Ch 12: Developing an Effective Business Plan

important aspect of an entrepreneurial venture

It must describe current status, expected needs, and projected results of the new business.

A lack of demonstrated experience, no clear market niche, a failure to anticipate roadblocks, no realistic goals set, and a lack of commitment are pitfalls or common points of failure that occur before an entrepreneur ever gets a plan reviewed

True

Every business plan should provide information about future harvest strategies.

True

business plan AKA

loan proposal

comprehensive business plan should be the result of

reflections on the direction of the venture.

Should a business plan/venture be turned down the first time, the entrepreneur should

revise, rework, and improve the plan.

business plan

- the minimum document required by any financial source. - forces the entrepreneur to analyze all aspects of the venture and to prepare an effective strategy to deal with the uncertainties that arise. - a written document that details the proposed venture.

appropriate guideline for successful business plan development

1. Keep the plan Respectably shoRt 2. oRganize and pacKage the plan appRopRiately 3. oRient the plan towaRd the FutuRe 4. avoid exaggeRation 5. highlight cRitical RisKs 6. give evidence oF an eFFective entRepReneuRial team 7. do not oveR-diveRsiFy 8. identiFy the taRget maRKet 9. Keep the plan wRitten in the thiRd peRson 10. captuRe the ReadeR's inteRest

How many pages should a business plan should be?

20-30 Ideal: 25

Marketing section of a Business Plan

Competitive analysis, advertising plan, and pricing policy

market niche

a homogeneous group with common characteristics (i.e., all the people who have a need for a newly proposed product or service). so marketing strategies can be organized to efficiently reach those most receptive customers and eventually advocates.

completed business plan provides the entrepreneur with

a tool for communicating with financial sources

significance of a harvest strategy segment in a business plan?

It is important for the entrepreneur to plan for a liquidity event as an exit strategy

6 steps represent the typical business plan reading process that many venture capitalists use (less than 1 minute is devoted to each step):

Step 1: Determine the characteristics of the venture and its industry. Step 2: Determine the financial structure of the plan (amount of debt or equity investment required). Step 3: Read the latest balance sheet (to determine liquidity, net worth, and debt/equity). Step 4: Determine the quality of entrepreneurs in the venture (sometimes the most important step). Step 5: Establish the unique feature in this venture (find out what is different). Step 6: Read over the entire plan lightly (this is when the entire package is paged through for a casual look at graphs, charts, exhibits, and other plan components).

common mistake in business planning is using acronyms and technical jargon without clearly explaining them early in the business plan

True

Management section of a Business Plan

identify key personnel

The most important statement in new venture creation

the cash flow statement - because it sets forth the amount and timing of expected cash inflows and outflows.

The most common viewpoint in business plans

the entrepreneur's viewpoint

benefits of a business plan

the identification of critical risks.