Lecture 4: Business Plan

Corrado Motta, Volvo Cars

Slides taken from darko Durisic - darko.durisic@volvocars.com

Previous Lecture
• Why do projects fail?

• Lean vs. traditional approach

• Business case and business model

• Business model canvas / Lean model canvas

• Selling products as services and its environmental impact

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Today’s Lecture
• In this lecture you will:
• Understand the need for developing a business plan for a business case.
• Explore strategies for detailing your organizational, marketing and financial plans.

• The lecture is primarily based on the following literature:

• Starting up - Achieving success with professional business planning, T. Kubr, 1998
• Writing a business plan: The basics, Excerpt from Entrepreneur's toolkit: Tools and
techniques to launch and grow your business, 2004
• How to write a great business plan, W. A. Sahlman, 1997
• Biz Model for Uber Technologies, www.slideshare.net/funk97/ubers-business-model
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Business Plan
• A detailed assessment of a potential business opportunity at a company level.
• Opportunity usually described in a business case/business model.

• Purpose of the business plan:

• External funding
• Internal company projects
• Forcing you and your team to think critically
• Presenting your idea to outsiders (trusted and/or experienced people) and getting
feedback
• Measuring progress during realization (budget)

• Business plans are communication tools that constantly evolve. 4

Investors

“Start up is a faith-based initiative.”

Steve Blank, Silicon Valley entrepreneur

Inspired the Lean start up movement

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Business Plan
1. Executive summary Possible appendices:
2. Business opportunity • Resumes of key team members
3. Business model • Rationale for the sales, financial,
4. Management team marketing and roadmap forecasts
5. Business organization and partnerships
6. Marketing and sales
7. Financial plan
8. Risk and sensitivity analysis
9. Key Performance Indicators
10. Roadmap 6
1. Executive Summary
• Short section (max 2 pages) containing snapshot of the entire business plan.

• Probably the most important section.

• Business plan should:

• Capture the interest and attention of the readers and prepare them for what follows.

• Do not underestimate the task of writing the executive

summary!
• Good strategy: One paragraph summarizing key
concepts of each section to follow

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2. Business Opportunity
• Clear description of the:
• Problem the proposed business idea tries to solve.
• Proposed solution for the identified problem gap.
• Competitive advantage, strategy - why the proposed solution is better?
• You can use or refer to the relevant information in the business case.
https://youtu.be/XT_yTogN2l8

Do not fill this section with too many data. Go easy on

the technical details, communicate visually. Use the
appendix.
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2. Business Opportunity – Uber Example
Biz Model for Uber Technologies, www.slideshare.net/funk97/ubers-business-model

Problem Solution
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3. Business model
• Rationale of how an organization creates, delivers and captures value.
• Recipe for how the company intends to make money.

• Should be simple, relevant and understandable (e.g. Business Model Canvas).

• It should cover 4 main business areas:

1. Offer
2. Customers
3. Infrastructure
4. Financial viability

• You can use or refer to the business model in the business case.
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4. Management Team
“When I receive a business plan, I always read the resume section first. Not
because the people part of the new venture is the most important, but because
without the right team, none of the other parts really matter.”

William A. Sahlman, Harvard Business School

• Investors consider the people behind the business as a key asset.

• A team can produce a result that is greater than the sum of each member’s
individual performance, if properly formed.

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 4. Management Team - Skills

• Investors look for teams that:

• Have worked together before
• Have relevant experience
• Know their weaknesses
• Have a common goal
• Are fully committed

Starting up - Achieving success with professional

business planning, T. Kubr, H. Marchesi and D. Ilar, 1998
12
5. Business Organization and Partnerships
• Provide as many information as possible about:
• Company/project organization
• Required office space
• Company culture/values
• “Make or buy” decisions
• Partnerships

• Provide actual names of people, partners, office size, etc., if already known .

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6. Marketing and sales
• The company will fail if it cannot identify and connect with customers.

• Develop marketing plan in 3 stages:

• Analyze the market and the competitors
• Choose your target market (customer segment)
• Determine your market strategy

• Develop sale forecast based on the market analysis.

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6. Analyse the Market and the Competitors
• Provide total market, your target market and market share estimates.

• Provide short and long-term sale forecasts based on market share.

• Start your estimates with small things you know and then scale them up.
• Market sizing: https://www.youtube.com/watch?v=v5eKAmZuQzs

• Name your competitors and describe why your product is better.

• Estimate potential new competitors that could come in future.
• Try to foresee how will the competitors react on your new product/service.

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6. Analyse the Market – Uber Example

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Biz Model for Uber Technologies, www.slideshare.net/funk97/ubers-business-model
6. Analyse the Competitors – Uber Example

Biz Model for Uber Technologies, www.slideshare.net/funk97/ubers-business-model 17

6. Choose your Target Market
• Customer segmentation:
• Which customer groups are particularly attractive financially?
• How can you differentiate yourself from the competition for them?
• Unique Selling Proposition (USP) shall be quickly understandable.
• Customers can be segmented by age, finances, gender, country, etc.
• Think about how you could attract your customers.

• Describe your plan to involve customers early in the development.

• You cannot make a perfect product for every single

customer, focus on your target market and develop
for them.
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6. Choose your Target Market – Uber Example
• Customer needs:
• I want a ride (Taxi, UberX, UberTaxi, Lyft)
• I want a luxury ride (Limousine Taxi, UberBlack)
• I’m willing to pay more to get a ride NOW (UberX, Lyft)
• I want to share the ride to reduce cost (UberPool)
• I want a scheduled ride (Taxi)
• I want a consistent good user experience (Uber, Lyft)

• Examples of customers:
• UberPool – non-working group (students, young adults)
• UberX – working adults (people in a rush)
• UberTaxi – the usual taxi passenger
• UberBlack (Premium) –professionals (people who wish to show off) 19
6. Market Strategy
• The “4Ps” of marketing:
• Product: features needed by customers?
• Price: what price can you ask for your product?
• Place: how will you reach your customers?
• Promotion: convincing customers in the benefit?

• Reaching customers via retailers, agents, online adds, social networks,

TV/radio commercials, direct mails, etc.

• Think about how you would expend your business.

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6. Market Strategy – Uber Example

Biz Model for Uber Technologies, www.slideshare.net/funk97/ubers-business-model

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7. Financial plan and Key Business Metrics
• Questions that the financial plan has to answer:
• How much money is needed for launching the product/service?
• How much cash a company needs at any point in time?
• Who will provide the money (investors, owners, company)?
• How much profit is the company/product/service likely to make?
• What are the main assumptions underlying the forecasts?

• Tools for financial planning: Balance sheet, Income statement and Cash flow
• Provide detail forecasts for the first year and rough
forecasts for the rest.
• Present only key data and provide full report in
appendix. 22
7. Financial Plan – Balance Sheet
Owners’ Equity = Assets - Liabilities
• Assets and liabilities at a given point in time.
• Assets: what the company invests in
• Current assets
• Fixed assets
• Liabilities: funds of creditors
• Current (short term) liabilities
• Long-term liabilities

Working capital = Current assets - Current liabilities

Starting up - Achieving success with professional 23
business planning, T. Kubr, H. Marchesi and D. Ilar, 1998
 7. Financial Plan – Income Statement
Net income = Revenues - Expenses
• Revenues and expenses over a specific
period of time.
• Revenue: Earnings from selling
products/services, investments, etc.
• Expenses:
• Manufacturing expenses
• Operating expenses
• Depreciation
• Interest and taxes
Starting up - Achieving success with professional 24
business planning, T. Kubr, H. Marchesi and D. Ilar, 1998
 7. Financial Plan – Profit Margins
Industry Name Net Margin
Air Transport 10,86%
Auto & Truck 3,36%
Bank (Money Center) 24,48%
Drugs (Pharmaceutical) 17,52%
Education 0,54%
Financial Services (non-bank) 22,30%
Green & Renewable Energy -6,17%
Information Services 14,00%
Insurance (General) 6,20%
Oil/Gas Distribution 3,53%
Retail (Automotive) 3,43%
Retail (Grocery and Food) 1,97%
Software (Entertainment) 13,08%
Tobacco 24,89%
Total Market 6,40%
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7. Financial Plan – Cash Flow
• Changes of cash during time.
• Activities that affect cash:
• Operations
• Investment
• Financial activities

• No-cash transactions not visible.

• Account receivable are subtracted.
• Account payable are added.

• Profit ≠ cash flow

Starting up - Achieving success with professional 26
business planning, T. Kubr, H. Marchesi and D. Ilar, 1998
7. Financial Plan – summary

• Balance Sheet: Describes the assets controlled by the business and

shows how those assets are financed.
• Income Statement: Describes whether a company is making profit and
how much it spends to make that profit.
• Cash Flow: Describes all changes of cash during a specific period in
order to assure solvency.

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7. Financial Plan – Risks and Awards

How to write a great business plan, W. A. Sahlman, 1997

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 8. Risk and Sensitivity Analysis
“One of the greatest myths about entrepreneurs is that they are risk seekers. All
sane people want to avoid risk.” William A. Sahlmann, Harvard Business School

• Risk analysis shall be continuous.

• Identification of risks
• Strategy for mitigating/avoiding risks

• Sensitivity analysis describes:

• Expected scenario
• Best case scenario
• Worst case scenarios
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http://www.irca.org/en-gb/resources/INform/archive/issue24/Extras/A-history-of-risk/
9. Key Performance Indicators
• KPI: measurable value that shows how well a company achieves key goals.
• Usually used by investors and the management team to track progress.
• Should be monitored in real-time (e.g., using dashboards).
• Can be related do sales, finance, marketing, etc.

• Chose only a few key metrics. http://www.klipfolio.com/resources/kpi-examples

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 10. Roadmap
• Technique for strategic, long-term technology management that communicates
the vision considering evolving markets, products and technologies.

www.slideshare.net/FrostandSullivan/future-of-autonomous-driving-28642051 www.slideshare.net/Funk98/autonomous-vehicles-28513504
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Business Plan – Effective Writing
• George Orwell’s 5 rules for effective writing:
1. Never use a metaphor or other figure of speech.
2. Never use a long word where a short one will do.
3. If it is possible to cut a word out, always cut it out.
4. Never use the passive where you can use the active.
5. Never use a foreign phrase, a scientific word, or a jargon word if you can think of an
everyday English equivalent.

George Orwell, Politics and the English language, 1946

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Key TakeAways
• Business plans are communication
tools that constantly evolve.
• Put some effort into getting the
executive summary right.
• Be honest about the skills you have
and the ones you lack.
• Identify and involve your target
customers early.
• Base your sales, financial and other
forecasts on the solid market analysis.
How to write a great business plan, W. A. Sahlman, 1997 33
Assignment – Business Plan
• Provide the executive summary for your business plan.
• Describe the problem you are addressing, why it is relevant and your solution.
• Describe the organization of your business and its management team.
• Develop a marketing plan for your business.
• Develop a financial plan for your business.
• Describe the technology roadmap for your business.

• For VG only:
• Discuss your business case with potential customers.
• Backup your marketing and sales forecasts with research data.
• Extend your financial plan with balance sheet and cash flow.
• Develop a small prototype of your MVP (Minimal Viable Product).
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Assignment – groups
1. Groups of 2 or 3 members.
2. Create a group on canvas
• Name of the group and members.
3. Mail to corrado.motta@volvocars.com :
• if you are searching for a group

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 Q&A

Contact:
corrado.motta@volvocars.com
Khaals@chalmers.se