Chapter 4 - Writing A Business Plan
Chapter 4 - Writing A Business Plan
Chapter 4 - Writing A Business Plan
Writing a Business
Plan
Bruce R. Barringer
R. Duane Ireland
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Chapter Objectives
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Chapter Objectives
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What Is a Business Plan?
• Business Plan
– A business plan is a written narrative, typically 25 to 35
pages long, that describes what a new business plans to
accomplish.
• Dual-Use Document
– For most new ventures, the business plan is a dual-purpose
document used both inside and outside the firm.
Investors and A firm’s business plan must make the case that the
other external firm is a good use of an investor’s funds or the
stakeholders attention of others.
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Guidelines for Writing a Business Plan
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Guidelines for Writing a Business Plan
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Guidelines for Writing a Business Plan
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• Executive Summary
– The executive summary is a short overview of the entire
business plan
– It provides a busy reader with everything that needs to be
known about the new venture’s distinctive nature.
– An executive summary shouldn’t exceed two single-spaced
pages.
Key Insights
• In many instances an investor will
ask for a copy of a firm’s executive
Executive Summary summary and will ask for a copy of
the entire plan only if the executive
summary is sufficiently convincing.
• The executive summary, then, is
arguably the most important
section of a business plan.
• Industry Analysis
– This section should begin by describing the industry the
business will enter in terms of its size, growth rate, and sales
projections.
– Items to include in this section:
• Industry size, growth rate, and sales projections
• Industry structure
• Nature of participants
• Key success factors
• Industry trends
• Long-term prospects
Key Insights
• Before a business selects a target
market it should have a good grasp
Industry Analysis of its industry—including where its
promising areas are and where its
points of vulnerability are.
• The industry that a company
participates in largely defines the
playing field that a firm will
participate in.
• Company Description
– This section begins with a general description of the
company.
– Items to include in this section:
• Company description
• Company history
• Mission statement
• Products and services
• Current status
• Legal status and ownership
• Key partnerships (if any)
Key Insights
• While at first glance this section
may seem less important than the
Company Description others, it is extremely important.
• It demonstrates to your reader that
you know how to translate an idea
into a business.
• Market Analysis
– The market analysis breaks the industry into segments and
zeros in on the specific segment (or target market) to which
the firm will try to appeal.
– Items to include in this section:
• Market segmentation and target market selection
• Buyer behavior
• Competitor analysis
Key Insights
• Most start-ups do not service their
entire industry. Instead, they focus
on servicing a specific (target)
Market Analysis market within the industry.
• It’s important to include a section in
the market analysis that deals with
the behavior of the consumers in the
market. The more a start-up knows
about the consumers in its target
market, the more it can tailor its
products or services appropriately.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
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Section 5: The Economics of the Business
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Key Insights
• Two companies in the same industry
may make profits in different ways.
One may be a high-margin, low
The Economics of the -volume business, while the other
Business may be a low-margin, high-volume
business. It’s important to check to
make sure the approach you select
is sound.
• Computing a break-even analysis
is an extremely useful exercise for
any proposed or existing business.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
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Section 6: Marketing Plan
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• Marketing Plan
– The marketing plan focuses on how the business will market
and sell its product or service.
– Items to include in this section:
• Overall marketing strategy
• Product, price, promotions, and distribution
• Sales process (or Cycle)
• Sales tactics
Key Insights
• The best way to describe a start-up’s
marketing plan is to start by
articulating its marketing strategy,
Marketing Plan positioning, and points of
differentiation, and then talk about
how these overall aspects of the
plan will be supported by price,
promotional mix, and distribution
strategy.
• It’s also important to discuss the
company sales process.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall
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Section 7: Design and Development Plan
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Key Insights
• Many seemingly promising start-ups
never get off the ground because
Design and Development their product development efforts
Plan stall or the actual development of
the product or service turns out to
be more difficult than thought.
• As a result, this is a very important
section for businesses developing a
completely new product or service.
• Operations Plan
– Outlines how your business will be run and how your
product or service will be produced.
– A useful way to illustrate how your business will be run is
to describe it in terms of “back stage” (unseen to the
customer) and “front stage” (seen by the customer)
activities.
– Items to include in this section:
• General approach to operations
• Business location
• Facilities and equipment
Key Insights
• Your have to strike a careful balance
between adequately describing this
Operations Plan topic and providing too much
detail.
• As a result, it is best to keep this
section short and crisp.
Key Insights
• This is a critical section of a
business plan.
Management Team and • Many investors and others who
Company Structure read the business plan look first at
the executive summary and then go
directly to the management team
section to assess the strength of the
people starting the firm.
• Overall Schedule
– A schedule should be prepared that shows the major events
required to launch the business.
– 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
Key Insight
• An effectively prepared and
presented schedule can be
Overall Schedule extremely helpful in convincing
potential investors that the
management team is aware of
what needs to take place to launch
the venture and has a plan in
place to get there.
• Financial Projections
– The final section of a business plan presents a firm’s pro
forma (or projected) 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
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Section 11: Financial Projections
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Key Insights
• Having completed the earlier
sections of the plan, its easy to see
Financial Projections why the financial projections come
last.
• They take the plans you’ve
developed and express them in
financial terms.