Business planningFrom A to F

Δρ. Ηρακλής Αγιοβλασίτης

From A to F(unding)

A. Defining the plan

B. Authoring the plan

C. Sales

D. Marketing

E. Financials

F. Funding

A. Defining the plan

What is and what is not

1. What is the business plan?

• Plan for the creation and management of business

• Goal setting instrument

• Connect the dots

• Owners’ manual

• The map

The map

2. Why write a business plan?

1. Objective & Critical tool

2. Focus ideas & Feasibility study

3. Business model

4. Communication tool

5. Financial projection

6. Operational tool

7. Inhouse vs Outsourcing

3. Advantages of great business plans

• Fundraising ability

• Attracting management team & employees

• Setting goals

• Easily adapted

• Providing indices to measure progress

• Continuously updated

• Can stand critical review

B. Authoring the plan

Templates

No right format

1. Executive Summary

2. Company Description

3. Market Analysis

4. Organization & Management

5. Marketing & Sales

6. Service or Product Line

7. Funding Request

8. Financials

9. Appendix

US Small Business Administration

1. Executive summary

• The mission statement

• History of the business

• Names of founders and the functions they perform

• Location of business

• Description of facilities

• Products manufactured/services rendered

• Banking and investment relationships

• Summary of company growth including financial or market highlights

• Summary of management’s future plans

2. Company description

• High level look at how all of the different elements of your business fit

together

o Nature of your business as well as primary factors that you believe will make

your business a success

• Marketplace needs that you are trying to satisfy

o Include the ways in which you plan to satisfy these needs using your products

or services. Finally, list the specific individuals and/or organizations that you

have identified as having these needs.

• Primary success factors (for example):

o Ability to satisfy your customers’ needs

o Highly efficient methods of delivering your product or service

o Outstanding personnel

o Key location

3. Market analysis

• Industry description and outlook

o Description of your primary industry

o Current size of the industry

o Historic growth rate, trends and characteristics related to the industry

as a whole

What life cycle stage is the industry in?

What is its projected growth rate?

What major customer groups are within the industry?

3. Market analysis

• Competitive analysis

o Identify your competition by product line or service as well as by

market segment

o Assess their strengths and weaknesses

o Determine how important your target market is to your competitors

o Identify any barriers which may hinder you as you are entering the

market

• Regulatory restrictions

o Current governmental regulatory requirements

o As well as any changes that may be upcoming

4. Organization & Management

• Organizational structure

o Create an organizational chart with a narrative description

• Ownership information

o Include legal structure and ownership details

• Management profiles

o Discuss key people in your company and their backgrounds

5. Marketing & Sales Strategies

• Market penetration strategy

o Strategy for growing your business

o Horizontal strategy where you would provide the same type of products to different users

o Vertical strategy where you would continue providing the same products but would offer

them at different levels of the distribution chain

• Communication strategy for reaching customers

• Sales force strategy

o If you are going to have a sales force, do you plan to use internal or independent

representatives?

o How many salespeople? How will you train your sales force?

o What is the compensation for your sales force?

• Sales activities

o When you are defining your sales strategy, it is important that you break it down into

activities.

6. Service or Product line

• Detailed description of your product or service

o Specific benefits of your product or service

o Ability to meet consumer needs

o Advantages your product has over that of the competition

o Present development stage your product is in (i.e., idea, prototype,

etc.)

• Information related to your product’s life cycle

• Any copyright, trademark, patent, and trade secret information

• Research and development activities you are involved in or are planning to

be involved in.

7. Funding request

• Current funding requirement

• Future funding requirements

o Typically the next five years

o At least three years of revenue generating years

• How you will use the funds you receive?

• Long-range financial strategies

Cash flow analysis

8. Financials

• Historic and prospective financial statements

o Income statements

o Balance sheets

o Cash flow statements

• For each year you have been in business

9. Appendix

• Resumes

• Credit history (personal & business)

• Product pictures

• Letters of reference

• Details of market studies

• Magazine articles or book references

• Licenses, permits, or patents

• Legal documents

• Copies of leases

• Building permits

• Contracts

• List of business consultants, including attorney and accountant

Sequoia Capital

Yahoo

Google

Electronic Arts

Cisco

Paypal

Linkedin

Sequoia Capital Business Plan template

1. Company Purpose • Define the company/business in a single declarative sentence

2. Problem • Describe the pain of the customer (or the customer’s customer)

• Outline how the customer addresses the issue today

• Include research and evidence of the problem

Sequoia Capital Business Plan template

3. Solution• Demonstrate your company’s value proposition to make the customer’s life

better

• Show where your product physically sits

4. Why now• Set-up the historical evolution of your category

• Define recent trends that make your solution possible

Sequoia Capital Business Plan template

5. Market size• Identify the current and expected customers

• How many dollars are spent on goods & services like yours

• What are the trends (opportunities & threats)?

6. Competition• List competitors

• List competitive advantages

Sequoia Capital Business Plan template

7. Product or service• Functionality, features, architecture, etc.

• Development and describe the roadmap

• Illustrate via

o Sketches

o Pictures

o 3D renderings

• Intellectual property

Sequoia Capital Business Plan template

8. Business model• Revenue model with pricing strategy

• Average account size and lifetime value

• Sales and distribution model

• Key partnerships and suppliers

Sequoia Capital Business Plan template

9. Team Founders and management

Board of directors

Board of advisors

10. FinancialsIncome statement, cash flow statement, and balance sheet

11. Closing

In any case

Watch out for the audience!

• Attention span: 20 pages

Summary

Do• Consider prevailing formats for your plan

• Adapt pending the audience

• Be clear, specific, and convincing

Don’t write a:

• long

• confusing mess with

• no convincing path to profitability,

• limited understanding, and

• a weak team

Best practice

• Have a main business plan

• Update it regularly

• 5-year P&L

>>> Adapt!

C. SalesAssumptions: Realistic or Imaginary?

Sales

1. Managing the sales pipeline

• Generating leads

• Planning

• Closing sales

2. Building one-to-one relationships

• Customer data

• Regular, targeted communication

3. Establishing a sales budget

Lead

Selling

Sold

Leads-to-Sales Call %? Sales Call-to-Close %?

1. The sales pipeline

Lead Selling Sold

Cold calling

- Plan, prepare,

practice

- Warm-up

Networking

- Personal and

professional

- Build and

maintain the

network

Lead Selling Sold

Cold calling

- Plan, prepare,

practice

- Warm-up

Networking

- Personal and

professional

- Build and

maintain the

network

– Sell solutions, not

products

– Guide meetings

– Understand the

influencers

– Keep your head

up

Lead Selling Sold

Cold calling

- Plan, prepare,

practice

- Warm-up

Networking

- Personal and

professional

- Build and

maintain the

network

– Sell solutions, not

products

– Guide meetings

– Understand the

influencers

– Keep your head

up

– Show them the

money

– Ask for the sale

– Offer payment

terms or

discounts

– Build a

referenceable

customer

– Budget for next

year

2. One-to-one relationships

Maximize sales by picking the BEST customers

Collect customer information • Know your customer

• Study prospective and current customers

• Setup a database

Customize the sales approach • Build individual profiles

• Get personal

Incentive

Loyalty card

Sign-up scheme

3. Establishing a sales budget

Start with sales costs as a percentage of sales

• $10 product price

• $7 expenses (not including sales cost)

• $3 profit (not including sales cost)

• $0 to $3 (0 to 30%) is sales cost; estimate $3

• For a 1,000 product forecast in yr. 1; sales budget = $3,000

Consider the lifetime value of the customer

• Factor in revenues from recurring purchases

Opportunity costs of various sales approaches

Sales: to plan or not to plan?

• Revenue goals are realized through a series of well

planned steps

• Sales and marketing budgets are dependent on proper

sales forecasts

• Managing the sales pipeline is critical to plan and

implement the sales strategy

D. MarketingNot advertising

Marketing

1. Explore customer needs and wants

2. Build a marketing plan that addresses

these needs and wants

– Now and in the future

3. Define a marketing mix that works

– And that is adaptable

4. Pricing: how to

1. Customer and problem

- Who are the customers?

- What are their problems?

- Confirm/revise your assumptions about

• Types of customers

• Needs and wants

• “Day in the life”

• ROI for customer

• Minimum and desired feature sets

• Willingness to pay

2. Marketing Plan

1. Product/service description and features,

2. Promotion and advertising details,

3. Pricing model• Business model

• Prices

4. Placement/distribution and sales plan.• Sales methods to include personal selling and/or sales channels, etc.

3. Marketing mix (4Ps)Product

• Brand

• Features

• Design

• Quality

• Packaging

• Warranties

• Returns policy

• Functions

3. Marketing mix (4Ps)Product

• Brand

• Features

• Design

• Quality

• Packaging

• Warranties

• Returns policy

• Functions

Price

• List price

• Discounts

• Credit terms

• Payment

period

3. Marketing mix (4Ps)Product

• Brand

• Features

• Design

• Quality

• Packaging

• Warranties

• Returns policy

• Functions

Price

• List price

• Discounts

• Credit terms

• Payment

period

Promotion

• Public relations

• Advertising

• Sales force

• Direct

messages

3. Marketing mix (4Ps)Product

• Brand

• Features

• Design

• Quality

• Packaging

• Warranties

• Returns policy

• Functions

Price

• List price

• Discounts

• Credit terms

• Payment

period

Promotion

• Public relations

• Advertising

• Sales force

• Direct

messages

Place

• Channels

• Locations

• Inventory

• Fulfillment

4. Pricing

Key considerations are – Your cost (direct costs plus overhead to including marketing, salaries, etc.)

– Competitor prices (current and future)

>> Research

Suggested approach– Price just below (10-20% less) comparable competitors, and offer better

service than them.

– If your product is significantly better, it’s OK to charge more than competitors.

4. Pricing >>> Competition

• Benchmark against which to evaluate prices

• Even new innovations have competitors

– Customer’s may not choose to adopt the new technology

– Competitive substitutes

• Cross-Price elasticity of demand

– % change in one product’s sales due to a % change in a price of another

product

• Increase in complementary competitors may increase prices

4. Pricing >>> Customers

Price ceiling is determined by customer’s perception of value & competitive

options

• Product Benefits

− Functional: attractive to users

− Operational: reliability, durability, efficiency

− Financial: credit terms, leasing options

− Personal: psychological satisfaction

• Costs

− Monetary: price, transportation, installation

− Nonmonetary: product failure, obsolescence

4. Pricing >>> New Revenue Streams

– New uses for existing products

– Offer whole product (end-to-end solution)

– Offer product bundles

– New, less price-sensitive, segments

– Offer product derivatives under a price lining

strategy

– IP

> outright sale vs licensing

> single vs multiple users

> pay-per-use vs subscription

E. FinancialsDo the math!

1. Objective

• 95% percent of start-ups fail due to:

o Lack of MONEY

o Lack of TIME

• Managing finances effectively can help you from running out of money

prematurely and from spending money at the wrong time

2. Who do they help?

• Investors understand

o The profit potential of your firm

o How much money you need to get there

o On what timeline and for what purpose

• Entrepreneurs understand

o Level of risk/reward for your venture

o Value of your company (and in turn, your percent ownership) when it’s

time to raise capital for the venture

3. How do they look?

1. Income statement

₋ Summarizes revenues and expenses

2. Cash flow statement

₋ Sum of retained earnings minus the deprecation

provision made by the firm

3. Balance sheet

₋ Summarizes the assets, liabilities, and

shareholders’ equity at a specific point in time

4. Income statements

Revenue (Sales)

– Money paid to the company by customers in exchange for the sale of a

product or service by the company

Costs of Goods Sold (COGS)

– Direct costs to produce each product or offer each service

– For a product, all components and manufacturing costs

– For a service, all costs of fulfillment; all labor costs.

– Costs of goods sold are often variable as component and manufacturing

costs drop as volume increases.

5. Income statements

• Revenue forecasts: What can we sell,

given the market, our pricing, and our

capability?

• COGS forecasts: How will our costs of

goods sold change as our revenues

change?

6. Income statements

SG&A forecasts: What marketing/sales

effort do we need to reach our revenue

goals? What infrastructure do we need to

support our business?

• How much money do we need to

accomplish growth?

Sales forecast

Income statement

• Reports cash receipts and payments

• Lists all cash going in and out by category

1. Operating activities: Cash changes by operating the company

2. Investing activities: Cash changes from buying/selling assets (equipment,

building)

3. Financing activities: Cash changes by borrowing funds, selling stock,

paying dividends, reducing debt, etc.

2. Statement of cash flows

Cash flow

Current Assets (liquid in less than a year)

Fixed Assets

Other Assets

Cash and equivalents

Accounts receivable

Inventories

3. Balance sheet

Property, plant and

equipment (minus

Depreciation)

Intangibles (minus

depreciation)

Investment securities

Total assets = Total liabilities + Shareholder’s equity

Current Liabilities (payable in less than a year)

Long-term liabilities

Shareholder’s

equity

Accounts payable

Accrued expenses

Short term debt

Common stock

Additional paid-in capital

Retained earnings

Bank loans

Bond issued

Balance sheet

Summary

• Financials statements are a valuable tool

to both investors and entrepreneurs

• Critical to determine how much money

you need when and for what purpose

• Quantifying the risk and reward is an

early step to determining if to launch the

venture

F. Financial capitalShow me the money!

Where does startup money come from?

Bootstrapping

Why?

• Owned by founders

• Easy ownership terms

• Controlled by founders

• Lower pressure

• Little time spent on fundraising

Bootstrapping

Why NOT?

• May constrain growth due to limited capital

• Lack of funding commitment for future

• Loss of advice and social capital from professional

investors

Questions to answer

• How much money you need?

• What will the money will be used for?

• At what stage is your business in?

• What is your capacity to repay the

money?

Advantages

– No share of ownership required

– More borrowing allows for potentially

greater return on equity

– During periods of low interest rates, the

opportunity cost is justified since the

cost of borrowing is low

Disadvantages

– Regular (monthly) interest payments are

required.

– Continual cash-flow problems can be

intensified because of payback

responsibility.

– Heavy use of debt can inhibit growth and

development.

Debt vs Equity

- Ownership (equity) in the

companies is sold to

investors.

- High risk - unsecured!

>> Term sheets

The funding gap

The funding gap >>> Solved (?)

1. Angel investors

2. Crowd-funding

3. Grants

• National Programmeso Microloans

• European programmes

o The SME Instrument

Concept & Feasibility Assessment

InnovationR&D activities

Commercialisation

Phase 2 Phase 3Market

• Feasibility of concept• Risk assessment• IP regime• Partner search• Design study

• Development, prototype, testing

• Miniaturisation/design• Clinical trials• Etc.

• Facilitate access to private finance

• Support via networking , training, coaching, knowledge sharing, dissemination

Lump sum: ~ 50.000 €~ 6 months

Output-based payments: 1 to 5 M€12 to 36 months

No direct funding

Phase 1Idea

SME Instrument

10% budget of SME instruments

~5200 proposals funded-10% success rate

Funding: lump sum 50.000 €

Duration: ~ 6 months

Target group: Innovative SMEs

Single company support possible

Other organisations= subcontracting

Input: idea/concept – Business Plan 1 (~10 pages)

Activities: Feasibility of concept; Risk assessment; IP regime;

Partner search; Design study; Pilot application….

Output: elaborated “Business Plan 2”

Call: always open with 4 cut-off dates/year

(first cut-off dates for Phase 1 around June 2014- 18/06/2013)

Evaluation: 2 evaluators, remote, quality threshold

Time to(TT) contract: 8-12 weeks

H2020 - New SME instrument

Phase 1: Concept & Feasibility Assessment

90% budget of SMEs instruments (~1700 proposals of 1,5 Mio. € ;

success rate ~30 to 50%)

Funding: 1 to 5 Mio. € / Duration: 12 to 24 months

Target group: Innovative SMEs

Single company support possible / Other organisations= subcontracting

Input: business plan 2 + description of activities under phase 2 (~30 pages)

Activities: Development; Prototyping; Testing, Piloting;

miniaturisation, scaling-up, market replication, research

Output: “Investor-ready Business plan 3”

Call: always open with 4 cut-off dates/year (first cut-off for Phase 2: 24/09/2014)

Evaluation: 3 evaluators, remote, quality threshold

TT contract: 150 days

H2020 - New SME instrument

Phase 2: R&D, demonstration, market replication

2% budget of SME instrument

No direct funding

Promote instrument as quality label for successful projects

Objective: Provide support and facilitate access to

Private finance

EU financing instruments (debt & equity facility)

Networking, training, information addressing IP management, knowledge sharing,

dissemination…

Connection to public procurement activities

Key account Management will be carried out by EENs & coaching by external specialists

H2020 – New SME instrument

Phase 3: Commercialisation & Coaching

Open calls

1. Space-SME-2014-1: SME Instrument

2. ICT-37-2014-1: Open Disruptive Innovation Scheme (implemented through the SME instrument)

3. NMP-25-2014-1: Accelerating the uptake of nanotechnologies, advanced materials or advanced

manufacturing and processing technologies by SMEs

4. PHC-12-2014-1: Clinical validation of biomarkers and/or diagnostic medical devices

5. SFS-08-2014-1: Resource-efficient eco-innovative food production and processing

6. BG-12-2014-1: Supporting SMEs efforts for the development - deployment and market replication of

innovative solutions for blue growth

7. SIE-01-2014-1: Stimulating the innovation potential of SMEs for a low carbon energy system

8. IT-1-2014-1: Small business innovation research for Transport

9. SC5-20-2014-1: Boosting the potential of small businesses for eco-innovation and a sustainable

supply of raw materials

10. DRS-17-2014-1: Critical infrastructure protection topic 7: SME instrument topic: “Protection of Urban

soft targets and urban critical infrastructures”

11. BIOTEC-5a-2014-1: SME boosting biotechnology-based industrial processes driving competitiveness

and sustainability

Open calls

18/06/2014

24/09/2014

17/12/2014

Deadlines

Phase 1

Specific Challenge: The challenge is to provide support to a large set of early stage

high risk innovative SMEs in the ICT sector. Focus will be on SME proposing

innovative ICT concept, product and service applying new sets of rules, values

and models which ultimately disrupt existing markets.

The objective of the ODI is threefold:

• Nurture promising innovative and disruptive ideas;

• Support their prototyping, validation and demonstration in real world conditions;

• Help for wider deployment or market uptake.

Proposed projects should have a potential for disruptive innovation and fast

market up-take in ICT.

In particular it will be interesting for entrepreneurs and young innovative companies

that are looking for swift support to their innovative ideas.

The ODI objective will support the validation, fast prototyping and

demonstration of disruptive innovation bearing a strong EU dimension.

Scope: ODI will be implemented through the SME instrument which consists of

three separate phases and a coaching and mentoring service for beneficiaries.

Participants can apply to Phase 1 with a view to applying to Phase 2 at a later date,

or directly to Phase 2.

ICT-37

In phase 1, a feasibility study shall be developed verifying the

technological/practical as well as economic viability of an innovation

idea/concept with considerable novelty to the industry sector in which it is

presented (new products, processes, design, services and technologies or

new market applications of existing technologies). The activities could, for

example, comprise risk assessment, market study, user involvement,

Intellectual Property (IP) management, innovation strategy development,

partner search, feasibility of concept and the like to establish a solid high-

potential innovation project aligned to the enterprise strategy and with a

European dimension. Bottlenecks in the ability to increase profitability of the

enterprise through innovation must be detected and analysed during phase 1 and

addressed during phase 2 to increase the return in investment in innovation

activities. The proposal should contain an initial business plan based on the

proposed idea/concept.

The proposal should give the specifications of the elaborated business plan,

which is to be the outcome of the project and the criteria for success.

Funding will be provided in the form of a lump sum of EUR 50.000. Projects

should last around 6 months.

ICT-37

In phase 2, innovation projects will be supported that address the specific challenge ODI and

that demonstrate high potential in terms of company competitiveness and growth

underpinned by a strategic business plan. Activities should focus on innovation activities such

as demonstration, testing, prototyping, piloting, scaling-up, miniaturisation, design,

market replication and the like aiming to bring an innovation idea (product, process,

service etc) to industrial readiness and maturity for market introduction, but may also

include some research. For technological innovation a Technology Readiness Levels of 6

or above (or similar for non-technological innovations) are envisaged; please see part G

of the General Annexes.

Proposals shall be based on an elaborated business plan either developed through

phase 1 or another means. Particular attention must be paid to IP protection and

ownership; applicants will have to present convincing measures to ensure the possibility of

commercial exploitation ('freedom to operate').

Proposals shall contain a specification for the outcome of the project, including a first

commercialisation plan, and criteria for success.

The Commission considers that proposals requesting a contribution from the EU of between

EUR 0.5 and 2.5 million would allow phase 2 to be addressed appropriately. Nonetheless,

this does not preclude submission and selection of proposals requesting other amounts.

Projects should last between 12 and 24 months.

ICT-37

Expected impact:

· Enhancing profitability and growth performance of

SMEs by combining and transferring new and existing

knowledge into innovative, disruptive and competitive

solutions seizing European and global business

opportunities.

· Market uptake and distribution of ICT innovations.

· Increase of private investment in innovation, notably

through private co-investments and/or follow-up

investments in successfully supported SMEs.

· The expected impact should be clearly substantiated in

qualitative and quantitative terms (e.g. on turnover,

employment, market seize, IP management, sales,

return on investment and profit).

ICT-37

One pager

How can we help?

• ICT-37

Topic/ Grant

• Brand name

Title/ Aconym

• What we are planning to do

Objective

• 5 Key questions

Background

• + Who wants them (Impact)

Results

• How?

Phases

Consortium

Cost/Duration

5 Key Questions

• Why bother?

• Why at a European Level?

• Is it already available?

• Why now?

• Why you?

Impact – 5 more key questions

• What will come out of the project? (Expected results)

• Who wants these results? (Lead users)

• Why do they want these results?

• How do you plan to tell the Lead users about the results?

• What further development steps will be required?

Εθνικό Κέντρο Τεκμηρίωσης

www.ekt.gr

Δρ. Ηρακλής Αγιοβλασίτης

E: agiovlasitis@ekt.gr

T: @hercagio

P: 210 727 3921