Business Plans Simonyi Center

Purpose of Business Planning Provide a roadmap for success of the company Force the entrepreneur to formalize their vision and do the research to answer hard questions about the company, its industry and the competitive landscape Set goals, strategies, policies and procedures for the firm A 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 reach What market(s) . . . with What pain . . . that need What product(s) . . . distributed through What channel(s) . . . against What competition . . . with What pricing and packaging . . . to deliver What 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 Summary Customer Need and Business Opportunity Business Strategy and Key Milestones Marketing Plan Operations Plan Management and Key Personnel Financial 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 customers Business 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 Situation Basic need and company solution Ideal customer and value proposition Objectives Marketing Strategy Market segmentation and size of markets Channels of Distribution Strategic Partners

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

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 Met They Find Customers and Suppliers Who Are Weaker Than They Are They Get More Out of Less They 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 Management and Key Personnel 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 Financial Projections 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, continued OPPORTUNITY 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, continued How 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 Marketing Strategy Development Business Analysis Product Development Concept Development and Testing Market Testing Commercialization Idea Screening Idea Generation

Market Development Strategy Checklist Target Customer Compelling Reason To Buy Whole Product Partners and Allies Distribution Pricing Competition Positioning Next Target Customer