Business planning in a rapidly changing business environment

Business Planningin a Rapidly Changing Business Environment

Eximius 2015 @ IIM Bangalore9th August 2015

Anjana Vivek; [email protected]

VentureBean Consulting Private Limited

Business Models – A Brief Introduction

Stock Take – At the Start

Growth: Sales and Beyond Sales

Valuation and Value Creation

Funding Options

Business Planning/ Plan

In Summary

Agenda

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WHAT IS A BUSINESS MODEL

• Business modelFrom Wikipedia, the free encyclopedia

A business model describes the rationale of how an organisation creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy.

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EXAMPLES OF INDIAN COMPANIES…Where the business model was different from those existing at that point in time:

• Bharti Airtel

• Big Bazaar

• RedBus

• Café Coffee Day

• eCommerce/technology platform/aggregator companies

• Others?

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Business Model Canvas: 9 building blocks

BUSINESS MODEL CANVAS (BMC)

• Customer segments• Value propositions• Channels• Customer relationships• Revenue streams• Key resources• Key activities• Key partnerships• Cost structures

SOURCE:http://www.businessmodelgeneration.com/canvas

• Acknowledgements:– Wikipedia, the free encyclopedia– http://www.businessmodelgeneration.com– http://www.businessmodelhub.com– Alexander Osterwalder

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AT THE START

• Can you explain to a stranger in 1 minute what your business/idea is about? Articulate this what your in 1-2 sentences

• Test with a couple of persons and see if it appeals to them and if you are satisfied.

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AT THE START• Stock Take of today both financial and non-

financial parameters (for example) :– Revenue, both quantity and value– Customer categories– Employees, technical and non-technical– Kinds of customers / categories– Key Cost elements– Balance in Bank accounts

– Advisors on board– Number/category of investors– etc..

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Setting Goals and Planning

• In 3 dimensions of time: short term, medium term and long term

– Long term: dreams and aspirations drive you and the business

– Short term: details are easier to think through, assumptions are fewer

– Medium term : more of guess work and trend analysis and less of data

• It is good to periodically go back and forth between these time horizons...

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Setting Goals/Targets

Planning for Alternate scenarios for eg:

• Funded/Non-Funded/Boot-strap• Pessimistic, realistic and optimistic• With alternate business models; impacting

strategy and cash flow• And more..

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Other Aspects

• Are You Ready for Growth and getting into the Next Orbit, all rockets do not get to next stage, some fall back into this orbit. Think through:

– Stepping out of comfort zone– Execution issues– Risk of failure

– Leading a larger company, ability to let go

– Inclination to grow into next level of leadership

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Growth

Key Growth Parameters

• Sales / Customers

• Profit

• Cash-flow

• Other such as employees; multiple city branches; retail outlets etc.

• .. etc

• Value

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Sales: Analysis

• Segments – B2B– B2C– Retail– online etc.– Analyse % of sales and quantity of sales in each

category (as applicable)

• What are the activities to reach out and get revenue from each of these segments?

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Sales: Analysis

• Review findings– Where is maximum sales coming from?– Where is maximum effort made for sales?

– Are you spreading yourself too thin?– Are you missing out on low hanging fruit?

• Can you tweak your sales plan?• Can you target segment-by-segment sales in a phased

manner?• Can you unbundle and bundle offerings to be more

meaningful?

• What is your pricing strategy?

• Go beyond sales, where is value to customer, where is value perceived by customer?

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Sales: More analysis

• Sales – Quantity (In numbers; in amount)

• Sales – Quality: for example – category A customers – ie Customers with revenue over Rs.1000 cr;

MNCs; listed companies; premier organisations etc..– Number of high value customers– Percentage of revenue from top few custumers– in terms of product/service/vertical/location etc

• Customers churn/T.O : lost and gained in a period

• Average revenue per customer

• Profitability: segment-category wise

• Pricing plans, alternates, for differently bundled offerings

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Sales Pipeline

• Categorise and list names as:

– Existing/Existing Biz – Existing/New Biz– New Customers/New Biz– Not yet on horizon (particularly when you are looking

at sales forecast say 6 months from today, some potential customers may not yet be on horizon

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Sales Pipeline

• How can you increase the pipeline funnel– List network contacts– Cold calls– move out of your comfort zone and set

ambitious/aggressive targets: for eg. how can you double number of meetings this week

– Social media, website tweak... etc… other?

• Periodically review sales/marketing strategy and execution with results.. i.e. track performance with activity

• What could be barriers to sales growth; how can you overcome these?

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Sales Collection: Governance• Is your billing timely?

• What is the mode of receipt?

• Are you collecting on time? .. Advance/upfront?

These basics are often ignored..

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Valuation

• Identify valuation methods and drivers in your industry– Number of customers?– Revenue?– GMV?– Number of unique views?– Average revenue per customer?– Profitability?– Cash Flow generated?– Combination of above?– Other?

• What could be – Value drivers – Value depleters

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Valuation

• Valuation is based on – intangibles and – tangibles

• Valuation is often computed as a multiple of– Revenue– EBIDTA– PAT– Cash Flow– Capacity/Quantity – Key value driver for industry; this changes from time to

time; especially in initial stages of industry development (i.e. page views; user base, clicks etc..)

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Valuation

• At the start value is mostly intangible, look at how this can be made tangible..

• For eg. service – through content, follow up calls, showcasing feedback, etc.

• Can you think of how you can demo value in early days of your business

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ValuationSome examples of value demonstrated:

• Association with credible organisations (incubation, acceleration etc..)

• Team: Reputed/trustworthy; experienced/multi-disciplinary

• Marquee/discerning customers

• Other stakeholders associated – Advisors, investors, bankers, well known professional service firms etc.

• Feedback/testimonials from reputed persons

• Ability to charge premium pricing

• Ability to address a huge market – i.e. ecommerce companies, value without profits

For more: 5 Points on Valuation and Negotiations… OR … how You can get a better price

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https://www.linkedin.com/pulse/20140630153355-2098566-5-points-on-valuation-and-negotiations-or-how-you-can-get-a-better-price?trk=mp-reader-card

https://www.linkedin.com/pulse/20140630153355-2098566-5-points-on-valuation-and-negotiations-or-how-you-can-get-a-better-price?trk=mp-reader-card


Funding OptionsDo take time out to think/reflect…

• What are the kinds of Funding options available today for business? Debt/Equity/Grant/Special Govt. Funds/Customers

• What are the alternate options? VC/PE/strategic/ angel/ incubation/ acceleration plus money?

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Investors: One Slide Checklist• HNIs, informal and formal angel groups• Seed Funds• Venture Capital• Private Equity• Banks exploring innovative ways to fund SMEs• Strategic Investors• Corporate Funds; (Family) Business Groups, Indian & Global

– Directly and/or through a special division or subsidiary– For employees alone or open to public– As intellectual and/or financial capital with other facilities

• Government supported funds

• Impact Investors

• Incubators• Accelerators• Co-Creators

• Crowd funding• Online funding platforms

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WhichOne

is the …

RightFit for

yourVenture

?


What Investors Look for

• INVESTOR FIT: Mandate and Fund Philosophy, stage of investment cycle, other portfolio companies

• Team: Education, Experience, Multi-disciplinary, co-founder team cohesiveness

• Past Track, of team members both in and before this venture, of business

• Idea/Business Growth and history thus far, ability for growth and sustainability

• Competitive Scenario• Financial plan and funding strategy


Due diligence reviews (DDR)Investment decision is based on DDR, some illustrative reviews are below. Some of these or aspects of these may be done in-house by the investor, others may be out-sourced to experts and professionals:• Business• Market • Accounting• Tax and Legal• Technical• HR


Due Diligence Examples• Forecast not reflecting expected reality, just an excel sheet

– Expenses uniform across optimistic to pessimistic scenarios– Few expenses static across months– Month 12 in1 city; Month 13 to 24 in 3 cities; Month 25 to 36 in 8

cities, i.e. sudden jumps do not reflect stage by stage expansion of business

• Forecast reflecting possibilities– Pipeline for next year detailed out with customer segmentation and

probability of conversion based on past record– Domain knowledge and expertise demonstrated on questioning,

for example in food business about customers eating habits etc.


Writing a Business Plan

Part 2 of session at:• http://

www.slideshare.net/anjanavivek/business-plan-1963604

Class Notes on Business Planning and Writing a Business Plan at:• http://

www.slideshare.net/anjanavivek/writing-a-business-plan-1914663

http://www.slideshare.net/anjanavivek/business-plan-1963604




http://www.slideshare.net/anjanavivek/writing-a-business-plan-1914663




In Summary

• Thank you for the patient hearing

• Additional information/articles/resources at: @ The VentureBean K.Hub: (Knowledge Hub)

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2013;2014• http://www.linkedin.com/company/venturebean-consult

ing-private-limited• https://twitter.com/VentureBean

• Contact for more information and inputs:

[email protected] 28

http://www.slideshare.net/anjanavivek

http://www.linkedin.com/company/venturebean-consulting-private-limited

http://www.linkedin.com/company/venturebean-consulting-private-limited

https://twitter.com/VentureBean

https://twitter.com/VentureBean

mailto:[email protected]


Thank You!

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Small Business & Entrepreneurship

Business planning in a rapidly changing business environment