CHAPTER 8

BUSINESS PLANS:
SEEING AUDIENCES AND
YOUR BUSINESS CLEARLY
C H R I S T I A N M A R K D C . C A B A LU N A
INS TR U CTOR
 LEARNING OBJECTIVES

• Unde rs t and w hy and w he n t o d e ve lo p a b us ine s s

plan.
• Know ho w t o t e ll t he b us ine s s p lan s t o ry.
• Learn t he majo r s e ct i o ns o f t he b us ine s s p lan.
• Focus b us ine s s p la n s e ct io ns t o me e t s p e cifi c ne e d s .
• Ident ify t he ma jo r ris k s t o b us ine s s p lan s ucce s s .
• Mas t e r p it ching yo ur b us ine s s p lan t o o t he rs
 Two circumstances under which creating a business
plan is absolutely necessary:
• External legitimacy–One is when outsiders expect it. Creating a business plan is the acknowledged best way to build

external legitimacy for your firm

• The most common use of business plans is when you are raising money for your business.

• T h e p l a n b e c o m e s a w a y t o i n t r o d u c e y o u r i d e a , y o u r b u s i n e s s , y o u r s e l f , a n d y o u r d e a l t o t h e r e a d e r.

• T h e p l a n i s a s a l e s d o c u m e n t , b u t a l s o t h e f i r s t i n s t a l l m e n t i n t h e r e l a t i o n s h i p y o u a r e h o p i n g t o b u i l d w i t h a n i n v e s t o r.

• On the other hand, if you are presenting to accomplished angel investors individually or in groups, they will want to know a

great deal about your business market potential.

• Second circumstance under which a business plan is needed: for internal understanding. This is when you want to get all

the aspects of the business clear in your mind and the minds of others in the business, such as your partners or your key

employees.

• G e n e r a l l y, i f y o u n e e d o u t s i d e s u p p o r t t o g e t a b u s i n e s s g o i n g , t h o s e y o u a r e s e e k i n g s u p p o r t f r o m w i l l w a n t t o s e e a

business plan—and you will want to make sure the plan addresses their concerns.

• A l s o , i f y o u a r e t r y i n g t o s t a r t o r r u n y o u r b u s i n e s s i n a p r o f e s s i o n a l o r a m b i t i o u s w a y, a b u s i n e s s p l a n i s v i t a l l y i m p o r t a n t .

• It is important to know that research suggests that firms without a business plan are more likely to close down than firms

with plans.

• While having a business plan does not guarantee higher profits, it is essential to qualify to be considered by business

professionals for investments, loans, or credit lines.

 Business Plan Story: Starting Small and Building
Up
Fo u r typ es o f b u sin ess p la n n in g p resenta tio n s :

1. Vision Statement–is a very simple 5- to 10-wordsentence or, better yet, a tagline that

expresses the fundamental idea or goal of the fi r m . Re late d to the vision statement is a

mission statement, which is typically longer (20–50 words) and often adds the fi r m ’ s

competitive advantage.

2. Elevator Pitch - A 30-second (100 words or less) action-oriented description of a

b u s i n e s s d e s i g n e d t o s e l l t h e i d e a o f t h e b u s i n e s s t o a n o t h e r.

3. Executive summary - A one- to two-page (250–500 words) overview of the business, its

business model, market, expectations, and immediate goals. It is typically put at the start of a

business plan and is the most popular summary form for a business plan.
 Business Plan Story: Starting Small and Building
Up
They give much more detail about the business than the vision or elevator pitch. Executive summaries are

u s u a l l y o r g a n i z e d i n a s e r i e s o f s h o r t p a r a g r a p h s ( t h r e e o r f o u r s e n t e n c e s ) a n d t y p i c a l l y c o v e r fi v e k e y t o p i c s .

These topics are:

Problem: Describes the need for the product or service.

Product: Describes the product or service and how it is used.

Market: Describes the size and characteristics of the customer group and how they will buy the product or

service (e.g., in person, online, catalog).

Competitive advantages : Explain what makes the product or service unique, often in terms of an entry wedge.

Business/team: Describes the current stage of the business, the timeline, and the team behind the product.

F i n a n c i a l s u m m a r y : G i v e s s a l e s , g r o w t h , a n d p r o fi t a b i l i t y i n f o r m a t i o n , a n d i f f u n d i n g i s s o u g h t , a n o v e r v i e w

of that.

4. Business Plan - business plan remains the standard for describing the business in detail. The business
 THE BUSINESS PLAN

A d oc u me n t d es i g n e d to d e ta il th e ma jor c h a ra cte ri s ti c s of a fi rm— its p rod u c t or s e rvi ce , i ts in d u s try, i ts ma rke t, i ts

ma n n e r of op e ra ti n g (p rod u c ti on , ma rke ti n g , ma n a g e me n t) , a n d i ts fi n a n ci a l ou tcom es on th e fi rm’ s p re s e n t a n d f u tu re .

B us i nes s P l a n Outl i ne
1. Cover l ette r ( 1 p a g e , b u t i s s e p a ra te from p l a n )
2. Ti tl e p a g e a n d ta b le of c on te n ts ( 1 p a g e, n ot cou n te d towa rd l i mi t)
3. Exe cu ti ve s u m ma ry ( 1 p a g e )
4. Th e com p a n y, p rod u c t/ s e rvi c e , a n d i n d u s try ( 2 p a g es tota l )
4a . Com p a n y d e s c r ip tion ( 1 p a ra g ra p h )
4a 1 . Vi s i on s ta te me n t
4a 2 . Comp a n y b a c kg rou n d
4b . Prod u c t/ s e rvi c e a n d i n d u s tr y (1 – 2 p a g es )
4b 1. Prod u c t/ s e r vic e d e s c ri p ti on a n d va l u e p rop os i tion
4b 2. I n d u s try d e s c ri p ti on
5. Th e ma rke t ( 3– 4 p a g e s tota l )
5a . Ma rke t a n d ta rg e t c u s tom e r ( 1– 2 p a g e s )
5b . Comp e ti ti on a n d c om p e ti ti ve a d va n ta g e ( 1 p a g e )
5c . Ma rke ti n g s tr a te g y ( 1 p a g e )
5c 1. O ve ra l l s tra te g y
5c 2. S a le s p l a n
5c 3. Comp e ti ti ve p l a n
5c 4. R & D/ g rowth p la n or n ext s te p s
 THE BUSINESS PLAN

6. Th e org a n i za ti on ( 1 p a g e tota l )
6a . Le g a l a n d org a n iz a ti on a l s tru ctu re s a n d I P a n d l oca ti on s
6b . Ke y p e r s on n e l
6c . Ke y p a r tn e rs , a d vis e rs , a n d re l a te d s e rvi ce p rovi d ers
6d . Ke y a c ti viti e s a n d op e r a ti on s
7. Fin a n ci a l s u mma ry: s a l e s , p rofi ts , “ th e a s k a n d d e a l ” ( 1 p a g e tota l)
8. Th e a p p e n d ixe s (typ i c a l l y 7 p a g e s ma xi mu m )
8a . Fi n a n c i a l s ta te me n ts (3 p a g e s ): I n c ome s ta te me n t, c a s h fl ow p roje cti on , b a l a n c e s h e e t, s ta rt-u p c os ts ,
a s s u mp ti on s , s c h e d u le
8b . S u p p or ts : O wn e r 1 -p a r a g ra p h b iog ra p h i e s , p rod u ct or s e rvi ce p i ctu re s , d e ta i l s or s p e c ifi c a ti on s ,
i n d ic a tors of s u cce s s
THE BUSINESS PLAN
C o ver Letter- A on e -p a g e d oc u m e n t on b u s i n e s s s ta ti on e ry (a l s o ca l l ed l ette rh ea d ) th a t i n trod u c e s th e b u s i n e s s p l a n
a n d th e b u s i n e s s own e r to th e re c i p i e n t a n d i n d ic a te s wh y th e re c ip i en t is b e i n g a s ke d to re a d th e p l a n .

S i g na ture bl o c k- A s n i p p e t of text ( or text a n d i ma g e s ) , typ i c a l l y i n s e rte d a t th e b ottom of a n e ma i l, th a t c on ta i n s

c on ta ct i n forma tion f or th e s e n d e r of th e e ma i l .

T i tl e Pa ge - typ i ca ll y c on ta i n s th e foll owi n g i n forma ti on :

Comp a n y n a me ( u s u a l ly i n l a rg e typ e , wi th a l og o i f you h a ve on e ) .
Con ta ct i n forma ti on (own e r n a m e [ s ], c omp a n y a d d res s , te l e p h on e a n d fa x n u mb e rs , e ma i l , we b s i te , a n d s oc i a l m e d i a
a d d re s s e s ) .
Da te th is ve rs i on of th e p l a n wa s c omp l e ted .
Prop r ie ta ry s ta tem e n t to p rote c t you r i d e a s : For exa mp l e , “Th i s d ocu m en t con ta i n s c on fi d e n ti a l a n d p rop r ie ta ry
i n f orma tion b e lon g in g exc l u s i ve l y to [ you r c omp a n y’s n a me g oes h e re ].

Ta b l e o f C o ntents - typ i c a l ly p u ts th e ma jor s e cti on h e a d i n g s ( e .g ., exec u ti ve s u mm a r y, c omp a n y, ma rke t, e tc . ) i n

b ol d fa c e typ e a n d th e s e c ti on s u n d e rn e a th e a ch i n re g u l a r typ e.

Exec uti ve S umm a ry- A on e - to two -p a g e (2 50 – 5 00 word s ) overvie w of th e b u s i n es s , its b u s i n e s s mod e l , ma r ke t,

exp e c ta ti on s , a n d im me d i a te g oa l s . I t i s typ i c a l l y p u t a t th e s ta rt of a b u s i n e s s p l a n a n d i s th e m os t p op u l a r s u m ma ry
form for a b u s i n e s s p l a n .

C o m p a ny, P ro duc t/S ervi c e, a nd Ind us try- Th e fi rs t s e cti on of a b u s i n e s s p l a n te l l s th e s tory of you r p rod u c t or
s e r vi c e, a n d th e c om p a n y th a t wil l d e l i ver i t. I t u s u a l l y con s is ts of two s u b s e cti on s — on e th a t p rovi d e s a n ove ra l l
d e s c ri p ti on of th e b u s in e s s a n d a n oth e r f oc u s i n g on i ts p rod u ct or s ervic e .

C o m p a ny Des c ri p ti o n ( 1 p a ra g ra p h ) -Typ i ca ll y th i s p a ra g ra p h g i ves th e vi s i on or ta g l i n e of th e c omp a n y a n d a b ri e f

d e s c ri p ti on of th e b u s in e s s — its a g e , c u rre n t s ta tu s a n d l oca ti on , a s we ll a s th e ma rke ts it s e r ve s or p la n s to s e rve . Th e
fi rm’ s mos t re ce n t mi l e s ton e a c h i e ve d i s ofte n me n ti on e d ( re ce i ved i n i tia l i n ve s tme n ts , fi n a l i ze d p rod u c t d e s i g n , te s te d
THE BUSINESS PLAN

P ro d uc t/S ervi c e a nd Va l ue P ro p o s i ti o n (1 – 2 pa ges )- I n ma n y wa ys th i s i s th e m os t im p orta n t s e c ti on of th e p l a n

b e c a u s e i t is wh e re re a d e rs c ome to u n d e r s ta n d wh a t you r b u s i n e s s i s a l l a b ou t—th e p rod u c t or s e rvi c e .

P ro p ri etary tec hno l o g y- A p rod u c t or s e r vic e or a n a s p ec t of on e th a t i s kep t a s a tra d e s e c re t or i s p rote c te d l e g a l l y

u s i n g p a ten t, cop yri g h t, tra d e ma r k, or s e r vi ce ma rk.

Ind us try (1 p ara gra p h) - Th e p a ra g r a p h u s u a l l y h a s th e i n d u s try’s forma l n a me ( p os s i b ly i n c l u d in g i ts N AI CS or S I C

n u mb e r ), i ts s i ze (i n n u mb e r of fi rms a n d s a l e s ) , a n d wh e th e r th e in d u s try i s g rowi n g , s ta b l e , or i n d e c l i n e ( with s ome
me a s u re of th i s ).

T he Ma rket - Th e ma rke t s e c ti on ta l ks a b ou t you r c u s tome rs —wh o th e y a re a n d wh a t th ey a re li ke , wh o e l s e i s p u r s u in g

th e m, a n d h ow you p l a n to g e t a n d ke e p you r cu s tom ers .

Ma rket a nd Ta rg et C us to mer ( 1 – 2 p a g es ) - Th e ma rke t refers to th e tota l p op u l a tion of p e op l e or fi rm s to wh om you

p l a n to s e l l . Ma rkets a re u s u a l l y d e s c ri b e d in terms of th e i r s i ze ( b oth i n n u m b e rs of cu s tom e r s a n d s i z e of s a l e s ) a n d
s c op e . Th e ta rg e t cu s tom e r s e c ti on foc u s e s a tten tion on th e in d i vi d u a l wh o wou l d b u y you r p rod u c t or s e rvi c e . Ta rg e t
c u s tom e rs a re d e s c ri b e d i n te rm s of d e m og ra p h ic s ( s u ch a s a g e , g e n d e r, e d u c a ti on , i n com e , exp e ri e n c e ) , th e i r re l a ti on
to th e p rod u ct or s e rvi c e ( wi l l th e y u s e i t th e ms e lve s , g i ft i t, re s el l i t, e tc.) , h ow ofte n th e y b u y ( on c e a d a y, on c e a
wee k, twi ce a m on th , e tc . ) , th e i r p a s t exp e ri e n c e wi th you r ki n d of p rod u c t or s e rvi ce , a n d wh a t th e y a re l ooki n g for
wh e n b u yi n g you r p rod u c t or s e r vi c e .

C o m p eti ti o n a nd C o mp eti ti ve A d va nta g e ( 1 p ag e)- Th e ta b le i d en ti fi e s th e ma j or comp e ti tors for you r ma rke t b y

n a me . Th e a cc omp a n yi n g p a ra g r a p h s u m ma ri ze s th e ta b l e ’s res u l ts a n d focu s e s on you r fi rm’ s c omp e ti ti ve a d va n ta g e —
wh a t ma ke s you r p rod u c t or s e rvi c e or fi rm u n i q u e —a n d h ow you r com p e titi ve a d va n ta g e g i ve s you a n op p or tu n ity to wi n
s a l e s f rom c om p e ti n g fi rms . T h e a d va n ta g e of h a vin g i t h ere i s th a t i t con n ec ts you r m a rke t d e s c ri p ti on to wh a t you wil l
d o to s e ll you r p rod u c t or s e rvi c e a g a i n s t th e com p e titi on .
THE BUSINESS PLAN

Ma rketi ng S tra tegy ( 1 p a g e) - A g ood ma rketi n g s tra te g y s ec tion foc u s e s on th ree i d ea s : ( 1 ) th e ove ra l l s tra te g y you r
fi rm p u r s u es i n th e m a r ke t, ( 2) th e s a l e s p la n th a t s h ows th e s p e ci fi c wa ys you a p p l y s tra te g y to s e c u re s a l e s from you r
c u s tom e rs , a n d ( 3 ) th e lon g e r-te rm c omp e ti ti ve p l a n th a t s h ows h ow you p rote ct you r fi rm from e ff orts of th e
c omp e ti tion to u n s e a t you .

P res el l i ng - Th is i n volve s i n trod u c i n g you r fu tu re p rod u ct to p ote n ti a l cu s tome rs a n d ta ki n g ord e rs for l a te r d e l i ve r y.

R& D/G ro wth P l a n o r Next S tep s ( 1 – 2 p a ra gra phs )- Th e p a rt of a b u s i n es s ( a n d a b u s i n e s s p l a n ) th a t i s foc u s e d on

c re a ti n g n ew p rod u cts or s e rvi c e s a n d p re p a ri n g n ew te ch n ol og i e s , i d ea s , p rod u c ts , or s ervic e s f or th e fi rm’ s ma rke t.

T he Org ani z a ti o n- I n th i s s e c ti on you la y ou t th e comp on e n ts a n d s u p p orts for th e fi rm its e l f. T h e g oa l for th i s s e c ti on

i s to c on vi n ce th e re a d e r th a t th e b u s i n e s s wi l l b e s u cc es s fu l b e ca u s e i t h a s a cc es s to h i g h -q u a l i ty p e op l e b oth wi th i n
th e fi rm a n d wi th i n th e l a rg e r b u s in e s s c om mu n i ty, a n d th e org a n i za ti on its el f is s tru c tu re d to m a ke th e b e s t u s e of
th os e p e op l e.

Leg a l a nd Orga ni z a ti o n S truc tures a nd IP a nd Lo c a ti o ns (1 pa ra gra ph) - Th is s u b s e c tion d e s c r i b e s th e l e g a l form

of th e b u s i n es s ( LLC, C c orp , s ol e p rop ri e tors h i p , etc .) a n d wh ere i t is forma ll y re g i s te red ( top i c s d i s c u s s e d in Ch a p te r
17 ) a n d l oca ted ( b oth p h ys i c a l ly a n d on th e I n te rn et) .

Key P ers o nnel (1 – 2 p a ra g ra p hs ) - Th e g oa l for th e ke y p e rs on n el s u b s e cti on i s to i n s p i re th a t c on fi d e n c e i n you r

re a d e r.
Re la te d S ervi c e Provi d e rs ( 1 p a ra g r a p h ) - Th es e d a ys , s ma ll b u s i n e s s e s a re ra re l y a l on e , a n d th e q u a l i ty of th e
p rofe s s ion a l s s u rrou n d i n g you te ll s p e op l e a l ot a b ou t h ow g ood you mi g h t b e . Ta ki n g a p a ra g r a p h or two to i d e n ti fy you r
b a n k a n d b a n ke r, you r a ttorn e y a n d l e g a l fi rm, a c cou n ta n t or b ookke e p e r, a n d oth e r c on s u l ta n ts c a n h e l p s h ow th a t you
h a ve h i g h -q u a l ity s u p p or ts
THE BUSINESS PLAN

Key A c ti vi ti es a nd Op era ti o ns ( 1 p a ra g ra ph) - Ma n y ti me s you r b u s i n e s s wil l op e ra te in ve r y s ta n d a rd wa ys . Le tti n g

p e op l e kn ow th a t you wi l l op e r a te i n a f a m i li a r wa y i s u s e fu l. Al s o, i f th ere a re ke y a cti vi ti e s — th i n g s you m u s t g e t ri g h t
to b e s u cce s s fu l— or s p e c i a l i ze d op e r a ti on s th a t you wa n t i n ves tors or p a rtn e rs to kn ow a b ou t to p rove you h a ve
ma s te re d you r b u s in e s s , th i s i s a p l a c e to p u t th a t i n forma ti on .

T he Fi na nc i a l S um ma ry - Th e on e -p a g e fi n a n ci a l s u mma ry s ec tion s ta rts wi th a p a ra g ra p h ( ofte n with a s u mma ry

ta b l e ) s h owi n g th e ove r a l l fi n a n c i a l re s u l ts ( i n s a l e s a n d p rofi ts ) . I t i s fol l owe d b y “th e a s k, ” wh i c h i s wh a t you a re
s e e ki n g from oth ers , th e u s e of th e in ve s tm en t fu n d s , a n d th e p roje cte d re tu rn s .

T he A p pendi xes - Th e fi n a n c i a l s ta te me n ts exp ec te d i n cl u d e ( 1) i n c ome s ta te me n ts ( a l s o c a l le d a P& L f or p rofi t a n d

l os s ) a n d i ts a s s u mp ti on s ; (2 ) c a s h fl ow a n d i ts a s s u m p ti on s ; a n d (3 ) b a l a n ce s h e et a n d i ts a s s u mp tion s . For s ta rt-u p
b u s i n e s s e s , it i s a l s o c omm on to i n c l u d e a l i s ti n g of th e exp e n s es i n c u rre d i n th e s ta r t-u p p roc e s s . For a n exi s ti n g
b u s i n e s s , th e fi n a n c ia l s re p ort th e l a s t two ye a rs of a c tu a l d a ta , a n d th e n off e r th re e -ye a r p roj e c ti on s for th e in c ome ,
c a s h fl ow, a n d b a la n c e s h e e t. For a s ta r t-u p b u s i n e s s , th e tra d iti on i s to off e r th re e ye a rs of d a ta p roj e c ti on s . I f you wil l
ta ke th re e or more ye a rs to s h ow a p rofi t, i t ma ke s s e n s e to g i ve p roj e cti on s for fi ve ye a rs .

Da ta ro o m- An on li n e re p os i tor y (e . g . , Drop b ox, B ox, S h a re Va u l t) for th e d ocu me n ta ti on th a t b a c k u p s a n d d e ta i ls th e

s p e c i fi c s of you r b u s i n e s s a n d b u s i n e s s p l a n . Th e con ten ts of th e d a ta room a re ve ry s i mi l a r to th os e of th e th re e ri n g -
b i n d e r p ers on a l e d i tion of th e p l a n h e l d a n d u s e d b y th e fou n d e r.

Due d i l i genc e - Th e p roc e s s of i n ve s ti g a ti n g a b u s i n e s s to d ete rmi n e i ts va lu e a n d p ote n ti a l f or i n ve s tme n t.

 Focusing Your Business Plan
Businesses face four situations in which reader needs are specific enough and distinct enough that it makes sense to write the plan with particular emphases in mind.
1. Plans for a pioneering business: When your product or service is truly new to every-one, it is considered a pioneering business.
• With a pioneering business, your greatest problems are: (1) helping people understand how it works, (2) showing them how they would use it, (3) estimating how
many people would want it, and (4) estimating how much they would be willing to pay for it.
• Test marketing - selling your product or service in a limited area, for a limited time

2. Plans for a new entrant business: When your product or service already exists but your firm is the first of its kind in your market, it is considered a new entrant
business. As such it is always harder to prove that your product or service will work.

3. Plans for an existing business: When writing a plan for an existing business, you have the benefit of knowing the history, the existing market, and the financial
track record of the firm.
• These form a foundation for the plan, so the projections about future markets, sales, and profits should clearly build on these historical facts.
• It can make sense to gather information on existing customers to help clearly define the market, and often suppliers and trade associations can provide more in-
depth information on market shares and competitors.

4. Plans for a business with significant government involvement: Some businesses depend on government approvals to go forward. Examples include salvage
yards, garbage dumps, companies using toxic chemicals, nursing homes, service stations, and even in many places, day-care centers.
• Working around approvals usually hinges on selling services or products that are part of the business but do not require specific approval.
 THE SEVEN OTHER SPECIAL-PURPOSE TYPES OF PLAN
1 . Sc r e e ni ng Pl a n - Al s o c a l l e d a mi n i - p l a n , g i v e s t h e b a s i c o v e r v i e w o f t h e f i r m a n d a d e t a i l e d l o o k a t t h e f i n a n c i a l s .
• Sc r e e n in g p l a n s u s u a l l y c o n s i s t o f t h e c o v e r l e t t e r, t i t l e p a g e , e x e c u t i v e s u mma r y, a n d f i n a n c i a l s s e c t i o n s o f t h e b u s i n e s s p la n .

2 . I nf or ma t i ona l Pl a n - A b u s i n e s s p l a n t h a t g i v e s p o t e n t i a l c u s t o m e r s o r s u p p l i e r s i n f o r ma t i o n t y p i c a l l y c o n s i s t o f c o mp a n y a n d o r g a n iz a t i o n s e c t io n s .

3 . Pr oof - of - Conc e pt We bs i t e - A s p e c i a l f o r m t h a t b a s e d o n I n t e r n e t - b a s e d , a n d i t i s a b u s i n e s s p l a n t h a t p r o v i d e s i n f o r ma t io n o r d e mo n s t r a t i o n o f a p r o d u c t o r
s e r v ic e d e s ig n e d t o s o l i c i t i n f o r ma t i o n o n c u s t o m e r i n t e r e s t .
• Th e g o a l i s t o i n f o r m c u s t o me r s a n d p a r t n e r s a b o u t t h e f i r m a n d t h e p r o d u c t , s o p r o o f - o f - c o n c e p t we b s i t e s c o n s i s t o f t h e v i s io n a d mis s io n s t a t e me n t s , t h e
p r o d u c t / s e r v ic e d e s c r i p t i o n , a n d o f t e n a n a n i ma t e d o r i n t e r a c t i v e d e m o n s t r a t i o n o f t h e p r o d u c t o r s e r v i c e .

4 . Ke y Empl oy e e / Pa r t ne r Pl a n - A s u m ma r y p l a n t h a t p r o v i d e s i n f o r ma t i o n o n t h e c o mp a n y, p r o d u c t / s e r v i c e , ma r k e t , a n d c r i t ic a l r i s k s t o p r o s p e c t i v e b u s i n e s s o r
ma r k e t in g p a r t n e r s o r t o p r o s p e c t i v e k e y e mp l o y e e s i n c l u d i n g t h e a l l ma t e r i a l s o f a n i n f o r ma t i o n a l p l a n .

5 . I nv e nt i on Pl a n - f o c u s o n t h e p l a n t h a t f o c u s o n t h e d e t a i l s o f a n i n v e n t i o n , i n c l u d i n g i n t e l l e c t u a l p r o p e r t y r i g h t s

6 . Ope r a t i ona l Pl a n - A b u s i n e s s p l a n d e s i g n e d t o b e u s e d i n t e r n a l l y f o r ma n a g e me n t p u r p o s e s a n d s e r v e a s wo r k i n g d o c u me n t s wit h in a b u s in e s s .

7 . Pr i v a t e Pl a c e me nt M e mor a ndum ( PPM ) - A s p e c i a l i z e d l e g a l f o r m o r t h e o t h e r t y p e o f p l a n t h a t a d d s t o a b u s i n e s s p l a n c r a f t e d b y l a wy e r s f o r t h e p u r p o s e o f

s o l ic it in g f o r ma l i n v e s t m e n t s .
• PPMs a r e t h e o ff i c i a l v e r s i o n o f a b u s i n e s s p l a n o ff e r e d t o p o t e n t i a l i n v e s t o r s .
 THE MOST COMMON CRITICAL RISKS IN A PLAN
STEP 1. Overstated numbers: Examples include sales or profits that are too optimistic, owner salaries above the minimum needed to live when the firm is just starting out.
2. Numbers that are wrong: Examples include balance sheets that do not balance, numbers in the financials that do not flow from one section to the next, no
assumptions given for the financials, and ratios that do not match RMA or other standards (Standard &Poors, BizMiner), with no explanation given for the differences.
3. Inadequate cushion: The number one killer of young firms? Not enough money. Having enough cash (called working capital) to survive three to six months goes a
long way to avoiding this risk.
4. Inadequate payback: There are always opportunities out there; is yours worth someone’s time, energy, and (maybe) money? Any plan that does not clearly specify
the key paybacks to readers will fail to sell them on the idea. Don’t offer an investor a 10 percent return when corporate bonds offer nearly that with little risk of
default.
5. Narrative and financials that do not fit: If you have a plan that calls for a large marketing campaign, but financials do not show costs for one, there is a problem.
6. No direct customer connection: If it sounds like you have not actually talked to potential customers about your product/service, readers will consider that a major
problem.
7. Uncertain sales (especially conversion rates): You need to prove your sales estimate. The best way is to know your conversion rate (alias hit rate), which is the
percentage of people who buy out of the total population of people you approach. You get this from test marketing or preselling (introducing your product to potential
customers and taking orders for later delivery).
8. Overlooked competition: Be broad in your search for competitors.
9. Experience deficits: Do you (or someone else in your firm) have experience in (a) the line of business, (b) the industry, (c) the locality, (d) managing?31 Have it,
find it, or say how you’ll learn it.
10. “What” problems: For the product or service, make sure it is explained clearly enough so anyone could understand it. Also make sure the plan (or cover letter) is
clear about what is being asked of the reader (e.g., invest, make a loan, give feedback, partner, etc.).
11. Deadly aggravations: Looking and sounding professional is key. A plan with misspellings looks amateurish. Lacking a table of contents or page numbers in the
plan makes life harder for people you want to impress. Selling instead of summarizing in the executive summary comes across as hucksterism.
PITCHING YOUR PLAN

Pi tch
• Has a v er y c lear t radit ion about how it is s uppos ed t o be done. Knowing t his t radit ion
c an help y ou quic k ly learn what is ex pec t ed when pit c hing a plan t o ot hers .
• Pit c h prov ides an ov erv iew of t he k ey point s of t he bus ines s plan—a c hanc e t o s ell y our
ideas and, mos t of all, a c hanc e t o s ell y ours elf .
• Name giv en t o t he f ormal pres ent at ion of a s lides how s ummariz ing y our bus ines s plan
giv en bef or e judges or pot ent ial inv es t or s or part ner s .

Pi tch Deck- The name of a s lides how pres ent at ion t hat s ummariz es a bus ines s or more
of t en a bus ines s plan.
THE KEY THINGS AN INFLUENTIAL PERSON LOOKS
FOR IN QUESTIONS ARE:
Passion for the business: When pitching, do not read. Think of yourself as telling a story—a fascinating story—about your business.

Expertise about the business and the plan : Practice answering questions about the plan. Expect really tough questions. Assume people

do not trust your assumptions when they first read them. Be ready to explain where you get your assumptions, your numbers, and your

ideas. Be ready to mention sources. Be ready with comparisons to competitors and their offerings. (This is where your three-ring binder

with the backup information becomes invaluable to you.) Know how every number in the plan came about and what it means.

H o w p r o f e s s i o n a l y o u a r e i n y o u r w o r k : Yo u r p l a n s h o u l d l o o k p r o f e s s i o n a l l y d o n e . I t s h o u l d b e n e a t a n d o r d e r l y, w i t h p e r f e c t s p e l l i n g a n d

g r a m m a r. W h e n y o u p r e s e n t i t , y o u s h o u l d b e i n b u s i n e s s a t t i r e , c l e a n a n d p r e s s e d .

H o w e a s y i t w o u l d b e t o w o r k w i t h y o u : Ty p i c a l l y w h e n y o u a r e p r e s e n t i n g a b u s i n e s s p l a n , y o u a r e d o i n g i t w i t h t h e g o a l o f e s t a b l i s h i n g

a n o n g o i n g r e l a t i o n s h i p w i t h t h e l i s t e n e r. A l l r e l a t i o n s h i p s c a r r y a n e l e m e n t o f l i k i n g . I t i s e a s i e r t o s e e y o u r s e l f e s t a b l i s h i n g a r e l a t i o n s h i p

with someone you like than with someone you do not like. Part of the goal in the presentation is to get the listeners to like you. How? The

techniques are simple— use eye contact, use people’s names, remember what they might be interested in or in what they have shown an

i n t e r e s t b e f o r e , s m i l e , a n d a b o v e a l l , b e h o n e s t . W h e n t h e y a s k t o u g h q u e s t i o n s , t r y n o t t o g e t n e r v o u s , u p s e t , a n g r y, o r d e f e n s i v e . I f y o u

do not have
 Crafting Your Pitch Deck: Pitch Deck Slide Categories
1. Introductory Slide: This slide introduces your firm by name, as well as you and any other people from your firm whom you
have brought with you.
2. Company Purpose Slide: Present and explain the purpose of the business as well as the purpose of this presentation of the
plan (e.g., financial, partnering).
3. Problem Slide: This slide tries to make real to the listener what is the problem customer ’s face or what is missing from their
experiences.
4. Solution Slide: This slide demonstrates how your product or service solves the problem or provides a much-needed benefit.
5. Product Slide(s) (1–2): Explain deeper or in detail how your product or service works.
6. Why Now Slide: What makes this point in time the right one for your business idea?
7. Market Size Slide: This slide gives the size of the overall market (customers/sales) as well as the specific target market you
can sell to, address, or service.
8. Business Model Slides (2–3): This section explains how you will market, distribute, and get sales made, with an eye toward
how you will generate revenues and profits.
9. Competition Slide(s) (1–2): Identify the major competing firms or products/services and shows how you compare to them, it
usually shows how you will successfully compete against these firms and what is your general strategy and distinctive
competence.
10. Team Slide(s) (1–2): Presents the key people with the one or two skills they have that are most persuasive in proving their
expertise or their contributions to the business.
11. Financials Slide: Here you give the sales, breakeven, and profit projections for the firm for the period covered in the plan.
12. The Ask and the Deal Slide: “The ask” can be funding, partnership, mentoring, network access, or just general support and
feedback. Explain briefly what the use of the listener ’s resources will be. There should also be a line on the slide for what is
offered in return (for the items above—the opportunity to grow sales, savings moved to a bank, stock in the firm for investors, or
a chance to help a great young firm grow). This is what is called “The Deal” by investors.
13. Closing Slide: Slide decks end with a slide that says thanks and asks for questions.