Instructor’s Manual
Chapter 18 Writing
the Business Plan
Contemporary
Business Reports, 5th
edition
Chapter 18 is available online
at the publisher’s website, NOT in the printed textbook.
If you accept the definition of a business
report presented in Chapter 1 (organized, objective presentation of
observations, experiences, or facts used in the decision-making process), then
you can understand that business plans merit inclusion in a book about business
reports. Indeed, business plans must be objective, organized, and directed
toward decision-making.
_______________________________________________________________________________________________________
Links – Objectives – Teaching Suggestions: Entrepreneurs – Components & Contents
– Producing & Presenting – KidSmart – End-of-Chapter: Discussion – Applications
_______________________________________________________________________________________________________
Chapter 18 provides
background information and guides for constructing business plans. The
significance of a business plan and its components are discussed along with
suggestions for producing and presenting the plan. Throughout the discussion,
students are referred to an annotated illustration of a successful business
plan that appears at the end of the chapter.
Your
students are especially privileged to be able to study an award-winning
business plan that resulted in the launch of a successful enterprise. The plan
for KidSmart, a vocal smoke detector,
is used with the permission of the directors of the corporation that emerged
from the plan. An enjoyable exercise may be to offer bonus points to the first
person who brings in a catalog advertisement about the product or is able to
locate the product in a local store. NOTE: If students do a keyword
search, let them know that a UK organization named KidSMART is unrelated to the
KidSmart featured in this chapter.
Upon
completion of this chapter, students should be able to:
1. Tell what a
business plan contains.
2. Explain the
two principal objectives of a business plan in terms of the purposes of
convincing and persuading.
3. Understand
why entrepreneurs need a business plan.
4. Apply their
knowledge of business research and analysis to write a business plan.
Chapter Outline
& Teaching Suggestions
To stimulate discussion of a business plan’s importance,
you might invite to class several entrepreneurs who successfully created such
plans for their respective firms. In addition, you might also invite a banker
to class to discuss how banks view business plans and how they are used to
extend loans. Ask the visitors to discuss (or precede their visits with a
discussion of) the following points.
·
Special challenge of the business plan. Emphasize
the dual purpose of a plan: to convince
and to persuade. Note that a reader may be convinced that a plan is a good
idea, but not be persuaded to provide financial support. Ensure that students
understand the need to meet both goals. Discuss some of the elements of content
and style that will further the accomplishment of those goals.
·
Why write a business plan? Discuss the multiple advantages to an
entrepreneur of writing a business plan:
o
Discover overlooked opportunities
o
Discover competitive threats
o
Discover flaws in the concept
o
Improve understanding of opportunities and
problems before launching the business
o
Persuade potential investors to support the
project.
Introduce
this topic with the reminder that no standard template exists that all business
plans must fit. In addition, remind students about uncritical use of templates
or software for business purposes. (The class might discuss this topic in
connection with preparing and presenting the business plan, pages 483-485). Recall
the critical need to base the plan on an informed audience analysis. Refer
students to the KidSmart business
plan that begins on page 487 as you discuss the components. The author has
annotated the plan with comments pointing out its strengths and flaws.
Use overhead transparencies or slides to
guide the discussion of components and contents. Preview the components by
comparing them to the components of a formal report shown in Chapter 16. Discuss
the essential features and importance of each component.
·
Preliminary
Components
o
Cover Page
o
Table of Contents
o
Executive Summary
·
Body: Concept and Product
o
The Business Concept
ü Explaining
the business concept
ü Primary
customer
ü Uniqueness
of product/service
o
The Product or Service
ü Development
of product/service
ü Proprietary
status
ü Sources of
materials, components, supplies
ü Potential
extension and diversification
·
Body: The Industry and the Market
o
The Industry
ü Industry Description
ü Competitive Forces
o
The Market
o
The Competitors You Will Face
·
Body: Venture Strategy and Plans
o
Venture Strategy: Differential or Cost Advantage?
o
Marketing Plan
o
Operational Plan
o
Management Plan
·
Body: Risks, Contingencies, and Future Development
o
Risks and Contingencies
o
Future Development
·
Body:
Financial Plan
o
Pro Forma Financial Statements
o
Proposed Deal Structure
·
Appendices
Ask students to bring to class sample plans they
obtain through primary or secondary data searches. Have students share their
examples with the class in brief oral presentations. Depending on the student
profile of your class, you may ask marketing majors to address the marketing
plan, management majors to comment on the management plan, finance majors to critique
the finance plan, and so on.
Explain the importance of striving for the
best in the business plan. There is no “acceptable C” level of writing for a
business plan. A discussion of the pitfalls of “fill-in-the-blanks” software is
appropriate here.
Emphasize the business plan writer’s responsibility
to prepare precise, factual information about a proposed business venture. Explain
the dangers of misrepresentation and fraud in generating a plan. Differentiate
between facts and opinions. Display statements that may or may not be fraudulent.
Remind students that to be fraudulent, a statement must involve facts. Students
should recognize that although a business plan may not be fraudulent, it might
still be unethical, particularly if the writer does not believe a specific
claim.
·
Producing the business plan. Discuss the
guides given on page 484. Notice the similarities to guides for formatting a
formal report. Remind students that producing and presenting a business plan
must be viewed as a formal situation, customized for the intended audience. To
begin the discussion, suggest these points a business plan writer must review
before writing begins.
o
Determine the priority of issues for each
area of the business. Identify the challenges the business faces and the
approaches or solutions for handling those challenges.
o
Include as much supporting material as
possible. Discuss any experiences or data that can aid in decision-making.
o
Avoid making unsupported claims. Do not state
opinions as facts. Provide specific answers to questions from a banker or investor
about how the idea(s) can work.
o
Consider putting one person in charge of
assembling and writing the document, though several people collaborate on
preparing the plan. One person can rework the material to give it a consistent
style and eliminate contradictions and repetitions.
o
Designate an outside reader/editor. An
outside reader/editor can maintain the necessary distance and objectivity to
edit effectively.
o Emphasize
that the format contributes to the attractiveness and readability of the
plan—essentials for attracting and maintaining reader interest. Refer to the three
guides to ease readers’ access to the information given at the bottom of page 484
along with the following cautions.
ü Make the
plan businesslike. Use charts, graphs, fonts, and color to make the plan easy
to grasp. The plan should be neither too slick nor haphazardly compiled.
ü Make the
plan stand out. Use colors, formats, and layouts that make the plan stand out. Tip: Refer to Chapter 5 (Illustrating the Report) and Chapter 6 (Formatting the Report.)
ü Tend to the
details. Carefully proofread and edit the plan for typos and misspellings.
·
Presenting the Plan to Investors and Others. Remind
students to be selective and cautious about distributing the plan. They must
protect their interests while trying to attract support for the business
proposal. Limit the circulation of the plan so that it is read only by people
for whom it is intended.
The business plan illustrated on pages
487-521 has been edited only slightly for publication in the textbook. Annotations
throughout the illustration point out the plans strengths and weaknesses. Students
should benefit from observing how a well-conceived business plan is presented;
they also may be pleased to note that few plans are perfect in all details. Nonetheless,
the goal is to strive for the A+ plan in all respects because to do less is to
court failure.
Use Topics
for Discussion to review the chapter content. As usual, encourage answers that
demonstrate clear and thoughtful thinking rather than memorization of
statements made in the chapter.
Six applications emphasize the business plan
essentials presented in the chapter. The following comments suggest ways you
can tailor the applications to your class.
1. The first
application calls on students to use creative thinking about a potential
business concept. Emphasize the importance of identifying a valid concept that
will both convince and persuade potential investors to support the idea.
2. In
Application 2, students demonstrate how they would develop a business plan to
support the concept identified in Application 1. You may choose to ask for an
outline of a business plan rather than a full-fledged plan. The important point
is that students should demonstrate an understanding of how to turn a concept
into a successful business plan.
3. -4. These applications direct students to interview
local entrepreneurs. They will use community resources to find help writing a
business plan. In addition, students will learn first-hand the importance of a
business plan. One or both of these applications could be done as a
collaborative assignment.
5. This
application points students to a valuable resource (Carnegie
Library of Pittsburgh) from which they can obtain sample business
plans. Specifically, it helps students develop critical thinking and writing
skills with respect to a business plan’s executive summary.
6. The final
application focuses on presenting a business plan. Though the KidSmart video is no longer available,
the following videos are suggested to illustrate business plan presentation.
The first two videos are concise, smooth presentations featuring high-school
aged presenters who have been well coached in business presentation and
professional image. The third video contains five presentations by actual
business people. It’s especially good for showing the in-depth questioning an
entrepreneur can expect when presenting a business plan.
·
Business
Plan for Shamazzle’s Dazzles. Presenter Shomari Patterson, a young
jewelry designer, presents her business plan as part of the 2011 National Youth
Entrepreneurship Challenge.
·
Business Plan for Earth
Custom Designs. Presenters Anthony Defilippo and John Novas
co-present their business plan as part of the 2011 National Youth
Entrepreneurship Challenge. The concept of Earth Custom Designs is to use
nonprecious stones from developing countries to create jewelry; then, return
proceeds to a foundation for needy children.
·
NewSpace 2011 Business Plan
Competition. Five teams present business plans for space-related businesses
in this competition co-sponsored by NASA and the Heinlein Prize Trust. The lengthy
video includes a thorough introduction of the competition judges.
