterprise
 Incorporation
 Acquiring staff, space, and equipment
 Delivering services
 Projected cash flow
 Growth milestones
 Attaining key goals
4 - 68

69. 8. Risk assessment
 Financial risk
 Legal risk
 Talent risk
 Environmental risk
 Other risks
4 - 69

70. 9. Supporting documents, in an
appendix
 Résumés for the key participants in the
enterprise
 Data sources cited in the plan
 References for literature cited in the
plan, if any
4 - 70

71. Pitfalls in assembling business
plans
 Failing to communicate realistic goals
 Failing to anticipate problems
 Lack of commitment or dedication to
the venture
 Lack of experience
 Failure to demonstrate market niche
4 - 71

72. Other pitfalls in presenting
business plans
 Too sloppy or too slick
 Doesn’t get to the point quickly enough
 Financial projections are unrealistic
 Unclear what stage the venture is
 Leaders’ qualifications are not clear
4 - 72

73. Information on leader/founder(s)
to include in the business plan
 The plan should present their …
 background, education, work experience,
accomplishments, reputation, experience,
and skills
 Their own realistic assessment of
chances for success
 How they will build a team
 Their motivations, toughness, and
personal drive
4 - 73

74. Further Reading
 Scarborough, Norman, M. 2011. Essentials of
Entrepreneurship and Small Business
Management. 6th edition. Pearson.
 Brooks, Arthur C. (2006) Social Entrepreneurship :
A Modern Approach to Social Value Creation.
Pearson
 Barringer, Bruce R. & Ireland, R. Duane, 2011
Entrepreneurship – Successfully launching new
ventures 4th edition, Pearson.
 Schaper, M., Volery, T., Weber, P. & Lewis, K. 2011.
Entrepreneurship and Small Business. 3rd Asia
Pacific edition. John Wiley.