Startup Essentials Peter Russo

2 Today’s Topics Business Plans Who Needs Them? How to Develop One Good and Bad Plans Business Models

3 Who Needs a Business Plan? … And Why? Some Good Ideas …And Some Bad Ones!

4 To Successfully Launch a New Business......Requires Identifying and Bringing Together Necessary Resources Human - Technological Physical - Financial We Do This Through a Business Plan

5 What Is a Business Plan? It’s a Process, Not a Product It’s Written to Develop a Successful Business Not Just to Raise $ Should Be Used & Updated as a Mgmt Tool Most Business Failures Can Be Prevented … If You Have a Good Business Plan

6 Why Do Startups Fail? How Often Can We Predict?

7 Who Do We Write Plans For? Resource Providers Might Be Investors Might Be Internal Sponsors Might Be Strategic Alliance Partners Always for Your Team! Many Entrepreneurs Have Multiple Versions

8 What Does the “Product” Look Like? Executive Summary (1-2 pages) It’s All They’ll Read Must Communicate and Capture Attention Industry & Market Opportunity Marketing Plan Product / Operations Management Team Financials Critical Risks Timetable / Milestones Exhibits

9 What Are They Looking For? What’s the Problem? How Big Is It? How Will You Solve It? You and Who Else? Do I Believe You Can Do It? The TEAM! Will I Make $ By Helping You? Financials Exit Strategy

10 So, How Do I Develop a Business Plan ? There Is No “Right Way” The Following Generally Makes Sense

11 My 10 Step Process (1-4) Start With “Why Am I Doing This?” Need To Define a Good Outcome to Achieve It Try To Answer the First 2 Questions “What Problem Am I Solving” “What Is My Solution?” Outline Your Market Analysis What Do I Know? What Do I Wish I Knew? Begin Talking to People Advisors Potential Customers Friends

12 My 10 Step Process (5-7) Define Your Business Model Both Revenues & Expenses Consider Alternates (List Them) Try to Begin a Rough Spreadsheet Identify Critical Success Factors Begin Formal Market Research What Questions DO You Need to Answer? Where Can You Find This Information? Consider Primary & Secondary Data List the Resources You Need to Succeed Human, Physical, Financial, Etc.

13 My 10 Step Process (8-10) Outline the Business Plan What Parts Can You Begin to Write? How Much More Info Do You Need? Define A Successful Scenario What Has to Happen? What Do You Need to Do? Simulate in Your Model Write the Plan …and READ It! Get Some Feedback Revise and Update

14 How Will I Know When I’m Done? You’re NEVER “Done”! The Environment Is Constantly Changing You Are Constantly Gaining New Information Your Capabilities Are Changing How Do These Things Change Your Plan?

15 What About BP Software? I Do NOT Recommend Often Gets In the Way of a Good Process It’s the Journey, Not the Destination! Plans Tend to Look “Canned” It’s YOUR Story! Can Be Helpful to Collect & Organize Thoughts

16 Good & Bad Business Plans What Do Investors Like to Hear? What Tends to Turn Them Off?

17 Ingredients of a Successful Plan Vision Commitment Strategy Time to Market Team Passion Customer Testimonial Competition Capital Need Milestones (What It Takes to Create Successful Enterprises – TiE)

18 What NOT to Do in a BP What is a “BAD” Business Plan? What Are Some of the Common Mistakes We See?

19 What is a “BAD” Business Plan? One That Doesn’t Meet Its Objectives Fails to Help Launch a Successful Business Fails to Identify Key Obstacles / Problems Fails to Attract Interest: Of Investors Of a Team Of Partners Of Other Resource Providers

20 First Clue That You’re Reading a “Bad Plan”… You Don’t Want to Keep Reading! It Doesn’t Capture Your Attention It’s Hard to Get Through You Just Don’t Get It!

21 Most Common Errors in a Plan Lack of Understanding of Value Proposition …Or Significantly Overstates It Lack of Understanding of Customer And How to Reach Them Lack of Focus Underestimating Inertia Underestimating Effort & Resources Required

22 Most Common Errors in a Plan (Cont’d) Failure to Identify Competition Lack of a Competitive Advantage Unproven Team Lack of a Robust Business Model Inconsistent Facts Inconsistent Logic Over-Optimistic Financial Projections

23 Understanding Your Business Model What IS it? How to Look at It What to Do About It

24 What IS a Business Model Description of the Key Decisions and Trade Offs That Define a Business How Do / Will We Make Money? Answers the Questions: How Will We Charge for Our Product/Service? Who Will We Charge? How Will We Sell? What Processes Will Be Managed Internally? Outsourced? What Critical Factors Will Define Our Success?

25 It All Starts With a Value Proposition How Do We Help a Customer Get an Important Job Done? Value Proposition Becomes More Compelling When: Job Is Important to Customer Customer Dissatisfaction Is High Our Solution Is Significantly Better Than Alternatives Look for Situations Where: Current Solutions Don’t Have Real Job in Mind We Can design a Solution That Is a Better Fit

26 …Then We Need a Target Customer …and a Way to Get to Them Distribution Channel …and a Way to Deliver Value to Them Value Configuration

27 VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIP TARGET CUSTOMER DISTRIBUTION CHANNEL VALUE CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS gives an overall view of a company's bundle of products and services portrays the network of cooperative agreements with other companies describes the channels to communicate and get in touch with customers describes the arrangement of activities and resources explains the relationships a company establishes with its customers sums up the monetary consequences to run a business model describes the revenue streams through which money is earned describes the customers a company wants to offer value to outlines the capabilities required to run a company's business model INFRASTRUCTURECUSTOMER OFFER FINANCE Putting it All Together

28 Revenue Sources What Are the Revenue Streams? Single Multiple (Different Products / Services) Interdependent (Razor Blades / Razor) Loss Leader Revenue Models Subscription / Membership Volume or Unit-Based Advertising-Based Licensing & Syndication Transaction Fee

29 Analysis of Revenue Define Revenue Streams If Interdependent or Loss Leader: Likelihood of Realizing the Attractive Business Which Model(s) Will We Use What Behavior Is Likely to Result? Who Is Most Likely Attracted to Us ? Do We Have Other Options? How Long Does It Take to Realize Cash Flow?

30 Analysis of Costs Cost Drivers Are They Primarily Fixed, Variable, etc. How Much Volume Can Fixed Cost Base Support? How Will Drivers Change Over Time? Cost Centers What Are Our Largest Cost Centers? Can Any Offer Us a Strategic Cost Advantage? Remember: This Is About How We deliver Value to Our Customers!

31 Investment Size & Timing How Much Cash Will We Need in Total? When? When Does Cash Flow Turn Positive? When Do We Reach Cash Break-Even? Then What?

32 Final Step – What Do We Want to Be When We Grow Up? Why Are We Doing This? What Constraints Do We Operate Under? What Alternatives Do We Have? To Reduce Cash Required To Speed Up Breakeven … Or Time to Market To Minimize Risk What Are the Tradeoffs?

33 Local Diagnostics Startup