1. MBA P715 Entrepreneurship Week 4 Marvin Ryder Assistant Professor, Marketing & Entrepreneurship

2. Components of the Business Plan • Executive Summary • Table of Contents • Product/Market or Service/Market Description • Entrepreneur Profile • Basis of Competitive Advantage • Business/Personal Objectives • Market Analysis • Customers – “Top-Down” & “Bottom-up” Analysis • Competitors

3. Customer Analysis Top Down • Start with population of “trading area” Reduce for demographic/psychographic factors Multiply by usage data What percent of this amount do you need to capture to meet your objectives for each of your first three years? 2) What other data from secondary data can you present that supports your business concept? Bottom Up • Present all survey results – use graphs/tables/charts • Use one or two results to re-do the “funnel” from above NOTE: Estimates from “top down” and “bottom up” never match but lead to “best” and “worst” case estimates

4. Components of the Business Plan • Executive Summary • Table of Contents • Product/Market or Service/Market Description • Entrepreneur Profile • Basis of Competitive Advantage • Business/Personal Objectives • Market Analysis • Customers – “Top-Down” & “Bottom-up” Analysis • Competitors

5. Components of the Business Plan • Marketing Strategy • Distribution • Pricing/Profit Margins • Promotion/Advertising/Selling Tactics • Manufacturing/Supplier Analysis (Optional) • Information Technology Analysis (Optional) • Organizational Structure and Personnel Requirements

6. Components of the Business Plan • Present Situation and Start-Up Requirements • Define a target opening data. Identify three to five steps to get from “now” to “then.” If a step has costs, list them and note how they will be financed. • Financial Projections • Assumptions • Three-Year “Most Likely” Income Statements • Quarterly Cash Flow Projections for Year One • Pro Forma Balance Sheet for End of Year One • Break-even Analysis for Year One • Sensitivity Analysis on Three-Year Income Statements – “Best” case/ “ Worst” case

7. What Bankers Want from Business Plan • Reliability of the Borrower • How will money be used? Assets vs. Operating expenses • How likely is business to generate a profit? • Loan repayment schedule • Credit worthiness of business’ customers • Collateral for the loan (or availability of guarantor) • Equity invested by the entrepreneur – D/E ratio

8. What Investors Want from Business Plan • Business concept – pique one’s interest • Cost of independently evaluating business plan • Is this a good substitute for something in the market? Strength of competitive advantage. • Can this be easily substituted in turn? Don’t like to fund intermediate steps or prototypes. • Definition of market niche – does it fill a need? • Certainty of market information • How will sales be made or revenue generated?

9. What Investors Want from Business Plan • Accuracy of competitive analysis – hole in the market? • Projected profit and return on investment (30%) • Profit growth • Financial investment of the founders • When and how will investment be cashed? – three to five year window • Will any investment be recoverable upon failure? • Any need for future cash investment?