© G. Guerra 1 Introduction to Business Assessment and Planning -Cl1,l2- © G. Guerra “I2C”...

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© G. Guerra

Introduction toBusiness Assessment and

Planning

-Cl1,l2-

© G. Guerra

“I2C”

Gianni GuerraIncubatore I3P

Politecnico di Torino, Tel. 011-5647255; 3487900554

[email protected]

“ENTREPRENEURSHIP & BUSINESS PLANNING”

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© G. Guerra

› Who has to developed it ?

› What is it, what does it do ?

› Why is necessary (who benefit)?

› How (content and style) ?

› When it has to be developed ?

› Where it has to be developed ?

Business Plan Developing Outline

(R. Kipling “six honest servants”)

(Developing=Writing)

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What is a Business Plan?

IT IS A WRITTEN DOCUMENT WITH CONFIDENTIAL AND PROPRIETARY INFORMATIONS

WHICH MAP OUT BEFOREHAND

A COMPANY BASIC ELEMENTS

FROM BUSINESS IDEA

TO OPERATIONAL AND ORGATIONAL STRUCTURE

OF THE ACTIVITY

TO ECONOMIC/FINANCIAL OUTCOMES

OVER A SPECIFIC PERIOD OF TIME

BusinessPlan

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What does it do? (what the use of it, why write it)

Test business assumptions Assure operational coordination Communicate corporate strategy Set management objectives To communicate with board of directors, advisors, consultants Recruit & motivate employees Secure financing

Identify weaknesses in a plan that requires further research and analysis…find out where your plan is weak

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“3 WHY?’” of a Business Plan

I. TO ENABLE THE ENTREPRENEUR TO TAKE THE RISKS RELATED TO

CARRYING OUT A BUSINESS IDEA

During the plan development, the entrepreneur is compelled to deeply examine every specific issue of the future company: it is probable that doing so, he will discover planty of bad elements and that he try to fix them. If some problems cannot be solved or reveal relevant implications, the fact that have been discovered allow comunque the entrepreneur to adopt the relevant initiatives (comprise not to go on) before take financial engagements.

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II. TO CONVINCE OTHER PEOPLE EXTERNAL TO THE COMPANY TO TAKE PART

IN THE RISK INVOLVED IN THE THE IDEA

(BP AS A MEAN OF INVESTMENT EVALUATION)

Lifestyle companies

High growth companies

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(BP AS A “MANAGEMENT TOOL”)

III. TO PROVIDE THE ENTREPRENEUR WITH A GUIDING TOOL FOR THE UNDERTAKED

MANAGEMENT PATH

(what else: nothing than to react) TIME

AIMS/PURPOSES/STRAT. OBJECTIVES

(GOALS)

PRESENTPOSITION

VISION

MISSION

VALUES

PLANS

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THE WORLD BEST BUSINESS PLAN WILL NEVER BE ABLE TO TURN A FLAWNED IDEA

IN A SUCCESS COMPANY

A GOOD BUSINESS PLAN DOESN’T MEAN THE SUCCESS FORMULA BUT CAN BE DETERMINANT

IN REDUCING THE FAILURE PROBABILITIES

1° Consideration:

2° Consideration:

“BUSINESS PLAN” NECESSARY BUT NON ENOUGH

Plan Execution Idea

Results

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Who has to prepared it ?

THE ENTREPRENEUR HIMSELF

It can be helpful, in the process of preparing it, to have professional input and evaluations from accountants, consultants, lawyers...

Pg.4 O’Donnell

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Entrepreneurs are most often doers rather than proposal writers. They would rather be on the battelfield -the cutting edge of business- than behind the lines planning their assault. In addition, many entrepreneurs have difficulty articulating the business concepts that have often become second nature to them.

Whatever difficulty the preparation of a business plan maypresent, a plan is an absolute necessity for any business.

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When?

PLANNING is the complete and continous process directed to improve business operations

in the light of existing oportunities

CONTINOUS IMPROVEMENTCONTINOUS

IMPROVEMENT

GOALS/OBJECTIVES

EXECUTION

GOALS/OBJ.REDEFINITION

CONTROLS& RECOVERY A. PLANS

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When ?

PLANNING NEEDS TO BE DYNAMIC(all the more reason for management control)

Rule n° 1: do it in a WORD PROCESSOR and using SPREADSHEETS.

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Where ?

Planning a new business involve much of the work “on the field”,

to speak with potential customers,to gather informations on competitors,

to gather the most of possible data related to investment and expenses that have to be supported.

The “writing work” means the least part of this activity and mainly deal

with the figure translation of gathered informations and the project economic/financial assessment.

Planning a new business involve much of the work “on the field”,

to speak with potential customers,to gather informations on competitors,

to gather the most of possible data related to investment and expenses that have to be supported.

The “writing work” means the least part of this activity and mainly deal

with the figure translation of gathered informations and the project economic/financial assessment.

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All organizations needplans

Who need/benefit?

•High/low/no-tech ventures •Profit/non profit organization•Start up•Expansion programs• …….

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How? (content and style)

Is an art, not a science Every plan is unique There is no “ideal” standard format It is a practiced skill, it can be learned There are some “best practices” “Developing” is different than “writing” It is a never ending process Everyone is an expert; has an opinion

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General guidelines

Lenght 20/30 pages +annexes

Period covered: 3/5 years

Data no more old than 3/5 years

(theren’t a “perfect” lenght. test: it can and will be easely read in a session? )

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Business Plan Reference Content

1-VENTURE DESCRIPTION

2- ENTREPRENEURIAL/ MANAGERIAL TEAM

3-MARKET ANALYSIS

6-OPERATION PLAN (VALUE CHAIN)

7-THE ORGANIZATIONAL/LEGAL PLAN

8-RISK/VULNERABILITY MASTERING PLAN

9-IMPLEMENTATION PLAN

10-ECONOMIC AND FINANCIAL PLAN

5-PRODUCTS PLAN

PURPOSE

EXECUTIVE SUMMARY(Synthesis)

5-MARKETING STRATEGY

4-INDUSTRY ANALYSIS

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PURPOSE

Nothing irritates more than a Business Plan from what it isn’t clearly understandable what is the proposal made to the receiver of it. Therefore it is advisable to avoid gereric positions and to highlight it’s own proposal in a direct way.

WHAT IT IS OFFERED

WHAT IS REQUESTED

- Definition of Business objectives and Strategies to achieve them.

- Management control guideline definition

- Loans/risk capital investments request/proposal support

- Baseline definition for agreement with potential partners

- Business plans competitions

Potential purposes:

PURPOSE

ENTREPRENEURIAL/MAN. TEAM

ORGANIZATIONALPLAN

SUSTAINABLEADVANTAGE

IMPLETATION PLAN

ECONOMIC ANDFINANCIAL PLAN

MARKETINGSTRATEGY

EX. SUMMARY

MARKET ANALYSYS

INDUSTRY ANALYSYS

VALUE CHAIN (COMPANY STRUCTURE)

VENTURE DESCRIPTION

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IT CHARACTERIZES AND HIGHLIGHTS

IN A CONCISE AND CONCRETE WAY

THE BUSINESS PLAN ESSENCE.

IT CHARACTERIZES AND HIGHLIGHTS

IN A CONCISE AND CONCRETE WAY

THE BUSINESS PLAN ESSENCE.

Indeed it is a syntetic version of the whole business plan

not a simple foreword not an introduction!!!

Executive SummaryORGANIZATIONAL

PLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


VENTURE DESCRIPTION

EX. SUMMARY


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Fast proposal understanding, Attention attraction capability, Immediate interest stiring up capability

It must allow the readers to gather a first general idea of the paper :

after the reading, the potential interested persons must have in mind a sufficient precise picture of what

it will be presented in more details in the plan.

Executive Summary ORGANIZATIONAL

PLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


VENTURE DESCRIPTION

EX. SUMMARY


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Executive Summary

Always gets read first It’s the “acid test” of your writing skills Often sent to investors by itself If it doesn’t create enough reader interest, the full plan is

never read 2 to 3 pages maximum If can’t arouse interest in 2-3 pgs, how can you market &

sell your product? Most VC won’t open attachements

(Bob Foster UCLA/ASM)

Garage Technology Ventures (www.garage.com) uses a one page summary approach. Tech Coast Angels (www.techcoastangels.org) uses a one page format

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


VENTURE DESCRIPTION

EX. SUMMARY


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Executive Summary

Although it come before, executive summary should be

prepared after having completed the preparation of BP

other parts.

(indeed, only after having meditate and defined the whole documentwe are in a position to make an effective and concise syntesis)

Otherwise it could be a reiterative process:

-You first write a “best effort” version

-Then you’ll update it as you more fully develop other parts of the plan- Final version will look very different

EX. SUMMARY

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


VENTURE DESCRIPTIONENTREPRENEURIAL/

MAN. TEAM

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1-Venture/Company Description

Also known as “Company/Venture Introduction” Second most important part of the plan Amplifies and expands on what’s in the Executive

Summary, but not as detailed as rest of the plan 1-3 pages These few pages together must present an

exciting, compelling investment opportunity

Condense several pages of each plan section (marketing, operations, financials, etc.) into a single paragraph or two

(Bob Foster UCLA/ASM)

VENTURE DESCRIPTION

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


EX. SUMMARY


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1-The Value Proposition

TechnologyProduct

MarketNeeds

(pains/wants)ProblemsBenefits

Focus here

Value

Proposition

Most business plans are focused on the entrepreneur, their idea, and why the idea is wonderful. They are me-focused or my-idea-focused rather than customer focused. People do matter -true- but investors don’t really care very much about you and your idea, at least not at the beginning. What investors care about is solving significant customers problems or needs that offer significant profit and growth potential.

VENTURE DESCRIPTION ENTREPRENEURIAL

TEAM

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


EX. SUMMARY

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2-Entrepreneurial Managerial Team

Shown that you (team) can deliver results. Many investors pay more attentions to people than in ideas/plan

E.M. TEAM

Mission, aspirations,

propensity for risk

Ability to execute

on CSFs

Connectedness

up, down, across value chain

TEAMDOMAIN

TEAMDOMAIN

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETINGSTRATEGY

PURPOSE

MARKET ANALYSYS

INDUSTRY ANALYSYS


EX. SUMMARY

VENTURE DESCRIPTION

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3/4-MARKET&INDUSTRY ANALYSIS

A MARKET consists of a group of current and/or potential customers having the willingness and ability to buy products –goods or services- to satisfy a particular class of wants or needs. Thus, markets consist of buyers -people or organizations and their needs- not products

An INDUSTRY consist of sellers –typically organizations- that offer product or classes of products that are similar and close substitutes for one another.

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETING STRATEGY

PURPOSE

E.M. TEAM


EX. SUMMARY

VENTURE DESCRIPTION

INDUSTRY A.

MARKET A.

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THE STRATEGIC BUSINESS UNIT

PAINS/NEEDS/WANTS

TECHNOLOGIES/FUNCTIONALITIES

CUSTOMERSPRODUCTS

MARKETS

BENEFITS

ValueProposition

BUSINESS (SBU)

PROBLEMS

ORGANIZATIONALPLAN


IMPLETATION PLAN


MARKETING STRATEGY

PURPOSE

E.M. TEAM


EX. SUMMARY

VENTURE DESCRIPTION

INDUSTRY A.

MARKET A.

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MARKET ANALYSYS


MARKETING STRATEGY

5-MARKETING STRATEGY

- I -MARKET

- II -COMPETITION

- III -MARKET OBJECTIVES

AND STRATEGY

- IV -MARKETING MIX

ORGANIZATIONALPLAN


IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

PRODUCT PRICING PROMOTION PLACING

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Product section of plan must include:

Clear description of the product What it does and how it’s made Is it patented or patent pending? Licensed? What stage of development? Alpha? Beta? Why will customers buy your product as opposed

to others? Future product plans? When

MARKET ANALYSYS


MARKETING STRATEGY

ORGANIZATIONALPLAN


IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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Describe what you’re selling If it’s new, have to give it a frame of

reference….”name it and frame it”– Saleslogix example

Present advantages over current products Explain why customers will buy it; what’s the

value to them?

MARKET ANALYSYS


MARKETING STRATEGY

ORGANIZATIONALPLAN


IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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6- Operation Plan (Value Chain)

- M. Porter Model -

INFRASTRUCTURAL ACTIVITIES

HUMAN RESOURCES MANAGEMENT

TECHNOLOGY DEVELOPMENT

PROCUREMENT

INC

OM

ING

LO

GIS

TIC

S

PR

OD

UC

TIO

N

OU

TG

OIN

GL

OG

IST

ICS

MA

RK

ET

ING

&S

EL

ING

SE

RV

ICE

S

EC

. MA

RG

INE

C. M

AR

GIN

DIRECTACTIVITIES

INDIRECTACTIVITIES

MARKET ANALYSYS

MARKETING STRATEGY

VALUE CHAIN

ORGANIZATIONALPLAN


IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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VALUE PLAN

7- ORGANIZATION/LEGAL PLAN

orizontal: activities/processes vertical: organizational structure

MARKET ANALYSYS

MARKETING STRATEGY ORGANIZATION PLAN


IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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8-RISK/VULNERAB. MASTERING PLAN

IMPACTlow highP

RO

BA

BIL

ITY

low

hig

h

RFBRFD

RFE

RFA

RFF

RFC

RFH

RFG

(risk matrix)

VALUE PLAN

MARKET ANALYSYS MARKETING

STRATEGY

RISKS PLAN ORGANIZATION

PLAN

IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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6 BASIC METHODS FOR RISK CONTROLLING AND REDUCING

EVENT DAMAGEFINANCIAL

CONSEQUEN.

1 Elusion2 Prevenction 3 Protection

4 Assurance5 Transfer

6 Retention

VALUE PLAN


STRATEGY

RISKS PLAN ORGANIZATION

PLAN

IMPLETATION PLAN


E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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- Funding agreements - Prototype development - First market test - Production&selling start up - Activity enlargement

- …………………..

Milestones

9-IMPLEMENTATION PLAN RISKS PLAN


VALUE PLAN


STRATEGY

IMPLEMENTATION PLAN

ORGANIZATION PLAN

E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

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RISKS PLAN


VALUE PLAN


STRATEGY

IMPLEMENTATION PLAN

ORGANIZATION PLAN

E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

EX. SUMMARY

VENTURE DESCRIPTION

9-IMPLEMENTATION PLAN

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EX. SUMMARY

WHILE THE OTHER SECTIONS OF BUSINESS PLAN GIVE THE VENTURE GLOBAL PICTURE, THE ECONOMIC/FINANCIAL SECTION ENABLE:

THE RISK CAPITAL INVESTOR TO UNDERSTAND THE RETURN HE CAN OBTAIN.

THE DEBT INVESTOR TO EVALUATE THE COMPANY ABILITY TO PAY BACK THE LOANS.

In several ways the economic/financial section of the Business Plan is the least flexible. Even if the figures are different, the schemes or templates put in the plan are always the same and are given in a way that is to a great extent a standard.

10-FINANCIAL PLAN RISKS PLAN

IMPLEMENTATION PLAN

VALUE PLAN


STRATEGY

ECO.FIN PLAN

ORGANIZATION PLAN

E.M. TEAM

PURPOSE

INDUSTRY ANALYSYS

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10

Cash flow Risk&Rewards

Profitability

Probability

Time

inflow

outflow

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THE BUSINESS OPPORTUNITY ASSESSMENT (what to do before you write a Business Plan)

John W. Mullins, “The New Business Road Test”, FT Prentice Hall

BusinessPlan

Target segment benefits

and attractiveness

Sustainableadvantage

Marketattractiveness

Industryattractiveness

MACRO

LEVEL

MICROLEVEL

MARKET DOMAIN INDUSTRY DOMAIN

Mission, aspirations, propensity

for risk

Ability to execute on

CSFs

Connectedness

up, down, across value chain

TEAMDOMAINTEAM

DOMAIN

Businessopportunityassessment

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A well written plan: – Quickly and effectively communicate your

vision for a new venture– Excite and motivate people to action– Be selected & read first...before other plans

that are poorly written– Increase your chances of funding– Not overcome a “non viable” business venture

with a losing business model

STYLE

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Won’t get read…..period Can ruin an otherwise good, solid business

concept Normally results in venture not being funded Reflects negatively on:

– the entrepreneurs– their advisors, directors – those who recommend the venture

A poorly written plan :

STYLE

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Pyramid concept of Business Plan

Business plandocument

Main textAppendixes

Business plansHave 3 sections 3 ring

binder Details plan for:-Market analysis-Sales plans-Financials-Mfg plans-Facilities plans

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The business plan document

Typically called the “Business Plan”Summary of the “Total Business Plan”Apendix for the important backup detail -financial spreadsheet -management resumes Don’t bore the reader with every details of all your research results and analysis - no amortization schedules, please

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Detail plans (“The 3 ring notebook”)

Where you put the research resultsBinder with sections for: - markrt, markrt strategies, sales plan - manufacturing, facilities

Examples sales plan: - sales rep job description - sales rep compensation plan - lead generation plan - sales cycle assumptions - sales rep headcount plan

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Mar

keti

ng

&S

ales

Fin

anci

als

(pyramid concept of Business Plan)

Appendices

(3/10)

One sentence Description

Elevator Statement

Executive Summary

Rest of Business Plandocument

Company Name

STYLE

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One sentence description: – “Thomas Bros. Maps produces high quality street maps

for metropolitan areas of the western U.S.”

Elevator statement:– “TBM produces high quality street maps for

metropolitan areas of the western U.S. Unlike Rand McNally and other similar competitors, TBM’s maps are completely updated every year and have the highest positional map accuracy of +/- 10 feet.”

– AKA business or positioning statement

STYLE

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– Detailed analysis & worksheets– Backup data to support plan sections– Example: Sales Section

Job description of sales Sales rep compensation plan Sales cycle assumptions Sales rep headcount plan

APPENDIX

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APPENDIX

The appendices may be bound as a separate volume. They will include the following: marketing support and collateral CVs of key staff IPR, patents, etc. letters of support or contract intent plans in full financial projections

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TEXTXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

………………...

DIAGRAMS

SPREADSHEETS/TEMPLATES

STYLE

FLOW-DIAGRAMS

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Always:

Date plans and Executive Summaries Present on front page:

– Name of Company and contact name– Address, telephone numbers– email and web site addresses

Label each page as “confidential information”

STYLE

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Common Problems

Market research generalization– Too much general, high level overview– Not enough specific target segment data

Unclear product/service description Minimal or non-existent compelling value

proposition…what makes you different? Why are you going to succeed??????

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Exclude data older than 5 years Vary use of company name

– Also use “we” and “the company”

All plans were wordy All 12 plans were way too long

– need to go on a diet…20-25% cut– average 18 pages– range 14 to 26 pages– With rest of plan added…will be too long

Don’t use “No-No” words or phrases

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What get angry Investors ?

• Having to read a 50 pages paper in which is never clearly said what is the new venture mission.

• Not explicity rendering the capital amount required

• The evident infatuation with the product or service that it is willing to offer instead of familiarity and knowledge of market needs.

• The stating of growing potential uot of reality.

• The presence of unjustified economic/financisal forecast.

C. Parolini “Diventare imprenditori”

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What impress Investors favourably?

• Evidence of offered product good acceptance by the customers

• Understanding of investors needs and knowledge of specific objectives in terms of financial return.

• Evidence of new venture focousing on a narrow number of products.

• Having intellectual property rights (patents, trate marks, industrial secrets,…)

C. Parolini “Diventare imprenditori”

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BUSINESSIDEA

GOOD

POOR

DEEPENESS OFDEVELOPMENT

GOODPOOR

Many words/datafew ideas/substance

(fried air)

What a pity!but whe can

remedy it

To sum up……

That’s not bad!

O.K!

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-Business planning deals with risults and the means to reach them.

- Plan contents must be coherent with the purpose

- Don’t accept a standard, acritically, only because there is it.

- Beyond the pointed out specificities, remember that your plan...

is yours !!!

remember……

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-W.A. Salman “How to write a great business plan” HBR -Gate2Growt “Guide to business plan writing”

Suggested readings:

© G. Guerra 1 Introduction to Business Assessment and Planning -Cl1,l2- © G. Guerra “I2C”...

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