Bus 101 from a fire hose

NCDCS, Inc. copy right 2009NCDCS, Inc. copy right 2009

Getting StartedGetting Started

An Introduction to the Nuances of Business

Tom Niewulis CEOTom Niewulis CEOwww.ncdcs.com360-666-3443360-666-3443

http://www.ncdcs.com/

www.ncdcs.comwww.ncdcs.com NCDCS, Inc. Copy right 2009NCDCS, Inc. Copy right 2009

Drinking It From A Fire Hose


Agenda Overview Attributes of the Serial Entrepreneur Organizations: Living Entities Business Structures Napkin Business Plan Introduction to Business Strategic Planning


Overview 7% of the Adult Population Starts a

Business Every Year As many as 60% of New Business Fail

Within Three Years Statistics Show the Majority of Failures Do

Not Have a Business Plan Plethora of Information on the Internet Who Has the Time in the Middle of the

Fray


Attributes of the Serial Entrepreneur

Absolute Support of Spouse & Family

Tenacity Commitment Good Judgment Adaptive Optimistic Financial Understanding Responsibility

Visionary Self-confident Communicator Creative - Able to

Improvise Overcomer Risk Taker Organizational Understands Good

Governance


Support of Family Emotional support Future proofing Disaster avoidance Who are you doing it for


Tenacity Not thick headed or stubborn Hangs on like a bull dog Focused on valued ideas with passion Pursued with reason and good judgment Knowledge and beliefs Get’r done Know when to punch out


Visionary A Critical trait Streams ideas Not always an operational executer Knows when other talent is needed Should learn excellent communication skills Understands leadership

– Responsibility– Authority– Accountability

Can believe in others


Commitment 200% + in! Time is constricted - Not your own Responsibility Accountability

Responsibility Accountability

Personal Time


Self-confidence Not arrogant Built on experience Develops trust with others Humility


Good Judgment Result of Life Experiences Common Sense - not so common Solid decision making Virtue Results based learning Hands on learning Mentoring


Creative Able to improvise Imaginative Needs balancing Operationally inventive and adaptive


Adaptive Functional shifts - spinning hats Quick responsiveness Get out of the comfort zone


Overcomer Execute no matter what the circumstances No excuses Always a result Ascend Prevail Surmount To gain superiority


Optimistic Positive perspective of the Future Forward Faith Knowledgeable Confidence


Risk Taker Bed to bathroom Business is risk Understanding the affects Poke it here and what happens all over Watch out for paralysis Calculate


Financial Understanding Capital

– Capitalization– Working

Revenue Expenses Balance Sheet

Cash Flow COGS Business Ratios

– Margin highlights– Growth rate– Capital return– Employee efficiencies

Dash Boards


Organizational Personal

– Time management– Filing– Email – Appearance

Business– Structure– Documentation– Processes– Procedures– IT– Communications


Good Governance Usually a public company issue Being pushed down by the Feds Basic Principles:

– Processes– Customs– Policies– Laws– Accountability


Responsibility An active moral consciousness A state of accountability Actions independently executed


Organizations A Living Entity Whole-istic view of a business

– a comprehension of the parts of the business entity as intimately interconnected and explicable only by reference to the whole of business entity

Interconnection of key business components

Maturation to a sustainable legacy


Key Business Components Management Product Markets Marketing - Branding Advertising Production Communication

Sales Finance Accounting Customer Service Distribution IT - Data

Management


Give Them A Poke

Finance

One NewDecision

Mktg.

Ops.

Ex. Mgt.

Dist.

I,T,

Cust. Svc. Prod

ucts


Origins Of A Business Conceived as an idea Developed in a vision Has the genetics of the founder Birthed as a legal entity Develops a personality Matures through growth Builds a legacy Hopes to be sustainable


Interesting 2008 U.S. Census data indicates about 196

million adults over age 25 SBA Report to the President indicates about 7%

of adult population begins a business every year– 13,720,000 business starts per year

Close to 60% of businesses started will fail in the first two years– 4.5 million will advance– Another 50% may not succeed over the first 5 years


More Interesting Deals that get venture funded per year

– 6 out of 1,000– Between 3% to 5% of the submitted business

plans are read beyond the executive summary– Only about 10% then get though to the

screening process– Then, only about 10% make it past due

diligence and get any funding


Beginning the Process Stop and breath Make choices with knowledge Ask the questions you know you have Take your time when selecting a business

entity Remember: that every business should be

looked at as its own entity


Choosing A Structure The structure sets the fundamentals for

building a legacy Stepping out of the skin

– Outsider looking in– Influencer

Review who and what you are compared to who and what the business entity is expected to be


The Initial Questions– Is there a plan to develop this personality so that it

matures according to the goals being established for it?

– What are the interdependencies that produce functional relationships?

– What is natural for this entity to do in accomplishing its plan?

– What is the entity doing that is un-natural to accomplishing its plan?

– Who or what are the influencers that contribute to the entity moving forward or what is inhibiting it?

– What legacy should this Living Entity have?


The First Step of Structure Choosing

Name search– State Attorney General web site

• Ensure you do this for each state you will do business in

Review the Initial Questions Build an Advisory Board as soon as

possible Legal or other professional assistance as

needed


Napkin Check List


Entity ComparisonSole

ProprietorshipGeneral

PartnershipLimited

Partnership(LP)

Limited LiabilityPartnership

(LLP)

Limited LiabilityCompany

(LLC)

S corporation C corporation

Ownership Single Person 2 or More PersonsorEntities

2 or More Persons orEntities



No More Than100 Shareholders(Spouses AreConsidered OneShareholder)

Unlimited Number ofShareholders

Formation No state filingrequired. However,IfPublic Notice ofTrade Name isDesired, You MustFile a DBA(Doing Business As)orFictitious Name

Agreementbetween two ormore parties.No state filingrequired.

Certificate of LimitedPartnership Statefiling required.

State filing required.In California, the useof LLP is limited toaccountants &lawyers.

State filing required.Articles/Certificate ofFormation/Organization

Articles ofincorporation withState filing required.

Articles ofincorporation withState filing required.

Duration ofexistence

Dissolved if entityceases doingbusiness or upondeath of the soleproprietor.

Dissolves upondeath or withdrawalof a partner, unlesssafeguards arespecified in apartnershipagreement.

Perpetual Dependent onthe requirementsimposed by the state offormation.

Dependent on therequirements imposedby the state offormation.

Perpetual Perpetual

Liability Sole proprietor hasunlimited liability.

Partners haveunlimited liability.

At least one generalpartner has unlimitedliability.

Partners are nottypically responsiblefor the debtsof the LLP.

Members are nottypically responsiblefor the debts of theLLC.

Shareholders aretypically notresponsible for thedebts of thecorporation.

Shareholders aretypically notresponsible for thedebts of thecorporation.

OperationalRequirements

Relatively fewlegal requirements.

Relatively fewlegal requirements.

Some formalrequirements, but lessformal thancorporations. Needto Draft and maintain"PartnershipAgreement"

Delaware, Georgia,Pennsylvania, Texas,and Virginia require anLLP to carry insuranceor escrow account tocover liabilities.

Some formalrequirements, but lessformal thancorporations. Need toDraft and Maintain an"OperatingAgreement"

Board of directors,annual meetings, andannual reporting.Need ToMaintain Minutes ofMeetings and By -Laws

Board of directors,annual meetings,and annualreporting. Need ToMaintain Minutes ofMeetings and By -Laws

Management Sole proprietor hasfull control ofmanagement andoperations.

Typically eachpartner has anequal voice, unlessotherwisearranged.

Limited partners areexcluded frommanagement unlessthey serve on theboard of directors.

All partners have theright to manage thebusiness directly.

Members have anoperating agreementthat outlinesmanagement.

Managed by directorswho are elected byshareholders.

Managed bydirectors who areelected byshareholders.

Taxation Not a taxableentity.Sole proprietorpays all taxes.

Not a taxable entity.Each partner paystax on his/her shareof income and candeduct lossesagainst othersources of income.

Files taxes as aseparate entity, mustmeet certain criteriato avoid being taxedas a corporation.

Files taxes as aseparate entity, mustmeet certain criteria toavoid being taxed as acorporation.

If properly structured,there is no tax at theentity level.Income/loss is passedthrough to members.

No tax at the entitylevel. Income/losspassed throughshareholders.

Taxed at the entitylevel. If dividendsare distributed toshareholders,dividends are alsotaxed at theindividual level.

Pass-throughIncome/loss

Yes Yes Yes, if requirementsare fulfilled.

Yes, if requirementsare fulfilled.

Yes Yes No

Doubletaxation

No No No No No No Yes, if incomedistributed toshareholders asdividends.

Cost ofcreation

Depending on StateLicense Fees

Depending on StateLicense Fees

State filing feerequired.





RaisingCapital

Often difficultunless individualcontributes funds.

Contributions canbe made frompartners, and morepartners can be

Contributions can bemade from partners,and more partnerscan be added.

Contributions can bemade from partners,and more partners canbe added.

Possible to sellinterests, thoughsubject to operatingagreement restrictions.

Shares of stock aresold to raise capital.

Shares of stock aresold to raise capital.


Sole Proprietorship Expedience or Life Style business First brush points

– The business is a ‘one-person’ operation, – They don’t believe they will have, need or want a

partner,– They see that it has the easiest forms to fill out on the

states’ Department of Licensing or Attorney General web site,

– They don’t care that the taxable income shows up on their personal tax return,

– They don’t understand the other forms of business entities


My Life Style Business Analysis

Desire to make money from a hobby Loss of a job and came up with an idea for a product More time with the family and can be self-motivated Desires to sustain a static level of income - does not

envision having a large market impact Desire a family owned business that is more regional Wants to enjoy what they do and doesn’t care about

the rest of the world going crazy Demands high quality of their service or product and

will not compromise for the sake of investors or greater income


Sole Proprietor Legal Definition A business structure in which, an individual and his

or her company are considered a single entity for tax and liability purposes. A sole proprietorship is a company, which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he or she reports business income or losses on his or her individual income tax return. The owner is inseparable from the sole proprietorship, so he or she is liable for any business debts. The entity is also called proprietorship.


Napkin Sole Proprietorship


Simple Execution Mechanics COGS - the Cost of Goods Sold - A costly

error!– Pricing model

• Hard cost vs. Product or Service specific cost– Hard Cost = Location + Phone + Lights + Office help + Other

Similar– Product or Service Cost = Raw materials + Labor + Shipping +

Everything specific to the product or service

Margin - Calculated by deducting operating expenses (e.g. cost of goods and services, sales and marketing, general and administrative, and depreciation and amortization) from total revenues and dividing the result by total revenues.


Simple Execution Mechanics Vendor Selection Marketing Taxes - everywhere!!!

– Federal• Social Security• Unemployment• Income

– State• Income - Depending on the state• Unemployment• Labor & Industries - Industrial Insurance

– County– City


Simple Disaster & Exit Planning1. Know that you need a plan and

develop one. Plan for how you want to leave the business on the upside:

– An income level that you personally would want to attain

– A revenue or customer base the business will attain that could be valuable in the sale of the business

– An age that you want attain so you can go do something else

– Develop some set of other goals that will allow you to leave having met these planned goals


Simple Disaster & Exit Planning2. As well as planning for the downside:

– Personal injury – Financial downturn – Not meeting your financial and customer objectives or – Just plain running out of money in the startup phase (know

when to pull the ripcord on the parachute)

3. Develop an Advisory Board4. Know your Business Plan inside and out.

Plan the plan and execute knowing that you have to be dynamic and flexible to market changes.


Simple Disaster & Exit Planning5. Get a good handle on your financial

model and know everything about it, especially your cash flow.

6. Train and communicate - processes• Choose a trusted person OR • cross train several trusted employees

7. Ensure your spouse has some understanding of everything going on


Simple Disaster & Exit Planning8. Vendor management and strategy9. Ensure all taxes are accounted for and the

cash is reserved to pay any monthly or quarterly amounts. Never, Ever use the tax monies for anything other than taxes

10. Business Plan or Strategy checklist


Simple Disaster & Exit Planning11. All documentation, processes,

procedures, financial data, personnel data, customer information, vendor information and other info well organized and accessible

12. Plan the Plan then work the Plan


Partnerships History - First recorded in Rome 3rd century BC Definition: A type of unincorporated business organization in which multiple

individuals, called general partners, manage the business and are equally liable for its debts; other individuals called limited partners may invest but not be directly involved in management and are liable only to the extent of their investments. Legal liability includes all of the general partners being bound by the actions of a single general partner. Unlike a limited liability company or a corporation, in a partnership the partners share equal responsibility for the company's profits and losses, and its debts and liabilities. The partnership itself does not pay income taxes, but each partner has to report their share of business profits or losses on their individual tax return. Estimated tax payments are also necessary for each of the partners for the year in progress. Partnerships must file a return on Form 1065 showing income and deductions. Estimated tax payments are also required if they expect their income to be greater than $1,000.


Partnership Influencers A well-defined organizational structure Job description definitions Information and communications

processes Generalized processes and common

procedures A dynamic business plan Strategic plans and a financial model


Key Partnership Consideration EACH participant is EQUALLY

RESPONSIBLE for the liabilities If one general partner gets a wild hair and makes

a commitment without the say of the other general partners then all the general partners are liable for that commitment

Must have clarity of roles and responsibilities, clarity of vision and a well defined plan to execute


Partnerships with Limited Partners

Depends on the legal construct– General Partnership (GP)– Limited Partnership (LP)– Limited Liability Partnership (LLP)

Limited partners may be:– The financiers– The investors– Junior members of the organization

The entity needs explicit agreements


Summary of PartnershipsGeneral

PartnershipLimited

Partnership(LP)

Limited LiabilityPartnership

(LLP)Ownership 2 or More Persons or

Entities2 or More Persons orEntities


Formation Agreement between two ormore parties.No state filing required.

Certificate of LimitedPartnership State filingrequired.

State filing required.In California, the use of LLPis limited to accountants &lawyers.

Duration of existence Dissolves upon death orwithdrawal of a partner, unlesssafeguards are specified in apartnership agreement.

Perpetual Dependent onthe requirements imposed bythe state of formation.

Liability Partners have unlimitedliability.

At least one general partnerhas unlimited liability.

Partners are not typicallyresponsible for the debtsof the LLP.

Operational Requirements Relatively few legalrequirements.

Some formal requirements,but less formal thancorporations. Need to Draftand maintain"Partnership Agreement"

Delaware, Georgia,Pennsylvania, Texas, andVirginia require an LLP to carryinsurance or escrow account tocover liabilities.

Management Typically each partner has anequal voice, unless otherwisearranged.

Limited partners are excludedfrom management unless theyserve on the board ofdirectors.

All partners have the right tomanage the business directly.

Taxation Not a taxable entity.Each partner pays tax on his/hershare of income and can deductlosses against other sources ofincome.

Files taxes as a separate entity,must meet certain criteria toavoid being taxed as acorporation.

Files taxes as a separate entity,must meet certain criteria toavoid being taxed as acorporation.

Pass-through Income/loss Yes Yes, if requirements arefulfilled.

Yes, if requirements arefulfilled.

Double taxation No No NoCost of creation Depending on State License

FeesState filing fee required. State filing fee required.

Raising Capital Contributions can be madefrom partners, and morepartners can be added.

Contributions can be madefrom partners, and morepartners can be added.

Contributions can be madefrom partners, and morepartners can be added.

Transferability of interest No Yes, pending approval of otherlimited partners and the generalpartners.

Possible, dependent onoperating agreementrestrictions.

Advantages Division of responsibilities

Limited personal liability forlimited partners

Easier to raise capital

No corporate income

Disadvantages Impermanence of existence

Difficult to find compatiblepartners

Annual reporting requirement


Corporations Latin word corpus means body or body of people Rome and India had entities that engaged in commerce

and had legal standing The oldest is the Stora Enso with a charter of 1347 for a

copper mine On 31 December 1600, a date as ominous as any in

history, the East India Company was given its charter 1886 The Supreme Court case - Santa Clara County v.

Southern Pacific Railroad set a precedent, a corporation was a "natural person”, not through the court ruling on "corporate personhood," but by the misleading notes of a clerk.


Definition of CorporationThe most common form of business organization, and one that is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. The process of becoming a corporation, called incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). Incorporation also provides companies with a more flexible way to manage their ownership structure. In addition, there are different tax implications for corporations, although these can be both advantageous and disadvantageous. In these respects, corporations differ from sole proprietorships and limited partnerships.


The Corporate Veil Protects shareholder and executives from

personal liability Caution to new corporations - banks, credit card

companies and other financial facilities will want personal guarantees. DON’T Do It!

Very few understand what it means to fulfill the corporate “duty of care” as part of the fiduciary responsibilities in corporate governance

Executives have a responsibility to another entity, the corporation


Corporate SummariesLimited Liability

Company(LLC)

S corporation C corporation

Ownership 1 or More Persons orEntities

No More Than100 Shareholders(Spouses Are Considered OneShareholder)

Unlimited Number ofShareholders

Formation State filing required.Articles/Certificate ofFormation/Organization

Articles of incorporation withState filing required.

Articles of incorporation withState filing required.

Duration of existence Dependent on the requirementsimposed by the state offormation.

Perpetual Perpetual

Liability Members are not typicallyresponsible for the debts of theLLC.

Shareholders are typically notresponsible for the debts of thecorporation.

Shareholders are typically notresponsible for the debts of thecorporation.

Operational Requirements Some formal requirements, butless formal than corporations.Need to Draft and Maintain an"Operating Agreement"

Board of directors, annualmeetings, and annual reporting.Need ToMaintain Minutes ofMeetings and By - Laws

Board of directors, annualmeetings, and annual reporting.Need ToMaintain Minutes ofMeetings and By - Laws

Management Members have an operatingagreement that outlinesmanagement.

Managed by directors who areelected by shareholders.

Managed by directors who areelected by shareholders.

Taxation If properly structured, there isno tax at the entity level.Income/loss is passed throughto members.

No tax at the entity level.Income/loss passed throughshareholders.

Taxed at the entity level. Ifdividends are distributed toshareholders, dividends are alsotaxed at the individual level.

Pass-through Income/loss Yes Yes NoDouble taxation No No Yes, if income distributed to

shareholders as dividends.Cost of creation State filing fee required. State filing fee required. State filing fee required.Raising Capital Possible to sell interests, though

subject to operating agreementrestrictions.

Shares of stock are sold to raisecapital.

Shares of stock are sold to raisecapital.

Transferability of interest Possible, dependent on operatingagreement restrictions.

Yes, observing IRS regulationson who can own stock.

Shares of stock are easilytransferred.

Advantages Legal entity separate fromindividuals

Limited personal liability

Continuity of existence

Continuity of management


No corporate income tax

Net operating loss is deductibleby shareholders

Less "Formal" record – keepingrequirements

Legal entity separate fromindividuals





Readily transferable interests

No corporate income tax

Net operating loss is deductibleby shareholders

Legal entity separate fromindividuals





Readily transferable interests

Disadvantages Subject to governmentregulations

Annual reporting requirements

Cannot raise capital throughissuance of stock

May have only one class of stock

Subject to governmentregulations


Subject to governmentregulations


Possible double taxation bypaying both corporate and


Limited Liability Company LLC Each state is unique in its requirements to form

an LLC there are requirements in the enabling

statutes/formation laws requires you to conform to and declare certain

criteria or else you will find you’re not really an LLC

understand the intrastate laws regarding the LLC formed in your state doing business in another state or country


Breathing Life to the LLC Has members at the core of its being Through an operating agreement, the

members begin to influence the personality of this organization


LLC Operating Agreement Several key components of this agreement

– Who the members are and how they will be elected into the charter in the future.

– How managers will be selected and what their duties, salaries, and grounds for dismissal will be.

– How major decisions will be made. Which decisions will require unanimous approval of the members and which require a simple majority vote? Which decisions can be delegated to the manager in charge of daily affairs?

– How compensation (salary) for actively participating members will be determined.

– How new capital should be acquired should the company need it.– What procedures must be followed to transfer interests in the

company?– Penalties, if any, if members or managers fail to act in

accordance with the operating agreement.


LLC Summary Like the Sole Proprietorship and Partnership, the individual humans

involved in conjunction with the foundational documents will develop the initial personality of the business.

This contractual combination will continue to influence the LLC persona throughout the limited life of the entity. That is correct, an LLC does not live forever. You have to reconstitute them when they reach their termination dates, some default to 30 years.

An LLC does not necessarily have to comply with corporate governance rules as noted by the Delaware court. Be prudent and check your state regulations to make sure. Also, the Revised Limited Liability Company Act suggests to states that they review LLC’s for conformance to good governance.

Consider how the sum of all the individuals in the LLC will be the influencers regarding how this entity establishes its legacy. Individual members participating in the LLC will leave a legacy, but what should the entity look like beyond the members’ participation.


“S” Corporation Came into existence as part of the Technical

Amendments Act of 1958 Developed as a way to boost the economy at the

time Greatest advantages:

– A unique blend of a true corporation– While retaining the taxing properties of a Partnership.

For most small businesses an “S” Corp is an optimum entity type


“S” Corp Limitations Must be a domestic corporation. Must not have more than 100 shareholders. Allowed to own subsidiaries. Allowed to create an employee stock

ownership plan. Exempt from the unified audit and litigation

procedures. Must include only eligible shareholders. Must have only one class of stock. Taxes distributed to shareholders as regular income


Plusses of A “S” Corps Compliance & Governance requirements apply Requires more significant thought and planning Flexibility Tax treatment as a partnership Always check with your attorney as you work

through the process As with an LLC, Exec’s, don’t sign any loan

papers…the corporate veil will be pierced.



“C” Corporation Basic Definition:A corporation in the United States that, for Federal

income tax purposes, is taxed under 26 U.S.C. § 11 and Subchapter “C” (26 U.S.C. § 301 et seq.) of Chapter 1 of the Internal Revenue Code.

A Corporation must file under Subchapter “C” if it fails to meet even one requirement to qualify as an “S” Corporation.


Key Pointers on “C” Corps Taxed directly since it is a legal Living

Entity The profits are taxed when earned The profit is taxed to the shareholders

when distributed as dividends Tax rate varies from 15% up to 38% of

profits that include dividend distribution Advantage to consider - if a future

consideration is a public offering


Corporate Personality Influencers

Board of Advisors– Don’t need to go it alone and you shouldn’t– Good counsel adds value of the Living Entity

What is it?The advisory boards are group of individuals that

can be developed for technical or specific business areas such as sales and marketing, information technologies or manufacturing processes.


The Advisory Board Constructing a dynamic Advisory Board

– What is the purpose of the board?• The first Advisory Board be focused on your

product or service– Look for trusted experienced people; a mix of

talent that contributes directly to the purpose and broadly to the business

• don’t look to these people as surrogate executives


The Effective Advisory Board Executive responsibilities to the Board

– Time management– 360˚ Communications– Respect your board members– Get rid of dweebs– Compensate

Board Size– Startups: three to five– Mature: Depends on purpose; may even have more

than one Board


Corporate Personality Influencers

Board of DirectorsThe BOD is comprised of individuals elected by the

shareholders to oversee the management of the corporation for the purpose of protecting the interest of the shareholders.

The Board legally assumes responsibility for all corporate activities and is critical to maturing a functional corporation


The Conscience A BOD as the conscience soul of the

corporation Sets the ethic standards of operation Is the life force for strategic development

and financial accountability Hierarchical structure of the corporation is:

The Shareholders, The Board of Directors, then the Executive Management Team and the employee base


Board Empowerment Set the company's strategy that includes – ethics,

policy, objectives, and overall direction Full financial fiduciary responsibilities Oversight in holding accountable the CEO and

Executive Management Team Modify and adopt bylaws Within the board; name members of the advisory,

executive, finance, compensation and other committees

Hire, monitor, evaluate, and fire the Chief Executive Officer and senior executives

Determine and pay the dividend Issue additional shares


Functional BOD The entire Board is held liable -under the doctrine of

collective responsibility A mix in membership

– the top executives ('inside directors' or 'executive directors') – industry experts or respected individuals, ('outside directors' or

'non-executive directors')

Must be educated in: – Good Governance

– nuances of financial management Must be free to offer unbiased advice in all areas of the

corporation as well as insisting on oversight and audits


Functional BOD Find missing expertise with the industry experience, funding, finance

and marketing. Independent minded - will speak truthful, qualified opinions. A broader candidate base - look at senior executives in addition to

CEO types. A manageable size – Always have an odd number. Have ready and willing participants Have specific committees Communicate, communicate…communicate! CEO’s and Executive Management LISTEN Fire bad Board members - Get rid of them.


Perception Is Reality About the BOD


The Personality Influencers Summarized

The executive team - the mind and heart of the corporation– The embodiment of the consciousness transferred

from the BOD– Establishes the essential character of the personality

for the Living Entity The Board being the conscience and soul of the

corporation The employees are the spirit of the Living Entity


Outside Influencers Customers Vendors Media The Stock Market (for public companies) Political Social


The Napkin Business Plan


The Business Plan FormulaBP = MP + SP + FM + ES

Business Plan = Marketing Plan + Strategic Plan + Financial Model + Exit Strategy

The Marketing Plan is one of the most critical first steps that should be accomplished - SWOT analysis

The Strategic Plan using the Political, Economic, Social, and Technological analysis with the Risk analysis

The Financial Model is complex tool that takes into account all the monetary nuances of business

Exit Strategy is the way out for Exec’s and Investors


Reasons for a Business Plan Getting Funded or Financed A higher probability to succeed Identify what the executives don’t know Understand resource requirements and

when you will need them Stipulate actions for problem solving Knowing when set goals are attained A Communication tool to others


12 Step BP Summary1. Grab their attention fast. The first few sentences must tell the

reader what you do; why you are unique; what size market you serve; what share of market you expect to capture; and when you intend to accomplish that.

2. Analyze your existing customers. Define them by customer type, values and products/services including major accounts. Remember that the '80:20 rule' often applies here, 80% of your business comes from 20% of your customers)

3. Explain your products and services - refer to the strategic propositions, what these propositions will do for your customers.

4. Detail solid distribution methods. The routes to market, gatekeepers, influencers and strategic partners; the other organizations and individuals you will work with to develop your market, including, commissions,endorsements, accreditations, approvals, licenses, etc.


12 Step BP Summary5. Competitor analysis with the SWOT analysis

compared to SWOT analysis of each competitor6. Sales plan (1 year min) showing sales and margins by

product or service stream, mix, values, segment, 'distributor', etc, whatever is relevant, phased monthly, in as much detail as you need.

7. List the executable actions (marketing campaigns, sales activities, advertising, other) that will deliver the above, with costs and returns.

8. Solid Management expertise is absolutely critical to both your success and your ability to raise venture and angel financing.


12 Step BP Summary9. Believable and Captivating Financials from the in-depth

financial model.10. Overcome Barriers to entry. Need to show a sustainable

competitive advantage. Are there patents, copyrights, a proprietary process or technology, exclusive licenses or agreements? Is the business the first to market? How long can the lead be protected if a big company enters the market?

11. Pay attention to details and ensure that the numbers are used consistently, the document is concise - from five to thirty pages depending on the audience, easy to read – don’t use technical jargon – keep it simple and an appropriate business style

12. Make sure all the company data; logo and contact information is on the cover page.


Exit Strategy Reasons Plan the Exit before you begin For the Investor - simple but complex

– Want their money back with high returns– Depending on stage from 5x to 12x– Most common exits are IPO, merger or

acquisition For the Executive

– Disability, Death, Divorce and Departure


Exit Strategy


Intro to Strategic Planning Strategies are different from tactics in that:

– They are proactive and not re-active as tactics are– They are internal in source and the business venture has absolute control over its application– A strategic plan is used as guidance to define functional and divisional plans, including technology, marketing, etc.

Deals with one of three key questions:– What do we do?– For whom do we do it?– How do we excel? Or How to bear or avoid competition?


Why the Strategic Plan The heart and soul of a sounding board Can validate what it is doing now and set

goals and objectives to move to the next level of opportunity

Write it down or draw a picture, record it so it can be listened to or etch it in a rock so it has to be picked up to review


Napkin Strategic Plan


Implementation1. Developing the plan2. Commitment to the plan3. Knowing all the resources are available4. Understanding your reality

a) Your internal reality: qualified employees, processes, finances and so on

b) Your external reality: customers, suppliers and other stake holders

5. Have a Communications plan 6. 6. Plan for Murphy


Why Do Any of This Statistically Those that don’t either fail or

never reach their fullest potential Acting on one area of the business causes

reactions everywhere Every business is a Living Entity that

needs maturation to develop a legacy Ensuring the vision comes to reality Success is defined by executing the plan