Writing a business plan - chapter 6

What is a business plan?

A written narrative that describes what a new business plans to accomplish and how it will do so.

Why is the "Management Team and Company structure" section of a business plan often touted as one of the most important sections?

Because investors reads more business plans with interesting ideas and exciting markets than they are able to finance. What wins the fundings are often the perception of the management team which is better prepared to execute its idea than others.

Why should the executive summary, which is the first things that appears in a business plan, be written last?

Because it is a summary of the whole business plan, which will evolve as it is written. You don't know everything at the outset and do not want to risk to write the plan fitting the summary rather than a summary that fits the plan.

Why is writing a business plan the last activity to be completed in the entrepreneurial process?

Because it must be substantive enough and have sufficient details about the merits of the new venture in order to convince the reader to receive support.

What is the difference between a concentrated and a fragmented industry?

Concentrated - Industry dominated by a few large firms that shape its direction and evolution. Fragmented - An industry in which no single enterprise has large enough share of the market to be able to influence the industry's direction.

What is the purpose of a mission statement?

Defines why a company exists, the path it will take, to act as its financial and moral compass and serve as an anchor around which decisions are made.

Who reads the business plan and what are they looking for when doing so?

Employees - it helps them to operate in sync and move forward in a consistent and purposeful manner. Investors and external stakeholders - it should be realistic. They want to see if it is viable and offers potential investors great financial returns.

What is the purpose of the "Operations Plan" section of a business plan?

In order to outline how your business will be run and how your product or service will be produced.

What are the advantages of preparing a business plan for a new venture?

It helps the company to develop a "road-map" to follow in order to execute its strategies and plans, but also to introduce potential investors and other stakeholders to the business opportunity.

Why is it important for a business plan to follow a conventional structure rather than be highly innovative and creative?

It looks more professional and investors are usually busy people who want to find what they are looking for fast.

What is the difference between a product prototype and a virtual prototype?

Product prototype - the first physical manifestation of a new product. Virtual prototype - a computer generated 3D image of a product or service idea.

What are the differences among a summary of a business plan, a full business plan, and an operational business plan?

Summary business plan - New ventures and used to see if investors might be interested. Full business plan - Spells out a company's operations and plans in more detail. Operational business plan - For internal audiences and works as a blueprint for its operations.

What are the difference between the industry analysis section and the market analysis section of a business plan?

The industry analysis focuses on the industry in which the company intends to compete while the market analysis breaks down the industry into more specific segment to which the firm will try to appeal.

What are the two primary reasons for those starting a new venture to write a business plan?

The internal reason - forces the founding team to systematically think through every aspect of its new venture. The external reason - communicates the merits of a new venture to outsiders such as investors and bankers.

If you are developing a completely new product or service, what type of information should you include in your business plan regarding the status of the development efforts?

The present stage of the development and a timeline describing the remaining steps.

How will investors typically react if they think a business plan is based on estimates and predictions rather than on careful analysis and facts?

They will find it unreliable and untrustworthy.

What is the number-one rule in making an investor presentation?

To follow instructions. If the investor wants a 20-minute presentation and a 40-minute q&a period it is important the presentation don't last more than 20 minutes.

What is the purpose of an executive summary?

To provide a busy reader with everything she needs to know about the new venture's new distinctive nature.

What is the purpose of "The Economics of the Business" section of a business plan?

To provide an overview for the company itself but also for the investors, of how the company will earn money and their predicted result.

When is the appropriate time to write a business plan?

When you have fully developed your business idea.