The document discusses the importance of a business plan for starting a new venture. It explains that a business plan provides guidance, helps determine viability, and is an important tool for obtaining financing. The business plan should integrate functional plans like marketing, finance, and HR. It should be prepared by the entrepreneur with input from advisors and consider the perspectives of entrepreneurs, investors, and lenders. Potential lenders and investors will evaluate characteristics like the management team, product, resources, and financial projections presented in the business plan. Developing thorough information on market opportunities, production needs, and financial forecasts is essential for the business plan.

1. Hisrich
Peters
Shepherd
Chapter 7
The Business Plan:
Creating and
Starting the Venture
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2. 7-2
Business Plan
 Business plan (road map or game plan):
Written document describing all relevant
external and internal elements and strategies
for starting a new venture (in short where am I
now? where am I going?).
 Business plan is often described as an
integration of functional plans (marketing,
finance, manufacturing and human resources
[organisational]); addresses short-term and
long-term decision making for the first three
years of business operation.

3. 7-3
Why Business Plan is important?
 Business plan provides guidance and structure in
a rapidly changing market environment.
 Business plan gets finalized as the entrepreneur
has a better sense of the market, the
product/services, the management team, and
the financial needs of the venture.
 Business plan should describe operational and
strategic goals along with short-term and long-
term business objectives.

4. 7-4
Who Should Write the Plan?
 The plan should be prepared by the
entrepreneur in consultation with other
informative sources (lawyers, accountants,
marketing consultants, and engineers etc).
 The entrepreneur should make an objective
assessment (measurable) of his or her own
skills before deciding to hire a consultant or
offer equity (partnership) to another person
who might provide the appropriate
expertise in preparing the business plan as
well as become an important member of the
management team.

5. 7-5
Scope and Value of the Business
Plan—Who Reads the Plan?
 Business plans can differ depending on the
type of business or the anticipated size of the
start-up operations.
 Whoever is expected to read the plan can often
affect its actual content and focus. The
business plan may be read by employees,
investors, bankers, venture capitalists ,
suppliers, customers, advisors, and
consultants. Therefore plan must try to satisfy
the needs of everyone as much possible as
needed.

6. 7-6
Scope and Value of the Business
Plan—Who Reads the Plan? (cont.)
 But least a business plan must consider the
perspective of following:-
 Entrepreneur’s perspective.
 Marketing perspective.
 Investor's perspective.
 Depth and detail in the business plan
depend on:
 Size and scope of the proposed venture.
 Size of the market.
 Competition.
 Potential growth.

7. 7-7
 The business plan is valuable because it:
 Helps determine the viability of the venture in a
designated market.
 Guides the entrepreneur in organizing planning
activities.
 Serves as an important tool in obtaining finance.
 The process of development of a business
plan provides a self-assessment by the
entrepreneur.
Scope and Value of the Business
Plan—Who Reads the Plan? (cont.)

8. 7-8
How do Potential Lenders and
Investors Evaluate the Plan?
 The business plan must reflect:
 The strengths of management team (personnel).
 The product/service.
 Available resources.
 Lenders are interested in the venture’s
ability to pay the debt.
 Focus on the four Cs of credit - Character, cash
flow, collateral, and equity contribution.
 Banks want an objective analysis of the
business opportunity and the risks.

9. 7-9
 Investors, particularly venture capitalists,
have different needs:
 Place more emphasis on the entrepreneur’s
character.
 Spend much time conducting background
checks.
 Demand high rate of return.
 Focus on market and financial projections.
How do Potential Lenders and
Investors Evaluate the Plan? (cont.)

10. 7-10
Presenting the Plan
 The entrepreneur is expected to ‘sell’ the
business concept.
 Focus should be on why this is a good
opportunity.
 Provide an overview of the marketing program
and sales & profits forecasts.
 Address associated risks and how to overcome
them.
 Audience includes potential investors who
may raise questions.

11. 7-11
Information Needs
 Before creating a business plan, the
entrepreneur must undertake a feasibility
study.
 Feasible, well-defined goals and objectives
must to be established.
 Based on this, strategy decisions can be
established.
 Information for a feasibility study should
focus on marketing (1), production
(operation) (2), and financial (3) need.

12. 7-12
Information Needs (cont.)
1. Market Information need
Market Positioning: is
an effort to influence
consumer perception of
a brand or product
relative to the
perception of competing
brands or products.
Market objectives: are
goals set by a business
when promoting its
products or services to
potential consumers
that should be achieved
within a given time
frame.

13. 7-13
 Location- company location and accessibility to customers,
suppliers, and distributors need to determine.
 Manufacturing operations – which basic machine and
assembly operations are need to be adopted.
 Raw materials – the needed raw material and who will be
the supplier.
 Equipment – what equipment would be needed and
whether it will be purchased or leased.
 Labor skills – number of employees of particular skill.
 Space – total amount of needed space
 Overhead – items/services needed to support
manufacturing.
 Most of the information from the feasibility report is
incorporated directly into the business plan.
Information Needs (cont.)
2. Production information needs

14. 7-14
Information Needs (cont.)
3. Financial Information Needs
 The entrepreneur has to prepare a budget
of all possible expenditures and revenue
sources, including sales and any external
available funds.
 The budget includes capital expenditures,
direct operating expenses, and cash
expenditures.
 Industry benchmarks can be used in
preparing the final pro forma statements in
the financial plan.