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Technology Management Program

A Winning Business Plan


Susan A. Block

BLOCK
BOWMAN &
ASSOCIATES, LLC

What Is a Business Plan?


Structured thought process/market validation
` Structure to collect thoughts
` Test assumptions
` Leads to otherwise overlooked realizations
(markets, pricing, etc.)

Capital Raising Document

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BOWMAN &
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Capital Raising Document


Conveys:
` Idea Product/Service and target Market
` Prospects Market Potential
` Why you will be successful
Competitive advantage
Management team

Purpose: Sell the idea, yourself and the


magnitude of the opportunity
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BOWMAN &
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Ideal Business Plan


` Addresses an Identified Need
` Is Customized With Different Versions
` Is Well Thought out and Researched
Takes a minimum of 2-3 months (200-300 hours)
Length: Typically 30-50 pages (excluding exhibits)

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A Winner
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Great Executive Summary


High potential revenue projections
Addresses defined need
Huge market potential
Thoroughly researched (did their homework)

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BOWMAN &
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What I Look For


` Is it a good idea?
` Market potential
` Revenue potential
` Is it fundable?
` Can the team do it? (or can a team be
pulled together?)
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BOWMAN &
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Tips to Differentiate Your Plan


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Easy to read
Exploit uniqueness
Qualify competition
Emphasize
management strength
` Market driven
approach
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BOWMAN &
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` Cite distribution plan


` Substantiate
statements with
market information
and references
` Use of funds
` Exit strategy

General Profile of a Winner Business Plan:


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`
`
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Addresses a defined need


Strong Management Team (or Board)
Great Executive Summary
High Revenue Projections ( but totally
justified and conservative)
` Huge Potential Market
` Thoroughly Researched Plan with
References to Statistics/Published Studies
` Industry is still in growth phase

BLOCK
BOWMAN &
ASSOCIATES, LLC

Address Defined Need


` If Unfulfilled Need Exists:
Providing product/service to a market sitting
there waiting to buy
Easier marketing task
Less competition initially
Constraint is how quick can scale up rather
than marketing
Often better margins available (higher prices)

BLOCK
BOWMAN &
ASSOCIATES, LLC

Other cases:
` Customer doesnt know they need it
Huge educational task need to educate market and then sell
to them
Will take a long time and a lot of $
Often first one is not successful

` A Me Too product (need already being fulfilled)

Need to show how you are better/less expensive etc.


Need to take the customer away from existing solution
Takes a lot of marketing time and money
Margins lower (prices lower)
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BOWMAN &
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Strong Management Team


` For most investors, Management Team is the
most important indicator of success
Experience
Diversity
Synergy

` Ideally includes a successful entrepreneur


that has done this before
` Reduces Risk
BLOCK
BOWMAN &
ASSOCIATES, LLC

Importance Of Executive Summary


` Less than 5% of those plans are ever reviewed beyond
Executive Summary
` Typical VC invests in < 1% of the business plans they
review
Guidelines:
Should be 1 3 pages in length
Written LAST

BLOCK
BOWMAN &
ASSOCIATES, LLC

Key Components of an Executive Summary

1. What is the problem?


2. How are you solving that problem?
3. Why can YOUR COMPANY win in
this business?
4. How real is the product and
technology?

BLOCK
BOWMAN &
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Key Components of an Executive Summary

5. How real is the market? Who is the


customer, how much will they pay,
do they pay for similar products now
etc. etc?
6. How will you enter the market - who
are the competitors, what is the
channel?
7. Why do you need money and how
will it help you?
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BOWMAN &
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Detailed Evaluation of Business Plan


` What investors want to see or
will look at

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BOWMAN &
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Market Validation
First step to evaluating a business plan
` Is there a desirable market opportunity?
` Can they profitably exploit this?
` Is their sufficient long term potential or an
attractive exit?

BLOCK
BOWMAN &
ASSOCIATES, LLC

Industry Attractiveness
` Size - now and
estimated future
` Growth rate
` Competitive structure
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`
`

Price
Branding
Quality
Technology

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BOWMAN &
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` Economies of
scale
` Firm dominance

Market Opportunity
` Competition - Firms
` Size of competitors
` Profitability
` Is there a niche for you?

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Market Validation
` Competition - Products
` Direct competitors or substitutes
Feature/benefit comparison with your
product/service

` Pricing

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Business Plan Needs to Convey:


Business Model
How are you going to make $
License technology
Sell product to someone else to package and sell
Buy components and repackage

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Business Plan Needs to Convey:


Promotion Plan
` The communication channels you will use
to make the customer aware of your
product/service and convince them to
purchase
` e.g.: advertising, on-line demonstration
videos, packaging
` PR
` Collateral
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Business Plan Needs to Convey:


Distribution Plan
` The distribution channel you will
use to move the product or service
to the customer
` e.g.: direct sales, wholesale
distributors, brokers

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BOWMAN &
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Business Plan Needs to Convey:


Demand Forecast
` Estimates of product or service
sales, based on the market analysis
and assumptions about the
effectiveness of the pricing,
promotion, and distribution
strategies

BLOCK
BOWMAN &
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Common Oversight
` Do not take market analysis far
enough
` Do not define addressable and
target markets

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Proper Scope
` Determining the proper scope of the target
markets is critical.
` If the definition of a target market is too
broad, it will be hard to identify their
information needs and you will waste
money on promotion that won't get the
results you want.
` If the target market is too narrowly defined,
it will be difficult to find and generate a
customer base that is profitable.
BLOCK
BOWMAN &
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Potential Market
` The total number of people who could buy
from your business.
` For example, if you are selling solely over
the Web and only accepting credit cards for
payment the potential market would be
everyone in the world who owns a credit
card and has access to the Internet.
` Obviously, this is a huge, but illusory,
market.
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Addressable Market
` The group of individuals in the
potential market who are likely to have
an interest in what your business has to
offer.
` For example, for Santa Barbara Roasting
Company the addressable market is persons
who live in Santa Barbara or travel thru here.

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Target Market
` The group(s) of individuals in the
addressable market that are likely to buy,
based on the segmentation factors.
` In other words, who will buy your product
or service provided consumer-environment
conditions are perfect and there is no
competition.
` Not everyone in target market will buy from
you
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Market Share
` The individuals in the target market who can be
expected to make a purchase from your business.
` Your market share is affected by
` the structure of the industry, the impact of
competition,
` strategies for market penetration, and
` the amount of capital the business is willing to
spend in order to increase its market share.

` Market share is estimated in the demand forecast


section of the marketing plan, which is beyond
the scope of this lesson.
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BOWMAN &
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Identifying Target Markets


` With this background and marketdefinition description in mind, it is
time to identify your primary,
secondary, and, if necessary,
tertiary markets.

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Primary Market
` The primary market is the group of
individuals in the addressable market most
likely to buy your product or service.
` Think of the primary market as your
"premium customer" or "who is most likely
to find my site and buy something from it"
or "who is chiefly interested in what I have
to sell".

BLOCK
BOWMAN &
ASSOCIATES, LLC

Secondary Market
` The secondary market is another class of
individuals who are "second most" likely
to buy your product or service.
` In other words, look for another distinct
group in the addressable market with
different segmentation factors from the
primary target market.

BLOCK
BOWMAN &
ASSOCIATES, LLC

Target Market Research


` With 1-2 target markets identified, the
next step is to conduct market research to
provide some concrete data about them.
` In this section you are seeking answers to
questions such as:
` What are the specific demographics (age,
education, income, etc.) of these markets?
` How many individuals are in the target
market?
` Are
these markets growing? stable?
B
B
A
declining?
LOCK
OWMAN &
SSOCIATES, LLC

Research Resources
` Trade associations and
publications
` Company websites
` Hoovers http://www.hoovers.com
` Edgar Online - http://www.edgaronline.com
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BOWMAN &
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Research Resources (cont)


` Research consultants
` Boston Consulting Group http://www.bcg.com
` Cahners - http://www.cahners.com
` Forrester Research http://www.forrester.com
` Gartner Group - http://www.gartner.com
` IDC - http://www.idc.com
` Jupiter Communications http://www.jup.com
B
LOCK

BOWMAN &
ASSOCIATES, LLC

Entrepreneurial Resources
` Organizations
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http://www.lava.org
http://www.socalTECH.com
http://www.nvca.org
http:/www.larta.org

` VC Listings and
Information
` http://www.vfinance.com
` http://www.corpfinet.com
` http://www.pwcmoneytree.co
m
` http://www.internetvcwatch.c
om
` http://privateequity.dowjones.
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com
BOWMAN &
ASSOCIATES, LLC

` Business Magazines
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http://www.redherring.com
http://www.thestandard.com
http://www.entrepreneur.com
http://www.inc.com
http://www.business2.com

Online Business Plan Resources


` http://www.sba.gov/starting_business/planning/basic.html
http://www.bizplanit.com/vplan.htm
` http://www.businessplans.org
` http://www.americanexpress.com/smallbusiness/resources
/starting/biz_plan/
` http://www.entrepreneur.com/article/0,4621,2873551,00.html
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BOWMAN &
ASSOCIATES, LLC

BLOCK
BOWMAN &
ASSOCIATES, LLC