Business PlansSimonyi Center

Purpose of Business Planning

Provide a roadmap for success of the companyForce the entrepreneur to formalize their vision and do the research to answer hard questions about the company, its industry and the competitive landscapeSet goals, strategies, policies and procedures for the firmA tool for raising capital

Business Plans Must Tell:

What Problem you are solving and how serious it is.Who has this Problem and Why it is Important to them.How Large is the Market and How Fast is it Growing.How Large your Company will be in 3 to 5 Years.

Business Plans Must, cont.

Who are You and Why are You Qualified to Solve this Problem.How much Money you need to Make this Happen.What are your Key Milestones.How much the Investors will Make on Their Investment in 3 to 5 Years.

What’s

What messages . . . to reachWhat market(s) . . . withWhat pain . . . that needWhat product(s) . . . distributed throughWhat channel(s) . . . againstWhat competition . . . withWhat pricing and packaging . . . to deliverWhat value . . . in What time frame?

What is the Customer’s Pain?

Must Have or Nice to Have?Who Are Your Customers?What Are They Buying?Why Are They Buying?Who Are Your Competitors?What is your Business Model?

Business Plan Components

Executive SummaryCustomer Need and Business OpportunityBusiness Strategy and Key MilestonesMarketing PlanOperations PlanManagement and Key PersonnelFinancial Projections

Business Plan Details

Executive Summary The Purpose of the plan including how much

money is required, what it will be used for and how much investors will make at exit

What is going to give you an unfair advantage! Business opportunity, business model, market,

product/service description, technology and management team

Summary of five-year income statement, profit, head count and capital requirements

BP Details, continued

Customer Need and Business Opportunity Product/service idea and technology

description Strategic Value Triangle for end users

and customersBusiness Strategy and Key Milestones Plan to out-maneuver the competition Show each milestone with the cumulative

cash needed and head count

BP Details, continued

Marketing Plan Basic need and company solution Ideal customer and value proposition Market segmentation and size of

markets Channels of Distribution Strategic Partners

The Marketing Plan

Current Marketing SituationBasic need and company solutionIdeal customer and value propositionObjectivesMarketing StrategyMarket segmentation and size of marketsChannels of DistributionStrategic Partners

Marketing Plan, cont.

Business model and branding planSales strategy and plansCustomer supportAction programsFive-year sales forecastCompetition, positioning and unfair advantageControls

BP Details, cont.

Marketing Plan, cont. Business model and branding plan Sales strategy and plans Customer support Five-year sales forecast Competition, positioning and unfair

advantage

How Do Businesses Compete?

They Fill Needs That Are Not Being MetThey Find Customers and Suppliers Who Are Weaker Than They AreThey Get More Out of LessThey Use Other People’s Money (OPM)The Try to Stay Out of the Way of Larger & Meaner Competitors (Nibble at the Edges)

Who Are Your Competitors?They Know All About You

What Type of People Are in Charge?Why Do They Want Your Customers?Do They Know Who Your Most Profitable Customers Are?Can You Win A Price War With Them?Do They Have A Glass Jaw or Do They Bite Ears?Whose Market Share Will You Take?

BP Details, continued

Operations Plan Engineering plan Web site plan Manufacturing or outsourcing plan (Make/Buy) Facilities and administration plan

Management and Key Personnel Organization Chart Staffing plan (timing) and head count

projections

BP Details, continued Detailed resumes of founders and key

employees Incentive compensation plan and stock

option pool Company culture plan

Financial Projections Overview and key assumptions Five-year forecasts – Balance sheet, Income

statement and Cash Flow Stmt by month for one year, by quarter for two years and annually for remainder of years.

BP Details, continued

Income Statement Balance Sheet Cash Flow Statement Best, Worst and Expected Case

Versions Valuation Analysis Exit Options Return on Investment for each option

Appendix

The remaining slides are summary of business plan requirements from local venture capital firms.

Every Business Plan Must Answer These Questions

PEOPLE Who are the people involved? What have they done in the past

that suggests they will be successful in the future?

Who is missing from the team and what will they do to get them to join?

Key Questions, continuedOPPORTUNITY What is the nature of the opportunity? How will the company make money? How is the opportunity likely to evolve? Can entry barriers be built and maintained?

CONTEXT Macro economy Tax Regulatory Socio-political Cultural

OPPORTUNITY

Is the Total Market for the product or service large and/or rapidly growing?Is the industry one that is now or can become structurally attractive?Who is the customer and how do they make decisions?Is this a compelling purchase for the customer?

OPPORTUNITY, continuedHow will the product or service be priced?How will you reach the target customer?How much does it cost to acquire a customer in time and $?How much does it cost to produce and deliver the product or service?How much does it cost to support a customer?How easy (expensive) is it to retain a customer?

OPPORTUNITY, continued

Buy Low, Sell High, Collect Early & Pay Late When do you have to buy and pay for

resources? How long does it take to acquire a

customer? How long before the customer sends you a

check? How much capital equipment is required to

support a dollar of sales? Accounts Receivable vs. Accounts Payable

COMPETITION

Who are the current competitors?What resources do they control and what are their strengths and weaknesses?How will they respond to our decision to enter the business and what can we do?Who else might notice and enter our market?Can we co-op competitors by forming alliances?

New Product Development Process

IdeaIdeaGenerationGeneration

ConceptConceptDevelopmentDevelopmentand Testingand Testing

MarketingMarketingStrategyStrategy

DevelopmentDevelopment

IdeaIdeaScreeningScreening

BusinessBusinessAnalysisAnalysis

ProductProductDevelopmentDevelopment

MarketMarketTestingTesting

CommercializationCommercialization

Market Development Strategy Checklist

Target CustomerCompelling Reason To BuyWhole ProductPartners and AlliesDistributionPricing CompetitionPositioning Next Target Customer