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1Entrepreneurship and tehnological management
Course
Business Plan
10.04.2012
2Entrepreneurship and tehnological management
Summary
Executive Summary
Company overview
Product and services
Market and industry analysis
PESTLE & SWOT
Market strategy
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Executive Summary
Chapter 1
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Executive Summary
Business name
Business location
What product or service you sell
Opportunity & Purpose of the plan
Highlights that encourage potential investors to read on, such as
Growth rates
Competitive edge
• What is your competitive edge?
• How is your company different from all others?
• Is there a sustainable value that you can maintain and develop over time?
Exciting new technology or service
Return on investment
5Entrepreneurship and tehnological management
Executive Summary
Objectives
Objectives should be specific goals that can be measured
Max 3- 4
Mission
Use to establish fundamental goals for the quality of your business offering, customer satisfaction, employee welfare, compensation to owners.
Keys to Success
They make the difference between success and failure.
Ex: quality control and manufacturing resources for production or costumer intimacy and feedback implementation for services
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Executive Summary
The Market
What are the key elements of your marketing strategy?
Competitive advantages
Who is the competition? What is your competitive advantage?
Startup founding requirements
Break-even analysis/ exit strategy & short financial overview
How much funding is required? What is the offering? What is the exit strategy?
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Company overview
Chapter 2
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Founding Members & Ownership
Founding Members
Who
What background
What roles
(if any) what advisors
Ownership of the company
[ 2. Founding Members & Ownership ]
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Status
(If the company exist legally) – what legal form
Other legal details
At what state is the company and / or product/services at?
Proof of concept
Prototype
Beta test
First sale
Expanding the business
[ 2. Founding Members & Ownership ]
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Product and services
Chapter 3
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Technical overview and features
Description of the product / service
Main characteristics
Main innovation
Product / service package description
Any details relevant in order to distinguish the product
[ 3. Product and services ]
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Competitive advantages
Possible comparison with other similar products
Distinguished characteristics that give the product / service an edge over the competition
If this characteristics are hard to copy, even better
[ 3. Product and services ]
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Services
If the business is a product, and services are extra
Value added by this services
Competitive advantages added by this services
Uniqueness of the services
Extra profit produced by the services
[ 3. Product and services ]
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Proprietary rights (if based on innovation/ patents)
Pending patents
Is the product based on other patents?
Are there any royalties to be paid?
[ 3. Product and services ]
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Production challenges
Are there any special challenges needed to be overcome in order to go into production/ mass production?
Generally this is a question related to:
Technical challenges of going from small scale to large scale with new technologies
Row material supply possibility (are there enough materials available?)
[ 3. Product and services ]
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Market and industry analysis
Chapter 4
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Market overview
Summary on:
What is the market?
Who are the costumers?
Distribution channels
Satisfaction factors
Market size and growth
Trends
Target market
[ 4. Market and industry analysis ]
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Description of buying patterns (if applicable) & Key satisfaction factors
How do people in your target customer group choose
between competing products?
What factors make the most difference for your products? Price, or features? Reputation? Image and visibility?
Are brand names important? Or is it simply word of mouth, in which the secret is long-term, satisfied customers?
[ 4. Market and industry analysis ]
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Market segmentation[ 4. Market and industry analysis ]
What are the maine market segments?
What are the diferentiators?
Posibble segmentation factors:
Price
Quality
Brand affilation
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Target market
Explain your choice of target markets. Explain why your company is focusing on these specific target market groups.
Determine the size of the market segment: numbers of customers, units sold (or transactions) and dollar value of purchases.
What is the expected growth over the next 5 years?
Identify the source of the data.
[ 4. Market and industry analysis ]
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Value proposition & competitive edge
What is your competitive edge?
How is your company different from all others?
Is there a sustainable value that you can maintain and develop over time?
[ 4. Market and industry analysis ]
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Estimated market share and Sales
Market share projections
market share and market size → costumers → sales
Sales projections
Sales projections + price strategy → gross income
[ 4. Market and industry analysis ]
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Barriers to entry & competition
What barriers to entry do new companies face? Consider the following: Economies of scale: manufacturing, marketing, technological
Customer loyalty: well established brands, long established relationships
Agreements with customers, suppliers, strategic partners
Control of the distribution channel
Switching costs
Capital requirements: high investment
Access to distribution channels: exclusive distribution agreements, dominant position of competitors
Intellectual property: patents, trade secrets, copyrights, trademarks, know-how
Government regulations: defense contracts, import restrictions
Industry hostility to new entrants. Will use all means to drive out new competition: pricing, legal, spreading rumors
Social
[ 4. Market and industry analysis ]
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Opportunity
Describe succinctly the opportunity and why it is attractive.
Draw conclusions based on your research.
What is the size of the opportunity? How rapidly is it growing? What trends support the opportunity?
What is the compelling need? What problem are you solving?
What evidence do you have that proves there is a market?
Who is the target market?
What is unique about your product or service? What are the benefits?
What is your competitive advantage?
[ 4. Market and industry analysis ]
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Distribution/Sales strategy
How you will sell your product/service is a critical component of your success. Remember, nothing happens until the sale is made.
Describe how your product/service will be sold:
Personal selling? TV infomercials? Direct mail?
Who will do the selling? Company sales force? Manufacturer's representatives? Telephone solicitors?
How will you generate leads?
How will you recruit, train, and compensate the sales force?
How will you support the sales effort (e.g. internal staff, service operations, etc.)?
[ 5. Market strategy ]
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Channel Strategy
Describe how your product/service will reach your customers.
Potential channels
Original equipment manufacturers (OEM's)
Distributors, wholesalers and retailers
System integrators
Value added retailers (VAR’s)
E-commerce
Multi-channel strategy
Identify specific companies that will be your channel partners. Describe how they make buying decisions.
Describe the discussions that you have had and any commitments that have been negotiated.
[ 5. Market strategy ]
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Pricing Strategy
Possible strategies: Commodity pricing
Set by the market
Supply and demand
Based on competitor(s) price
Value pricing - how much the customer is willing to pay for value received
Payback period – depends on impact on company profit
Introductory low price to get customers to use
Cost plus + markup
Razor & razor blade
[ 5. Market strategy ]
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Communication Strategy
Channels / strategies:
Media advertising (TV, radio, newspaper and magazines)
Direct response advertising (mail, email, text messaging, infomercials)
Outdoor advertising (billboards, posters, cinema, vehicles)
Brochures, catalogs, specifications, manuals
Point-of purchase
Trade and consumer promotions
Sponsorships and event
Exhibitions and conferences
Public relations
E-commerce
Strategic alliances
Advertising budget
Total advertising cost for 1 paying costumer
[ 5. Market strategy ]
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Development and barriers of entry
Chapter 7
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Development strategy
Identify 5 to 10 key events that must take place for your venture to succeed. The focus should be over the next 2 to 3 years. For each step indicate the completion date. Consider the following:
Product and process development
Intellectual property
Marketing strategies, e.g. advertising launch, catalog mailing, website launch
Agreements with key customers, distributors or suppliers
Strategic alliances
Roll-out strategies, e.g. by regions, new products, new channels
Facility construction and equipment installation
Market and beta tests
Key hires, e.g. sales manager
Funding
[ 6. Development and barriers of entry ]
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Product improvement and new products
In order for your company to succeed, you will need to:
Respond to competition improvements
Take lead and impose new trends
Periodically impose new products
Plan the next improvements
Do not include all your ideas in the first phase
• Not economical feasible to include them all
• Harder to respond to competition responses if you do not have something prepared
Examples: the IPAD – apple did not include simple extra options / better hardware in the first versions in order to have a easy way to upgrade the next versions
[ 6. Development and barriers of entry ]
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Management team and organization
Chapter 9
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Organization structure
Describe how your company will be organized.
Organization chart.
Board of directors?
• Who will be on it?
• What will be their role?
Board of advisors?
• Who will be on it?
• What will be their role?
What is the ownership structure of your company?
• What percent of the company do each of the founders own?
[ 9. Management team and organization ]
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Key management personnel
Describe the founders and principal managers who will run your firm.
Write a short paragraph on each of the key managers? (Include resumes in the Appendix)
What will be their duties and responsibilities?
What unique skills do they bring to the venture?
How will they be compensated?
Is there a significant “hole” in the team? How do you propose to fill it?
[ 9. Management team and organization ]
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Financial Plan
Chapter 10
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Important assumptions and risks
Explain the key financial drivers of the venture. What assumptions have you made that will determine the financial success of the business?
[10. Financial Plan ]
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What are the customer acquisition costs? Very important.
What minimum number of customers per day and average selling price is assumed?
What level of costs per unit must be achieved?
What level of discount is assumed for
the distribution channel?
What are the lease costs for the site?
What is the development cost and
timing of a new product
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Important assumptions and risks
Market
Size of market
Competitor’s response
Long sales cycle
Price that customers are willing to pay
Closing window
Strategic
Establishing strategic partnerships
Operational
Large number of interrelated components
Costs
Quality level
Technology
Will it work?
Patentability
Time and cost to development
Scalability
Financial
Risk/return
Dilution
Macro-economic
Volatile industry
Government approval
New regulations and laws
Exchange rates
Interest rates
[10. Financial Plan ]
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Important assumptions and risks[10. Financial Plan ]
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Startup founding requirements
Estimate the initial capital requirement
Start-up expenditures (legal, administrative)
Buffer money for all costs until sales completely cover expenditures
Investors do not like to invest all the money at once
If you need 100 units for the first 6 months, 100 units for the next 6 months and 100 units for the next 12 months, do not ask for 300 in month 1 (this would mean 200 units stuck in the bank)
[10. Financial Plan ]
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Break-even analysis
Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs) → units needed to sell
[10. Financial Plan ]
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Sales Forecast
What growth rates are you expecting for the more important lines, and what growth rates in units, and in dollars?
Why are you projecting your sales at this level? Why not less or more?
What are the main driving forces behind the sales forecast?
How does it relate to your market analysis, your main target segments, your sales strategy and marketing strategy?
Is your sales forecast believable? Why?
What events might turn the sales forecast downward?
What kind of things are you assuming will happen to make sure the sales happen?
[10. Financial Plan ]
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Financial projections (details beyond the scope of this course) [10. Financial Plan ]
Projected Profit and Loss
Projected Cash Flow
Projected Balance Sheet
Business Ratios
Check an working example @
http://blog.guykawasaki.com//RedfinFictitiousModel.xls
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Financial projections (details beyond the scope of this course) [10. Financial Plan ]
Profit & Loss Statement:
Revenues & Expenses accruing over a period of time
Balance Sheet:
Assets & Financing at a point in time
Cash Flow:
A detailed look at actual cash inflows and outflows over a period of time
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Profit & Loss (P&L) Statement
• Revenue (after discounts)
• Cost of Goods Sold (COGS)
•Direct product cost
•Mfg but NOT R&D
• Gross Margin or Gross Profit
• Departmental Expenses
• Operating Profit / Loss
•Earnings before interest and taxes (EBIT)
•EBITDA (Earnings before interest, taxes, depreciation, amortization)
Revenue 50.0$ 100%
Cost of Goods Sold 20.0$ 40%
Gross Margin 30.0$ 60%
Sales & Marketing 15.0$ 30%
R&D 5.0$ 10%
G&A 2.5$ 5%
Total Expenses 22.5$ 45%
Operating Profit 7.5$ 15%
How it looks
[10. Financial Plan ]
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Practical Considerations
Chapter 11
46Entrepreneurship and tehnological management
Business Plan in a Slide[11. Practical Considerations]
What is the pain? What problem is being solved?
What is the market we shall be in?
What is our business model?
Who is going to hurt us and how bad?
How we are going to achieve our objectives?
How am I going to clone and complement myself?
How are we going to make money?
47Entrepreneurship and tehnological management
Reasons for Having a Business Plan[11. Practical Considerations]
Helps asking better questions
Helps with organizing the business
Helps drawing boundaries
Helps focus on the essentials
Helps keeping things untangled
Enhances communication
Offers a balanced perspective
48Entrepreneurship and tehnological management
Common Business Plan Temptations to Avoid[11. Practical Considerations]
Temptation to elaborate it too much
False sense of security
Temptation to create a too rosy future
Illusion of control, especially in the long run
49Entrepreneurship and tehnological management
Is It Worth the Whole Effort?[11. Practical Considerations]
It disciplines you
Leaving your emotions out of the equation. Keeping the score better though milestones, deadlines, KPIs.
It opens your eyes
Separate Real from Fantasy, Present from Future, Strategy from Tactics, Project from Operations.
It sells your business and your idea
Partners, Colleagues, Investors
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