Unit 4: Writing a Business Plan

Unit 4: Writing a Business Plan

• A business plan is a written narrative, typically 25 to 35 pages long, outlining a new business's goals.
• It serves as a dual-purpose document, used internally and externally by the firm.

Unit Objectives

• Explain the purpose of a business plan.
• Identify the readers of a business plan and their expectations.
• Outline the guidelines for creating an effective business plan.
• Describe the suggested outline for a business plan.
• Explain how to present a business plan to potential investors effectively.

What is a Business Plan?

• A business plan is a detailed document.
• It often runs between 25 to 35 pages.
• It should describe the aims of a new business.
• It primarily focuses on how to reach those aims.
• It often doubles as a tool for both those inside and outside the business entity.

Who Reads the Business Plan?

• Employees – need a plan to synchronize and guide their efforts.
• Investors and stakeholders – need a plan to justify the use of funds or to attract interest.

Guidelines for Writing a Business Plan

• Follow a conventional structure.
• Consistency with conventional frameworks is key in creating a business plan.
• Keep it concise; find critical information easily.
• Create excitement about the new venture.
• The plan should contain clear and concise information about all major business aspects.
• Aim for comprehensiveness but remain within an acceptable length.

Types of Business Plans

• Summary Business Plan – 10 to 15 pages, ideal for early-stage testing of investor interest.
• Full Business Plan – 25 to 35 pages, best suited for ventures needing funding and outlining operations.
• Operational Business Plan – 40 to 100 pages, primarily for internal use, and focuses on operational guidelines.

Outline of Business Plan

• Business plans do not always include every detail discussed.
• Individual entrepreneurs should choose the elements relevant to their specific plans.

Section 1: Executive Summary

• A brief overview of the entire business plan.
• Crucial for busy readers, providing a concise summary of the venture's key attributes.
• It shouldn't exceed two single-spaced pages.
• Written last, reflecting the evolved plan's details.

Section 2: Industry Analysis

• Introduce the target industry, showing characteristics of size, growth rate, and sales forecasts.
• Analyse the structure and participants within the industry.
• Identify key success factors.
• Include long-term industry prospects.

Section 3: Company Description

• A comprehensive overview of the company.
• Covers the company's history, mission statement, products/services, and current status.
• Includes legal status and ownership details.

Section 4: Market Analysis

• Analyse the industry into segments.
• Define the specific segment (target market) the business intends to cater to.
• Includes market segmentation, buyer behavior, and competitor analysis.
• Many start-ups focus solely on a particular market segment, unlike the entire industry.
• Important to understand the consumers within the target segment for efficient product/service implementation.

Section 5: The Economics of the Business

• The logic behind profits within the business.
• Explains how many units need to be sold to break even.
• Include details on revenue drivers, profit margins, fixed/variable costs, operating leverage, start-up costs, and detailed break-even analysis.
• Important to ensure the economic approach selected is sound.

Section 6: Marketing Plan

• Explain the firm's marketing strategy, including product/service positioning, pricing, and differentiation.
• Include an explanation of the sales cycle/process and crucial sales tactics.
• The plan should show how marketing strategies support business operations.

Section 7: Design and Development Plan

• Focuses on the status of development efforts for new products/services.
• Include progress reports, challenges, projected costs, and proprietary details (patents/trademarks).
• Understand the significance of well-executed design and development.

Section 8: Operations Plan

• Describes how the business will operate, covering front stage (customer-facing) and back stage (internal) activities.
• Includes general operational approach, business location, and facility/equipment details.
• Detailing this aspect accurately ensures smooth execution.

Section 9: Management Team and Company Structure

• Introduces the team, outlining founder/personnel roles, the board of directors, and/or advisors.
• Presents the company structure clearly.
• Investors often prioritize the management team based on their expertise and experience.

Section 10: Overall Schedule

• Create a detailed schedule showcasing major events and milestones for successfully launching the business.
• This often includes specifics like incorporation, obtaining financing, and achieving initial sales.
• Showcasing a well-structured schedule convinces investors of a clear plan.

Section 11: Financial Projections

• Detailing the pro forma financial projections for the business.
• Include details like the source/use of funds statement, assumptions, income statements, balance sheets, cash flows, and financial ratios.
• Essential step for financial evaluation.

Presenting the Business Plan to Investors

• Follow directions/time limits during the presentation.
• Focus on a smooth and rehearsed presentation.
• Keep slides uncluttered and visually appealing.
• Be prepared to answer tough questions from investors.
• Utilize 12 slides, following a specific order.

This quiz covers the essential elements of writing a business plan, highlighting its purpose, structure, and audience. Learn to identify the needs of various readers and how to effectively present a business plan to potential investors. Prepare to outline the guidelines for creating an impactful business proposal.