creating a business plan vb quizlet

Total Instructional Time

The instructional time for ENTREPRENEURSHIP ranges from 26 hours (simulation exercises only) to 36 hours (simulation exercises, reading assignments , reading quizzes, and math quizzes) . You can configure your course to include or exclude reading assignments (3.3 hours) , reading quizzes (1.7 hours) and math quizzes (5 hours) . For instructions on how to configure your course, click here to access a series of videos to help you get your classroom up and running with Virtual Business.

Prior to beginning work with ENTREPRENEURSHIP , students should sign in to their account at vb.KnowledgeMatters.com and go through the Tutorial.

Lesson: Spotting the Opportunity

Description.

In this simulation exercise, students find themselves in an expansive city. They are considering opening a new business and have 5 different businesses in mind.  Students browse over the city and see many competitors in different locations. They then do a survey to determine where most potential customers live.  Next, they do a Google maps-like search on businesses of the types they are considering. For each, they note the number and location of competitors as well as their hours, breadth of product offerings and customer ratings.  From this they identify an opportunity and prepare to start a business.  As a final check, they research the local labor supply in their city to make sure they can hire employees. Students form the business which is auto-run for them. They learn how to find its income statement and run time forward to observe operations.  Students meet the goal when their business generates a target weekly profit.

LEARNING OBJECTIVES

• Explore different types of businesses
• Spot opportunity geographically
• Spot opportunity by industry
• Assess competition in evaluating an opportunity

Lesson: Market Research

In this simulation exercise, students dig deeper into evaluating an opportunity by employing market research techniques. Students hope to open a trampoline park in their city. Students run a survey to determine the current demographics of their city, then run the simulation in a hyper-speed mode to watch their city grow and track changes in the city’s demographics. They then resurvey their population to spot trends in demographics and income. With positive trends for a second trampoline park in the city, students look at the competitor’s prices and offerings. They then open a trampoline park in a specific location and try to set prices to achieve a profit goal.

• Understand trends in physical development and the opportunities they present
• Understand trends in demographics and the opportunities they present
• Use surveys as part of a market research effort
• Examine longitudinal survey data over time to spot trends
• Find competitor data and use it in good pricing decisions

Lesson: Creating a Business Plan

In this simulation exercise, students open a hair salon in a growing city. By using tools in the simulation environment, they are guided through answering key questions that a business plan must address. As they answer successive questions, a written business plan is progressively filled in until they have a complete plan. Students then use the plan as a prescription for how to run their business.  They operate the business controlling almost all functions and try to manage their salon to a profit goal. This lesson gives students a taste of the decisions they’ll make in the comprehensive projects but leads them through it by giving them a specific written plan to follow.

In this simulation exercise, students focus specifically on how to create financial projections for a business plan.   They estimate both capital expenses they’ll need to acquire equipment and operating losses they can expect as they build a customer base and move towards profitability. As a final step, they are challenged to do the financial projections for a large salon.  Based on their projections, they request funding and must meet an ROI goal of profit over investment.

• Read and understand a business plan outline
• Understand how to find the information needed to complete a business plan
• Project how much cash a business will need
• Read and analyze completed business plans

Lesson: The Elevator Pitch

In this lesson, students see and read “elevator pitches” describing “can’t-miss” business opportunities in their city. Students begin by reading a pitch and then going through a series of steps to determine whether the claims made in the pitch match economic realities in their city. They discover that for this pitch most of the claims are true. They invest in the business, watch the business operate and see the value of their investment grow. Students then must evaluate four other elevator pitches.  All claim to be great business opportunities, but the students can use information and tools in the simulation to discover which truly are.  They then invest in those, operate the businesses and try to reach a net worth goal based on their equity positions in the companies.

• Learn what an elevator pitch is
• Learn why elevator pitches are considered important for entrepreneurs
• Be able to critically analyze an elevator pitch
• Describe how an elevator pitch differs from a business plan

Lesson: Making the Plunge

Name, location, form of business.

In this simulation exercise, students start a trampoline business as a sole proprietorship. Unfortunately, an accident causes them to be sued and much of their personal wealth is lost. Undeterred, they next form a plumbing business and learn to name it. (The name does not affect their success in the simulation.) Next, they are guided through choosing a form of business (sole proprietor, partnership, corporation) and then explore suitable locations. They discover that rents vary widely for their main facility. They analyze the tradeoff between high rents and longer, more expensive driving times. They finally choose a location and observe as the business auto-runs. As a last challenge, they start and locate an electrical business trying to achieve a specific weekly profit.  They can move their business if their first choice of location doesn’t work out.

Form of Business & Taxes

In this simulation exercise, students start three different pizza businesses -- one as a sole proprietorship, one as a partnership, one as a corporation. They run the business for a period of time and do calculations to see the tax rates on each.  Students then try transferring money out of the business and see which transfers are taxed at that time. Finally, those businesses are automatically closed and students are free to open pizza shops using their chosen form of business.  Their goal is to have the businesses generate after-tax profits and then transfer those profits to a personal savings account to meet a wealth target .

• Understand the major forms of business (FOB) available to entrepreneurs
• Explain how the FOB affects access to capital
• Explain how the FOB affects liability/risk
• Explain how the FOB affects taxes
• Understand strategies for naming a business
• Perform detailed analyses of location choices

Lesson: Raising Money & Financials

Savings & bank loans.

In this simulation exercise, students begin by taking a quick look at funding a venture through savings and learn that it’s the simplest method but often inadequate.  They look at an automobile repair shop that has taken out a small loan and see how interest payments flow through the income statement. They also review a credit report and discover how credit ratings affect the interest rate on a loan and the amount of the loan they can get. Finally, students go ahead and get a bank loan to acquire more equipment for the autoshop.  This equipment is put to use as the auto shop tries to turn its new capital into ongoing profits.

Selling Shares/Venture Capital

In this simulation exercise, students seek to start a very capital intensive business, a bowling alley with up to 18 lanes.  Students do not have enough savings on their own to start such a business and the bank won’t give them a loan. Students then must consider stock sales as a means of financing their business. They learn about the “valuation” of a company and how that affects how many shares (what percent of) their company they need to sell to raise a given amount of money. Students also learn how money eventually gets returned to shareholders as dividends. Finally, students use the increasing valuation of their business to sell more stock at a better price to buy more lanes for their alley and eventually meet a weekly profit goal..

• Understand common sources of financing, including savings and family & friends
• Know how bank loans work and critical factors for getting a loan
• Be able to discuss the pluses and minuses of selling stock to raise money
• Explain how different financing methods might be best suited for different businesses

Lesson: Building a Team

In this simulation exercise, students learn about every business’s most important asset: its people. Students are planning to start a new physical therapy business. But to do this, they need licensed and unlicensed personnel and people with the experience to deliver quality therapy to their customers. Furthermore, students are in a somewhat tight labor market, and they must staff the business by paying sustainable wages to quality employees without breaking the bank. The lesson steps guide students through an employee search-and-hire process for one position. Students discover that in the simulation more educated and experienced workers keep their customers happier and work faster. Students also learn that employees can quit and positions may need to be refilled. Students are then challenged to effectively fill the remaining four roles. If they succeed, they can make the profit goal for their new business.

• Understand the importance of personnel to a new business
• Evaluate experience and educational qualifications
• Explain the difference between licensed and unlicensed positions
• Staff a business economically to allow the business to make a profit

Lesson: Acquiring Resources

This simulation exercise picks up where the lesson on raising money left off.   Students are budding auto repair shop owners. They have little money and know that auto repair equipment can be expensive. By first purchasing less expensive equipment and delivering good service, they generate cash to reinvest in upgraded resources—more expensive equipment that will let them do more lucrative jobs. Lesson steps guide the student through the first cycle of buying equipment and delivering service to make profits. Students are then challenged to use this “bootstrap” method to generate a thriving auto shop with all the best equipment.

• Sort out what resources you can afford and not afford
• Get a business started with less-than-optimal resources/equipment
• Use the business to generate cash to upgrade and expand the resources
• Understand terms like “bootstrap” and “self-funded“

Lesson: Going to Market

In this simulation exercise, students start an online business selling high-quality gift baskets. The capital needs of this business are low, but marketing could be expensive because of the many competitors. Students review a few local competitors’ offerings before setting their own prices. They then use social media (like Facebook and Instagram) to create ads for their products. Lesson steps show students how to evaluate the responses to their social media ads and assess effectiveness. They are then challenged to adjust prices and make marketing buys to achieve a profit goal for their business.

In this simulation exercise, students are the proud owners of a successful smoothie shop. However, they discover that its revenue potential is limited because customers will only travel so far for a smoothie. To grow, they need to replicate their success in multiple physical locations, similar to how restaurant chains often franchise as a strategy to grow. Students pick new locations for additional shops and set those shops up with an eye on replicating successful practices of their first store. They are then challenged to expand in this manner until they reach a total assets goal based on the value of their empire of smoothie shops.

• Understand key pricing considerations
• Understand different types of social media advertising
• Evaluate the success of marketing efforts
• Manage a marketing budget effectively

Lesson: Operations & Feedback

Work flow & feedback.

In this simulation exercise, students have inherited their family business of three pizza restaurants.  Unfortunately, the once successful chain has fallen on hard times.  Lesson steps guide the students through fixing operational problems at their first two stores. Students learn how to find customer and employee feedback as well as how to read financial statements to assess the health of operations. Finally, students are challenged to diagnose and fix the problems at their third restaurant. To meet their goal, they must achieve a specific weekly profit at the third restaurant.

Risk Management

All entrepreneurship is risky, but good founders find ways to reduce risk where possible. In this simulation exercise, students learn how to use insurance to insulate themselves from large financial losses. They learn about basic elements of policies including coverage amounts, deductibles, and premiums.  Students then learn about some risks that are out of their control, such as a widespread economic downturn. Techniques are shown that help small companies get through tough times so they can thrive during a subsequent recover.  Students work through an economic cycle and then try to make a profit goal upon the recovery.

• Respond effectively to complex operational challenges
• Learn to multitask
• Respond to surprises
• Use insurance effectively
• Understand economic cycles
• Assess an income statement and use it to manage the business

Lesson: Business Plan Project - Unique City Per Class

In this project, students are free to start any one of 20 possible businesses. They begin by preparing a business plan based on a provided business plan template . They can conduct customer and competitor research within the simulation before writing the plan, and they can form their business but not locate it. Plans are submitted to the instructor, who assigns a grade. When assigning the grade, the instructor sees information about which businesses offer the most opportunity within the city; this is provided to help in assigning the grade. You, the instructor, also set the amount and interest rate on the student’s loan. Based on the business plan outline, the student should have requested a specific amount. In general, the better the grade, the more likely you should be to grant the requested amount.   The interest rate you set can vary from 5% to 25%. Give lower rates to students with better plans. Specific suggestions are given on the grading page you will use.  A sample well-written business plan is included in the Answer Key for this project under Instructor Resources. This may be especially helpful if you are having students submit drafts of their plans and want to give them suggestions for improvements.

Watch the Business Plan Project "How To" Video

The student’s business plan grade is also factored into their project grade. Students then start and run their business, attempting to reach a total assets goal based on the valuation of business(es). Students may start multiple businesses of the same type as their original business to satisfy demand and build valuations.  If a student struggles with operating their business and the business fails and is forced to close, the student will automatically be reset to the start of the goal step with their original business formed and their initial funding restored.

By default, all students see the same city.  This helps you, the instructor, gauge relative performance and use the answer key provided as a solution.  There are two variants of the project available for inclusion in your course. The first provides a unique, random city for your class ; this is helpful if students are searching for project hints on the Internet or if you want to use the project as an assessment .  The second provides a unique, random city for each student ; this is helpful if students tend to share too much information among each other or if you want to give them additional opportunities to explore  and learn in a unique environment. To use these other variants, click Change Course Settings on your home page and look for Change Order of Assignments & Enable Teams or Competition Scoreboard.

This project can be set up for students to work in teams.

STEP-BY-STEP TEACHER INSTRUCTIONS

• Have students open the exercise normally and proceed through the steps to research opportunities, write a business plan (in the format or file type of your choosing), submit the plan to you in a manner of your choosing, and finally form their business using Actions>>Form Business . Confirm that all students have submitted business plans and formed their businesses.
• Log in to your instructor account and click the View Student Progress  button for your Entrepreneurship Course.
• In the grade matrix, find the Business Plan Project lesson and click on each student’s NC  grade hyperlink.
• In the Student Sim Work History dialog window that comes up, click on the first Review Student’s Sim   link that appears in the table.
• When the sim loads, assign a Grade, Loan Amount, and Interest Rate, and then click the Finalize Grade and Financing  button. Grading guidance is shown in the window.
• Click Yes  in the confirmation dialog window, then click OK  to close the Saved dialog window.
• Repeat steps 3 through 6 for each student.
• Tell all students that the business plan grades and loans have been finalized and that they can continue their sims running their new businesses with loan money. Students can see their business plan grade by clicking the Working on Goal  link at the bottom of the left-side text under the last step in the project.
• Understand the components of a business plan
• Do the research necessary to prepare a business plan
• Write a business plan
• Understand the relationship between business plans and funding
• Operate a business successfully with the aid of a plan

Lesson: Shark Project

In this project, students can choose to start any of the 20 businesses available. They can also enter their city to do research.  They can form their business but not locate it or operate it until they get funding.  Based on the research, students spot an opportunity and develop a short elevator pitch that should include supporting evidence from their research. In turn, each student gives his/her pitch to the class. It may be advisable to set this project up in teams to make the number of pitches more manageable for class time and attention. Students make notes on the most compelling pitches. Students then use an online interface to offer a certain dollar amount for a certain percentage of each company.  

Watch the Shark Project "How To" Video

You then run a computer automated “auction” that optimally matches investors with investees. If any students don’t get sufficient investor interest, their shares are sold to a “venture capitalist” at a low price, but one that is sufficient to let them continue the assignment. With the money raised, students are then free to start their businesses.  Students can look at a personal financial summary that shows the value of all their investments in classmates’ businesses. The student’s final grade is based on the value of the business they created (only the portion they still own) and the value of all the investments they made.  Students may start multiple businesses of the same type as their original business to satisfy demand and build valuations.

By default, each student sees a unique, random city .  This is done so that students can’t copy the pitch they have heard from students going before them. It also prevents students from searching the Internet for project hints.  There are two variants of the project available for inclusion in your course. The first provides a standard city that is the same for all students, and has a layout and demographics that match an answer key provided for you; this can be helpful if students are overwhelmed by the variety in cities.  The second provides a unique, random city just for your class; this is helpful if students search for project hints on the Internet. To use these other variants, click Change Course Settings on your home page and look for Change Order of Assignments & Enable Teams or Competition Scoreboard.

• Have students (or teams) open the exercise normally and proceed through the steps to research opportunities, prepare their elevator pitches, and form their business using Actions>>Form Business . Confirm that all students have prepared pitches and form their businesses.
• Have students (or teams) present their pitches to each other.
• Have students re-enter the sim exercise and complete their bidding for shares in other students’ businesses using Actions>>Investing . Confirm that all student bidding is done prior to running the share auction.
• To run the share auction, log in to your instructor account and click the Go to Assignments button.
• Navigate to the Shark Project lesson and click the  Run Sim  link.
• When the sim loads, review the current bids and if they appear complete, then click the Finalize Auction  button. (If the bids do not appear complete, close the sim, ask the students to log in and make corrections, then go back to step 3 and try again.)
• Click OK  to close the saved dialog window
• Tell students that the auction has been finalized and that they can continue their sims running their new businesses with loan money. Students can see the value of their business and all their investments in classmates businesses by clicking Reports>>Personal Financial Summary .

Some instructors may want to run this project more than once. This can be done by setting up a second course and using Change Course Settings  to include only the Shark Project.

• Be able to pitch your idea effectively
• Understand how much money is needed and how much of your company you are willing to give away
• Evaluate other pitches
• Allocate your investment across potential options
• Value a portfolio of your own business and outside investments.

Lesson: Mega Mogul Project - Unique City Per Class

In this project, students are challenged to become the ultimate “serial entrepreneurs,” starting many businesses and becoming the economic kings and queens of their city.  They raise money to start their first business and then use that business to generate cash to grow their empire.  The number of businesses they can start is only limited by the processing power of their computer.  To keep them on their toes, students will experience surprises while running their far flung empires.  Although students are given a specific total assets goal for grading purposes, students are able to continue running their simulation after the goal is met. The purpose of this is to let students explore freely in the world of entrepreneurship. As a "stretch" goal, dare your most advanced students to reach double the goal!

By default, all students see the same city.  This helps you, the instructor, gauge relative performance and use the answer key provided as a solution.  There are two variants of the project available for inclusion in your course. The first provides a unique, random city for your class ; this is helpful if students are searching for project hints on the Internet, or if you want to use the project as an assessment .  The second provides a unique, random city for each student ; this is helpful if students tend to share too much information among each other, or if you want to give them additional opportunities to explore  and learn in a unique environment. To use these other variants, click Change Course Settings on your home page and look for Change Order of Assignments & Enable Teams or Competition Scoreboard.

There are no actions required of the instructor for this project.

• Understand the breadth of business start-up possibilities
• Be able to “bootstrap” an empire and create a fortune
• Read a personal financial summary detailing the elements of net worth
• React to surprises such as those faced by real world entrepreneurs
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11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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Chapter 8: Entrepreneurship

Create your business plan.

Learning Outcomes

• List the components of a business plan
• Briefly describe the components of a business plan

The following written guide will help you create a business plan and map out how you will start and run your business successfully. The different parts are described in the order in which they appear in a business plan.

Executive Summary

The executive summary is often considered the most important section of a business plan. This section briefly tells your reader where your company is, where you want to take it, and why your business idea will be successful. If you are seeking financing, the executive summary is also your first opportunity to grab a potential investor’s interest.

The executive summary should highlight the strengths of your overall plan and therefore be the last section you write.

Below are several key points that your executive summary should include based on the stage of your business.

If You Are an Established Business

If you are an established business, be sure to include the following information:

• The mission statement : This explains what your business is all about. It should be between several sentences and a paragraph.
• Company information : Include a short statement that covers when your business was formed, the names of the founders and their roles, your number of employees, and your business location(s).
• Growth highlights : Include examples of company growth, such as financial or market highlights (for example, “XYZ Firm increased profit margins and market share year-over-year since its foundation). Graphs and charts can be helpful in this section.
• Your products/services : Briefly describe the products or services you provide.
• Financial information : If you are seeking financing, include any information about your current bank and investors.
• Summarize future plans : Explain where you would like to take your business.

With the exception of the mission statement, all of the information in the executive summary should be covered in a concise fashion and kept to one page. The executive summary is the first part of your business plan many people will see, so each word should count.

If You Are a Start-up or New Business

If you are just starting a business, you won’t have as much information as an established company. Instead, focus on your experience and background as well as the decisions that led you to start this particular enterprise.

Demonstrate that you have done thorough market analysis. Convince the reader that you can succeed in your target market; then address your future plans.

Company Description

This section of your business plan provides a high-level overview of the different elements of your business. The goal is to help readers and potential investors quickly understand the goal of your business and its unique proposition.

What to Include in Your Company Description

• Describe the nature of your business and list the marketplace needs that you are trying to satisfy.
• Explain how your products and services meet these needs.
• List the specific consumers, organizations, or businesses that your company serves or will serve.
• Explain the competitive advantages that you believe will make your business a success such as your location, expert personnel, efficient operations, or ability to bring value to your customers.

Market Analysis

The market analysis section of your business plan should illustrate your industry and market knowledge as well as any of your research findings and conclusions.

What to Include in Your Market Analysis

• Industry description and outlook : Describe your industry, including its current size and historic growth rate as well as other trends and characteristics (e.g., life cycle stage, projected growth rate). Next, list the major customer groups within your industry.
• Information about your target market : One of the first steps in the process is determining your target market and why they would want to buy from you. Narrow your target market to a manageable size. Many businesses make the mistake of trying to appeal to too many target markets. Research and include the following information about your market:
• Distinguishing characteristics : What are the critical needs of your potential customers? Are those needs being met?  What are the demographics of the group and where are they located? Are there any seasonal or cyclical purchasing trends that may impact your business?
• Size of the primary target market : In addition to the size of your market, what data can you include about the annual purchases your market makes in your industry? What is the forecasted market growth for this group?
• How much market share can you gain? : What is the market share percentage and number of customers you expect to obtain in a defined geographic area? Explain the logic behind your calculation.
• Pricing and gross margin targets : Define your pricing structure, gross margin levels, and any discount that you plan to use.
• Competitive analysis : Ask which areas are being ignored by your competitors. Creating a niche for your business is essential. Your competitive analysis should identify your competition by product line or service and market segment. Assess the characteristics of the competitive landscape (e.g., market share, strengths and weaknesses, barriers to market entry, etc.). Don’t Become a jack-of-all-trades. Learn to strategize.
• Regulatory restrictions : Include any customer or governmental regulatory requirements affecting your business, and how you’ll comply.

Once you’ve completed this section, you can move on to the Organization and Management section of your business plan.

Organization and Management

This section should include your company’s organizational structure, details about the ownership of your company, profiles of your management team, and the qualifications of your board of directors.

Who does what in your business? What is their background and why are you bringing them into the business as board members or employees? What are they responsible for? The people reading your business plan want to know who’s in charge, so tell them. Give a detailed description of each division or department and its function.

Service or Product Line

Once you’ve completed the Organizational and Management section of your plan, the next part of your business plan is where you describe your service or product, emphasizing the benefits to potential and current customers. Focus on why your particular product will fill a need for your target customers.

What to Include in Your Service or Product Line Section

• A description of your product/service : Include information about the specific benefits of your product or service – from your customers’ perspective. You should also talk about your product or service’s ability to meet consumer needs, any advantages your product has over that of the competition, and the current development stage your product is in (e.g., idea, prototype).
• Details about your product’s life cycle : Be sure to include information about where your product or service is in its life cycle, as well as any factors that may influence its cycle in the future.
• Intellectual property : If you have any existing, pending, or any anticipated copyright or patent filings, list them here. Also disclose whether any key aspects of a product may be classified as trade secrets. Last, include any information pertaining to existing legal agreements, such as nondisclosure or non-compete agreements.
• Research and development (R&D) activities : Outline any R&D activities that you are involved in or are planning. What results of future R&D activities do you expect? Be sure to analyze the R&D efforts of not only your own business, but also of others in your industry.

Marketing and Sales

Once you’ve completed the Service or Product Line section of your plan, the next part of your business plan should focus on your marketing and sales management strategy for your business.

Marketing is the process of creating customers, and customers are the lifeblood of your business. In this section, the first thing you want to do is define your marketing strategy. You’ll learn more about this in the Marketing chapter of this course.

After you have developed a comprehensive marketing strategy, you can then define your sales strategy. This covers how you plan to actually sell your product. Sales is also covered later in the course.

Next, if you are seeking financing for your business, you’ll need to complete the next part of your plan—Funding Request.

Funding Request

If you are seeking funding for your business venture, use this section to outline your requirements, including the following:

• Your current funding requirement
• Any future funding requirements during the next five years
• How you intend to use the funds you receive: Is the funding request for capital expenditures? Working capital? Debt retirement? Acquisitions? Whatever it is, be sure to list it in this section.
• Any strategic financial situational plans for the future, such as: a buyout, being acquired, debt repayment plan, or selling your business.

When you are outlining your funding requirements, include the amount you want now and the amount you want in the future. Also include the time period that each request will cover, the type of funding you would like to have (e.g., equity, debt), and the terms that you would like to have applied.

Once you have completed your funding request, move on to the next part of your plan—Financial Projections.

Financial Projections

You should develop the Financial Projections section after you’ve analyzed the market and set clear objectives. That’s when you can allocate resources efficiently. The following is a list of the critical financial statements to include in your business plan packet.

Historical Financial Data

If you own an established business, you will be requested to supply historical data related to your company’s performance. Most creditors request data for the last three to five years, depending on the length of time you have been in business. Typical financial data to include are your company’s income statements, balance sheets, and cash flow statements for each year you have been in business. Often, creditors are also interested in any collateral that you may have that could be used to ensure your loan, regardless of the stage of your business.

Prospective Financial Data

All businesses, whether start-up or growing, will be required to supply prospective financial data. Most of the time, creditors will want to see what you expect your company to be able to do within the next five years. Each year’s documents should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets.

Make sure that your projections match your funding requests; creditors will be on the lookout for inconsistencies.

Lastly, you may want to include an Appendix to your plan.

The Appendix should be provided to readers on an as-needed basis and should not be included with the main body of your business plan. Specific individuals (such as creditors) may want access to this information to make lending decisions. The appendix can include items such as your credit history, résumés, letters of reference, and any additional information that a lender may request.Therefore, it is important to have the appendix within easy reach.

Any copies of your business plan should be controlled; keep a distribution record. This will allow you to update and maintain your business plan on an as-needed basis.

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered above. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.

• Revision and adaptation. Authored by : Linda Williams and Lumen Learning. License : CC BY: Attribution
• Check Your Understanding. Authored by : Lumen Learning. License : CC BY: Attribution
• What I Do at Work. Authored by : The Scott. Located at : https://www.flickr.com/photos/thescott365/3183484673/ . License : CC BY-NC: Attribution-NonCommercial
• Create Your Business Plan. Provided by : U.S. Small Business Association. Located at : https://www.sba.gov/writing-business-plan . License : Public Domain: No Known Copyright

How to Write a Business Plan for Your Small Business

Do you need an employer identification number (ein), get to know our team: doug harding.

In my experience, a sizable number of prospective clients come to the SBDC seeking grants/loans to realize their dream of creating and owning a small business. Many clients may have already met with a prospective lender who often introduces them to the need for a formal business plan, and subsequently points them to the SBDC. (Sidebar -- business bankers are a great source of SBDC referrals!)  

Regardless of your industry, (restaurant, cannabis, food truck, coffee shop, daycare, or tech startup),  my advice to clients who intend to either seek a loan or self-fund their new business is the same –  you need a formal business plan.  Whether starting a new business, expanding an existing business, or simply introducing a new product or service, it’s a best practice to start with a plan – a business plan. To some, developing a business plan may seem like an extremely time-consuming and unnecessary task. But it’s time well spent. Business plans can range from the simple to the complex– but should include the same core elements. Here are the 7 Critical Business Plan Elements:

1. A convincing business case or "reason for being."

What is your business all about and why does it – or should it – exist? What benefits does it provide? And what problem does it solve?  

2. A differentiating product or service description.

What, specifically, is the product or service you’re offering? What is your USP – Unique Selling Proposition? Not just an Italian restaurant, but perhaps, an Italian bistro with a specific menu, and items, not typically found in your town, as well as appealing to people in a certain specific way. Include those unique points that differentiate your product or service from others.

3. A clearly defined target market. 

What is the market for your product or service? And is the market sufficiently large for you to generate cash flow, succeed, and remain profitable? Where will your customers come from and for what geographic area does your market extend? What type(s) of businesses or individuals does your product appeal to?

4. A thorough competitive analysis. 

What level of competition will you face and how will you effectively respond to that competition? Consider not just the direct competition, but  all substitute products and services that may represent threats to your sales . Following through on the Italian restaurant example, you’ll need to consider not only other/similar ethnic restaurant types but emerging competition like upscale food delivery companies and the share of the market they have.  Look at each competitor’s strengths and weaknesses and consider how your business is positioned against that competitor. As with other elements of your plan, be honest – and be specific.

5. A credible statement of mission, goals, and objectives.

Your mission statement, (and perhaps, vision statement), and goals define the objectives that will drive all of your activities. This mantra provides clarity of purpose as well as incentives for motivating staff, and they serve as milestones by which you can measure success or identify areas for remedial action. Your objectives support your goals. While your goals should be broad: e.g. “Increase margins in NE territory.”, your objectives should be specific and should support your goals: e.g. “Grow the luxury bedding product line market share by 15% over the next six months in FLA / GA areas.”

6. A comprehensive marketing plan. 

How do you intend to market your product or service? Your marketing plan should describe how your target customer group will be motivated to purchase your product or service. It should detail your marketing goals, the marketing and media mix you will use (i.e. traditional media advertising, (newspapers, television, magazines), Internet and social media marketing, direct mail, etc.), the cost, and the anticipated impacts. How will you measure your marketing effectiveness? Sales, profits, impressions?

7. A credible financial plan. 

How much revenue do you expect your business to generate? And what is the basis for your number? You need to support your financial predictions with sound data and evidence. Lenders look more favorably on projections based on historical actual numbers, but with a start-up, that isn’t typically doable. What is the financial feasibility of your business? The bottom line matters. What financial goals have been established and what evidence do you have that these goals can be achieved? Do you have a pipeline of potential customers who would provide testimonials of their intent to support your business? Even if you’re not looking to others to provide financial support to help you get your business off the ground, realistic but defensible projections are best in the long run.  

Your business plan should serve as a blueprint or a roadmap for your business, detailing what the business concept is, what is expected for the business in terms of goals and objectives, and – most importantly – how (specifically!) you will achieve those goals and objectives.   

So now what? I may be biased, but a great option is to work with your SBDC consultant who can support and guide you through the process, which can be daunting. Not to worry -- your consultant will help you plan and prioritize the key components of the plan, and will also provide a sounding board for the document – all of which will improve your odds of securing the funding you likely need.  

A great template to follow is Duquesne SBDC’s Guide to Writing a Business Plan , which creates a logical format for you; plus, small business bankers are familiar with our format, which creates a level of advantage for you.    

Key elements to include in your plan:

• Executive Summary  – which is written last and after all other sections are completed
• Company  – a detailed explanation of your company’s reason for being, which may include your mission statement and some of your personal background and aspirations, as well as your USP – Unique Selling Proposition.
• Products / Services  – provides extensive details about your product and services assortment and potential for growth
• Market Analysis and Evaluation  – describes the size and state of the market, and your target market, including demographics. You should also address growth trends, challenges and opportunities, and details of your competitors in the market.
• Marketing Strategies  – how will you price and promote your products/services? What advertising and marketing tools will you use? 
• Social media is sure to represent a sizable part of the effort. How will you distribute/sell your products?
• Production and Operating Plans  – describe the location and layout of your operations, your production strategy, and the controls you have in place.
• Management  – provides details of the management staff, and if applicable, those of the Board of Directors, often including resumes.  
• Financial Statements and Plans  – typically, the heart of most business plans and certainly the focus of lenders. Includes your sources and uses of funds, income statements, cash flow statements, and balance sheets; as well as assumption statements about revenues and expenses.
• Appendices / Exhibits  – are included if/as needed.

A complex business plan can take several months to complete and requires a commitment from the author and an aspiring entrepreneur.  Partnering with your local SBDC is an indication that you are seeking professional quality deliverable and no-cost consulting help – all of which will improve the odds that your resulting business will succeed in helping realize your dream.

The Duquesne University SBDC provides free business consulting for entrepreneurs in the Greater Pittsburgh area.  Click here  to request free consulting, or  contact the SBDC  for additional help and information.

Paul Bucciarelli  is a part-time business consultant with the Duquesne University SBDC and serves in the New Castle/Lawrence County Area. He recently retired from the PNC Financial Services Group after 19 years as a VP - Supply Chain Manager. Paul holds a Master's in Business Administration from Youngstown State University and a Bachelor's degree in Advertising and Journalism from Penn State. He is a part-time faculty member for the Penn State Shenango Campus, and he also serves on the Advisory Board for PSU - Shenango.

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True or False: Net profit is greater than gross profit.

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