BA350

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Chapter Eight
Business Plans: Seeing Audiences
and Your Business Clearly
Copyright 2021 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.

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Business Plan Background
A business plan details major characteristics of a firm – its
product/service, industry, market, manner of operating, and financial
outcomes emphasizing the firm’s present and future.
Two circumstances when a business plan is necessary.
• When outsiders expect it – external legitimacy.
• For internal understanding.
Remember - different groups look for different kinds of benefits.
• You may have different types of plans for different audiences.
• A family member may want different information than an angel.
Lean business practices argue all you need is a pitch deck.
• Yet a business plan is essential for a clear understanding of the
business – for yourself, your partners, and your employees.

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The Business Plan Story: Starting Small and Building Up
A business plan is a story
telling about a future
place – your business.
Your story must fit the
audience’s time.
Four presentation types:
Vision statements.
Elevator pitches.
Executive summaries.
Business plans.
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The Vision Statement
The vision statement is a simple 5- to 10-word sentence.
• Should be inspiring, overarching, and long term.
• Bill Gates and Paul Allen started Microsoft as teenagers with the vision
“a computer on every desk – running Microsoft software.”
A tagline is a mantra – brief and memorable.
• Book Passage: The Bay Area’s Liveliest
Bookstore.
• Crum Electric Supply: Plug into Quality-
People, Products, Service.
• Progressive Insulation & Windows: Total Living
Comfort.
A related concept is
the mission
statement, which
is a bit longer and
often adds the
firm’s competitive
advantage.

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The Elevator Pitch
An elevator pitch is an action-oriented description of your business
designed to open the door to a more in-depth dialogue.
Elevator pitches have four success factors:
• First find a hook – describe a problem people face.
• Second, focus on the solution your product provides.
• Third, provide support to prove your solution works – traction is best.
• Finally, always close with an ask – get the listener to make a micro-
commitment – contact information so you can build your network.

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The Executive Summary
An executive summary is what most people
read when they receive a plan.
• Typically one page, but a freestanding
summary can go as long as five pages.
• These are the most common items sent to
someone who asks about your business.
• Written in a formal style, suitable for investors.
• Usually arranged in short paragraphs which
typically cover five key topics.
Problem.
Product.
Market.
Competitive
advantages.
Business/team.
Financial summary.

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The Business Plan
The full (or classic) business plan runs 18 pages.
• May be longer for new products or shorter for
imitative products.
Some sections from the feasibility study align with
sections of the business plan.
• For example, the IDEO’s technical feasibility
screen corresponds to:
• The business model canvas’ problem solution.
• The feasibility study’s business idea and
product/service sections.
• The business plan’s company, product/service
section.
Cover letter.
Title page and
table of contents.
Executive
summary.
The company,
product/service,
and industry.
The market.
The organization.
Financial summary.
The appendixes.

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The Business Plan: Cover Letter and Title Page
When sending a business plan to
someone, include a cover letter.
• One page.
• Introduces the plan and owner.
• Indicates why the recipient is
asked to read the plan.
• Traditionally done on letterhead,
but can be an email if submitted
electronically.
• If so, use a signature block for
your business.
The title page contains:
• Company name and logo.
• Contact information.
• Date this version of the plan
was completed.
• Proprietary statement to protect
your ideas and a copy number.
• You may need to include a
securities disclaimer.
• The person who wrote the
plan, if other than the owner.
• A copyright notice is optional.

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The Business Plan: Table of Contents and Executive
Summary
The table of contents page.
• Lists major section headings in
boldface.
• Page numbers for every
component, including
financials.
• Every page should be
numbered.
• Typically the second page of
the plan packet.
Many entrepreneurs write the one-
page executive summary first.
• Then use it as a guide for the
rest of the plan.
• Covering the major sections is
the usual strategy.
• It is common to revise the
summary.
• Your thinking changes as you
write the plan.
• This is the first and also the
last item you will edit.

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The Business Plan: Company, Product/Service, and Industry
Company description.
• State the vision or tagline and a brief description of the business.
• Its age, current status (and milestones), location, and its markets.
Product/service and value proposition.
• An important section – where the reader understands your business.
• Starts with the pain and gain.
• If the product/service is a proprietary technology, mention your
patent, trademark, or copyright here.
Industry.
• The formal name and NAICS number.
• Its size and whether the industry is growing, stable, or in decline.

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The Business Plan: The Market
Market and target customer.
• Describe the market in terms of
size, scope, and channels.
• Describe target customers by
demographics, product use,
purchase schedule, and
experience with similar items.
• Describe each target segment.
Competition and competitive
advantage.
• Identify competitors by name.
• Focus on your firm’s
competitive advantages.
Marketing strategy.
• Focus on overall strategy, sales
plans to apply strategies, and
long-term plans.
• Give pilot test results, sales, or
preselling efforts.
R&D/growth plan or next steps.
• Explains how you will maintain a
competitive advantage.
• Discuss long-term partnerships,
new markets, or ways to
leverage assets.

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The Business Plan: The Organization
Legal and organizational structures
and IP and locations.
• Describe the firm’s legal form,
where it is registered, and
located.
• List licenses, certifications, or
intellectual property protections.
Key personnel.
• Owners and senior managers.
• Those handling key aspects.
• Talk about accomplishments
rather than just experience.
• Also mention total employees
and their status.
Related service providers.
• Identify your banker, attorney,
accountant, consultants.
• Any major relationships with
suppliers or customers.
• Board of directors.
Key activities and operations.
• Identifying familiar operations
is useful.
• Highlight something in how you
operate that is distinctive.
• Mention any specialized
operations here.

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The Business Plan: The Financial Summary
Starts with a summary table of financial results, followed by “the ask.”
• A set of financial reports or projections comprise most of the appendix.
• Develop the financials in the most conservative way possible.
• Explain assumptions and be ready to give the source of every number.
“The ask” section typically talks about how much money is needed and
how the funds will be used.
• Address any prior or existing investments and current ownership.
• Explain the funding type offered, give the price and any assurances.
• Describe how investors will be able to harvest their money and exit.
• Explain how management will be responsive to investor concerns.

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The Business Plan: The Appendixes
Certain financial statements are expected.
• Income statement and cash flow tables –
year 1 monthly, years 2-3 annually.
• Balance sheet for years 1-3 by year.
• Include assumptions in endnotes or
footnotes.
• Include a start-up budget.
• Include a timeline or a milestone list.
• Any supporting materials that helps you tell
your story better.
Product/service pics or
specifications.
Copies of signed contracts
or letters of intent.
Marketing study results or
pilot sales efforts.
Industry reports.
Price lists.
Location floor plans.
Advertising copy.
Testimonials.
Letters of opinion.
Bios of key personnel.

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The Mechanics of a Business Plan
After the plan is written – either from scratch or using a template – you
must assemble it.
• Typically a document or PDF – with no spelling or grammar errors.
• Distribute spiral bound copies which lay flat when opened.
• Your copy should be kept in a 3-ring binder for adjustments.
• Take the binder with you if you give a presentation.
• The electronic version of the binder is called a data room, and is what
you share with potential investors as they do their due diligence.

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Focusing Your Business Plan
Plans for a pioneering business.
• Your problems are helping people understand how it works, showing
them how to use it, estimating potential customers and price.
• Preselling, pilot tests, or test marketing is important here.
Plans for a new entrant business.
• To prove your product/service will work, make it familiar by detailing
how it is used by customers, provide similar market sales statistics.
• Emphasize existing operations in your industry analysis
Plans for an existing business.
• Projections should build on historical facts.
Plans for a business with significant government involvement.
• Anticipate delays and offer work-arounds.

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Special-Purpose Versions of the Business Plan
Specialized plans meet the needs of a wide variety of people.
• Private banks, investment clubs, or VC firms are commonly sent a
mini-plan or a screening plan.
• Use an informational plan if you do not wish to share the financials.
• An informational plan posted online is a proof-of-concept website to
solicit customer interest.
• A key employee/partner plan also lacks financials, also called a
summary plan, concept plan, or idea plan.
• An invention plan focuses on the market and operationalization of a
new invention, but typically lacks the marketing strategy.
• Operational plans include the full business plan but add details on
major techniques, methods, recipes, formulas, and sources.
• A private placement memorandum (PPM) or an offering circular
(OC) is used for equity crowdfunding under the JOBS Act.

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The Most Common Critical Risks in a Plan
Each risk can be handled, but the
best test is feedback.
1. Overstated numbers.
2. Numbers that are wrong.
3. Inadequate cushion – you
need working capital.
4. Inadequate payback.
5. Narrative and financials that
do not fit.
6. No direct customer
connection.
7. Uncertain sales (especially
conversion rates or hit rates.
8. Overlooked competition.
9. Experience deficits.
10. “What” problems.
11. Deadly aggravations.
• Look and sound professional.
• No misspellings.
• Lacking a table of contents
frustrates readers.
• Selling, instead of
summarizing, in the executive
summary is unprofessional.

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Pitching Your Plan
When you make a formal presentation of your plan, this is called a pitch
and the slideshow you create to accompany you is the pitch deck.
Covey the following things.
• Passion for your business.
• Expertise about the business and the plan.
• How professional you are in your work.
• How easy it would be to work with you.
Listeners provide
you with value in
the questions they
ask and the
feedback they give.

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Crafting Your Pitch Deck
1. Introductory slide with the
firm’s name and presenter.
2. Company purpose slide –
here you thank listeners.
3. Problem slide – can be in the
form of a user experience.
4. Solution slide – can be
combined with problem slide.
5. Product slide(s) – give an
understanding of the product.
6. Why now slide – what makes
this the right time?
7. Market size slide.
8. Business model slides – how
you will market, distribute, sell.
9. Competition slide(s) lists firms
and outlines your strategy.
10. Team slide(s) outlines key
people with one or two skills.
11. Financials slide gives sales,
breakeven, and profit
projections – and the worst-
case scenario.
12. The ask and the deal slide.
13. Closing slide – ask for
questions.

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Storytelling and the Art of the Pitch
Stories tend to tall into one of several storytelling arcs, with the oldest
being Aristotle’s Three-Act Structure – a beginning, a middle, an end.
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The Mechanics of Pitching
The pitch deck you present with is likely to have many additional slides
prepared to answer questions or provide additional depth on a topic.
• Present your pitch deck using your own laptop or tablet.
• Think about your listeners and make slides short and easy to read.
• If placing the deck online, opposite rules apply as you will not be there
to explain anything.
• Consider hiring a graphic designer.
• There are free pitch deck templates online.

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Closing Thoughts on Business Plans
Parts of your plan may change from week to week.
• Create handouts with the new information.
• The best way to think about the business plan is that it is a way to get
you to think through your entire business.
• Plan, once done, get revisited.
• You will likely often compare reality with the plan.
• The process of business planning helps firms survive and prosper.

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Education.