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MGT602 - Entrepreneurship - Lecture Handout 23

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CREATING AND STARTING THE VENTURE (Continued….)

LEARNING OBJECTIV ES

  1. To present examples and a step-by-step explanation of the business plan.
  2. To explain how to write a business plan
  3. To explain the procedure and list of document included in business plan
  4. To discuss the contents of each document and how to prepare them

WRITI NG THE BUSINESS PLAN

Description of the Venture

The description of the venture should be detailed in this section. This should begin with the mission statement or company mission, which describes the nature of the business and what the entrepreneur hopes to accomplish. The new venture should be described in detail, including the product, location, personnel, background of entrepreneur, and history of the venture. The emphasis placed on location is a function of the type of business. Maps that locate customers, competitors, and alternative locations can be helpful. If the building or site decision involves legal issues, the entrepreneur should hire a lawyer.

Production Plan or Operations Plan

If a new venture is a manufacturing operation, a production plan is necessary. This plan should describe the complete manufacturing process, including whether or not the process is to be subcontracted. If the manufacturing is carried out by the entrepreneur, the plan should describe the physical plant layout and machinery and equipment needed. If the venture is not manufacturing, this section would be titled operational plan. The entrepreneur would need to describe the chronological steps in completing a business transaction.

Marketing Plan

The marketing plan describes how the products will be distributed, priced, and promoted. Potential investors regard the marketing plan as critical to the venture’s success.

Organizational Plan

The organizational plan section should describe the venture’s form of ownership. If the venture is a corporation, this should include the number of shares authorized, share options, and names and addresses of the directors and officers. It is helpful to provide an organization chart indicating the line of authority. This chart shows the investor who controls the organization and how members interact.

Assessment of Risk

It is important that the entrepreneur make an assessment of risk in the following manner: The entrepreneur should indicate the potential risks to the new venture. Next should be a discussion of what might happen if these risks become reality. Finally the entrepreneur should discuss the strategy to prevent, minimize, or respond to these risks. The entrepreneur should also provide alternative strategies should these risk factors occur.

Financial Plan

The financial plan determines the investment needed for the new venture and indicates whether the business plan is economically feasible. The entrepreneur should summarize the forecasted sales and expenses for the first three years. Cash flow figure for three years are needed, with the first year’s projections provided monthly. The projected balance sheet shows the financial condition of the business at a specific time.

Appendix

The appendix contains any backup material not included in the text of the document.

Other possible documents

Letters from customers, distributors, or subcontractors Secondary or primary research data Leases and contracts Price lists from suppliers and competitors

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