1. Business Plan Preparation College of Business Administration University of Central Florida Business Plan Preparation College of Business Administration University of Central Florida

2. Business Models 2

3. Determinants of Performance

4. What Creates a Successful Business Model? 4 Customer value Scope Pricing Sources of revenue Connected activities Capabilities Implementation Sustainability

5. Critical Business Model Questions 5 Component of Business ModelQuestion for all Business Models Customer ValueIs the firm offering its customers something distinctive or lower cost than its competitors? ScopeTo which customers (demographic and geographic) is the firm offering this value? What is the range of products/services offered that embody this value? PricingHow does the firm price the value? Revenue SourceWhere do the dollars come from? Who pays for what value and when? What are the margins in each market and what drives them? What drives value in each source?

6. Critical Questions for a Business Model 6 Connected Activities Which set of activities does the firm have to perform to offer this value and when? How connected (in cross section and time) are these activities? ImplementationWhat organizational structure, systems, people and environment does the firm need to carry out these activities? What is the fit between them? CapabilitiesWhat are the firm’s capabilities and capability gaps that need to be filled? How does a firm fill these capabilities gaps? Is there something distinctive about these capabilities that allows the firm to offer the value better than other firms and makes them more difficult to imitate? What are the sources of these capabilities? SustainabilityWhat is it about the firm that makes it difficult for other firms to imitate it? How does the firm sustain its competitive advantage?

7. Business Model Dynamics 7

8. Generic Strategies and Complementary Assets

9. Who Profits from Innovation?

10. Appraising a Business Model

11. 11

12. Appraising a Business Model 12

13. Elements of a Successful Business Plan

14. Agenda Twelve Steps to a Successful Plan Twelve Components Step One – Assess Feasibility

15. Elements of a Successful Business Plan Executive Summary Company Overview Product Plan Industry/Marketplace Analysis Marketing Plan Operations Plan Development Plan Management Financial Summary Offering Appendices  5-yr P&L  5-yr Balance Sheet  5-yr Cash Flow  1-yr monthly CF  Other support docs

16. How to Write a Plan?

17. IterativeApproach Iterative Approach

19. Step One – Assess Feasibility Quick Concept Analysis Bring all members of team up to speed Review critical plan components Identify missing information / research

20. Industry and Marketplace Analysis

21. Agenda Industry and marketplace analysis  Industry analysis  Marketplace analysis  Customer analysis  Competitor analysis Product/service description

22. Industry and Marketplace Analysis Overview of industry and marketplace  Trends, dynamics, problems, opportunities  Demonstrate need or hole in marketplace  Show how trends lead inevitably to your concept Tone of dispassionate analysis  Arms-length viewpoint, outsider looking in Not the place to describe your concept or firm  This is not where you present your market strategy

23. Organization of Analysis Section Industry Analysis Marketplace Analysis Customer Analysis Competitor Analysis

24. Conceptual Picture Your Industry Your Marketplace Buyers Sellers You X Save for Marketing Plan

25. Industry analysis Overview of industry organization  Pure competition, oligopoly,.. Focus on major and important trends Identify disruptive technologies (if any) Porter analysis is a good exercise  May or may not include in plan

26. Industry Questions How do we define our industry? How is the industry segmented? What are current trends and important developments? Who are the largest and most important players? What problems is the industry experiencing? What national and int’l events influence our industry? What are growth forecasts?

27. Marketplace Analysis Define and describe your marketplace  Niche, geographic area, subset of larger industry What’s happening in your market? Network! – talk with the marketplace  Customers, competitors, vendors, suppliers, salespeople, …  Chambers of commerce  Industry trade groups

28. Marketplace Questions How do we define our marketplace? How large is it and how fast is it growing? How is our marketplace segmented? What companies currently service this market? What trends are important in our marketplace?

29. Customer Analysis Identify current buyers in your marketplace  Segment these customers  What “problems” are not being solved?  What needs are not being met?  Which customer segments are currently ignored? Talk with current buyers!

30. Customer Questions Who are the traditional customers in this market? How is the market segmented? What motivates buying decisions? What channels of distribution are used? What channels are ignored? In what ways are customers dissatisfied with current offerings in the marketplace? What customer needs are currently unmet by the market? What emerging customer groups are being ignored?

31. Competitor Analysis Identify current sellers in your marketplace  Niche and focus  Target customers  Strengths and weaknesses Talk with current marketplace sellers!  Sellers themselves  Vendors  Customers Competitive Matrix Comparison

32. Competitive Matrix

33. Competitor Questions Who are current sellers in the marketplace? What are the attributes and characteristics of these sellers and their products/services? What is their size, location, target market, and other important characteristics? For their products or services, identify price, quality, features, distribution, and other important attributes. What problems and concerns to customers have with these sellers?

34. Product/Service Description Introduction Description  What is your product or service? Describe carefully. Market comparison  Why is our product or service unique or better?  What problems does it solve for customers? Proprietary rights (if any) Stage of development (brief) Use this section to sell your concept

35. Product/Service Description 35

36. Product/Service Summary Introduction Write an evocative paragraph that attractively presents your product or service Entering Hill’s Kitchen, customers are engulfed by the aroma of warm, hearty soups and freshly baked breads. They relax to music and peruse our menu of original gourmet recipes and freshly baked breads. A friendly and knowledgeable kitchen staff person greets them at the counter to offer suggestions and health information, and to take their order. Within moments the customer is served a generous portion of hot, hearty, and delicious Hill’s Kitchen soup. Accompanying the soup is a large slice of freshly baked bread and a fresh fruit choice, all of which can be carried out or enjoyed in our clean and comfortable dining area. In just those few brief moments, Hill’s Kitchen has served another healthy and delicious meal, and satisfied yet another customer.

37. Product or Service Life Stages Death DiscoveryDifferentiation Optimization Retrenchment

38. Differences Between Services and Products Products are generally tangible, services intangible Services are created and delivered at the same time Services cannot be inventoried Services are highly visible to consumers Some services have low barriers to entry and exit Location is often important to service design, with convenience as a major factor Service systems range from those with little or no customer contact to those that have a very high degree of customer contact Demand variability alternately creates waiting lines or idle service resources

39. Differentiation Road Map Core Benefits Tangible Benefits Augmented Benefits Communications What’s it for? What’s it do? Delivery Warranty Installation Time of sale Service After sales Special terms Usergroups Design help Features Packaging Quality Color Size Style Options Timeliness Customize Brand Trademark Bundling Example : Morton Salt

40. Core Benefit  Flavor enhancer, preservative, health Tangible Benefit  Iodize, pourability, granule size, color flavor, packaging, organic, sea salt Augmented  Delivery (restaurant, road dept.), healthy recipes Communication  “When it rains it pours” (girl with umbrella)

41. Company Overview

42. Introduction (1 paragraph)  Name  Geographic location  Legal form of organization Vision Statement Mission Statement History and Current Status Markets and Products Objectives

43. Vision Statement Pithy 4 to 10 word statement of company purpose Expresses the fundamental idea or goal of the firm Use in business plan, advertising, descriptions of business, business cards, etc.

44. Mission Statements What is a mission statement? What makes a good mission statement? Why does the organization exist? What do we do differently? How do we create value?

45. Mission Statements What makes a good mission statement?  Compelling  Inspiring  Clear, measurable objectives  Concise

46. Marketing Plan

47. Marketing Plan Objectives Most important piece of your plan Build on industry and marketplace analysis – define your niche Identify your customers Demonstrate how you will solve problems for customers Describe how you will reach customers – advertising sales Convince reader that there is an eager market for your product or service

48. Marketing Plan Outline Introduction Target Market Product/Service Strategy Pricing Strategy Distribution Strategy Advertising and Promotion Sales Strategy Sales and Marketing Forecasts

49. Introduction Seven sentence introduction 1.The first sentence tells the purpose of the marketing strategy. 2.The second tells how you’ll achieve this purpose, focusing upon your benefits. 3.The third tells your target market – or markets. 4.The fourth, the longest sentence, tells the marketing weapons you’ll employ. 5.The fifth tells your niche. 6.The sixth tells your identity. 7.The seventh tells your budget, expressed as a percentage of your projected gross revenues.

50. Introduction – Example The purpose of Prosper Press is to sell the maximum number of books at the lowest possible selling cost per book. This will be accomplished by positioning the books as being so valuable to free-lancers that they are guaranteed to be worth more to the reader than their selling price. The target market will be people who can or do engage in free- lance earning activities. Marketing tools to be utilized will be a combination of classified advertising in magazines and newspapers, direct mail, sales at seminars, publicity in newspapers and on radio and television, direct sales calls to bookstores, and mail-order display ads in magazines. The niche to be occupied is one that stands valuable information that helps free-lancers succeed, the ultimate authority for free-lancers. Our identity will be one of expertise, readability, and quick response to customer requests. Thirty percent of sales will be allocated to marketing.

51. Target Market Strategy Identify the market niche you will serve Be as specific as possible  Better to be too specific Benefits to target market  What problems do you solve?  What needs do you fulfill?

52. Two Types of Benefits Emotional  Hope, fear, love guilt, greed, convenience Financial  Increased profit, value pricing, save money, payback period

53. Talk to Your Customers Imperative that you talk with customers!  Casual conversations  Interviews  Surveys  Focus groups Identify needs Listen!

54. Target Market Questions What buy now? How get service? Would you be interested in …? Demographics Newspapers, magazines, TV Would you buy? Where would you expect us to advertise? Who do you consider our competition? Other comments? Levinson, “Guerrilla Marketing” 3rd edition

55. Creating New Market Space HBR, Kim & Mauborgne New Market Space What factors might be eliminated that the industry has taken for granted? Eliminate What factors might be created that the industry has never offered? Create What factors might be raised well beyond industry standards? Raise What factors might be reduced well below industry standards? Reduce

56. Product/Service Strategy Describe how the design of your product/service fulfills unmet marketplace needs Differentiate your product/service from the competition Explain why and how customers will switch to your product or service Describe how you will defend your product or service from competition

57. Product Attribute Map Attribute 1 Attribute 2 You Competitor 2 Competitor 3 Competitor 1

58. Pricing Strategy Describe and justify your pricing strategy Provide evidence that your target market will accept your price Position your strategy relative to current and potential competition NOTE: Low price often (usually) is NOT a good strategy for a startup!

59. Advertising/Promotion Describe how you will communicate with current and potential customers Advertising Public relationsPersonal selling Printed materialsOther means of promotion Explain why this be strategy is most effective in reaching your target market Note: See Guerrilla Marketing

60. Distribution Strategy Explain how you will deliver your product or service to your customers  How will your customers acquire your product or service Describe and justify the distribution channels you will use Describe how you will gain access to your planned distribution channels

61. Sales Strategy Describe to whom you must sell your product or service (not always obvious) Explain how you will “sell”  An internal sales force  Manufacturer's representatives  Telephone solicitors Describe how you will support your sales effort  internal staff  service operations

62. Goals for Marketing Plan Compelling “story” that there is a need in the market Need flows logically from industry analysis Product/service designed to fulfill market needs Advertising, price, distribution, and sales all flow logically, convincingly from characteristics of the market “WOW! What a great idea! I wish I had thought of that…”

63. Management Team

64. Management Company Organization Management Team

65. Management Company Organization  Organizational structure  Ownership structure  Board of directors/advisors

66. Management Management Team Key managersDuties and responsibilities Unique skillsCompensation Planned additions to the team

67. Operations Plan

68. Operations Strategy Added Value How will we use operations to add value for customers in our target market? Operations Emphasis How will we win in the marketplace on the dimensions of cost, quality, timeliness, and flexibility? Which dimensions will we stress and which will we de-emphasize? What comparative advantages do we have with our operational design?

69. Operations Plan Scope of Operations Make vs. Buy – What will we do in-house and what will we purchase (make vs. buy?) Why does this make sense for our business? Partnerships – What will be our relationship with vendors, suppliers, partners, and associates? Personnel – What kind of people will we need to hire?

70. Operations Plan Ongoing Operations Execution  Describe ongoing operations  Specific to your business – hard to generalize  What will you be doing on a day-to-day basis? Critical success factors  Key performance indicators Include detail in an appendix, as necessary.

71. Development Plan “Welcome to the Graveyard of Good Ideas”

72. “Development” Defined What must be done between now and when you open your doors for business (or collect your first dollar in revenue) Development plan may include  Product / service development  Organizational development  Successive products / services  Roll-out strategies

73. Development Questions What work remains to be done? What factors must come together? What are we doing to bring them together? What are the risks our development? Are they technological risks? Cost risks? Competitive risks? How will we mitigate these risks?

74. Traditional Product Development (Old School) Development Implementation Start Concept Freeze Market Introduction Development Implementation StartConcept FreezeMarket Introduction Total Lead Time

75. Flexible Product Development (New School) Specification Design Testing Implementation Stabilization / Ramp-Up Sense the Market Market Introduction Total Lead Time

76. Development Timeline Schedule for development Major milestones Tie-in with marketing plans Major obstacles and mitigation plans

77. Development Timeline Tool for illustrating timeline…