1. Developing a Business Plan BIT Final Year Project

2. Learning Outcomes n Understand the objectives of the business planning process for a start up venture. n Gain an insight into how to write such a business plan. n Understand what the various audiences who will see the plan will be looking for.

3. Presentation Structure n Business plan overview n Content of a Business Plan

4. Why prepare a Business Plan? n The primary objective of many business plans is to set out a convincing case to secure financing, either internal or external, for the start-up or expansion of a business venture. n However, just as importantly, business plan is a ‘living document’ that should be updated on a regular basis.

5. Useful Websites n www.investni.com - Student Enterprise Awards - Kauffman Fellowships n www.nibusinessinfo.co.uk n www.nisp.co.uk

6. Audience Internal Audience n Self n Management team n Board of Directors n Employees

7. Audience External audience (potential funders). n Banks n Government agencies n Business Angels n Venture Capitalists n Corporate Partners

8. Bank n Banks provide loan capital. n Overdraft, short term, payable on demand. n Business Loan, fixed term. n SFLGS, reduces risk to bank n Key issues: Security, interest & capital repayment therefore not suitable for hi-tech start-up ventures, little security and no early cashflow.

9. Government Agencies n Invest NI, provides grant support. n Business Development n Revenue, Marketing, Management Salary, Preference Shares. n R&D n COMPETE, SMART n Key issues: Additionality, Admissibility, percentage contribution, export focus.

10. Business Angels n Business Angels provide risk capital seeking a return over 5-10 years. n High net worth individual n Probably ‘exited’ from previous venture n Brings skills, expertise and cash. n Key issues: <£100k, ‘hands-on’ role, capital growth.

11. Venture Capital n Investment fund of risk capital, which will seek a return in circa 5 years. n Local funds: Crescent Capital, Enterprise Equity, Viridian Growth Fund (Clarendon). n May bring sectoral expertise, contacts and experience of similar ventures. n Relatively high investment threshold, high fixed costs. n Key issue: >£400k, capital growth, Board seat, focus.

12. Other Funders n Seed Capital Funders: QUBIS Ltd & University Challenge Fund (NI). Basically a VC investing £10k to £100k.

13. Return on Investment n Investors, whether business angels, venture capitalists, banks will all be looking for a return on their investment. n The size of that return and the cost of their money is governed by the risk of the project.

14. Key Elements within a Business Plan n Executive Summary n Background n Corporate Objectives n Product/Technology n Manufacture n Market n Marketing/Sales n Management Team/Structure n Finance/Funding

15. Corporate Objectives This section should set out objectives for 3/5 years: n Financial projections - sales - profits - return on investment n Markets - geographic - market segments n Customers n Products n Management and organisation

16. Product/Technology This section should answer the following questions: n What are you going to make/will there be a product range? n How much will the product cost to produce? n What are the product features/how does it work? n What are the product applications? n What is the R&D plan and cost? n How long/much will it take to get the product to market? n What is novel about your product/IP? n What associated services are being offered?

21. Product Vs Service n A product based business model is scalable; a service based business model is not. n To increase sales in a service business you have to add bodies. n To increase sales in a product business you don’t. n Ideally service based businesses should be profitable from day 1. n Services can be useful in reducing risk during the product development phase.

22. Technology -ve n Unproven technology, this will require a lot of product development, i.e. time and money before there is a product which can be sold. n Frequent problem with hi-tech start-up proposals which can often be ‘technology’ and not ‘market’ led.

23. Technology +ve n Early stage sales, especially ‘good quality’ early stage sales, i.e. blue chip customers who appreciate the technology/product. n Provides an endorsement of technology,especially if the product has been sold to a ‘knowledgeable’ customer.

24. Manufacture This section should answer the following questions: n In-house or sub-contract manufacture? n What is the production process? n What are the plant and equipment requirements? n What is the capital spend and timetable? n What are the production inputs – premises, labour, suppliers, raw materials? n What are the production and quality control procedures?

25. Manufacture Checklist n How will you make the product and what inputs are required? n What plant and machinery is required and what are the costs? n What management and labour skills are required? n What management/quality controls are in place?

26. Market This section should answer the following questions: n What is your target market? n What size is the market and is it growing? n What market segments will you target? n What is the market structure and how does the market operate? n Who are your customers, where, how many, how big, purchasing power? n What are your customers’ requirements and how do your customers buy? n Who are your competitors, where, market share, strengths/weaknesses?

27. Market Research Sources n Libraries – Invest NI, Belfast Central Library, Queen’s, UU n Internet n Published reports n Customers/potential customers n Competitors – annual reports, promotional material, product manuals n Magazines/newspapers n Trade Associations n Companies Registry

28. Market -ve n #1 turn off n Gaining a small % of a BIG number n Plan to achieve 1% of the UK/EU/US etc market within one/two/three years will result in sales of £10m

29. Market +ve n Clear knowledge of the existing marketplace and a ‘channel to market’. n Knowledge of the existing competitors, i.e. who they are and their strengths and weaknesses. n Awareness of the potential end user/customer needs, i.e. what they want and how the existing products/services fall short.

30. Route to Market Checklist n What is the geographic scope of the market: world, Europe, local? n What is the market value in terms of units and value? n How fast is the market growing and where are the opportunities? n Which market segments will you concentrate on & why? n What is your target market share?

31. Route to Market Checklist n If there is no existing market or if the market is being developed, what is the expected take up rate? n How will your company’s entry affect the market? n What is the market structure? n What are the key customer requirements? n How will you meet these?

32. Route to Market Checklist n Who are your major competitors? n What are their strengths and weaknesses? n What is their pricing, profitability etc? n How will they react to your entry? n What are your competitive advantages?

33. Bottled Water – the UK market n 2001 – 1.6 billion litres; £900 million n 12% growth on 2000; £1.1 billion forecast for 2003 n 10-12% growth to 2006 => 2.6 billion litres n Average consumption/person/year – UK 26 litres; French 139 litres; Italians 183 litres; Euro average 93 litres n 40+ producers Top five producers = 52% of market n Customers – supermarkets (50% of total); independent grocery outlets; petrol station forecourts; CTN’s; sandwich bars; kiosks; department stores; variety stores;on-trade (pubs, restaurants, hotels); off licences n End customer needs – healthier lifestyles; convenience; working lunches; hot(!!) summers n Own label; branded; packaging and labelling n Planned; impulse n Spring; mineral; flavoured Still 82%; sparkling 18% n End market segments – young professionals, especially females; children; sports people; housewives; office workers; diners; drivers

34. Marketing/Sales This section should answer the following questions: n What are your target market segments? n What are your competitive advantages? n How will you sell to your customers? n What promotional activities will you undertake ? n What prices will you charge/discounting? n How will you transport your products? n What customer service will you offer? n Will you brand your products? n What packaging and labelling will be used?

35. Marketing -ve n Waiting for the telephone to ring. n Developing the ‘perfect’ product. n Note: only sales generate income; everything else is a cost.

36. Marketing +ve n Knowing your customers and markets. n Being proactive, persistent and professional. n Note: customers will only buy from suppliers they believe will have a long term market presence.

37. Marketing Checklist n Who are your customers and what are their needs? n What are your competitive advantages? n How will you sell and support that sales effort through promotional activities and customer service? n What pricing and distribution strategies will you use?

38. Management Team/Structure This section should answer the following questions: n Who will execute the plan and deliver the projected returns? n How will the various individuals fit together/what roles will they play? n What are their strengths? n What are their weaknesses and how will they be addressed? n What is the balance of company ownership? n What is the organisational structure? n What are the management control systems?

39. An ‘A’ Quality Team n Investors will invest in an ‘A’ quality team and a ‘B’ quality product, but not the other way around. n An investment decision is based on many things but one of the main elements is the combination of individuals who make up the team

40. Management -ve n ‘All conquering hero’. n Not prepared to acknowledge areas of weakness. n Note: hi-tech start-up businesses have a certain level of business naivety.

41. Management +ve n ‘Previous’. n Substantial previous business experience, possibly specific experience. n Ability to bring together a strong team and address areas of potential weakness.

42. Management Team Checklist n Who are the key team members? n What are their skills and experience? n What are their roles and responsibilities? n What are the gaps in the team? n How are you going to plug those gaps?

43. Finance n Cash flow n Balance Sheet n Profit & Loss Account Note: Financial forecasts within start–up venture business plans are heavily discounted.

44. Cashflow

45. Balance Sheet

46. Profit & Loss Account

47. Project Costs/Source of Funds

48. Finance -ve n ‘Hockey stick’ projected sales growth.

49. Finance +ve n Cash investment from promoters. n Cash investment from other ‘knowledgeable’ investor.

50. Raising Funding n 3Fs, Friends, Family & Fools n Self, from your own resources n Revenue generated n Grants n J/V or Commercial Partner n Business Angels n Venture Capital

51. Finance Checklist n What is the project cost? n How will the project be funded? n When will income begin? n What are the costs? n When will profitability be achieved? n What is the level of profitability?

52. Executive Summary This section is critical, it may be the only part of the plan that an investor reads! n The purpose of the plan n The business opportunity n The market the product is aimed at n The competitive advantages n The management team n Financial profile

53. Executive Summary Checklist n What is the business name and activity? n Who are the key contacts? n What is the scope of the business and the market potential for its products? n What are the competitive advantages? n What resources (human & financial)are needed for the venture to succeed? n What skills and expertise do the team bring?

54. Appraisal of the Business Plan n Management team: capability, experience and balance. n Market: size, potential for growth, competitive nature. n Finance: funding, realism of projections and profitability. n i.e. Man/Market/Money n Ideally have some initial sales