Guidelines Business Plan

(1)

Guidelines

Business Plan

(2)

Jurors evaluate business plans and provide feedback – entrepreneurs in 9 areas and VCs in 4 areas

Elements of evaluation

Executive Summary Product Manage- ment team Marketing Business systems Implemen- tation plan Financing Overall impression

Areas of evaluation: Entrepreneurs² Objectives

Jurors evaluate business plans and provide

constructive feedback and recommendations

Feedback

Points Nominations

Relevant for ranking¹

Executive Summary Product idea Manage ment team Marketing Business systems Implemen tation plan Financing Risks Overall impression

recommendations to participants

Manage- ment team Risks Business potential Financing potential

Areas of evaluation: VCs²

(3)

Jurors evaluate the business plans based on a given set of criteria (1/4)

Product / service 2–4 pages

Describes the features of the product/service and its benefits for target customers Explains current status and next steps of product/service development

Describes patents/IP protection issues and potential solutions Executive

Summary 1–2 pages

Provides clear, compelling and concise overview of the project’s most important aspects along the chapters of the document

Raises interest of decision makers

Manage- ment team 1–2 pages

Outlines educational background and professional experience of founders Highlights competencies of team members

Describes how skill gaps can be closed in the future

Convinces potential investors that the team unites managerial and technological expertise

Describes patents/IP protection issues and potential solutions

(4)

Jurors evaluate the business plans based on a given set of criteria (2/4)

Marketing 6–8 pages

Provides thorough understanding of markets and competitors

–

Market size

–

Market growth

–

Overall competition

Determines segmentation and selection of target markets

–

Market segmentation

–

Selection of target segment

Business system 2–3 pages

Outlines what parts of the value chain are covered by the project Details “make or buy” decisions

Describes necessary partnerships Discusses organizational issues

–

Positioning of product vis-à-vis competition

–

Estimate of market share

Outlines planned marketing and sales activities (e.g. using “four Ps” framework)

(5)

Jurors evaluate the business plans based on a given set of criteria (3/4)

Implemen- tation plan 1–2 pages

Financing

Presents plausible financial forecasts including base/worst/best case scenarios for income statement, balance sheet and cash flow statement

Describes the most important activities and milestones for the development of the business

Highlights the interdependence of milestones and activities on critical path

Oppor- tunities and risks 2–3 pages Financing 4–6 pages

income statement, balance sheet and cash flow statement

Outlines plausible liquidity planning and forecasts on capital requirements Outlines deal proposal for investors

Describes specific opportunities

Identifies and assess risks (e.g. quantification with sensitivity analysis) Develops suitable countermeasures against risks

(6)

Jurors evaluate the business plans based on a given set of criteria (4/4)

Business potential

In addition to the sections “management team” and “opportunities and risks”

mentioned above, jurors with the profile “Venture Capitalist” rate the following two dimensions:

Attractive market and product potential for investors Robust business concept

Sound growth and profit potential

Financial potential

Adequate investment attractiveness

Reasonable returns and exit strategies for investors Suitable quality of deal proposals

(7)

Deep Dive: Writing the section on Marketing / Finance

on Marketing / Finance

(8)

There are 3 essential steps to undertake for a good marketing strategy

Segmentation and selection of target market

Determine your marketing strategy

Number of potential customers

Number of units sold Total potential sales in CHF

Overall market size

Market growth during the

Segmen- tation

Meaningful grouping of potential customers (e.g., with similar needs, attitudes and behavior)

Selection of target

Match between offered product/service and customer needs

Financial attractiveness

Product

Product meets relevant needs of customers in the selected segments Adjustment of product to each target segment

Price

Pricing strategy Objectives of pricing strategy

Overall market potential and competition

1 2 3

Overall market growth

Market growth during the last five years

Forecast for the next five years

Overall compet- ition

Most important current and potential competitors

– Strategy of competitors

– SWOT¹analysis

of target

segment Financial attractiveness and growth potential of the segments?

Position- ing in target segment

Differentiation from competition

Estimate market share in

Development of market share and sales volume Customers per segment

Price strategy

– Market penetration

– Skimming

Place

How are customers reached

Potential outsourcing of distribution

Promo- tion

Means of communication (advertising, direct marketing, etc.)

(9)

Similarly, the financial section can be structured into three pillars

Plausible revenue model Detailed income statement forecast (for 5 years)

Capital needs resulting from projected cash flows Planned financing rounds

Current shareholder structure and funding history

Investor shares for each

Financial

projections¹

1 2 Financial planning Deal proposal for

investors 3

Balance sheet

forecast (for 5 years) Cash flow statement forecast (for 5 years and detailed for first 24 months) Underlying assumptions and comments

Usage of funds

Investor shares for each financing round

IRR

²

for investors

Exit strategy

(10)

Back-up

(11)

Besides the evaluation on a points scale, jurors can nominate teams to increase chances for the Top 25

Feedback

Points

Jurors rate each area of the business plan on a scale from 0 to 9:

Juror feedback constitutes a valuable part of the »venture» experience for the teams. Constructive and critical feedback helps teams to further develop their business plan

Nomi- nations

9 = outstanding, complete 8 = very good

7 = primarily very good

6 = partly good, partly very good 5 = good (midst of scale)

4 = partly good; partly acceptable, some gaps 3 = partly acceptable, gaps

2 = mostly unacceptable, significant gaps 1 = clearly unacceptable

0 = not discussed

Jurors nominate up to 2 teams as potential winners

¹

(12)

The overall market needs to be assessed in terms of size, growth and competition

1

Number of (potential) customers?

Number of units sold?

Total sales in CHF in product- relevant areas?

Analyze total market size and each segment

Possible sources: investment banking reports, official statistical bureaus, specialist associations, specialist journals, your own survey

Market size

In the last five years?

Forecast for the next five years?

Forecasts regarding market growth need to be realistic and understandable

Key questions Hints

Forecast for the next five years? need to be realistic and understandable Market growth

Most important current competitors?

–

Their market share?

–

Their strategy?

–

Their strengths and weaknesses?

Potential new competitors?

Can our business idea be copied?

How quickly?

What are possible substitute

An attractive market is ideally characterized by

–

Few competitors

–

High entry barriers

–

No (foreseeable) substitute products

–

Many equally good suppliers

–

Many potential customers Competitive

environment

(13)

Within overall market, attractive segments need to be identified and approached

2

How to meaningfully group potential customers with similar needs?

Segmentation is possible, e.g., by industry, geography, purchasing power, intensity of customer needs

Segmentation should be simple and feasible Segment the

market

Which customer needs will our product primarily satisfy?

Which customers/customer groups are especially financially attractive?

Get to know extremely well the markets that you can serve with your products

Set yourself the target of dominating first a part of the market, in order to later expand into neighboring segments

Choose target market

What share of market and what sales can we probably achieve with our customers?

How many customers can we

– Reach in each target segment?

– Convert from the competition?

Be aware of the non-linear market penetration dynamic

Be aware of the 6-12 month delay in the sales process for expensive products (B2B) Estimate market

share and sales volume

into neighboring segments How is our offer differentiated from the

competition?

What additional benefits does our product offer?

Possible additional benefits: easier to use, greater safety, etc.

Position yourself against

competitors

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Target segments need to be served with orchestrated marketing strategy based on the 4P’s (1/2)

3

Does our product meet the relevant needs of customers in the selected target segments?

Do we want to adjust our product to each target segment?

Customer needs can be defined along three dimensions

– Functional level: product attributes, value, quality, etc.

– Process level: user-friendly transactions, easy access, etc.

– Relationship level: personal service, loyalty program, etc.

Product

What price can we ask for the product?

What objective are we following with our price strategy?

– Market penetration: quick penetration with low price?

– Skimming: fewer customers at a high price in order to later gradually expand the target segment?

There are three approaches to pricing

– Market price

– Costs plus margin

– Customer benefit as basis (value- based)

Customer benefit is ideal as a basis, costs plus margin is not recommended

As a rule, start-ups use the skimming strategy, as higher prices can be justified by an innovative product

Price

(15)

Target segments need to be served with orchestrated marketing strategy based on the 4P’s (2/2)

3

How do we want to reach the customer with our product?

Do we want to outsource distribution or do it ourselves?

Possible criteria for selecting the distribution channel: number of potential customers, companies vs. private individuals, need to explain the product; upper vs. lower price segment

Sales focus changes with time:

– Convince the first five customers through outstanding service

– Convince the next fifty customers with your first five references

Place

first five references

– Convince other customers through segment-specific standardization With which means of communication do

we want to convey the advantages of our product to customers? (advertising, direct marketing, PR, trade fairs, visits to customers, etc.)

Is our "Unique Selling Proposition“¹ precise, brief (two lines) and formulated from the customer's perspective?

Focus your energies on fewer but more effective means

Calculate how much advertising you can allow for each sales completion

Differentiate between

– Users

– Technically-focused buyers (e.g., IT dept.)

– Economically-focused buyers (e.g., CFO).

Promotion

(16)

For further information please refer to our supporting material

Available for CHF53.90

Presentations and video of founder knowledge seminar

on Marketing (and other topics):

http://www.venture.ch/default_e.asp Recommended book (in German only)

Available for CHF53.90 + Shipment or

at Amazon, buch.ch,

Orell-Füssli, and others

Further reading:

Richard Stutely: The Definitive Business Plan: The fast-track to intelligent business planning for