MMT-4

Section 1 Section 1 has three major areas: (1) the title page, (2) table of contents, and (3) executive summary. The title page labels the innovation and all major participants involved and their title. Often a three- to four-sentence summary of the purpose of the business plan follows. The title page should conclude with the following: “This is confidential business plan________.” The line should be filled in with a low number between one and five and then a record kept of the person receiving that particular business plan and the date. This allows follow up to occur in 30-, 60-, and 90-day intervals if no response is received.

The table of contents allows the reader to quickly locate any particular information desired. All pages should be sequentially numbered as should each table, figure, or other document appearing in the appendices (exhibit) in Section 3.

The third part of Section 1 is the executive summary. This important two-page document summarizes the main aspects of the business plan determined by the reader, purpose, and stage of development of the innovation. For example, if the innovation is almost developed and the purpose of the business plan is to obtain financing for the reader to launch the innovation, then the executive summary would emphasize (1) the management team and entrepreneurs; (2) the nature of the innovation, its competitive position, and unique differences and the size and nature of the market; and (3) the revenues and profits expected over the next 5 years. Five years is the usual time frame as that is the input required by most investors and the software program typically used by private investor groups frequently called angel groups.

Section 2 The main body of the business plan appears in Section 2 and contains seven, eight, or nine parts depending mostly on the type of innovation. The parts that may or may not be represented are the technology plan and the production plan. While there are several different ways a business plan can be laid out, the one indicated in Table 8.1 has been well received when used for a variety of purposes by the author.

The first part of Section 2 is the description of the business. This part describes in as much detail as possible the type of business being created and all aspects of the innovation and the resulting product(s)/service(s). A discussion of the industry of the innovation and its general characteristics position the innovation appropriately. This discussion is followed by the mission statement of the venture. A mission statement describes the overall main purpose and direction of the venture. It indicates the values and what is important. The core of the mission statements of several companies such as 3M, American Express, Ford, IBM, Marriott, Nordstrom, Procter & Gamble (P&G), Walmart, and Walt Disney are indicated in Table 8.2. Many common core features occur in these mission statements, including product/service excellence, honesty and integrity, respect for the individual employee, great customer service, continually innovate, and a customer satisfaction focus.

The final part of the description of the business is the business model. The business model has become an increasingly important part of the business plan as it gives an entire picture of how the venture will operate together with all of its strategies and tactics. It describes the innovation and how it will be produced and marketed. When the business model created actually is new and can change the way business is done in an industry, it is particularly beneficial. For example, Pizza Hut changed the pizza industry business model by introducing delivery. Dell changed the business model of the personal computer industry by building computers to order.

The next area of Section 2 is the description of the industry. The country code of the product in the respective country needs to be identified so that industry statistics can be gathered. This country code is the North American Industry Classification System (NAICS) code in the United States and the Standard Industrial Classification (SIC) in Korea and a different SIC in China. Data on the industry over at least the past 3 years should be collected so that a trend is apparent. The growth rate of the industry should be cited. Also, all competitors of the innovation should be identified and at least the ones closest to the innovation should be thoroughly discussed so that the uniqueness of the innovation is shown. Each successful innovation needs to have at least three to five unique features called unique selling propositions.

The next area of the business plan is the technology plan (see Table 8.1). This section may or may not be in a business plan depending on the technology of the innovation. Where there is a patent granted or pending then it should be discussed in the technology plan. The technology needs to be described in detail, indicating how the technology features of the innovation are better than those presently on the market and can produce benefits for the user. All commercialization requirements should be described by

providing an understanding that the innovation can be produced in a systematic sustainable way.

The technology plan is followed by the marketing plan. The marketing plan starts with a discussion of the market, its size, trends, and growth rate. In a business-to-business (B2B) market, this will involve finding the country system number for the market similar to the industry analysis. In a business-to-consumer (B2C) market, this involves demographic data on the market. The typical demographic variables used are age, income, and gender.

Following the discussion of the market are the four major elements of the marketing plan: (1) price, (2) distribution, (3) promotion, and (4) product or service. Parts of each of these are indicated in Table 8.3. A detailed marketing plan needs to be developed for the innovation so that sales and revenues occur. The packaging, where applicable, and use of social media can be extremely important. Of all the areas of the marketing plan, price is probably the most difficult one. Not only do the costs of the innovation need to be carefully determined but competitive prices and customers' view of price need to be examined as well. In many cases, the innovation is priced too low. The marketing plan ends in first-year sales, which logically flows into the next area of the business plan: the financial plan.

Table 8.3 The Marketing Plan

The financial plan—the fifth area of Section 2 of the business plan— has the 12 financial statements indicated in Table 8.4. The one different statement from the financial statements regularly seen in an operational business is the sources and uses of funds statements where the uses of the capital and the sources for this capital are indicated. Of

course since the venture does not have actual numbers, all the income and cash flow statements as well as the balance sheets are pro forma or forecasted. In a start-up venture, the most important financial statements are the 5-year pro forma income statement summary and the 5-year pro forma cash flow statement summary.

Following the financial plan is the production plan. This may or may not be present depending on the nature of the innovation. Many innovations are service-oriented in nature. The product plan can become an outsourcing or licensing plan if the intention is to either outsource or license the innovation to be produced by someone outside the venture.

The organization plan is the next area of Section 2 of the business plan. This focuses on the organizational form (type of venture) and the organizational structure. Besides proprietorships or partnerships, there are six general types of corporations available to be the organizational form of the venture: (1) LLC, (2) SC, (3) C corporation, (4) professional corporation, (5) nonprofit corporation, and (6) hybrid corporation. Care should be taken to understand the aspects of each type of organizational