Business Plan Essentials

B i

Pl

101

Business Plans 101

Why business plan?

Why business plan?

„ Framework for identifying the resources

(capital and people) and tactics needed to execute the strategy

„ Focus management’s thoughts on the

business model and execution

„ Get stakeholders on the same pagep g „ Raise capital

Business Plan Essentials

Business Plan Essentials

† First impressions are important † First impressions are important.

„ A well-organized plan is essential for a lender or investor

to assess your financing proposal and to assess you as a business manager.g

† By committing your plans to paper, your overall ability to manage the business will improve.

„ Can concentrate efforts on the deviations from plan before „ Can concentrate efforts on the deviations from plan before

conditions become critical.

„ Will have time to look ahead and avoid problems before

they arise.y

† It encourages realism.

† It helps identify your customers, market area, pricing strategy and the competitive conditions pricing strategy, and the competitive conditions.

Q: Who would read the plan?

A:

Whomever are you going after

† F i d F il & F l (FFF) † Friends, Family, & Fools (FFF) † Professional Angels

† Bank/SBA Loans

† Government Grants (SBIR) † Customers in Value Chain † Strategic Investors

† Strategic Investors † Venture Capital

Investors want to know…

1 Where’s the pain? 1. Where’s the pain?

2. How severe is the pain? 3. What is your solution? 4. Who will buy it? Why?

5. How will you sell it to them? 6. How will you make money? 6. How will you make money?

7. Why are you the best team to do this?

C ti d

Investors want to know…

8. Who else is in the business?

9. How will you stay ahead of them?y y 10. What can go wrong, and what are

you doing about it? you doing about it?

11. How much do you need?

12 What will you do with the money? 12. What will you do with the money? 13. How will the investor cash out?

Typical Outline

† Executive Summary † Executive Summary

† Background (if necessary) † Products/Services † Products/Services † Markets † I l t ti Pl † Implementation Plan † Company Info † Fi i l A l i † Financial Analysis † Appendix

There is no “Right” structure! There is no “Right” structure!

Executive Summary:

The Appetizer

† 1 ( t t 2)

† 1 (or at most 2) pages

† First paragraph – even the first g

sentence – can determine success or failure

† Encapsulates everything that follows † W it it l t

† Write it last

C ti d Continued…

Executive Summary:

The Appetizer

† Include: † Include:

„ What you do

„ Why the market needs ity „ How big the market is

„ How you will sell it

„ Why you are the right team to do it „ Competitive advantages „ Traction „ Traction „ Product status „ Required funding „ Required funding

Background

† O l f l fi ld † Only necessary for complex fields

(like life sciences)

† Written for a layperson

† Must pass the Grandmother Test † Must pass the Grandmother Test † 1-2 pages

Products/Services

† Key questions: † Key questions:

„ What do you make/do? „ How does it reduce pain?p „ How does it work?

„ Why is it the best?

„ How close is it to going to market?

† Keys:

A id i j G d th T t!

„ Avoid using jargon – Grandmother Test! „ Use images if it simplifies the presentation „ 2 3 pages

Markets

† Key Sections: † Key Sections:

„ Market opportunity – where’s the pain? „ Market size

„ Market size

„ About the industry „ Market trends „ Market trends „ Customers „ CompetitionCompetition „ Competitive advantages C ti d Continued…

Markets

† Keys: † Keys:

„ Research, research, research

„ Get some solid verifiable numbers „ Get some solid, verifiable numbers „ Primary research rules

„ 1-2 pages „ 1 2 pages

Implementation Plan

† Sales/distribution/channel plan &

projections projections

† Partners

C ti d Continued…

Implementation Plan

† Milestones – Past and Future † Milestones Past and Future † Risks & mitigation

† Key success factors † Key success factors † 2-3 pages

Company Information

† Desired legal structure † Desired legal structure

† Company history (if applicable) † Management team bios

† Management team bios † Board of Directors

† Advisory Board

† Organizational Chart † Staffing Plan

Financial Info

„ Amount Required & Use of Funds „ Amount Required & Use of Funds

(Spending plan) † Exclude:

„ Summary financials (P&L, cash flows) „ Valuations

Tie Everything Together

Capital

Formation _Website

Legal _{Formation Website}

Sales & Business g Structure Financial Projections Sales & Distribution Strategy Business Plan Marketing & Product Positioning Investor Presentations IP Strategy

Appendix

† Complete Resumes † Complete Resumes

† FAQs – Updated regularly! † Other possible info:

† Other possible info:

„ Customer lists „ Marketing materialsg „ Press releases/coverage „ Product details „ Etc. † Don’t overdo it

Business Plan Essentials

† Find the front of the “curve” † Tell the “story”

† Get the whole team on the same

Traps to Avoid

† D NOT h

† Do NOT hype

† You are NOT unique

† You ALWAYS have competition –

direct, indirect, substitutes

† Patents are NOT perfect † Things WILL go wrongg g g

† The road ahead is NOT going to be

easy

Contin ed

y

More Traps to Avoid

† D NOT it l di † Do NOT write an encyclopedia

† You may NOT be the right person to

th

run the company

† DO have it proofed – by many people † DO the grandmother test

Final Thoughts

† Be prepared to change based on † Be prepared to change based on

feedback

† Goal: To get investors to return † Goal: To get investors to return

your calls

† Assume your plan will fall into the † Assume your plan will fall into the

hands of competitors

† Take ownership be prepared to † Take ownership – be prepared to

defend facts, figures, and strategies

† ALWAYS be honest † ALWAYS be honest

Now What?

† D it lf f t h † Do it yourself from scratch † Do it yourself with software † Hire somebody else to do it † Combination of the above