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← Unit 3: The Benefits of a Venture Plan

BDI3C · Unit 3 test review

The Benefits of a Venture Plan: Test Review

Everything for the Unit 3 test on one page: the key facts from all 4 lessons, the mistakes that cost the most marks, and a practice test that points you back to the lessons you need.

Key facts

Why Write a Venture Plan?

  • A venture plan is a written description of a business idea, how the business will operate, who it will serve, and how it will make money.
  • Its four main purposes: a road map, a test of the idea on paper, a tool to attract funding and support, and a set of goals to measure progress against.
  • A formal, accepted structure lets readers find what they need quickly and shows the writer which parts are not thought through yet.
  • Banks want repayment; investors and venture capitalists want a return; suppliers want to be paid on time; partners want clear roles and profit shares; the entrepreneur wants a road map.
  • Return on investment:

Inside a Venture Plan

  • Order of a venture plan: title page, table of contents, executive summary, business description and mission, marketing research, resource analysis, production plan, marketing plan, financial plan, appendices.
  • The executive summary is written last, because it summarizes decisions made in every other section, but it is placed first because many readers read only it at first.
  • Marketing research proves there are customers; the marketing plan explains how the venture will reach them (product, price, place, promotion).
  • The financial plan holds start-up costs, funding sources, a projected income statement, a cash-flow projection and the break-even point.
  • Appendices hold the evidence: résumés, survey results, quotes, licences and detailed spreadsheets.

Where to Get Help and Templates

  • Small Business Enterprise Centres (SBECs) give free, confidential advice and workshops to people starting a small business in Ontario communities.
  • Futurpreneur Canada supports young entrepreneurs with financing, mentoring and free planning tools; BDC is a federal Crown corporation that offers loans, advice and free templates.
  • Indigenous entrepreneurs can turn to organizations such as the Canadian Council for Indigenous Business (formerly the Canadian Council for Aboriginal Business) and Aboriginal Financial Institutions.
  • Women's enterprise organizations, settlement agencies and ethnocultural business associations offer mentoring and workshops for women and newcomer entrepreneurs.
  • A template is a starting point: adapt the headings to your venture, write in your own words, and check every number.

Evaluating and Revising the Plan

  • A venture plan should be flexible (has options), ethical (honest forecasts, disclosed risks, promises kept) and adaptable (reviewed and rewritten as facts change).
  • Conditions that may force a revision: a new competitor, cost increases, a supplier failing, a recession, regulation changes, and lower-than-expected sales.
  • Profit = units × (price − variable cost) − fixed costs. Break-even units = fixed costs ÷ (price − variable cost), rounded up.
  • Because fixed costs do not shrink, a percentage drop in sales causes a larger percentage drop in profit.
  • Community members (entrepreneurs, bankers, advisers, friends and family, customers, suppliers) test the plan from outside and point to sections that need revising.
  • A thorough plan lowers start-up costs, the amount borrowed and the break-even point, which reduces financial risk.

Where marks get lost

  • Thinking a venture plan is only for getting a loan. Even a business that needs no outside money uses the plan as its road map and its test of the idea. (Why Write a Venture Plan?)
  • Treating every reader the same: sending an investor a plan with no return figures, or a bank a plan with no cash-flow projection. (Why Write a Venture Plan?)
  • Inventing a new structure or skipping sections because they feel unimportant. Readers expect the standard sections and assume a missing one means a missing piece of thinking. (Why Write a Venture Plan?)
  • Making the forecasts rosier for the reader who matters most. Different emphasis for different readers is fine; different numbers are dishonest. (Why Write a Venture Plan?)
  • Assuming venture capitalists fund small local ventures. They look for businesses that could grow very large; a summer service business usually turns to savings, family, small loans or grants instead. (Why Write a Venture Plan?)
  • Writing the executive summary first as an introduction, then changing the numbers later and forgetting to update it, so the summary contradicts the financial plan. (Inside a Venture Plan)
  • Mixing up marketing research and the marketing plan. Research is what you found out about customers and competitors; the plan is what you will do about it. (Inside a Venture Plan)
  • Leaving out the production plan for a service business. Services have a process too: booking, travel, the steps of the job and a quality check. (Inside a Venture Plan)
  • Stuffing the main sections with raw survey sheets and spreadsheets instead of stating the finding and putting the evidence in the appendices. (Inside a Venture Plan)
  • Letting numbers disagree between sections, such as a $45 price in the marketing plan and a $50 price in the financial plan. (Inside a Venture Plan)
  • Assuming help costs money and skipping it. Small Business Enterprise Centres, BDC's online resources and Futurpreneur Canada's planning tools are free. (Where to Get Help and Templates)
  • Filling in a template word for word, leaving "N/A" under headings that do not fit instead of renaming them for the venture. (Where to Get Help and Templates)
  • Copying sample text from a template, so the plan describes a generic business and readers can tell. (Where to Get Help and Templates)
  • Relying on an old web page or a friend's memory for a program's age limit or grant amount instead of checking the organization's current website. (Where to Get Help and Templates)
  • Trusting spreadsheet totals in a template without checking that the formulas add the right cells. (Where to Get Help and Templates)
  • Treating the plan as finished once it is written, instead of comparing actual results with the goals every week or two and revising. (Evaluating and Revising the Plan)
  • Assuming a 20% drop in sales means a 20% drop in profit. Fixed costs stay the same, so profit falls by a much larger percentage. (Evaluating and Revising the Plan)
  • Rounding break-even down (44 instead of 45 tune-ups). Selling 44 still leaves a small loss, so always round up. (Evaluating and Revising the Plan)
  • Changing the forecast to make the numbers look better without any new evidence. That is wishful thinking, not revision, and showing it to lenders is unethical. (Evaluating and Revising the Plan)
  • Counting praise from friends and family as market research. They may be too kind to criticize; real customers and experienced advisers give more reliable feedback. (Evaluating and Revising the Plan)

Practice test

24 questions from across the unit. Each one shows the lesson it comes from.

  1. Why Write a Venture Plan?
    1
    Which of these is NOT a purpose of a venture plan?
  2. Why Write a Venture Plan?
    2
    Match each reader of a venture plan to what they most want to know.
    Bank
    Venture capitalist
    Supplier
    Partner
    Entrepreneur
  3. Why Write a Venture Plan?
    3
    A phone-case venture plans to sell 80 cases at $25 each. Each case costs $9 in materials, and fixed costs are $700. What is the projected profit, to the nearest dollar?
    $
  4. Why Write a Venture Plan?
    4
    Why does a professional presentation (clean formatting, no spelling errors, consistent numbers) matter in a venture plan?
  5. Why Write a Venture Plan?
    5
    Why is a venture capitalist unlikely to invest in Ride Ready's summer bike-repair business?
  6. Why Write a Venture Plan?
    6
    Put Ride Ready's steps in a sensible order, from first to last.
    1. 1Launch, then compare results with the plan's goals
    2. 2Share the plan with lenders and the parts supplier
    3. 3Write the venture plan and test the numbers
    4. 4Come up with the mobile bike-repair idea
    5. 5Research customers, competitors and costs
  7. Inside a Venture Plan
    7
    Put these components of a venture plan in the order they appear in the finished document.
    1. 1Marketing plan
    2. 2Appendices
    3. 3Financial plan
    4. 4Title page
    5. 5Table of contents
    6. 6Executive summary
    7. 7Business description and mission
    8. 8Marketing research
    9. 9Resource analysis
    10. 10Production plan
  8. Inside a Venture Plan
    8
    Match each Ride Ready item to the component of the plan where it belongs.
    Survey: 52 of 80 cyclists would pay $50
    The 45-minute tune-up checklist
    Flyers at the community centre
    Break-even at 40 tune-ups
    Two price quotes for used tools
  9. Inside a Venture Plan
    9
    A phone-case venture needs $450 for a printer, $300 for blank cases, and $150 for a website and packaging. The owner has saved $650. How much more money does the resource analysis need to find, in dollars?
    $
  10. Inside a Venture Plan
    10
    Which section would describe the owners' skills and experience and list the equipment the venture needs?
  11. Inside a Venture Plan
    11
    Ride Ready is a service business. What does its production plan describe?
  12. Inside a Venture Plan
    12
    What is the difference between marketing research and the marketing plan?
  13. Where to Get Help and Templates
    13
    A student in an Ontario town wants free, one-on-one advice on a draft venture plan this month. Which is the best first stop?
  14. Where to Get Help and Templates
    14
    Match each organization to the description that fits it.
    Futurpreneur Canada
    BDC
    Canadian Council for Indigenous Business
    Small Business Enterprise Centre
  15. Where to Get Help and Templates
    15
    A student who recently immigrated to Canada wants help understanding Canadian business licences and banking, ideally in her first language. Which source fits best?
  16. Where to Get Help and Templates
    16
    In a few words, why should you adapt a venture-plan template instead of just filling in the blanks?
  17. Where to Get Help and Templates
    17
    Ride Ready's template has a section called "Retail location and lease". What is the best way to handle it?
  18. Where to Get Help and Templates
    18
    Which statement about getting help with a venture plan is most accurate?
  19. Evaluating and Revising the Plan
    19
    Ride Ready's sales come in 25% below the forecast of 60 tune-ups. With a $50 price, $10 of parts per tune-up and $1,600 of fixed costs, what is the profit, in dollars?
    $
  20. Evaluating and Revising the Plan
    20
    A venture's forecast profit was $1,000. After a cost increase, the revised profit is $650. What is the percentage change in profit? Use a negative number for a decrease.
    %
  21. Evaluating and Revising the Plan
    21
    Ride Ready's sales are lower than forecast, and it will be two weeks late repaying Jordan's parents. What is the ethical response?
  22. Evaluating and Revising the Plan
    22
    Why did a 20% drop in Ride Ready's sales cause a 60% drop in profit?
  23. Evaluating and Revising the Plan
    23
    Research lowers a venture's start-up cost from $2,400 to $1,500. By what percentage did the start-up cost fall? Give your answer to one decimal place.
    %
  24. Evaluating and Revising the Plan
    24
    Put the steps for revising a plan after a problem appears in the order of the problem-solving cycle.
    1. 1Implement the solution
    2. 2Choose a solution by weighing cost, time and effect
    3. 3Check whether it worked, and loop back if not
    4. 4Define the problem (bookings are behind target)
    5. 5Research the causes
    6. 6Generate possible solutions

Endless drill

Fresh numbers every time, for the calculation questions in this unit.

Endless drillnew numbers every time

Generating a problem…

Keep going