Presentation on theme: "Creating The Winning Business Plan"— Presentation transcript:
1Creating 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 DruckerCreating The Winning Business PlanDerby Management, LLC 399 Boylston Street Boston, MA Jack Derby1
2You’re an entrepreneur, if… Kaufmann Foundation, July 2009 on Company FoundersAge: around 4095.1% Bachelors, 47% graduate degrees75% 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 familiesBirth order: 2.2; siblings: 3.151.9% were first in family to start a business69.9% are married; 59.7% have first child52% thought about becoming entrepreneurs in college24.5% extremely interested; of these, 47% >1 business.74.8% want to build wealth60.3% do not want to work for others37.8% have an entrepreneur role model18.1% have developed a technology to commercialize
3Jack Derby20 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 SportsCo-founded 9 companies; Current director of 8Raised over $645 million in venture and private equityEx General Partner, Kestrel VenturesDirector: AMS, Beacon, Brainshark, Hybricon, Rome, Ntirety, AllianceActivities…Chairman, Association of Corporate GrowthDirector Emeritus, Associated Industries of MassachusettsEx Chair, MIT Enterprise Forum- Distinguished Service AwardEx Vice Chair, SBANE- Pro Bono Publico AwardMember & Director of Common AngelsLecturer, MIT, Business Planning; Sales & MarketingProfessor, Tufts, Entrepreneurship-Sales & Marketing
5The 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
6The 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
7Just What Are Business Plans? Elevator SpeechExecutive SummaryPresentation PitchThe Business Plan
15Successful Planning Architecture Great Business Planning should provide…A common architecture for the futureAgreed upon & well understood strategiesA socialized common management languageDetailed tactics with measurementsAbsolute total consensusOwnership & Accountability on everyone’s partResponsibility as a senior manager
20The Five Stages of Growth SuccessGrowthStabilitySurvivalConceptThe question is… Where are you along this path?
21The Five Stages of Growth It is very critical to objectively determine where you areEqually critical to understand that shifts will occur with timeGrowth metrics today will not be the same in two yearsAs a result, you must plan for scalabilityProcesses put in place now that will be cost effectivePeople put in place now who can expandThis becomes an overall benchmark of where you are along your planning horizon
22The Five Stages of Growth SuccessGrowthStabilitySurvivalConceptPositive cash flow“A” level managers hiredStrategies locked downTactical plans in placeRepeatable processesWhat this really means is…There must be metrics at every stageBusinesses must reach Stability at a minimumIn order to succeed every business must grow
27The Classic Problems of Product Adoption … Tip:The Dreaded GAP eats resources & slows progress.Critical decisions on pricing, protecting marketing resources and optimizing SalesIt’s easy to find these people. The question is whether your product gets defined by themContinue to ask whether they represent the true customer? Make sure that you’re focused on the E MajorityNeed to be making critical decisions about extending product life and new product design to repeat the curve.• Low touch • Spend very little • Increase prices
28A Business Planning Architecture simpleA Business Planning Architecture
29A Business Planning Architecture simpleA Business Planning Architecture
30What’s included? 7-9 Sections… Executive Summary Introduction to the businessDefinition of products & servicesOverview of marketsOverview of sales & marketing plans6. Overview of products and roadmap7. Summary of manufacturing & operationsManagement team biosFour pages of financials
35Writing a plan is tough work ! VeryWriting a plan is tough work !It requires disciplined balanceIt’s visionary, but logical.It’s financially perfect, but flexible.It’s for today, but also for 3 to 5 years outIt’s a formal Plan, but it’s easy to read.It’s creative, but it follows The Rules.
37The Traditional Business Plan… An Executive Summary7-9 sections20-30 pages with financialsProvides clear detailsBrings out the richness of the business idea.Details the market opportunity & complexityDetails the business and sales models
38What’s included? 7-9 Sections… Executive Summary Introduction to the businessDefinition of products & servicesOverview of marketsOverview of sales & marketing plans6. Overview of products and roadmap7. Summary of manufacturing & operationsManagement team biosFour pages of financials
42Don’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?VisionStrategiesTacticsBusiness Plan Focus
43Don’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?
44Classic Product Adoption Life Cycle… It would be wonderful if this really happened !
45Building a Solid Business Plan Growth is Never a Straight Line
48What’s included? 7-9 Sections… Executive Summary Introduction to the businessDefinition of products & servicesOverview of marketsOverview of sales & marketing plans6. Overview of products and roadmap7. Summary of manufacturing & operationsManagement team biosFour pages of financials
49The Financial Section… What Professional Investors Expect Lots of numbers is not the answer !
50The 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?
51Business Plan Financials … Present the punchline, know the detailsAverage selling price per unit, average cost per unitCustomer payback periodRevenue per salesperson; revenue per customerDays Sales Outstanding and Days Payable OutstandingOverall revenue per personComponents of cost as a %, (material, labor, & OHD)Industry metricsCompensation plans/ key manager salariesExhibit confidence & passion, show humilitySell the 5 year plan, deliver on a solid 6 month planHide a few rabbits, you’re likely to need them
52Assembling a Bottoms-Up Plan 80 % of your effort should be spent on the top lineDefine the market opportunityrevenues, potential customers, units availableProject an achievable penetration rateWhat is your go to market plan?RevenueASP per unit – consider product cost and distributionDepict the economics surrounding a single saleHow will the customer measure ROI?What is the economic impact to you? Price, cost, futures?Define the model and scale it!
53Assessing Your Margins… Gross margin plan must be bottoms upLabor, Materials, OverheadOperating costsBenchmark whenever possibleBuild manpower plan functionallyCompensation & benefits will represent 70% of costsSo plan headcount carefullySpend a modest amount of time on the remaining costsCash flow is all about timingPlan to pay fast & collect slow, execute the opposite5353
54Forecast Content / Format Investors expect to see…Five-year summary projectionsFull, cohesive set of financial statementsStatements should correlateChanges in each statement should agreeStatements that are supported by monthly detailUntil breakeven point / profitability,Then quarterly for two years and yearly thereafterList of major assumptions
55Building 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 restraintLimit capital expenditures (consider renting / leasing)Save money for marketing and selling expenses.
56Building Assumptions & Projections Statement of Cash Flows…Consider level of funding required to achieve all milestonesMirror timing of funding requirements as stated in planInvestor focus:Cash breakeven and periodic need for additional fundingVery important to make realistic forecast so that initial funding request covers capital needs until critical milestone achievement
57Sensitivity 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?
65Where to go for more information? Kauffman.orgEntrepreneurs.orgSBA.govSuccessful entrepreneurs in Providence & BostonTypically volunteer time to young entrepreneursTypically organized around universities and not-for-profits
66Thanks… email@example.com 617-504-4222 March 26-28th Sales Management Boot Camp