Essentials of Entrepreneurship: A Practical Approach

On this page is a discussion of business plans and keys to a sound business plan.

Business Plans

A business plan is a narrative and quantitative document describing the what, why, where, how, when, and who of developing and operating a new (or existing) venture.  It is particularly useful to the entrepreneur because it forces him/her to come to grips immediately with the basic policies of the business. An entrepreneur must consider why he/she is establishing a new business or continuing to operate a given one (goals) and what specifically one hopes to accomplish (objectives).  The entrepreneur must contemplate what resources will be required to reach the goals and achieve the objectives that have been set.

The complete business plan is an entire planning document that includes the items listed below.

Figure 2-1. The Planning Documents

The complete plan requires the entrepreneur to quantify in hard numbers what is expected to be done and is thus a vital management tool for enhancing the chances for success of the new (or existing) enterprise.

The summary business plan (or financing plan) contains parts of the complete plan which venture capitalists and other investors might wish to review prior to committing funds to the enterprise.  It should include all elements of the complete plan except the strategic plan (to be discussed later), the operating plan (to be discussed later), and certain appendices (containing pertinent contracts, technical information, and support data).  Thus, the complete business plan and the summary (financing) plan are prepared to provide the entrepreneur and his/her financial backers with benchmarks which can be used to measure the relative success of the new business.  Quantification of the plan results in the timely, careful, and adequate consideration of the salient factors that go into decision making.

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Keys to a Sound Business Plan

There are 25 keys to preparing a sound business plan:

Key #1 Every business should have a mission

Key #2 Every business needs to define what the business does and identify a market opportunity

Key #3 The entrepreneur must identify the external factors that may have an impact on the business

Key #4 A successful business depends on analyzing the nature and contemplating the future of the business

Key #5 The business idea determines the key factors that result in business success

Key #6 The major strengths of the business should be identified in detail

Key #7 The major weaknesses of the business should be identified in detail

Key #8 A complete business plan should be prepared

Key #9 The business plan should be specific and well written

Key #10 Financial statements are the heart of the business plan

Key #11 A strategic plan should be developed to determine what products or services the business is going to offer

Key #12 An operating plan should be prepared to determine how to run the business effectively

Key #13 The first year of operations is an important time for a new enterprise

Key #14 Growth strategies may be affected by the goals and objectives of the business

Key #15 There is no law that requires a business to grow

Key #16 Simple growth calculations are easy to make and should be a focal point for the entrepreneur

Key #17 Growth calculations may be expanded to include return on investment (ROI) analysis

Key #18 Long-term growth may depend on the ability to get long-term financing

Key #19 Operating leverage is a key in determining the riskiness of a business

Key #20 Deciding when and how the business reaches the break-even point is critical to its success

Key #21 Trade credit is often overlooked as a key source of short-term financing

Key #22 Bank financing may be available to certain businesses

Key #23 Factoring may be an important source of funds available to a new business

Key #24 Selling common stock to outsiders may be a big mistake

Key #25 Venture capital is not available for most entrepreneurs, but it can be attractive for the few that qualify
 

For more details, see Business Planning:  25 Keys to a Sound Business Plan.

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