1. 1
Enterprise Creation & Development
Lecture 4:
Importance of
a Business Plan
Mr Khoo Chen En
(6460 8016; kce3@np.edu.sg)
ECD Oct 14/Lecture 4/kce 1

2. ECD Assignment 1
• Due Wed, 26 Nov 2014, 3pm.
• Drop it at the project box, blk 72
level 9.
• Marks will be deducted for late
submission.
2ECD Oct 14/Lecture 4/kce

3. Lecture Objectives
• What is a business plan?
• Purpose of a business plan
• Pitfalls to avoid in planning
• Benefits of a business plan
• A guideline on developing a business
plan
• Effective presentation of a business plan
3ECD Oct 14/Lecture 4/kce

4. Recommended Reading
4
• Donald F. Kuratko ENTREPRENEURSHIP –
THEORY, PROCESS AND PRACTICE, 9th
Edition, CENGAGE, Chp 12
ECD Oct 14/Lecture 4/kce

5. Additional Resources
• www.business.gov.sg
• Gives advice on how to plan a
business, tips on writing
business plans & building a
network of contacts
• www.gmarketing.com
• www.bplans.com
• www.ace.sg
5ECD Oct 14/Lecture 4/kce

6. We thought
we’ll put in
the details
later.
6ECD Oct 14/Lecture 4/kce

7. What is a Business Plan?
It is a written document
prepared by the entrepreneur
that describes all the relevant
internal & enternal elements
involved in starting a new
venture.
7ECD Oct 14/Lecture 4/kce

8. Purpose of a Business Plan
Marketing
R&D
Manufact-
uring
Mgmt
Critical
Risks
Financing
Milestones
It is often an
integration
of functional
plans, like:
8ECD Oct 14/Lecture 4/kce

9. Purpose of a Business Plan
1) A business plan
describes current status,
expected needs &
projected results of the
new business.
9ECD Oct 14/Lecture 4/kce

10. Purpose of a Business Plan
2) Allows the
entrepreneur entrance
into the investment
process.
3) Describes to investors
& financial sources all of
the events that may
affect the proposed
venture.
4) Used internally as a
‘roadmap’ for the
operations.
10ECD Oct 14/Lecture 4/kce

11. Recent Trends
Increasingly important to include
in your business plan:
• How your business will impact
the environment
• What will people do with your
product when they have
finished using it?
• Eg TVs, plastic bottles
11ECD Oct 14/Lecture 4/kce

12. Critical Factors in Planning
Realistic goals – these must be specific,
measurable and set within time
parameters
Commitment –supported by all involved-
family, partners, employees, team
members
Milestones – sub-goals must be set for
continual and timely evaluation of progress
Flexibility – obstacles must be anticipated
and alternative strategies must be
formulated
12ECD Oct 14/Lecture 4/kce

13. Pitfalls to avoid in Planning
Pitfall 1:
Goals are unrealistic and/or
immeasurable.
Pitfall 2:
Failure to anticipate roadblocks
eg threats or weaknesses to
business.
Pitfall 3:
No commitment or dedication.
13ECD Oct 14/Lecture 4/kce

14. Pitfalls to avoid in Planning
Pitfall 4:
Lack of demonstrated
experience & knowledge.
Pitfall 5:
No market niche. Customers’
needs not established.
14ECD Oct 14/Lecture 4/kce

15. Benefits of a Business Plan
FOR THE INVESTOR:
1) To assess the
entrepreneur’s planning
& managerial ability.
2) Provides a
comprehensive overview
of the entire operation
(i.e. through business
and financial evaluation)
15ECD Oct 14/Lecture 4/kce

16. Benefits of a Business Plan
FOR THE INVESTOR:
3) Illustrates the venture’s
ability to service debt or
provide an adequate return
on equity.
4) Provides details of the
market potential & plans for
securing a share of that
market.
5) Identifies critical risks and
crucial events
16ECD Oct 14/Lecture 4/kce

17. Benefits of a Business Plan
Analyses all aspects of the
venture
Prepares strategy for uncertainties
Forces critical and objective view
Closely scrutinises entrepreneur’s
assumptions (i.e. competitive,
economic )
For the
entrepreneur
17ECD Oct 14/Lecture 4/kce

18. Benefits of a Business Plan
Develops & examines operating
strategies & expected results
Quantifies objectives & provides
measurable benchmarks (i.e.
forecasts vs actual results)
Provides a communication tool for
outside financial sources
Provides an operational tool for
guiding the venture toward success
For the
entrepreneur
(cont’d)
18ECD Oct 14/Lecture 4/kce

19. No Standard Business Plan Format
• Plans vary from industry to industry.
• Craft your plan to correspond to your specific
conception of your business.
• Use sample plans mainly to stimulate your
thinking.
19ECD Oct 14/Lecture 4/kce

20. Who Reads your Business Plan?
• Venture capitalists, bankers, angel
investors, potential corporate customers,
lawyers, consultants and suppliers.
• 3 MAIN VIEWPOINTS
• YOU, the entrepreneur
• YOUR CUSTOMERS – what benefits do they
get?
• YOUR POTENTIAL INVESTORS - $$$ -
Financial projections
20ECD Oct 14/Lecture 4/kce

21. Executive Summary:
1 or 2 pages
Table of contents:
List sections & mark
the pages
Cover & Title Page:
Visible contact detail.
Well-designed
Length:
No more than 20 pages
Appearance:
Binding & printing must
not be sloppy
Putting the Package Together
21ECD Oct 14/Lecture 4/kce

22. 10 Guidelines to Remember!
1. Keep the Plan Respectably Short
2. Organise and Package the Plan
Appropriately
3. Orient the Plan towards 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
22ECD Oct 14/Lecture 4/kce

23. Outline of a
Business
Plan
1. Cover Page/Table of Contents
2. Executive Summary
3. Company & its Industry
4. Product/Service
5. Market & Competitive Analysis
6. Marketing Plan
7. Manufacturing & Operations
8. Management Team
9. Financial Plan
10. Critical Risks
11. Harvest Strategies
12. Milestones
13.Appendices
23ECD Oct 14/Lecture 4/kce

24. Elements of a Business Plan
1. Executive Summary
• Written after the entire business plan has been completed
• A clever snapshot of the complete plan
• Lets the reader know if:
• Your basic business concept makes sense & has been
thoroughly planned
• The management is capable
• A clear-cut market exists
• Your business has significant competitive advantages
• Your financial projections are realistic
• Investors or lenders have an excellent chance to get their
money back
24ECD Oct 14/Lecture 4/kce

25. Elements of a Business Plan
2. Business Description
• Name of the venture
• Industry background presented in terms of
current status & future trends
• Venture to be thoroughly described, along
with its proposed potential.
• Potential competitive advantages eg
patents, special technological or market
advantages
DESCRIBE WHY YOUR SOLUTION MAKES
CUSTOMERS VERY HAPPY.
25ECD Oct 14/Lecture 4/kce

26. Elements of a Business Plan
3. Marketing
(Lecture 8 – Developing the Business)
• Research, design & development
• Market niche & market share
(BIGGER IS BETTER!)
• Competitive analysis
• Marketing strategy
• Pricing Policy
• Advertising Plan
26ECD Oct 14/Lecture 4/kce

27. Markets and
Competitive Analysis
Customers
• Who are your customers and what are their needs?
• Be precise in the specific groups of customers.
• What are the customer-buying patterns?
Note: Questionnaires be drawn up to conduct survey
on customers’ needs and preferences.
Competition
• Who are your direct/indirect competitors ?
• Compare and contrast your competitors with your
product/service
Note: Competitive analysis table be set up to show
the comparisons.
27ECD Oct 14/Lecture 4/kce

28. Competitor Analysis for Car Wash
(adapted from Entrepreneurship Ideas in Action
by Cynthia L. Greene)
28ECD Oct 14/Lecture 4/kce

29. Target Customer Profile
With Market Segmentation, develop a profile of
the potential target customer.
Sample Customer Profile For A Sporting Goods Store
in Jurong Point
 Individual 23 to 52 years of age
 Participates in sports regularly
 Wants good-quality sports equipment
 Lives in western Singapore
 Average income of $50,000 per year.
(Source : Entrepreneurship Ideas in Action by Cynthia L. Greene)
29ECD Oct 14/Lecture 4/kce

30. Marketing – 4 P’s
• Product/Service
• Place - Selling/Distribution policy
• Promotion - Advertising, Sales Promotion,
Public Relations, Personal Selling
• Pricing/Service Policy
NOTE : As far as possible, make use of guerilla
marketing tactics. It would be useful to
prepare marketing materials (samples,
brochures, etc).
30ECD Oct 14/Lecture 4/kce

31. Elements of a Business Plan
4. Manufacturing & Operations
• Location
• Labour availability
• Wage rate
• Proximity to suppliers & customers &
community support
• Local taxes
• Facilities (plant, warehouse, offices)
• Equipment (machinery, computers &
vehicles)
31ECD Oct 14/Lecture 4/kce

32. Elements of a Business Plan
32ECD Oct 14/Lecture 4/kce

33. Elements of a Business Plan
5. Management
• Organisational structure
• Management team & critical
personnel
• Experience & technical capabilities of the
personnel
• Ownership structure & compensation
agreements
• Board of directors & outside consultants &
advisors
33ECD Oct 14/Lecture 4/kce

34. Elements of a Business Plan
6. Financial
(Lecture 7 – Financing the Business II)
• Potential viability of the venture
• Pro forma balance sheet
• Income statement
• Cash-flow statement
34ECD Oct 14/Lecture 4/kce

35. Elements of a Business Plan
7. Critical Risks – potential risks that could
cripple the business.
• Potential risks should be identified:
• Effect of unfavourable trends in the industry
• Design or manufacturing costs that have
gone over estimates
• Difficulties of long lead times encountered
when purchasing parts or materials
• Unplanned –for new competition
• Regulatory risks
• Weather-related physical risks
• Reputational risks
35ECD Oct 14/Lecture 4/kce

36. Elements of a Business Plan
7. Critical Risks
• In addition, Cover the what-ifs
• What if the competition cuts prices?
• What if the industry slumps?
• What if the market projections are wrong?
• What if the patents do not come through?
• What if the management team breaks up?
• Suggestions for alternative courses of
action
36ECD Oct 14/Lecture 4/kce

37. Elements of a Business Plan
8. Harvest (Exit) strategy (Lecture 5 – Starting
the business)
• Management succession and investor exit
strategies
• Capital cow, employee stock ownership plan,
merger, outright sale, public offering
“Build a great company but do not forget to
harvest”
Think harvesting as a vehicle to reduce risk &
create future entrepreneurial choices & options.
9. Milestone schedule
• Provides investors with a timetable for the
various activities to be accomplished
37ECD Oct 14/Lecture 4/kce

38. Elements of a Business Plan
10. Appendix and/or bibliography
• Additional information not appropriate in
the main parts of the plan.
• diagrams, blueprints
• Operations manuals
• resumes of management team
• financial data
• Evidence of market research activity –
competitor’s analysis, questionnaires &
responses
• Marketing brochures
38ECD Oct 14/Lecture 4/kce

39. Effective Presentation of
a Business Plan
Important points to note as you prepare for an
oral presentation of your business plan.
1. Hook the readers, especially in the Executive
Summary
• Have a compelling opportunity where you can:
• Identify a need/opportunity in a large and
growing market
• Conceptualize a business that will fill that need
or take advantage of that opportunity.
• Demonstrate that you have the know-how and
the team to effectively build a profitable and
sustainable business.
39ECD Oct 14/Lecture 4/kce

40. Effective Presentation of
a Business Plan
2. Prioritise the points you are making into 3
categories:
• Essential - without this the plan makes no
sense.
• Good to know - directly supports and gives
context to your essential points.
• Interesting - provides a higher level of
understanding of market dynamics,
industry, etc.
40ECD Oct 14/Lecture 4/kce

41. Effective Presentation of
a Business Plan
3. Articulate the size of your market:
who are your customers, why they will
purchase your product or service, how
much they will buy at what price.
4. Include evidence of customers.
5. Discuss the competition and why they
will buy your product/ service vs the others.
6. Articulate your marketing strategy:
How will they become aware of your
product/service, and how will you
communicate the benefits?
41ECD Oct 14/Lecture 4/kce

42. Effective Presentation of a
Business Plan
7. Be specific when discussing your team.
8. Edit for the details – clarity and typos – a
sloppy presentation says a lot!
9. Know the outline thoroughly.
10. Utilise key words – in the outline that
help recall examples, visual aids, or other
details.
11. Rehearse the presentation.
42ECD Oct 14/Lecture 4/kce

43. Last but not least….
• DON’T GIGGLE
• DON’T TALK AMONGST
YOURSELVES WHEN YOUR MEMBER
IS PRESENTING
• DON’T MUMBLE
• DON’T COME IN SLIPPERS AND/OR
SHORTS
• DON’T FIDGET OR SLOUCH WHEN
YOUR MEMBER IS PRESENTING
• DON’T BE LATE!
43ECD Oct 14/Lecture 4/kce

44. Recall Lecture Objectives
• What is a business plan?
• Purpose of a business plan
• Pitfalls to avoid in planning
• Benefits of a business plan
• A guideline on developing a business
plan
• Effective presentation of a business plan
44ECD Oct 14/Lecture 4/kce