The Business Plan Venture Planning Chapter 12 Dowling Fall 2005.

The Business The Business PlanPlan

Venture Planning Venture Planning Chapter 12Chapter 12

DowlingDowlingFall 2005Fall 2005

The Business PlanThe Business Plan

The Business PlanThe Business Plan Carefully articulates the merits, Carefully articulates the merits,

requirements, risks, and potential rewards requirements, risks, and potential rewards of the opportunity and how it will be seized.of the opportunity and how it will be seized.


The Four Anchors (See Chap. 4)The Four Anchors (See Chap. 4) Create or add significant value to a Create or add significant value to a

customer or end user.customer or end user. Solve a significant problem or meet a Solve a significant problem or meet a

significant want or need, for which significant want or need, for which someone is willing to pay a premium.someone is willing to pay a premium.

Have robust market, margin and money-Have robust market, margin and money-making characteristics.making characteristics.

A good fit with the founder(s) and A good fit with the founder(s) and management team at the time and management team at the time and marketspace, and with the risk/reward marketspace, and with the risk/reward balance.balance.


The plan is not the business, but…The plan is not the business, but… The vast majority of INC.’s 500 fastest-The vast majority of INC.’s 500 fastest-

growing companies had business plans at growing companies had business plans at the outset. the outset.

Don’t confuse the plan and building the Don’t confuse the plan and building the business.business.

Unless the fundamental opportunity is Unless the fundamental opportunity is there, along with the requisite resources there, along with the requisite resources and team needed to pursue it, the best plan and team needed to pursue it, the best plan in the world won’t make much difference.in the world won’t make much difference.


‘‘Tips from the trenches’Tips from the trenches’ Stress your business concept in the Stress your business concept in the

executive summaryexecutive summary The numbers don’t matter; but the The numbers don’t matter; but the

economics (e.g., value proposition and economics (e.g., value proposition and value model) really matter.value model) really matter.


Do’s and Don’tsDo’s and Don’ts DoDo

Make plan logical, comprehensive, and Make plan logical, comprehensive, and readable – and short.readable – and short.

Articulate what the critical risks and Articulate what the critical risks and assumptions are and how and why these are assumptions are and how and why these are tolerable.tolerable.

Remember that the plan is not the business Remember that the plan is not the business and that an ounce of ‘can-do implementation’ and that an ounce of ‘can-do implementation’ is worth two pounds of planningis worth two pounds of planning

Let realistic market and sales projections Let realistic market and sales projections drive the assumptions underlying the financial drive the assumptions underlying the financial spreadsheets, not vice-versa.spreadsheets, not vice-versa.


Do’s and Don’tsDo’s and Don’ts Don’tDon’t

Describe technical products or Describe technical products or manufacturing processes using jargon or in manufacturing processes using jargon or in a way that only an expert can understand, a way that only an expert can understand, because this limits the usefulness of the because this limits the usefulness of the plan.plan.

Spend money on developing fancy Spend money on developing fancy brochures, elaborate slide show brochures, elaborate slide show presentations and other “sizzle.” Instead, presentations and other “sizzle.” Instead, show the “steak.”show the “steak.”


Know your stuffKnow your stuff ““Investors attach great importance to Investors attach great importance to

the quality of the management team the quality of the management team andand to their complete understanding of to their complete understanding of the business they are preparing to the business they are preparing to enter.”enter.”

““There is a great difference between There is a great difference between screening an opportunity and screening an opportunity and developing a business plan.”developing a business plan.”


Executive SummaryExecutive Summary Description of the business concept and Description of the business concept and

the businessthe business The opportunity and strategyThe opportunity and strategy The target market and projectionsThe target market and projections The competitive advantagesThe competitive advantages The economics, profitability, and The economics, profitability, and

harvest potentialharvest potential The teamThe team The offeringThe offering


The Industry and the Company and The Industry and the Company and its Products or Servicesits Products or Services The industryThe industry The company and the conceptThe company and the concept The product(s) or service(s)The product(s) or service(s) Entry and growth strategyEntry and growth strategy


Market research and analysisMarket research and analysisNote: DO THIS STEP FIRSTNote: DO THIS STEP FIRST

And, information in this section And, information in this section needs to support the assertion that needs to support the assertion that the venture can capture a the venture can capture a substantial market share in a substantial market share in a growing market in the face of growing market in the face of competition.competition.


Market Research & AnalysisMarket Research & Analysis CustomersCustomers Market size and trendsMarket size and trends Competition and competitive edgesCompetition and competitive edges Estimated market share and salesEstimated market share and sales Ongoing market evaluationOngoing market evaluation


The Economics of the BusinessThe Economics of the Business Gross and operating marginsGross and operating margins Profit potential and durabilityProfit potential and durability Fixed, variable and semivariable costsFixed, variable and semivariable costs Months to breakevenMonths to breakeven Months to reach positive cash flowMonths to reach positive cash flow


Marketing PlanMarketing Plan Overall marketing strategyOverall marketing strategy PricingPricing Sales tacticsSales tactics Service & warranty policiesService & warranty policies Advertising and promotionAdvertising and promotion DistributionDistribution


Design & Development PlansDesign & Development Plans Development status and tasksDevelopment status and tasks Difficulties and risksDifficulties and risks Product improvement and new productsProduct improvement and new products CostsCosts Proprietary issuesProprietary issues


Manufacturing and Operations PlanManufacturing and Operations Plan Operating cycleOperating cycle Geographical locationGeographical location Facilities and improvementsFacilities and improvements Strategy and plansStrategy and plans Regulatory and legal issuesRegulatory and legal issues


Management TeamManagement Team OrganizationOrganization Key management personnelKey management personnel Management compensation and ownershipManagement compensation and ownership Other investorsOther investors Employment and other agreements and stock Employment and other agreements and stock

option and bonus plansoption and bonus plans Board of directorsBoard of directors Other shareholders, rights and restrictionsOther shareholders, rights and restrictions Supporting professional advisors and servicesSupporting professional advisors and services

The Business PlanThe Business Plan Overall ScheduleOverall Schedule

Step 1 - Lay out cash conversion cycleStep 1 - Lay out cash conversion cycle Step 2 – Prepare a month-by-month schedule Step 2 – Prepare a month-by-month schedule

that shows the timing of such activities as that shows the timing of such activities as product development, market planning, sales product development, market planning, sales promotions, production, and operationspromotions, production, and operations

Step 3 – Show on the schedule the deadlines Step 3 – Show on the schedule the deadlines or milestones critical to the venture’s successor milestones critical to the venture’s success

Step 4 – Show on the schedule the “ramp-up” Step 4 – Show on the schedule the “ramp-up” of the number of management personnelof the number of management personnel

Step 5 – Discuss in a general way the activities Step 5 – Discuss in a general way the activities most likely to cause a schedule slippagemost likely to cause a schedule slippage


Critical Risks, Problems and Critical Risks, Problems and AssumptionsAssumptions Identifying the risks in your venture Identifying the risks in your venture

demonstrates your skills as a managerdemonstrates your skills as a manager Discuss assumptions and risks implicit in Discuss assumptions and risks implicit in

your planyour plan Identify and discuss any major problems and Identify and discuss any major problems and

other risksother risks Indicate what assumptions or potential Indicate what assumptions or potential

problems and risks are most critical to the problems and risks are most critical to the venture’s successventure’s success


The Financial PlanThe Financial Plan Actual income statements and balance Actual income statements and balance

sheetssheets Pro-forma income statementsPro-forma income statements Pro-forma balance sheetsPro-forma balance sheets Pro-forma cash flow analysisPro-forma cash flow analysis Break-even chartBreak-even chart Cost controlCost control HighlightsHighlights


Proposed Company OfferingProposed Company Offering Desired financingDesired financing OfferingOffering CapitalizationCapitalization Use of fundsUse of funds Investors’ returnInvestors’ return


AppendixesAppendixes Include pertinent information here that Include pertinent information here that

is too extensive for the body of the is too extensive for the body of the business plan but which is necessarybusiness plan but which is necessary

The Business Plan Venture Planning Chapter 12 Dowling Fall 2005.

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Transcript of The Business Plan Venture Planning Chapter 12 Dowling Fall 2005.