ENTREPRENURAL

MANAGEMENT

GROUP 5

PLANNING FOR
ENTREPRENEURS
 CONTENT

I. Introduction
II. Why develop a business plan?
III. The Elements of a business plan.
IV. Can Your Plan Pass These Tests?
V. Making the Business Plan Presentation.
VI. What Lenders and Investors Look For in a Business Plan
VII. Conclusion
OBJECTIVES

1.Explain why every entrepreneur should create a business plan.

2.Describe the elements of a solid business plan.

3.Explain the three tests every business plan must pass.

4.Understand the keys to making an effective business plan

presentation.

5.Explain the "5 Cs of Credit" and why they are important to

potential lenders andinvestors reading business
I. INTRODUCTION

A. STARTING A BUSINESS REQUIRES LOTS OF

PLANNING.

1. Whatever their size, companies that engage in

business planning outperform those who do not.
 INTRODUCTION

B. For entrepreneurs, a business plan is:

01 A systematic, realistic evaluation of a venture's chances for success in

the market.
02
A way to determine the principal risks facing the venture.
03

04 A game plan for managing the business successfully.

A tool for comparing actual results against targeted performance.

05
An important tool for attracting capital in the challenging hunt for
money
 II.
Why Develop a Business
Plan?
 A. DEFINITION

A business plan is a written summary of an

entrepreneur's proposed business venture,its
operational and financial details, its marketing
opportunities and strategy, and itsmanagers’ skills
and abilities.
 B. IT SERVES AS AN ENTREPRENEUR'S ROAD MAP ON THE
JOURNEY TOWARD BUILDING A SUCCESSFUL BUSINESS

• It describes the direction the company is taking,

• its goals are,
• where it wants to be, and;
• how it's going to get there.
 C. IT’S THE ENTREPRENEUR'S BEST
INSURANCE

The business plan is the entrepreneur's best

insurance against launching a business destined to
fail or mismanaging a potentially successful company
 D. THE BUSINESS PLAN SERVES TWO
ESSENTIAL FUNCTIONS

• It guides the company's operations by charting its

future course and devising a strategy for following
it.

• The second function of the business plan is to

attract lenders and investors.
 E. A PLAN IS A REFLECTION OF ITS
CREATOR

A strong business plan shows an entrepreneur's serious

commitment, thoughtful consideration of success factors, and a
thorough evaluation of the business. Potential investors
prioritize well-prepared plans, considering them a reflection of
the entrepreneur's discipline and readiness to run a successful
venture.
 F. CRAFTING YOUR OWN BUSINESS PLAN HOLDS IMMENSE VALUE
FOR ENTREPRENEURS FOR SEVERAL COMPELLING REASONS.

• Firstly, outsiders may find it challenging to grasp the business as deeply as the entrepreneur
does. The entrepreneur's vision and passion position them as the best person to articulate its
potential.

• Moreover, as the driving force behind the idea, the entrepreneur's enthusiasm and insight are
crucial for effectively conveying the vision, particularly to investors.

• Furthermore, when presenting to potential investors and lenders, understanding every part of
the business plan is crucial. It's not just about the content; it's about the conviction with which
it's presented.
 G. ADDRESSING INVESTOR CONCERNS

•Investors seek not just a good idea but a meticulously thought-out

plan with a leader who comprehends risks and offers robust
mitigation strategies.

•Demonstrating profitability and a clear roadmap for achieving it is

essential for instilling confidence in potential backers.
 H. THE "TWO-THIRD RULE"

• Only two-thirds of viable ventures secure financial backing. And even

when they do, it's often less than what was initially sought, and the
process takes longer than anticipated.

• Crafting a comprehensive business plan is your secret weapon against

this rule. It's not just a document; it's your strategy to beat the odds and
secure the backing your venture deserves.
 I. IDENTIFYING AND ADDRESSING ISSUES EARLY

•The planning stage is where potential pitfalls are uncovered, mitigating

costly mistakes before significant resources are committed.

•A well-crafted business plan serves as your compass, revealing

important challenges to overcome before launching your venture.
 J. VALUE IN THE PLANNING PROCESS

•The journey of creating a business plan is as valuable as the destination. It's not just
about the end product; it's about the insights and growth you gain along the way.

•Through this process, entrepreneurs gain a deeper understanding of their industry,

target market, financial needs, and competition

•By carefully creating your business plan, you not only reduce risks but also improve
the skills and discipline needed for success in entrepreneurship.
 CONCLUSION:
crafting your business plan isn't just a
task; it's a strategic imperative. It
serves as your blueprint for success,
your key to securing vital resources, and
your roadmap through the unpredictable
world of entrepreneurship.
III. THE ELEMENTS OF
A BUSINESS PLAN
III. THE ELEMENTS OF A
BUSINESS PLAN
Executive Mission Company
Summary: Statement: History:

Business and Market Marketing and

Industry Profile: Analysis: Sales Strategy:

Product or Operations and Financial

Service Line: Management: Projections:

Risk
Assessment:
III. THE ELEMENTS OF A
BUSINESS PLAN
Executive
Summary:
This section provides a concise overview of the
entire business plan. It should include key
information such as the business model, target
market, competitive advantage, and financial
highlights. For example, if you're starting a
software development company, your
executive summary might highlight the unique
features of your software and the potential
market demand for it.
III. THE ELEMENTS OF A
BUSINESS PLAN
Mission
Statement:
The mission statement expresses the purpose
and values of your business. It should define
what your company does and why it exists. For
instance, a mission statement for a sustainable
fashion brand could be: "Our mission is to
create stylish and eco-friendly clothing that
promotes ethical and sustainable practices in
the fashion industry."
III. THE ELEMENTS OF A
BUSINESS PLAN
Company
History:
This section provides a brief overview of your
company's background, including its formation,
milestones, and growth. It can also include
information about the founders and their
expertise. For example, if you're starting a tech
startup, you might mention that the idea was
born out of the founders' shared passion for
solving a specific problem in the industry.
III. THE ELEMENTS OF A
BUSINESS PLAN
Business and
Industry
Profile: This section outlines your business goals,
objectives, and strategies. It should include
details about your target market, competition,
and how your product or service meets
customer needs. For instance, if you're opening
a coffee shop, you might describe your target
market as urban professionals who appreciate
high-quality coffee and a cozy atmosphere.
III. THE ELEMENTS OF A
BUSINESS PLAN
Market
Analysis:
This section involves researching and analyzing
the target market, including its size, trends,
and potential customers. It should also include
an assessment of the competition and how
your business will differentiate itself. For
example, you might analyze the market
demand for organic skincare products and
identify key competitors in the industry.
III. THE ELEMENTS OF A
BUSINESS PLAN
Marketing and
Sales Strategy:
This section outlines how you will promote and
sell your product or service. It includes your
marketing channels, pricing strategy, sales
tactics, and customer acquisition plan. For
instance, you might describe your social media
marketing campaigns, partnerships with local
retailers, and online advertising strategies.
III. THE ELEMENTS OF A
BUSINESS PLAN
Product or
Service Line:
This section provides detailed information
about your product or service offerings. It
should highlight the unique features, benefits,
and value proposition of your offerings. For
example, if you're launching a mobile app, you
might explain its key functionalities, user
experience, and how it solves a specific
problem for users.
III. THE ELEMENTS OF A
BUSINESS PLAN
Operations and
Management:
This section covers the operational aspects of
your business, including your production
process, supply chain management, and
organizational structure. It should also
introduce your management team and their
roles and responsibilities. For instance, you
might describe your manufacturing facilities,
inventory management system, and the
qualifications of your key team members.
III. THE ELEMENTS OF A
BUSINESS PLAN
. Risk
Assessment:

This section identifies potential risks and

challenges that could impact your business. It
should outline your risk mitigation strategies and
contingency plans. For instance, you might
discuss risks such as changes in regulations,
economic downturns, or supply chain
disruptions, and how you plan to address them.
III. THE ELEMENTS OF A
BUSINESS PLAN
Financial
Projections:
This section presents your financial forecasts,
including projected revenue, expenses, and
cash flow. It should also include a break-even
analysis and a discussion of your funding
requirements. For example, you might include
a sales forecast for the next three years, an
expense budget, and a description of how you
plan to finance your business.
 IV.
CAN YOUR PLAN PASS
THESE TESTS?
 Testing your business idea is a necessary preliminary
step to identify your target market and refine your
business idea with their real-world needs in mind. If you
don’t test your product or service, you may be setting
yourself up to fail.
If you blindly assume an idea will be
a big hit, you’ll risk a great deal of:

Time money resources

 It’s wise to test a business plan early in the entrepreneurial process
before you spend too much time and money developing a business
or product for which there’s no market.

A. Building the plan forces a potential entrepreneur to look at her

business idea in the harsh light of reality.

1. It also requires the owner to assess the venture's

A business plan chances of success more objectively.
prompts an
2. A well-assembled plan helps prove to outsiders
individual to be
that a business idea can be successful.
realistic and
assess their
numbers.
In this sense the business plan is a promotional piece to
present and describe your business venture, how you will put it
together and why it will be successful.

The basic premise is to A business plan forms

show that you know what the basis of the
you are doing and why offering presentation
your business will be to potential investors.
successful.
B. To get external financing, an entrepreneur's plan
must pass three tests with potential lenders and
investors:

reality competitive value

test test test
 i. reality test

a) The external component of the reality test revolves around

proving that a market for the product or service really does exist.
• It focuses on industry attractiveness, market niches, potential
customers,market size, degree of competition, and similar
factors.

b) The internal component of the reality test focuses on the

product or service itself.
• Can the company really build it for the cost estimates in the
business plan?
• Is it truly different from what competitors are already selling?
• Does it offer customers something of value?
ii. competitive test

a) The external part of the competitive test evaluates the

company's relative position to its key competitors.
• How do the company's strengths and weaknesses match up
with those of the competition?
• How are existing competitors likely to react when the new
business enters the market?
• Do these reactions threaten the new company's success and
survival?

It is similar to checking out the competition to see how and

where you can improve.
 ii. competitive test

b) The internal competitive test focuses on management's ability

to create acompany that will gain an edge over existing rivals.
• What other resources does the company have that can give it
acompetitive edge in the market?

It can be used to discover: The plan must show that it can

• where your business is effectively meet customer
doing well needs, and foster satisfaction
• where you need to improve and loyalty through tailored
• which trends you need to products, services, and
get ahead of. interactions.
 ii. competitive test

b) The internal competitive test focuses on management's ability

to create acompany that will gain an edge over existing rivals.
• What other resources does the company have that can give it
acompetitive edge in the market?

• Do we offer a solution that looks at the problem differently

than competitors?
• Can we protect our intellectual property or create a
protectable niche?
• Do we disrupt the market but not so much that the “cost” of
changing to us is too high?
iii. value test

a) A business plan must prove to them that it offers a high

probability of repayment or an attractive rate of return.

b) A plan must convince lenders and investors that they will earn
an attractive return on their money.

Entrepreneurs view their businesses as good investments

because they consider the intangibles of owning a business,
such as gaining control over their fate and freedom to do what
they enjoy.
iii. value test
Following the execution of a feasibility analysis and development of a
business model, it is possible for entrepreneurs not to realize that a
business will not do well until they create a business plan.

It is best to determine the business likelihood to succeed

during the planning stages, before investing significant
resources, time, and effort into a business idea.

Note: Making mistakes on paper is much less

costly than making mistakes in the actual
course of business.
 V. MAKING THE BUSINESS
PLAN PRESENTATION
A. When entrepreneurs try to secure funding from lenders or
investors, the written business plan almost always precedes the
opportunity to meet “face-to-face.”

1. Usually, the time for presenting a business opportunity is short,

often no more than just a few minutes,

15-20 MINUTES
30 MINUTES (MAXIMUM)
B. Entrepreneurs who are successful in raising the capital
their companies need to growhave solid business plans and
make convincing presentations of them.
 2. A business plan presentation
should cover five basic areas:

e) A financial
Presentation
analysis and
that
d) The
Sharing
shows lenders
management
c) The team and its and investors
Review and
b) A market company’s members’ an attractive
Editing
a.) The competitive qualificationan payback or
analysis and a
company's edge and the d experience. payoff.
description of
background marketing
the
and its strategies
opportunities it
products or
presents.
services.
 C. SOME HELPFUL TIPS FOR MAKING A BUSINESS PLAN
PRESENTATION TO POTENTIAL LENDERS ANDINVESTORS INCLUDE:

1. Prepare.
2. Demonstrate enthusiasm about the business, but don't be overemotional.
3. Focus on communicating the dynamic opportunity your idea offers and how you plan to
capitalize on it.
4. “Hook” investors quickly with an up-front explanation of the new venture, itsopportunities,
and the anticipated benefits to them.
5. Use visual aids.
6. Hit the highlights; specific questions will bring out the details later. Don't getcaught up in too
much detail in early meetings with lenders and investors.
7. Keep the presentation “crisp” just like your business plan
 C. SOME HELPFUL TIPS FOR MAKING A BUSINESS PLAN
PRESENTATION TO POTENTIAL LENDERS ANDINVESTORS INCLUDE:

8. Avoid the use of technological terms that will likely be above most of the audience
9. Remember that every potential lender and investor you talk to is thinking “What'sin it for
me?”
10. Close by reinforcing the nature of the opportunity.
11. Be prepared for questions.
12. Anticipate the questions the audience is most likely to ask and prepare for them inadvance.
13. Be sensitive to the issues that are most important to lenders and investors by“reading” the
pattern of their questions.
14. Follow up with every investor you make a presentation to.
VI. WHAT LENDERS AND
INVESTORS LOOK FOR IN A
BUSINESS PLAN?
 DEFINITIONS
VI. WHAT LENDERS AND INVESTORS LOOK FOR IN A BUSINESS PLAN

LENDERS
AN INDIVIDUAL, A GROUP, OR A financial institution that makes funds available
to a person or business with the expectation that the funds will be repaid. The
principal amount as well as any interest or fees must be paid back on the agreed
date.
EXAMPLES:
Banks
Credit Unions
Mortgage Company
Online Lending Platform
INVESTORS
AN INDIVIDUAL THAT PUTS MONEY INTO AN ENTITY SUCH AS A BUSINESS
FOR A FINANCIAL RETURN. THE MAIN GOAL OF ANY INVESTOR IS TO
MINIMIZE RISK AND MAXIMIZE RETURN. INVESTORS RELY ON DIFFERENT
FINANCIAL INSTRUMENTS TO EARN A RETURN ON INVESTMENT AND
ACCOMPLISH IMPORTANT FINANCIAL OBJECTIVES LIKE BUILDING
RETIREMENT SAVINGS, FUNDING A COLLEGE EDUCATION, OR MERELY
EXAMPLES:
ACCUMULATING ADDITIONAL WEALTH OVER TIME.
• Exchange-traded funds (ETFs • foreign exchange
• Equities • Gold
• Bonds • Silver
• Commodities • retirement plans
• mutual funds • real estate
 IMPORTANCE OF INVESTORS AND
LENDERS IN THE BUSINESS

Investors
• Helps in the success and growth of businesses,
particularly startups and emerging ventures.
• They provide not only the necessary capital but also
valuable guidance, expertise, and networks.
Lenders
• Provides financial resources that enable businesses to
operate, innovate and develop.
CRITERIAS LENDER AND INVESTOR LOOK FOR IN A
BUSINESS PLAN
Entrepreneurs must be aware of the criteria lenders and investors use to evaluate
the creditworthiness of entrepreneurs seeking financing. The criterias are the five
Cs of credit; namely capital, capacity, collateral, character, and conditions.

CAPITAL amount of money or personal funds an owner invests into the success of the
company.
• A small business must have a stable capital base before any lender will grant a
loan.
• The most common reasons that banks give for rejecting small business loan
applications are undercapitalization or too much debt.
CAPACITY ability to repay a loan.
• A synonym for capacity is cash flow.
• Lenders and investors must be convinced of the firm's ability to meet its regular
financial obligations and to repay bank loans, and that takes cash.
• Lenders expect a business to pass the test of liquidity, especially for short- term
loans

COLLATERAL any assets an entrepreneur pledges to a lender as security

for repayment of the loan.

• Banks make very few unsecured loans (those not backed by collateral) to
business start-ups.
• Bankers view the owner's willingness to pledge collateral (personal or
business assets) as an indication of dedication to making the venture a
success
 CHARACTER evaluation of intangible criteria including integrity, skill,
determination, knowledge, and ability.
Lenders and investors know that most small businesses fail
because of incompetent management, and so they try to avoid
extending loans to high-risk entrepreneurs.

CONDITIONS the terms of the loan itself as well as any economic conditions that
might affect the borrower
• The conditions surrounding a loan request also affect the owner's chance of receiving
funds.
• Banks consider factors relating to the business operation such as potential growth in the
market, competition, location, form of ownership, and loan purpose.
• Another important condition influencing the banker's decision is the shape of the overall
economy, including interest rate levels, inflation rate, and demand for money.
 CONCLUSION
A good plan serves as a strategic compass that
keeps a business on course as it travels into an
uncertain future.
• A solid plan is essential to raising the capital
needed to start a business; lenders and
investors demand it.
• Building a plan is just one step along the
path to launching a business.
 SUMMARY
• A solid plan is essential to raising the capital
needed to start a business; lenders and
investors demand it.
• Building a plan is just one step along the
path to launching a business.