Chapter 4- Writing a Business Plan – Flashcards
Unlock all answers in this set
Unlock answersquestion
A written narritave, typically 25-35 pages long, that describes what a new business plans to accomplish
answer
A business plan
question
A dual-use document....
answer
is used both inside and outside the firm
question
There are two primary reasons for writing a business plan
answer
Internal reasons and External reasons
question
Internal reasons
answer
forces the founding team to systematically think through every aspect of their new venture
question
External reasons
answer
communications the merits of a new venture to outsiders, such as investors and bankers
question
The two primary audiences for a firm's business plan:
answer
(1) A firm's employees; (2) Investors and other external stakeholders
question
A firm's employees are looking for......
answer
a clearly written business plan helps the employees of a firm operate in sync and move forward in a consistent and purposeful manner
question
Investors and other external stakeholders
answer
A firm's business plan must make the case that the firm is a good use of an investor's funds or the attention of others
question
Guidelines for writing a business plan
answer
*Structure of the business plan *Content of the business plan *Style/format of the business plan *Recognition the elements of the business plan may change
question
Structure of the business plan
answer
*Follow a conventional biz plan structure *Not the time or place to demonstrate
question
Departing from the basic structure of the conventional business plan format is usually a:
answer
MISTAKE! Assume investors are busy people who want a plan where they can easily find critical information.
question
Structure of the business plan:
answer
*Facts, figures, and financial analysis *Narrative *Explanation of the possibilities that surround a new venture *Sense of anticipation & excitement
question
Content of the business plan
answer
*Clear & concise information on all the important aspects of the proposed venture *Long enough to provide sufficient information yet short enough to maintain reader interest *For most plans, 25-35 pages is sufficient
question
3 types of business plans
answer
Summary Biz Plan, Full biz Plan, and Operational Biz Plan
question
Summary Biz Plan
answer
10-15 pages; Works best for new ventures in the early stages of development that want to "test the waters" to see if investors are interested in their idea
question
Full Biz Plan
answer
25-35 pages; Works best for new ventures that are at the point where they need funding or financing: serves as the "blueprint" for the companies operations
question
Operational Biz Plan
answer
40-100 pages; Is meant primarily for an internal audience; works best as a tool for creating a blueprint for a new venture's operations and providing guidance to operational managers
question
It is important to recognize....
answer
that the plan will usually change while being written & implemented *New insights invariably emerge when writing the plan and start getting feedback from others
question
Most business plans ______________ include all the elements introduced in the sample plan; included them here for the purpose of completeness
answer
DO NOT
question
Each entrepreneur must decide which elements to include in her or her plan.
answer
True
question
Business Plan Outline
answer
(I) Executive Summary (II) Industry Analysis (III) Company Description (IV) Market Analysis (V) The Economics of the Business (VI) Marketing Plan
question
Business Plan Outline (continued)
answer
(VII) Design & Development Plan (VIII) Operational Plan (IX) Mngmt Team/ Organization Structure (X) Overall Schedule (XI) Financial Projections Appendices
question
Executive Summary
answer
*short overview of the entire business plan *provides reader with what they need to be known about the new venture's distinctive nature *shouldnt exceed two single-spaced pages *WRITTEN LAST!
question
Executive Summary- Key Insights
answer
*Investor may ask for only the exec summary *most important section of a business plan
question
Section II: Industry/Competitive Analysis
answer
*Define the playing field *Competitive Scouting Report
question
Section II: Industry Analysis
answer
Industry size; Growth rate; Sales projections; Industry structure; Nature of participants; Key success factors; Industry trends; Long-term prospects
question
Section III: Company Description
answer
*section is extremely important *demonstrates that you know how to translate an idea into a business
question
Section III: Company Description
answer
Company description; Company history; Mission statement; Products & services; Current status; Legal status & ownership; Key partnerships (if any)
question
Section IV: Market Analysis
answer
*Undifferentiated market- all the needs the same- homogeneous- 1 market
question
Section IV: Market Analysis
answer
*Segmented markets- all individuals different & unique needs- heterogeneous- 1 individual
question
Section IV: Market Analysis
answer
Market research; Market Segmentation; Target market selection; Buyer behavior; Competitor analysis
question
Section IV: Market Analysis
answer
*Focus on mass market *Focus on servicing a specific target market *Understand of target market & their buying behavior
question
Section V: The Economics of the Business
answer
Profit = Revenue - Expenses Revenue = Price X Quantity Sold Expenses = Variable + Fixed Costs
question
Breakeven in Units =
answer
Total Fixed Costs / Unit Contribution Margin
question
Section V: The Economics of the Business
answer
*How profits will be earned (high margin vs low margin operation) *Start-up costs; fixed & variable costs; revenue drivers & profit margins; operating leverage and its implications; break-even chart and calculations
question
Two companies in the same industry may make profits in different way
answer
Low margin high volume strategy or High margin low volume strategy
question
Section VI: Marketing Plan
answer
Nothing happens till you SELL something!
question
Section VI: Marketing Plan
answer
*How the business will market & sell its product or service *Overall marketing strategy; Product, price, promotions, and distribution; Sales process (or cycle); Sales tactics
question
Marketing Mix Decisions
answer
Product, Price, Promotion, Channels of Distribution
question
Section 7: Design and Development Plan
answer
Critical section for businesses developing a completely new product or service
question
Section 7: Design and Development Plan
answer
*Many startups never get off the ground bc their product development efforts stall/too expensive *Actual development of the product or service is more difficult than thought
question
Section 7: Design & Development Plan
answer
*Developing a completely new product or service *What is status of your development efforts (timeline & tasks; challenges & risks; projected development costs; proprietary issues(patents, trademarks, etc))
question
Section 8: Operations Plan
answer
*How your business will be run *How your product or service will be produced (backstage-unseen; frontstagen-seen) *Items to include: general approach to operations; business location; facilities & equipment
question
Section 8: Operations Plan
answer
Balance between describing how and providing too much detail
question
Section 9: Management Team & Company Structure
answer
*Who is involved? * Do they have the skill, ability, knowledge, motivation?
question
Section 9: Management Team & Company Structure
answer
*Founders and a handful of key management personnel *Items to include in this section: management team, board of directors, board of advisers, company structure
question
Section 10: Overall Schedule
answer
*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
question
Section 10: Overall Schedule
answer
What needs to be done, by whom, and when
question
Section 11: Financial Projections
answer
*The final section of a business plan presents a firm's pro forma 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
question
Section 11: Financial Projections
answer
Numbers the Language of Business
question
Appendix
answer
Provided to readers on an as-needed basis
question
Appendix
answer
Credit history (personal & business); resumes of key managers; product pictures; letters of reference; details of market studies
question
Appendix
answer
Relevant magazine articles; licenses, permits, or patents; legal documents; copies of leases; building permits; contracts
question
Need to be able to provide 3 years of tax returns
answer
True
question
May have to provide
answer
site plans; store layout design; 3D renderings; parking;
question
The Oral Presentation
answer
*Follow directions *Smooth & well-rehearsed *Slides should be sharp & not cluttered
question
Presenting the Business Plan to Investors
answer
12 powerpoint slides for an investor presentation 1) Title Slide 2) Problem 3) Solution 4) Opportunity & Target Market 5) Technology 6) Competition 7) Marketing & Sales 8) Management Team 9) Financial Projections 10) Current Status 11) Financing sought 12) Summary
question
The smart entrepreneur has a good idea of the questions that will be asked, and will be prepared for those queries
answer
True
