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Al Fikra, Qatar's National Business Plan Competition 2014 Business Plan Workshop January 2014 Prepared by Professor George White and S. Thomas Emerson,

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Presentation on theme: "Al Fikra, Qatar's National Business Plan Competition 2014 Business Plan Workshop January 2014 Prepared by Professor George White and S. Thomas Emerson,"— Presentation transcript:

1 Al Fikra, Qatar's National Business Plan Competition 2014 Business Plan Workshop January 2014 Prepared by Professor George White and S. Thomas Emerson, Distinguished Career Professor of Entrepreneurship at Carnegie Mellon University Qatar

2 Business Plan Content 1.Executive Summary 2.The Problem & Opportunity 3.The Business Model 4.Underlying Magic 5.Marketing and Sales 6.Competition 7.Product Development & Deployment 8.Management 9.Financial Projections 10.Current Status

3 Executive Summary This document describes the creation and operation of the company would like to create. Everyone knows that the company doesn't yet exist, or if it does, it hasn't achieved the form described in this document. This document describes your wishes and your forecasts. It is your best estimate of what you could create in the next few years. Most businesses start out to serve an unmet need. You can express that unmet need as and an opportunity or a problem. You must point out that you have a business concept to serve these unmet needs with new technology or in some other way to reduce costs or improve quality over potential competitors.

4 The problem/need/opportunity the company intends to address is …. The solution the company intends to deliver is …. Our mantra is (the purpose that motivates your employees). Our vision is (why the market needs your business) Our mission is (what benefits you deliver to your customers) Our customers will be … Our business model is …. (We will make money by…) Our competitive advantage:…. we have (knowhow, intellectual property, etc. that our competitors do not …) What our product/service does: Typical usage examples are … Status: (We are currently just two people in a garage… but we soon will be thousands of people on the Internet with global reach.) Executive Summary should contain


6 The Business Model Canvas The business model is a description of how your company will make money, and the business model canvas is a breakdown of the most obvious factors that influence how your company will make money. You should go down the checklist below of 9 questions to show the reader that you have considered these important factors. Try to answer each question in less than 3 or 4 sentences. This list of 9 items is standardized and described in a textbook.

7 The 9 items for the Business Model Canvas 1.Key activities: List the things you expect to be your core competencies, things you will do really well. 2.Cost structure: what or who controls your costs? 3.Key partners: which partners and suppliers do you need to rely on? 4.Revenue streams: what are customers really willing to pay for (recurring or per transaction) 5.Key resources: what resources/assets are essential for your business? 6.Channels: how does each customer segment want to be reached? 7.Customer relationships: what relationships are you establishing? Personal? Automated? Acquisitive? Retentive? 8.Customer segments: which customers and users are you serving? What jobs do they really want to get done? 9.Value propositions: what are you offering customers and suppliers?

8 Marketing and sales are two different operations, but often confused. Marketing is the study of the characteristics of groups of potential customers and mechanisms for reaching groups of customers. On the other hand, “Sales” is the day-to-day mechanics of reaching out to customers and actually selling product. In this section you discuss the characteristics of the community of buyers of your product. You discuss how many of them there are and how much each is willing to pay you for your services. You also discuss the mechanisms for four delivering your products or services and estimate the costs of advertising and promotion. Marketing

9 It is best to include two sub-sections in this part of the business plan: – Economics of the business – How you make money, including pricing, which is governed by the value perceived by the buyer and competitive offerings, and cost for the seller, which together determine the profit margin. – Economics for the customer – Discuss return on investment the customer receives. Note that a good business transaction is good for both buyer and seller, so both of the above should paint a positive picture. Marketing Section must include

10 Sales You also discuss who will be involved in selling the product, how much each salesperson will be paid, how much each salesperson will earn. How much will be salary and how much will be incentive-based percentages of sales. You discuss costs of recruiting, training, maintaining and upgrading the staff involved in selling. Discuss the method of payment (cash, credit/debit card) and who handles the money.

11 Competition In this section you identify who could be a competitor in the future. No one in their right mind will start a business that has an existing business doing exactly what you propose to do, unless you have really new strong proprietary technology and/or enormous wealth. Startups usually don't have either of these, so you don't want to enter a market where head-to-head competition already exists. Let's presume you don't have entrenched competitors. Even when you don't have entrenched competitors, it isn't sufficient to say "no competitor exists". In this section you describe who could become a competitor. So you want to identify companies that are in related businesses that could migrate over into the area you propose to serve.

12 Operations “Operations” refers to the day-to-day mechanics of running your business. You basically describe the flow of material, products and services that go through your company on a daily basis. You need to identify the principal activities and the people responsible for delivering them. This section also includes any nonrecurring startup operations required to launch your business. If it involves hardware, there will be a design phase, a sourcing phase, and ongoing product improvement operation, and a schedule for receiving completed components from hardware vendors, and delivery to the point-of- sale or installation.

13 Financial Projections The financial section is the most challenging section for startup. Here you have to be quantitatively accurate in estimating all the costs for starting up the business as well as the ongoing cost of operation. It's vital that the financial projections show that the company throws off enough cash to pay back investors handsomely and/or expects to go public in less than 5 years. Mergers and acquisitions are also a respectable way of generating "liquidity" for investors. In any case, you must mention the mechanism whereby investors will be repaid. It is practically essential to show graphically the change in headcount, expenses and income for the first five years. Usually you would have formal cash flow, P&L and balance sheet statements, PRESENTED GRAPHICALLY in this section. (Put your spreadsheets in an appendix to the business plan.)

14 Financial Projections (contd.) You should show yearly results for the first five years, and monthly charts for the first year. In other words you need an excel spreadsheets showing P&L with 13 columns (the first column for the labels, followed by 12 columns for the 12 months). (You need to print this in landscape mode, with the columns running horizontally.) In addition you need a spreadsheet with six columns (the first column for the labels, and the following five columns for years 1, 2, 3, 4 and 5. In addition you need line chart showing both income and expenses for the first five years of operation. In addition, you need a projected distribution of ownership after the first year of operation. In other words, how will the ownership in your company be distributed between investors and employees and founders after the first year of operation.

15 Management Team All startups should have a Board of Directors. Investors will have seats on the Board. The Board will meet monthly for the first year, quarterly for the second year, and eventually annually once the company is up and running smoothly. The function of the board is to appoint a CEO, to agree on the business plan of operations, and to vote on the compensation of the senior executives in the company. In a startup, most important thing is to state that you understand the board needs to exist, that you anticipate recruiting certain types of businessmen to board, how many board members you'll have, what their compensation will be (usually it's nice to give them a small number of stock options), and cover their expenses to attend board meetings.

16 Management Team: Organization Chart The business plan should include short bios of the key players, with full CVs in an appendix. It is important to show MOTIVATION AND COMPETENCE, which are more important in a startup than experience. Experience is VERY IMPORTANT in those recruited to serve on the Board of Directors.

17 Current Status Here you simply state what the plans are for the current founders. If you are students, when would you be available to actually join the company full-time. If you don't plan to join the company full-time, what role will you play. Beyond that, if the company is actually been formed, state that. If you have created a website, state that and show some pictures of your webpages.

18 How investors will receive payback and profit This section usually focuses on the “liquidity event” in which a company goes public and an equity investor can start trading their stock. In other words, investors who gives the company money for which they receive stock will at some point want to sell their stock. Unfortunately, there is usually nobody who wants to buy the stock in a startup “private” company. However, when a company is able to go “ public”, owners of the company shares can start selling their shares on public exchanges. This is the first opportunity most investors get to transform their shares back into cash. Therefore when asking for an investment, a company needs to more or less promise to go public at some point so the investor can get your money back. This section needs to state that.

19 However, if the company never gets big enough to go public, investor will want to have other mechanisms to get payback plus profit. This could be accomplished by my having the company pay dividends to shareholders at some minimal rate that guarantees the investor will receive all his money back plus profit. If this is the plan, it must be stated so in this section. The third way of paying back investors is through “mergers and acquisitions”. If the startup gets acquired by a publicly traded company, the initial investor will receive shares in a publicly traded company which means he can sell his shares and get his money back. If this is the most likely payback mechanism, you need to state this. How investors will receive payback and profit


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