Slide 1

Report
The Full Business Plan
Paul Kirsch
Samuel Zell & Robert H. Lurie Institute
For Entrepreneurial Studies
January 20, 2006
Parts of a Coordinated Message
Executive
Summary
Core
Idea
The Message of your
Elevator
Pitch
Business Idea
Power
Point
Business
Plan
2
Parts of a Coordinated Message
• Core Idea
– 5 Breaths
• Executive Summary
S.S.D.D.
– 2 – 5 pages generally accepted
• PowerPoint
– 8 – 15 minutes
• Elevator Pitch
– 1 – 3 minutes
– 3 minutes for MBC on 12/9
• Full Business Plan
Same
Stuff,
Different
Delivery
–- 20
15pages
pages++up
Financials
to 10 pages appendices
3
The Business Plan
• Always a work in progress
– About the process NOT the document
• 20 pages, plus appendices
• Ties everything together
• Offers clear linkage between ideas and
vision and business entity to bring them to
life
4
Understand Your Audience
• Investors
FFF | Banks | Private investors | VCs | Grantors
• Business partners
Beta customers | Suppliers | Distributors
• Management team
– Current – talking from the same script
– Potential – need to understand business
5
B.P. includes Executive Summary
• What is it?
• Market Need or
Pain, Size
• Value Proposition &
Business Model
• Competitive
Advantage
• Competition &
Industry
• Products &
Services
• Sales & Marketing
• Operations
• Management
• Risk Mitigation
• Action Plan,
Milestones
• Key Financials
• Exit Strategies
6
What Is Your Idea & Why Now?
• Be clear and complete
• Plain English but use technical language,
schematics where necessary
• Origin of the idea: Paint a picture
– Linear development or disruptive?
– Improvement or new?
– Evolutionary or revolutionary?
• Connect timeliness of idea to market “pain”
• Staying power and permanence
7
Market Need or Pain, Size
• What is the pain in the market
• Market need drives idea, the product fills the
need
– Products do NOT create a market
• Quantify “pain” in terms of true market
opportunity
– Just how “big” is this opportunity?
• What are potential customers doing now?
– A current solution DOES exist
• Connect the listener to the problem
9
Market Need or Pain, Size
• Which product, products segments are in the
initial focus and planning horizon?
– Three to five years is acceptable
• Describe your customers, segments:
– Geographic
– Demographic
– Psychographic
– Business, economics, SIC codes
•http://www.osha.gov/pls/imis/sicsearch.html
10
Value Proposition & Business Model
• How valuable is your idea to your
customers?
• How are you going to extract this value from
the marketplace?
• Be specific. Who else do you need to make
this happen?
• What is the business model? *
11
Value Proposition & Business Model
• What is the business model? *
• *This is really two questions
What do you do?
½ of the Business Model Answer
How are you going to make money?
½ of the Business Model Answer
12
Comp. Adv., Competition & Industry
• What is your #1 competitive advantage?
– Intellectual Property
– Management Team
– Exclusive customer relationships
• How are you going to protect it?
– Being the “first mover” IS NOT a sustainable
competitive advantage
• Who is your competition?
– Porter’s 5 Forces
– Value Chains?
– How will they respond?
13
Products and Services
• Detailed description
• Where in the product life cycle
• Where in the development process
– Other R&D concerns?
• IP protection
14
Sales, Marketing, Management
• How are you going to sell your product?
• What “beta” relationships exist? Why?
• Who are your first prospective customers
• Be realistic, don’t overpromise or oversimplify
• Highlight team’s ability to deliver. Past
success is a good indicator of future
performance
• Be honest about team’s missing skills
15
Operations
• What activities will you be doing?
• Do any operational components deliver key
advantages?
• Important relationships
16
Risk Mitigation
• Commonly explored classes of risk
– Technical
– Market
– Competitive
– Management
– Execution
17
Action Plan, Milestones
• Overview of timeline
• Demonstrates understanding of KEY issues
• Shows that the team knows what is whose
responsibility
– Only items that are your responsibility can be a
milestone
• Easy win: include product launch/first sales
in ANY discussion of milestones
18
Key Financials
• Provide credible financial measures
Sales | Margins | # of Customers | Market share
• Cash flow is king
• KNOW you assumptions
• “The Good, The Bad and the Likely”
• Be realistic, don’t overpromise or
oversimplify
19
Key Financials
• What do you need NOW?
• What are your start-up costs? Estimating Startup Costs
• Working capital is a legitimate use of funds
• Estimate costs and revenues to the best of
your ability
• Allowing a percentage of “cushion” is okay
20
Exit
• Document “ballpark” returns
• Offer feasible exit strategies
• What is “typical” in your industry?
– Acquisition
– IPO
– Management buyout
21
Exit
• Acquisition
– Who?
– How many “who’s”
• IPO
– Recent market track record IPO Monitor
– What performance measures are important?
• Management buyout is not necessarily a
desireable exit
– Dividend payments are viewed similarly
22
This is the content portion of the
presentation
Questions?
23
Other information, advice and
things to keep in mind while
developing your plan
24
Format
• Cover page (not included in page total)
– Company name
– All team member names, and full contact information
for at least team leader
• Body of plan – 20 pages - includes the executive
summary and summary financial data
• Appendices – not to exceed 10 pages
– Include only when they support the findings, statements
and observations in the plan. No new information.
– Judges may not be able to read all the material in the
appendices. Therefore, the text portion must contain all
pertinent information in a clear and concise manner.
25
Format
• Limited to 20 pages, including the executive
summary and summary financial data.
–
–
–
–
Typed, double-spaced
12-point font
1-1-1-1 margins
Numbered pages
• In total, the plan is limited to 30 pages.
• Hard copies of business plans should be
professionally bound.
• Soft copies of business plans should be in a
SINGLE .pdf document
26
To Stand Out…
• Captivating idea with growth potential
• Sustainable competitive advantage
• Strong, core team
• Logical go-to-market strategy
• Sound financial plan
• Don’t give evaluators a reason to mistrust or
disbelieve plan or the authors
27
Typical Pitfalls
• Core idea not linked to market need
• Gross over-simplification of the issues
• No credible go-to-market strategy
• The “1% market share” objective
• Team composition and experience
• Sources and uses of funds
• Unclear role for the audience, investor
28
Challenges
• Many plans are product- or technologycentered rather than market-driven
– FIX: Focus on the real, supported market need
• Many plans are usually written in an
academic style (read: boring)
– FIX: Put your passion for the business in the
plan
29
Challenges
• Many entrepreneurs address preparing the
plan and giving the pitch as a necessary evil
– FIX: Treat “marketing” your company as essential
as “running” your company
– FIX: View these opportunities for feedback as
invaluable instances that will be difficult if not
impossible to duplicate in the “real world”
30
Challenges
• Oft-heard: “no way to do this in 20 pages”
– FIX: Succinct and concise understanding AND
presentation of key issues is paramount
– FIX: View assembly of plan and presentation as
much a communication challenge as it is a
business issue
– NOTE: teams have NO option
31
This is YOUR story
• Infuse delivery with personality and passion
• Not a “right” way to tell the story
• Different aspects of a plan will be
emphasized differently for different types of
businesses
32
½ of the Business Model Answer
• What do you do?
Technology
Raw Materials
Product
Design
Value Proposition & Business Model
Mfg
Marketing
Sales
Distribution
33
½ of the Business Model Answer
• How do you make money?
Can you use a diagram for each of these?
Value Proposition & Business Model
– Retail sales: direct to wholesalers
– Internet sales: direct to customer
– B2B: commercial purchase on terms
– Licensing: per unit revenue, payable (?)
– Consulting: fee for service or impact
– Services: per unit charges
34
Business Model
• Business Model integrates
– Value created for the users
– Target market
•the purpose of the product to those users
– Value chain
– Sharing value across the network
– Competitive strategy
– Specify the revenue generation mechanisms
•cost structure, margins
REF: Open Innovation, Henry Chesbrough © 2003. 35
Value Chain Implications
• Creating and Capturing Value
– Number and power of players
– Amount and type of “value” to be shared
Your
Company
Lower
Tiers
Tier
Ones
OEMs
Dealers
Individual
Drivers
36
Estimating Startup Costs
Working it backwards from the Steady-state numbers:
• Obtain steady state costs (GS&A, etc, as % of sales
from industry data)
• Make costs constant over transition
• Add development costs
• Ramp down develop costs while ramping up operating costs
Sales
Costs
Development
Transition
Modest Growth
Time
38
Top-Down & Bottoms-Up Forecasts
• Top down and bottom up forecasts are
complementary
• One is a reality checks for the other
• Top-down forecasts:
– Usually industry analysts’ worldwide estimates for
a large market, which are then split into segments
by major product group, region or vertical industry
• Bottoms-up forecasts:
– Build up revenue forecasts by defining the key
underlying variables and estimating how they will
change over the next 3-5 years.
39
Top-Down & Bottoms-Up Forecasts
• Are the assumptions realistic & believable
• Market timing & adoption rate assumptions
are critical
• Does the methodology reflect deep
understanding of the target market segments?
• How “close” are the to bottom-up and top-down
perspectives?
40
Mullins’ Assessment
Framework
Market Domain
Industry Domain
Macro-level
Market
Attractiveness
Industry
Attractiveness
Missions,
aspirations,
Propensity
for risk
Ability to
execute
CSFs
TEAM
DOMAIN
Connectedness up, down,
and across value chain
Micro-level
Target segments
benefits and
attractiveness
Sustainable
advantage
REF: The New Business Road Test, John Mullins © 2003. 41
The Critical Success Factors
• Which assumptions are critical to the
success of your business?
• What are the “big levers”?
– Sensitivity analysis
– Typically time (to develop and through the
transition)
– Market size (total sales)
42
Sensitivity Analysis
Low
Value
High
Base Value: $41.67
Base
$Time to max sales
Projected Sales max
Development Costs
COGS
SG&A as % of sales
$10.00
$20.00
$30.00
$40.00
$50.00
14%
$60.00
$70.00 12%
11%
25%
3%
-1%
40%
4%
5%
3%
5%
36%
35%
35%
25%
12%
Sales acquisition timing
14%
Research Income Growth
-2%
DSO
58
10%
1%
2%
45
Inventory Days
40 32
DPO
40 50
50
33
45
43
Next Session:
Presenting Your Business Plan
February 3, 2006
12:00 – 1:30
E0540

similar documents