1. Creating The Winning Business Plan
Entrepreneurs see change as the norm and as healthy. Usually they do not bring about change themselves. But-and this defines entrepreneur and entrepreneurship-the entrepreneur always searches for change, responds to it and exploits it as an opportunity Peter Drucker
Creating The Winning Business Plan
Derby Management, LLC 399 Boylston Street Boston, MA Jack Derby 1

2. You’re an entrepreneur, if…
Kaufmann Foundation, July 2009 on Company Founders
Age: around 40
95.1% Bachelors, 47% graduate degrees
75% top 30% of high school, 52.4% in top 10%
67% top 30% of undergraduate, 37.5% in top 10%
71.5% from middle class families
Birth order: 2.2; siblings: 3.1
51.9% were first in family to start a business
69.9% are married; 59.7% have first child
52% thought about becoming entrepreneurs in college
24.5% extremely interested; of these, 47% >1 business.
74.8% want to build wealth
60.3% do not want to work for others
37.8% have an entrepreneur role model
18.1% have developed a technology to commercialize

3. Jack Derby
20 year successful track record of coaching over 400 companies.
19 year successful track record in medical devices as Executive Vice President of Becton Dickinson Medical Systems, CEO of Datamedix Corporation and President of Litton Medical Systems.
3 years, President, CB Sports
Co-founded 9 companies; Current director of 8
Raised over $645 million in venture and private equity
Ex General Partner, Kestrel Ventures
Director: AMS, Beacon, Brainshark, Hybricon, Rome, Ntirety, Alliance
Activities…
Chairman, Association of Corporate Growth
Director Emeritus, Associated Industries of Massachusetts
Ex Chair, MIT Enterprise Forum- Distinguished Service Award
Ex Vice Chair, SBANE- Pro Bono Publico Award
Member & Director of Common Angels
Lecturer, MIT, Business Planning; Sales & Marketing
Professor, Tufts, Entrepreneurship-Sales & Marketing

4. A Business Planning Architecture

5. The Art of War…
The art of war is of vital importance to the state. It is a matter of life and death, a road either to safety or to ruin. Hence under no circumstance can it be neglected.
General Sun Tzu The Art of War

6. The Importance of Business Plans…
The general who wins a battle makes many calculations in his temple before the battle is fought. The general who loses a battle makes but few calculations beforehand. Thus do many calculations lead to victory, and few calculations to defeat; how many more do no calculations at all! It is by attention to this point that I can foresee who is likely to win or lose.
- General Sun Tzu The Art of War

7. Just What Are Business Plans?
Elevator Speech
Executive Summary
Presentation Pitch
The Business Plan

8. Planning Terms & Timelines
Vision: Future State in plus months Strategies: Primary Directions in 1-18 months Tactics: Operating Plans in months Every Tactic has Objectives Objectives: Measurements in months.
Planning Terms & Timelines 8
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9. The Chris Columbus Plan Process…
Pre-planning…
I have a pretty good Vision
I will bring back gold and riches
I need some money and ships
I am not too sure how to get there
I am also not sure of how long it will take
But, I’ll be back soon… 9
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10. The Chris Columbus Plan Process…
Post Planning Follow Up…
I’m not too sure where we went
I do know it was not where we expected to be
There were a lot of strange people there
It took a lot longer than I expected.
I did not bring back the gold that I said I would
I’d like some more money & ships to try again
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11. “Vision without action is hallucination’ jack derby
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12. Business Planning Architecture
Vision CEO & BOD
Strategies All Managers
Tactics & Objectives All Employees
Actions
Operations
Common Mistake #1
24 months
1-18 months
1-12 months
Common Mistake #2
Common Mistake #3
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13. = A Business Planning Architecture ( Everything needs to fit )
Product & Services Plans
Engineering & Manufacturing
Finance Metrics & Review
Company Business Plan
Marketing & Market Analysis Plans =
Strategy
Sales Plans
Service Plans
Management’s Job is One Simple Thing: Create Highly Scaleable Growth 13
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14. Planning Architecture…
Common Business Planning Mistakes…
Terminology is not understood and shifts back and forth
A lack of process consistency
A lack of timely follow up & review
Even understanding the most timelines will be late
The biggest mistake is always…
A lack of consistency on the part of the CEO
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15. Successful Planning Architecture
Great Business Planning should provide…
A common architecture for the future
Agreed upon & well understood strategies
A socialized common management language
Detailed tactics with measurements
Absolute total consensus
Ownership & Accountability on everyone’s part
Responsibility as a senior manager

16. What’s my responsibility?
So that at the end…
Vision is totally aligned with Strategies & Tactics
Your goals are married with your managers
Your managers have accepted responsibility
Your managers have accepted accountability
There is an interlaced environment of objectives.
There is a common architecture of metrics & rewards 16
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17. What does this process look like?
Two components…
Your own planning
Your Company’s planning
Somewhat the same in concept…
But very different in impact and importance…
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18. What does this process look like?
My own plan…
A Personal Business Plan
You owe it to yourself to develop one
It’s written out once a year typically in January
It’s typically just for you
It defines…
Personal Success Measures
Critical timelines: 5 years & 1 year.
Critical Improvement Factors
You review it every six months 18
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19. The Five Stages of Growth

20. The Five Stages of Growth
Success
Growth
Stability
Survival
Concept
The question is… Where are you along this path?

21. The Five Stages of Growth
It is very critical to objectively determine where you are
Equally critical to understand that shifts will occur with time
Growth metrics today will not be the same in two years
As a result, you must plan for scalability
Processes put in place now that will be cost effective
People put in place now who can expand
This becomes an overall benchmark of where you are along your planning horizon

22. The Five Stages of Growth
Success
Growth
Stability
Survival
Concept
Positive cash flow
“A” level managers hired
Strategies locked down
Tactical plans in place
Repeatable processes
What this really means is…
There must be metrics at every stage
Businesses must reach Stability at a minimum
In order to succeed every business must grow

23. Early Stage Value Creation Cycle
PHASE 2 Build the Business
PHASE 3 Scale the Organization
PHASE 1 Create Effective Models
Exit
Profitability
Revenue Growth
Founder CEO
Early Stage CEO
Expansion Management
Customer Validation
Strategic Investments
Venture $
Angel $
Seed $
Idea
Years 1-2 Survival
Years 2-3 Stability
Years Growth

24. Value Creation Model… PHASE 2 Build the Business
PHASE 3 Scale the Organization
PHASE 1 Create Effective Models
Exit
Early Market Strategies & Initial Tactics
Formal Marketing Plan-Products, Tactics, Leads
Profitability
Revenue Growth
Founder CEO
Early Stage CEO & Team
Expansion Management
Customer Validation
Sales Channel Decisions
Strategic Investments
Revised & Expanded Marketing & Sales Processes & Plans
Venture $
Angel $
Formal Sales Plans-Processes, Tactics, & People
Seed $
Idea
Years 1-2 Survival
Years 2-5 Stability
Years 5 to ? Growth 24
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25. The Art of Creating… The Winning Business Plan

26. Business Plan Architecture

27. The Classic Problems of Product Adoption …
Tip:
The Dreaded GAP eats resources & slows progress.
Critical decisions on pricing, protecting marketing resources and optimizing Sales
It’s easy to find these people. The question is whether your product gets defined by them
Continue to ask whether they represent the true customer? Make sure that you’re focused on the E Majority
Need to be making critical decisions about extending product life and new product design to repeat the curve.
• Low touch • Spend very little • Increase prices

28. A Business Planning Architecture
simple
A Business Planning Architecture

29. A Business Planning Architecture
simple
A Business Planning Architecture

30. What’s included? 7-9 Sections… Executive Summary
Introduction to the business
Definition of products & services
Overview of markets
Overview of sales & marketing plans
6. Overview of products and roadmap
7. Summary of manufacturing & operations
Management team bios
Four pages of financials

31. Why create a Business Plan?
For you as a company manager, it…
Communicates your strategic direction
Communicates your tactics
Communicates your objectives
Communicates your department’s objectives
Communicates your budget requirements
Provides for common agreement & buy-in
Provides common language 31
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32. Why create a Business Plan?
For you as an entrepreneur, it…
Provides the same as a company manager
And …
…provides an architecture for investors 32
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33. For the Team… Most importantly, for you & your team
The actual process of planning is the key.
It consolidates management direction.
It provides debate & finally consensus.
It is a guide when speed bumps happen.
It is your company & personal scorecard. 33
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34. No Business Plan, No Larger corporations
Plans are the foundation of your budgeting
Business plans are the keys to your objectives
Smaller companies
Plans are the foundation for outside investors
Private angels
Venture capitalists
Corporate investors & strategic partners
Banks 34
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35. Writing a plan is tough work !
Very
Writing a plan is tough work !
It requires disciplined balance
It’s visionary, but logical.
It’s financially perfect, but flexible.
It’s for today, but also for 3 to 5 years out
It’s a formal Plan, but it’s easy to read.
It’s creative, but it follows The Rules.

36.  Rules  Preparation  Start Writing

37. The Traditional Business Plan…
An Executive Summary
7-9 sections
20-30 pages with financials
Provides clear details
Brings out the richness of the business idea.
Details the market opportunity & complexity
Details the business and sales models

38. What’s included? 7-9 Sections… Executive Summary
Introduction to the business
Definition of products & services
Overview of markets
Overview of sales & marketing plans
6. Overview of products and roadmap
7. Summary of manufacturing & operations
Management team bios
Four pages of financials

39. How do you start? Pay attention to The Rules… Be compelling
Be brief, focused, & deliberate
Focus on the markets & on your customers
Provide solid market research & hard data
Be innovative and provide unique value
Define an experienced management team 39
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40. Rules… Be brief & direct & detailed.
Identify what the business is immediately
Identify the business model immediately.
Define the products & their technologies
Detail the markets
Identify your customers.
Identify the sales model immediately
What?
Where?
Who & How? 40
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41. Rules… Be realistic with yourself.
This is your Plan, your Career, your Time & Money
Define your 1 and your 3 year objectives
Describe your 3 to 4 primary strategies.
Always focus on…
the cash
growth in margin
growth in revenue. 41
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42. Don’t just start writing…
Preparation is The Key to Success.
Question everything…
What’s our Vision?
Can we explain it to others ?
What business are we in today?
Who are our customers in 3 years ?
How are we going to sell them?
Do we have a 3 year product map?
Vision
Strategies
Tactics
Business Plan Focus

43. Don’t just start writing…
Preparation is The Key to Success.
What do we really know about…
Our market & customer targets?
Market data, trends, & forecasts?
Competition?
New technologies in development?

44. Classic Product Adoption Life Cycle…
It would be wonderful if this really happened !

45. Building a Solid Business Plan
Growth is Never a Straight Line

46. One more preparation task…
Analysis of assumptions…
Internally, what do we want for…
Revenue, margin and profit growth rates
Cost of goods
Sales acquisition costs & Sales channel models
Hiring rates and ramp speed
Technology investment rates
Product costs & expected margins
G&A expense percentages
Receivables, payables, and financing costs 46
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47. Now, you can start writing…
What you need…
A quiet place and time.
All of your data easily available.
Start writing by yourself. Not a team effort.
Get the content down quickly.
Send a first rough draft to others quickly.
Write draft after draft after draft after….. 47
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48. What’s included? 7-9 Sections… Executive Summary
Introduction to the business
Definition of products & services
Overview of markets
Overview of sales & marketing plans
6. Overview of products and roadmap
7. Summary of manufacturing & operations
Management team bios
Four pages of financials

49. The Financial Section… What Professional Investors Expect
Lots of numbers is not the answer !

50. The Financial Section Must Support…
The Key Questions are about Customers & Sales…
Who will buy?
What will they buy?
How will they buy? How do they want to buy?
Why will they buy?
Why will they buy from you?
What will they pay for it?

51. Business Plan Financials …
Present the punchline, know the details
Average selling price per unit, average cost per unit
Customer payback period
Revenue per salesperson; revenue per customer
Days Sales Outstanding and Days Payable Outstanding
Overall revenue per person
Components of cost as a %, (material, labor, & OHD)
Industry metrics
Compensation plans/ key manager salaries
Exhibit confidence & passion, show humility
Sell the 5 year plan, deliver on a solid 6 month plan
Hide a few rabbits, you’re likely to need them

52. Assembling a Bottoms-Up Plan
80 % of your effort should be spent on the top line
Define the market opportunity
revenues, potential customers, units available
Project an achievable penetration rate
What is your go to market plan?
Revenue
ASP per unit – consider product cost and distribution
Depict the economics surrounding a single sale
How will the customer measure ROI?
What is the economic impact to you? Price, cost, futures?
Define the model and scale it!

53. Assessing Your Margins…
Gross margin plan must be bottoms up
Labor, Materials, Overhead
Operating costs
Benchmark whenever possible
Build manpower plan functionally
Compensation & benefits will represent 70% of costs
So plan headcount carefully
Spend a modest amount of time on the remaining costs
Cash flow is all about timing
Plan to pay fast & collect slow, execute the opposite 53 53

54. Forecast Content / Format
Investors expect to see…
Five-year summary projections
Full, cohesive set of financial statements
Statements should correlate
Changes in each statement should agree
Statements that are supported by monthly detail
Until breakeven point / profitability,
Then quarterly for two years and yearly thereafter
List of major assumptions

55. Building Assumptions & Projections
The Balance Sheet…
Define very conservative A/R and A/P days.
Consider level of inventory and capital expenditures required to support sales projections.
Investor focus: Demonstrate fiscal restraint
Limit capital expenditures (consider renting / leasing)
Save money for marketing and selling expenses.

56. Building Assumptions & Projections
Statement of Cash Flows…
Consider level of funding required to achieve all milestones
Mirror timing of funding requirements as stated in plan
Investor focus:
Cash breakeven and periodic need for additional funding
Very important to make realistic forecast so that initial funding request covers capital needs until critical milestone achievement

57. Sensitivity Analysis…
Models must be able to quickly assess cash impact of…
What happens if sales are +/- 20%?
What if unit sell ramp is slower?
What if average sell price is 20% less than planned?
What if we accelerate Sales hiring?
What if product development is delayed?
What if a management change is necessary?

58. Typical Finance Presentation Formats

59. Presentation of Forecasts
“presentation…” doesn’t match table of contents

60. Presentation of Forecasts

61. Presentation of Forecasts

62. Presentation of Forecasts (for inclusion in Executive Summary)

63. Some Examples

64. More information about Business Plans

65. Where to go for more information?
Kauffman.org
Entrepreneurs.org
SBA.gov
Successful entrepreneurs in Providence & Boston
Typically volunteer time to young entrepreneurs
Typically organized around universities and not-for-profits

66. Thanks… jack@derbymanagement.com 617-504-4222
March 26-28th Sales Management Boot Camp