Business Plan

Write a formal report to potential investors. Your purpose is to obtain funding by demonstrating that your idea can be profitable, that your research is reliable, and that you are credible.

The report should be 25-40 pages.  Each group member will be responsible for one of the four main sections described below.

• Minimum of five pages of text from each group member.
• Minimum of three graphs or other visuals for each section.

Research methods and sources will depend on the nature of the business and your section.  Start with traditional sources such as libraries, local organizations, the web, business texts, and so on.  You can also employ field research, marketing surveys, interviews, etc.  For documenting sources, please follow the Harvard Business Citation Guide (link on GauchoSpace).

The group is responsible for front and back matter, and for coordination between sections.

You should know that the business plan for this class differs from real-world business plans.

• Real-world plans will vary considerably in information and organization, relying not on a pre-determined formula but on exhaustive analysis of specific circumstances of the business idea, its industry, the financial needs of the entrepreneurs, and so on. Your plan is divided into sections I pre-determined in order to evenly distribute the workload among students.
• In real-world-plans, a lot of information comes from the entrepreneur’s experience. As a class assignment, you are expected to research and learn about starting a business and to show evidence of your research.
• Compared to far more thorough and detailed real-world plans, your plan will necessarily be limited in scope. To limit scope, emphasize the entrepreneurial logic and sacrifice some details of implementation.  That is, explain the viability of the business before, say, details about recruiting and training a workforce.
• The best student plans stick to demonstrable areas of research and avoid speculation.

For the purposes of this course, then, use the following sections.

Front Matter (group)

1. Cover/Title Page

• Be creative and visual
• Include the name of your business and the names of the people who prepared the plan.

2. Transmittal letter

• Use standard letter format
• Write and address it to a potential investor, an actual individual or firm you have identified as a potential source of funding for your business.

3. Table of contents

• Use the decimal outline format the Writing Program has adopted as the standard for the business plan (see samples).

4. Executive Summary (2 pages or so)

• Write a sizzling summary of your plan, emphasizing the entrepreneurial logic and providing an overview of each section.

Main Sections (individual)

Business Description

This section should serve as the investor’s introduction to your business and the deal you would like to make with the investor.  Your thesis should be that your start-up is a good investment.  You will need to write rationally and persuasively, keeping the hard-headed, risk-averse investors’ concerns in mind, in order to move investors into the rest of the plan.

Much of the information in this section will be articulated in more detail in other sections, so you will get some information from your group mates. In real-world business plans, the other information in this section may come from research or from the entrepreneur’s experience.  For this class, to make sure you understand how start-ups work and what the options are, you definitely need to do the research.  You should accomplish the following tasks (not necessarily in this order):

• Describe the product or service, emphasizing the benefits to your customers and to the community as a whole.
• Describe your advantage over competitors—quality, service, price, location, or whatever.
• Describe briefly the target market for your product or service, emphasizing the features that will make your product or service attractive.
• Describe the business model—the way your business will bring in revenue, how the sales transaction will work.
• Describe the ownership structure of the company and why. Here I will be looking for evidence of research in the ways to structure a new business—from sole proprietor to C-Corporation, and options between.  As you present your research, articulate the rationale for the choice that is best for your business.
• Identify specific, real-world investors, or a strategy for finding them.
• Describe how the investors fit in and the benefits to them of this arrangement. Be specific about money.  Research ways to involve the investors and provide a return—from part owner to a schedule for loan repayments, and options between.  In short, find out how financing works and persuade investors to accept the benefits to them of your choices.
• Assess the risks to investors, then research and discuss strategies for minimizing them. Research is particularly important for this subsection to establish credibility. Study the success and failure rates for startups in general as well as the specific risks within your industry.  What do you have to watch out for?  How will you minimize the risks?  Look especially for ways to test your strategies before spending lots of investors’ money.
• Establish the qualifications of your group. Research the skills required for your business and show that you have those skills or have the drive to get the necessary skills.

Industry Analysis

This section should include an overview of the industry and an analysis of your specific competitors.  If your business crosses industry lines—such as selling clothes on the Internet—then research both industries and, if available, online clothing sales. Your thesis should be that your business will be able to establish itself in this industry. What is your advantage, your niche?  You should include (not necessarily in this order):

• A description of your industry, the current size and historic growth rate. How much money is it generating?  How much is it expected to generate?  How much in sales dollars or units? How much in profit? Sometimes this information is hard to find for free, as marketing research is a lucrative business, and the University (absent a Business School) does not subscribe to expensive periodical publications containing the latest industry information and trends.  Still, if you are persistent, you will find enough to give a credible overview of the industry.
• What are the major customer groups within the industry (i.e., businesses, governments, consumers, etc.)?
• Identify your key competitors and their market share. Again, this information can be a challenge to find, though crafty internet searches should provide what you need, especially issues of market share.  If you can’t find specific information on market share, you should at least be able to find some statistics on the size of the business’s operation.
• For each key competitor, analyze their strengths and weaknesses. Are they able to satisfy their customers’ needs?  Is their track record or reputation strong? Do they have financial resources? Can they retain good people? Be realistic in your assessments.
• Identify any indirect or secondary competitors which may have an impact on your business’ success.
• How do you stack up to the competition? What is your competitive advantage? Again, this is the key point for this section. Your analysis of the industry and the competition should lead to this conclusion.

Market Analysis

Your target market is simply the group of customers that you want to sell to. Who will buy your product or service? How many of them are there?  Where do they live?  How much do they earn? How much do they spend on your industry? Why will they spend money on your product/service?  What is it about their lifestyle, values, beliefs, etc., that makes them potential customers?  Your thesis in this section should be that you can capture market share.  You should gather information which identifies (not necessarily in this order) the:

• Size of the primary target market. Here, you would need to know the number of potential customers in your primary market, the number of annual purchases they make in products or services similar to your own, the geographic area they reside in, and the forecasted market growth for this group.
• Distinguishing characteristics of the major/primary market you are targeting. This section might include information about the critical needs of your potential customers, the degree to which those needs are (or are not) currently being met, and the demographics of the group. It would also include the geographic location of your target market, the identification of the major decision-makers, and any seasonal or cyclical trends which may impact the industry or your business.
• The extent to which you feel you will be able to gain market share and the reasons why. In this research, you would determine the market share percentage and number of customers you expect to obtain in a defined geographic area. You would also outline the logic you used to develop these estimates.
• Trends and potential changes which may impact your primary target market.  Key characteristics of your secondary markets. Just like with your primary target market, here you would again want to identify the needs, demographics, and the significant trends which will influence your secondary markets in the future.

Marketing Plan

Marketing is the process of creating customers, and customers are the lifeblood of your business. In this section, you define your marketing strategy. What need or desire will motivate your customer to spend money on your product/service?  What message will speak to that need?  How will you communicate that message?  What media does your target market utilize? How will you actually sell your product?  Who will do the selling?  You should work with the group member doing market analysis to coordinate and avoid overlapping research.  Your thesis in this section is to show how your comprehensive marketing strategy will create customers.  You should include information (not necessarily in this order) on:

• Your customers’ needs and desires. Such “psychographics” can be hard to find.  You can research successful strategies in your business.  You might also consider primary research, such as focus groups, surveys, etc.
• An effective marketing message. Based on your research, create—using your creativity—a message about your product or service appealing to your customers’ needs and desires.
• A communication strategy. Research your customer’s media use and devise a plan for using those media to send your message to your customers.
• The work required to make a sale. Research the sales rates in your business to determine the average number of sales calls you will need to make per sale, the average dollar size per sale, and the average dollar size per vendor, or any information of this kind, in order to provide a realistic sense of the viability of reaching sales goals. This information is also important for the Management/Financial Plan.

Back Matter (group)

1. Résumés

2. Appendices

• Advertising materials you created, schematic drawings, etc.
• Anything else you feel should be included, but doesn’t fit in the rest of the plan