The role of business planning in a startup firm is outlined in this revision presentation.

1. Business Planning for
a New Business

2. Role of business planning for a new
business
• To set the objectives for the business
• To ensure the business idea can be
delivered profitably
• To raise finance (if required) from
third parties
• To help control / manage the
business

3. Key questions a startup business plan must answer
• What is the product and how is it different or unique?
• What is the target market segment and who are the
potential competitors?
• Who are the customers; how much will they buy and at
what price?
• What will it cost to produce and sell the product?
• At what stage will the business break-even and what
are the likely profits?
• What investment is required to launch and establish
the business?
• Where will the finance come from and what type of
finance is required?

4. How business planning helps
• Provides a focus on the business idea - is it really good
and why?
• Helps clarify thoughts and identify gaps in information
• Provides a logical structure to thinking about the
business
• Encourages the entrepreneur to focus on what the
business is really about
• Helps test the financial viability of the idea - can the
business achieve the required level of profitability
• The plan provides something which can be used to
measure actual performance
• Nearly always required if raising finance from outside
providers - particular investors and banks

5. Limitations of planning for a start-up
• Time is the main constraint – the
business planning process should be
kept simple and focused
• Easy to produce an over-optimistic plan
on paper
• The written business plan should be
long enough for purpose – it doesn’t
have to be a bible!

6. Contents of a simple business plan
• Where the idea came from and why it is a good one
• Key targets for the business - sales, profit, growth
(gives a sense of direction for the business), ideally
for the next 3-4 years
• Finance required - how much from the founder, how
much to be loaned over how loan and from who
• Market overview - main segments, market size
(value, quantity), growth, market shares of main
competitors (if known)
• How the business will operate (location, premises,
staff, distribution methods)
• Cash flow forecast (important) + trading forecast

7. Contents of a detailed business plan (1)
Executive Brief 1-2 page summary – the key issues
summary
Market Profile of the target market segment based on market research
Product What it is and how it is differentiated from existing products in the
market (the "unique selling point")
Competition Honest description of the competition in the target market -
strengths / weaknesses and likely response
Protecting the How the product and business can be protected from competition -
idea e.g. patents, trademarks, branding etc
Management Crucial area. Who is involved in the start-up and what will they be
team doing? What experience and expertise do they bring? Which
management roles will need to be filled as the business grows?
Marketing Key elements of the marketing mix should be explained here.
Remember that for a start-up the marketing budget is likely to
limited, so the strategy should be credible

8. Contents of a detailed business plan (2)
Production Explains what is involved in the production process, what
/operations capacity is needed, who will supply the business, where it will be
located etc. A reader of the plan will want to know that the
detailed operational issues have been considered carefully, and
that the cash flow forecast takes account of all operational
requirements
Financial Summary of the cash flow and trading forecasts. This section
projections should highlight the key assumptions that have been made and
also outline the main risks and opportunities in the forecasts (i.e.
what might go wrong, or where things might prove better than
forecast). The detailed projections would be included in the
appendices.
Funding Proposals for where the funding needs to come from (founder,
requirements banks, investors etc).
Exit strategy How the entrepreneur expects investors to get a return on their
investment. Who might eventually buy the business, when, and
for how much?

9. Follow tutor2u on Twitter
tutor2u tutor2u_econ

10. Become a fan of tutor2u on
Facebook!
tutor2u on Facebook

11. Keep up-to-date with business
stories, resources, quizzes and
worksheets for your business
course. Click the logo!