TECHNOPRENEURSHIP(EM604)

Session 12PREPARING THE BUSINESS PLAN

Dr. Winarno

Business Plan: What For?

• The business plan for a high potential ventures reveals the business’s ability to:– Create or add significant value to customers or end-users.– Solve a significant problem, or meet a significant want or

need for which someone will pay a premium.– Have robust market, margin, and moneymaking

characteristics; large enough, high growth, high margin, strong and early free cash flow, high profit potential, and attractive IRR.

– Fit well with the founders and management team at the time, in the market space, and with risk-reward balance.

Business Plan: What For?

• The plan becomes the point of departure for prospective investors to begin their due diligence to ascertain potential and various risk of the venture:– Technology risk– Market risk– Management risk– Competitive and strategic risk– Financial risk

The Plan is Not the Business

• Developing the business plan is one of the best ways to define the blueprint, strategy, resources, and people requirements for a new venture.

• This document focuses and communicate the founder’s vision.

The Plan is Not the Business

• Mitch Kapor original business plan for Lotus Development Corp. (Lotus 1-2-3): Brief Letter, contained:– PC market– Description of 10 separate products– One year monthly start-up budget– Five year goal of US$30 million revenue– US$200 – 300 thousands capital.

• In fact Lotus reached US$500 million of revenue in the first five year.

The Plan is Not the Business

• But just you have a good business plan does not mean the business will automatically success.

• Key success factors are:– The fundamental opportunity– Resources– Team

Business Plan: Do’s and Don’ts

Do’s• Involve all team• Make the plan logical,

comprehensive, readable, short

• Demonstrate commit ment to the venture by investing a significant amount of time & money

Don’ts• No mysterius people• No ambiguous, vague

statements

• Describe the technical jargons

Business Plan: Do’s and Don’ts

Do’s• Articulate what the critical

risks and assumptions are.• Disclose or discuss any

potential problem in the venture.

• Identify several alternative sources of financing.

• Spell out the proposed deal: How much and for what ownership share, and how investors will win.

Don’ts• Spend money on developing

fancy brochures.• Waste time writing a plan

when you could be closing sales and collecting cash.

• Assume you have a done deal when you have a handshake or verbal commitment, but no money in the bank.

Business Plan: Do’s and Don’ts

Do’s• Be creative in gaining the attention of potential investors.• Remember that the plan is not the business.• Accept customers that will generate a positive cash flow,

even it means you have to stop writing the plan.• Know your targeted investor group what they really want

and dislike (venture capital, angel investor, bank, leasing company). Tailore your plan according to them.

• Let realistic market and sales projection drive the assumptions underlying the financial spreadsheet.

BUSINESS PLANTable of Contents

I. Executive Summary

• Description of the business concept and the business opportunity and strategy.

• Target market and projections• Competitive advantages• Cost• Sustainability• The Team• The Offering

II. The Industry and The Company and Its Products/Services

• The Industry• The Company and the Concept • The Products or Services• Entry and Growth Strategy

III. Market Research and Analysis

• Customers• Market Size and Trends• Competition and Competitive Edges• Estimated Market Share and Sales• On-going Market Evaluation

IV. The Economics of The Business

• Gross and Operating Margins• Profit Potential and Durability• Fixed, Variable, and Semivariable Costs• Months Breakeven• Month to reach Positive Cash Flow

V. Marketing Plan

• Overall Marketing Strategy• Pricing• Sales Tactics• Service and Warranty Policies• Advertising and Promotion• Distribution

VI. Design and Development Plan

• Development Status and Tasks• Difficulties and Risks• Product Improvement and New Products• Costs• Proprietary Issues

VII. Manufacturing and Operations Plan

• Operating Cycle• Geographical Location• Facilities and Improvements• Strategy and Plans• Regulatory and Legal Issues

VIII. Management Team

• Organization• Key Management Personnel• Management Compensation and Ownership• Other Investors• Employment and Other Agreements and Stock

Option and Bonus Plans• Board of Directors• Other Share Holders, Rights, and Restrictions• Supporting Professional Advisors and Services

IX. Overall Schedule

X. Critical Risks, Problems, and Assumptions

XI. The Financial Plan

• Actual Income Statement and Balance Sheets• Pro Forma Income Statements• Pro Forma Balance Sheets• Pro Forma Cash Flow Analysis• Breakeven Chart and Calculation• Cost Control • Highlights

XII. Proposed Company Offering

• Desired Financing• Offering• Capitalization• Use of Funds• Investor’s Return

XIII. Apendices