Chapter 11 The Business Plan. Copyright © Houghton Mifflin Company11-2 Overview Some truths about business plans Feasibility analysis versus business

Chapter 11

The Business Plan

Copyright © Houghton Mifflin Company 11-2

Overview

• Some truths about business plans

• Feasibility analysis versus business plan

• Types of business plans

• Overview of the components

• Oral presentation


Dispelling Some Myths

• A business plan means you can raise money

• A well-written plan = a better valuation and more money


Some Truths

• There isn’t a customer you don’t have to convince

• Don’t use cliché approaches—hockey stick growth

• Seek the highest valuation needed to get the right amount of capital from the right investor

• Plan to outperform expectations

• Don’t put yourself in the position of having to start the business to answer key questions

ttTimeline

Go Forward/ReworkGo Forward/Rework

Product/Service Development & Management

Product Service Risks/Benefits

Market/Distribution Risks/Benefits

Opportunity Environment—Industry-Concept

Competition Grid

Custom

er

Definiti

on

Market Analysis

Industry Status

Pattern

s of

ChangeConcept

Statement

Financial Risks/Benefits

Team

Feasibility: Test the Concept

Customer Test

IP

Devel

opm

ent

tt

Business Plan: Build the Company From the Inside Out

Marketing

Produ

ctio

n

Finance

Core ContributionsCore Contributions

Core Business

Extended Business

Opportunity Environment

Suppliers

Con

sulta

nts

Mon

ey

Government

Capital Markets

Values Purpose

Mission

Customers

OEMs

Com

petit

ors


Feasibility Study versus Business Plan

• Feasibility = screening opportunities to decide the conditions under which you are willing to go forward

• Business Plan = execution plan for implementing the business


Purpose of the Business Plan

• Reality Check—What’s it going to take?

• Living Guide to the Business

• Statement of intent for third parties– Investors– Bankers/lenders– Potential management– Strategic partners– Suppliers


Bankers/Lenders

• Margins – How much room for error?

• Cash flow– Can you pay them back?

• Qualifications and track record of management team– Do they have what it takes to execute

the plan?


Investors

• Predictors of growth

• Qualifications and track record of the management team

• Deal structure

• Exit


Strategic Partners

• Growth plans indicate potential business

• Ability to pay

• Future management

– Where do they fit in?


Types of Business Plans

• The traditional plan– About 20 pages plus appendices

– Inductive approach

• The e-commerce business plan– Timeline to launch and trigger points for rapid growth

– Technology standards

– Software and hardware needed to operate

– Internet service provider and capabilities

– A storyboard of the product or service


What Every Plan Needs

• What need is being served?

• Do you have a team that can serve that need?

• Why is now the right time to launch this business concept?

• Can you make money at it?


The Components

• The business concept

• The industry/market analysis

• The founding team

• Operational analysis

• Organization plan

• Technology plan


The Components (cont.)

• Marketing plan

• Financial plan

• Contingency plan

• Growth plan

• Deal structure


The Executive Summary

• Arguably the most important part of thebusiness plan

• Stimulates an investor, bankers, or other interested party to read the business plan

• Should be no more than two pages

• Contains the most important points from all sections of the plan

• Must capture the reader’s attention instantly


For a Business Plan to Be Successful…


You Must Tell a Compelling Story

• How do you plan to change the world?

• How will you solve the customer’s pain?

• Who are you?

• What have you done?


You Must Move in with Your Customer

• Talk with the customer

• Shadow the customer

• Put the customer on your development team


You Must Have a Pricing Strategy

• Who’s doing what in your market and why?

• Don’t compete on price; compete on value

• Margins are everything

• Justify what you’re asking


You Must Support What You Claim

• Primary and secondary research

• Cite your sources and interrelate

• Don’t rely on one source

• Talk to strangers


What Business PlansLook Like Today

• Shorter

• Larger appendix

• Bigger focus on intellectual property and other intangible assets

• Demonstrate use of technology as a competitive asset


Technology Plan

• Because technology may be at the core of your concept– IP: patents, trademarks, know-how

• Because technology enables the achievement of business goals– Expands possibilities– Creates efficiencies– Facilitates information sharing


Bottom Line

• The business plan carries your vision

• The business plan is an execution plan

• The business plan demonstrates that you know what you’re doing


Oral Presentation

• Answer the fundamental questions

• Be under a half hour

• Catch the audience’s attention in the first sixty seconds

• Involve the key members of the founding team

• Demonstrate the product or service where possible


Take-Aways

• List what students took away from the discussion in real time

Documents

Chapter 11 The Business Plan. Copyright © Houghton Mifflin Company11-2 Overview Some truths about business plans Feasibility analysis versus business