Chapter 6 : The Business Plan: Visualizing the Dream
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In some startup situations, the environment is just too turbulent, experiencing too
much change, for extensive planning to be beneficial. In new fields there may not be
enough information to be able to plan. In these situations, adaptability may be more
important than a careful plan for the future. The last thing you want to do is decrease
your willingness to adapt when necessary because it does not fit the plan—and this
does happen occasionally, especially when investors become so focused on the “plan”
that they insist that the entrepreneur not vary from the plan. Planning may also pose a
problem when the timing of the opportunity is a critical factor. Becoming operational
as quickly as possible may have to take priority over in-depth planning; but you should
be careful not to use timing as an easy excuse not to plan.
3. What are the two types of business plan? In what situation(s) would you use
each type of plan?
The two types of business plans are the summary plan and the comprehensive plan.
The summary plan is a short form of a business plan that only presents the most
important issues and plans for the business. It should focus heavily on market issues,
such as pricing, competition, and distribution channels. It provides little in the way of
supporting information. A summary plan is adequate if you are not seeking
significant amounts of outside financing, except for the possibility of bank financing.
Furthermore, you may use a summary plan when you are trying to gauge investor
interest to see if a full-length plan is worth the time and effort.
When entrepreneurs and investors speak of a business plan, they usually refer to a
comprehensive or full business plan that provides an in-depth analysis of the critical
factors that will determine a firm’s success or failure, along with all the underlying
assumptions. Such a plan is beneficial when (1) describing new opportunities
(startups), (2) when facing significant change in the business or the external
environment (changing demographics, new legislation, or developing industry
trends), or (3) when explaining complex business situations.
4. Why is the executive summary so important?
The executive summary provides the reader a first impression of the opportunity, and
it is here where you either catch the readers’ attention or you don’t. If you don’t,
most likely the reader will not continue reading. This is the entrepreneur’s
opportunity to convey a clear and concise picture of the proposed venture and, at the
same time, create a sense of excitement regarding its prospects. This means that it
must be written—and, if necessary, rewritten—to achieve clarity and create interest.
Even though the executive summary comes at the beginning of the business plan, it
provides an overview of the whole plan and should be written last.
5. How might an entrepreneur’s perspective differ from an investor’s in terms of
the business plan?
The entrepreneur and the investor have very different interests. The entrepreneur is
willing to accept risk in an effort to establish an enterprise because of its potential for
success. Given his/her personal involvement with the venture, it is easy for the
entrepreneur to view the business plan with optimism. In contrast, the investor is