Chapter 6.
Writing a Business Plan
A.
Business Plan
A
business plan is a written
narrative that describes what a new business intends to accomplish and how it
plans to achieve its goals. There are two reasons why we should writing a
business plan:
1.
Writing a business plan forces a firm’s founders
to systematically think through each aspect of their new venture.
2.
To crete a selling document for a company
B.
Who Reads the Business Plan and What are they
looking for?
There are two primary audiences for a
firm’s business plan:
1.
A Firm’s Employee
A business plan can helps a firm’s rank and file employees operate in
sync and move forward in a consistent and purposeful manner.
2.
Investors and Other External Stakeholders
Investors vary in terms of the reliance they place on formal business
plans.
C.
Guidelines for Writing a Business Plan
There are several important guidelines that
should influence the writing of a business plan.
1.
Structure of the Business Plan.
A business plan should follow a conventional structure such as outline.
2.
Content of The Business Plan
The business plan should give clear and concise information on all the
important aspects of the proposed new venture. There are 3 types of formal of
the business plan:
a)
Summary plan: 10-15 pages , good on new company.
b)
Full business plan : 25-35 pages, good on
preparing for investor.
c)
Operational business plan : 40-100 pages, best
tool for creating a blueprint for a new venture’s operations and providing
guidance to operational managers.
A final guideline for writing a
business plan is to recognize that the plan will usually change as it is being
written and as the business evolves.
D.
Outline of the Business plan
1.
Exploring Each Section of the Plan
a)
Cover Page and Table of Contents
The cover page should include the company’s name , address, and phone
number; the date; the contact information for the lead entrepreneur; and the
company’s website address if it has one. The table of contents should follow
the cover letter and page numbers.
b)
Executive Summary
Executive summary is a short overview of the entire business plan; it
provides a busy reader with everything she needs to know about the new
venture’s distinctive nature.
c)
Industry Analysis
The main body of the business plan begins by describing the industry in
which the firm intends to compete.
d)
Company Description
This section begins with a general description of the company.
e)
Market Analysis
Market Analysis breaks the industry into segments and zeroes in on the
specific segment.
f)
The Economics of the Business
This section begins the financial analysis of a business.
g)
Marketing plan
Focuses on how the business will market and sell its product.
h)
Product Design and Development Plan
This section focuses on status of your development efforts.
i)
Operations Plan
Plan outlines how your business will be run and how your product will be
produce.
j)
Management Team and Company Structure
Consists of the founder or founders and a handful of key management
personnel.
k)
Overall Schedule
A schedule should be prepared that shows the major events required to
launch the business.
l)
Financial Projections
Presents a firm’s pro forma financial projections.
m)
Appendix
Any material that does not easily fit into the body of a business plan
should appear in an appendix.
n)
Putting it all together
The writers should put themselves in the reader’s shoes to determine if
the most important questions about the viability of their business have been
answered.
E.
Presenting the Business plan to investors
If the business plan successfully elicits
the interest of a potential investor, the next step is to meet with the
investor and present the plan in person. When asked to meet with an investor,
the founders of a new venture should prepare a set of PowerPoint slides that
will fill the time slot allowed for the presentation portion of the meeting.
These are 12 PowerPoint Slides to include in an investor presentation:
a)
Title Slide
b)
Problem
c)
Solution
d)
Opportunity and target market
e)
Technology
f)
Competition
g)
Marketing and sales
h)
Management team
i)
Financial projections
j)
Current status
k)
Financing sought
l)
Summary
Chapter 7.
Preparing the Proper Ethical and Legal Foundation
A.
Establishing a Strong Ethical Culture for a Firm
1.
Lead By Example
Leading by example is the most important thing that any entrepreneur,
manager, or supervisor can do to build a strong ethical culture in their organization
2.
Establish a Code of Conduct
A code of conduct is a formal statement of an organization’s values on
certain ethical and social issues.
3.
Implement an Ethics training program
Ethics training programs teach business ethics to help employees deal
with ethical dilemmas and improve their overall ethical conduct. An ethical
dilemma is a situation that involves doin something that is beneficial to
oneself or the organization, but may be unethical.
B.
Dealing Effectively with Legal Issues
1.
Choosing an Attorney for a Firm
It’s important for an entrepreneur to select an attorney as early as
possible when developing a business venture.
2.
Drafting a Founders’ Agreement
A founders’ agreement is a written document that deals with issues such
as the relative split of the equity among the founders of the firm.
3.
Avoiding Legal Disputes
Most legal disputes are the result of musunderstandings, sloppiness, or a
simple lack of knowledge of the law.
C.
Obtaining Business Licenses and Permits
1.
Federal Licenses and Permits
Most businesses do not require a federal icense to operate, although some
do.
2.
State Licenses and Permits
Most states have start-up guides that walk you through the steps of
setting up a business in the state.
3.
Local Business and Permits
A fictitious business name permit allows a business to legally operate
under a fictitious name.
D.
Choosing a Form of Business Organization
1.
Sole Proprietorship
The simples form of business entity is the sole proprietorship. A sole proprietorship
is a form of business organization involving one person and the person and the
business are essentially the same.
Advantages:
Creating one is easy and inexpensive, the business is easy to dissolve
Disadvantages:
Lialibility on the owner’s part is unlimited, raising capital can be difficult.
2.
Partnerships
a.
General Partnership
Is a form of business organization where two or more people pool their
skills, abilities, and resources to run a business.
Advantages:
Having more than one owner may make it easir to raise funds, its not
subject to double taxation.
Disadvantages:
Liability on the part of each general partner is unlimited, Raising
capital can be difficult.
b.
Limited Partnership
A modified form of a general partnership, the difference is that a
limited partnership includes two classes of owners.
3.
Corporations
Corporation is a separate legal entity organized under the authority of a
state.
a.
C Corporations
C corporation is a separate legal entity that, in the eyes of the law, is
separate from its owners.
Advantages:
·
Owners are liable only for the debts and
obligations of the corporation up to the amount of their investment
·
The mechanics of raising capital is easier
Disadvantages:
·
Business losses cannot be deducted against the
shareholders’ other sources of income.
b.
Subchapter S Corporation
Combines the advantages of a partnership and a C
corporation
4.
Limited Liability Company
Is a form of business organization that Is rapidly
gaining popularity in the US.
Advantages:
·
Members are liable for the debts and obligations
of the business only up to the amount
of their investment
·
The number of shareholders is unlimited
Disadvantages:
·
Setting up and maintaining one is more difficult
and expensive
·
Tax accounting can be complicated
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