The Art and Science of Writing and Presenting a Business Plan

Company Confidential

Company Confidential

Why create a Business Plan?
• Most importantly, for you & your team – You need one for a startup – You need one for a corporation – The actual process of planning is the key.
• It consolidates management direction. • It provides debate & finally consensus.

– It’s used as a guide when speed bumps happen. – It’s your company & your personal scorecard.
Company Confidential

Source: Jack Derby, Derby Management

Why else?
• No Business Plan…No money.
– The Six Stages of Successful Sources:
• • • • • •
Company Confidential

FF&A: Friends, Family & Acquaintances Private angels Venture capitalists Corporate investors Strategic partners Banks

Writing a plan is tough work
• It requires disciplined balance – – – – – It’s visionary, but logical. It’s financially perfect, but flexible. It’s for today, but also for 3-5 years out It’s a formal Plan, but it’s easy to read. It’s creative, but it follows The Rules.

Company Confidential

– Above all else… • • • • • • Be compelling Be brief. Create an experienced management team Company Confidential . & deliberate Focus on customers & how you will sell them. Provide market research & hard data Be innovative & describe barriers to others. focused.How do you start? • Pay attention to The Do’s & Don’ts.

Define what’s unique. Identify what the business is immediately Identify the business model immediately. Define what’s compelling. Company Confidential . Focus on your customers. Get to the bottom line quickly.The 25 Do’s… • • • • • • • Be brief & direct & detailed.

you're investing your career. • Include your ecommerce strategies. Focus on your sales model & channel strategies. Describe the 3 to 4 primary strategies. Remember. Company Confidential . • Make realistic. but exciting.The 25 Do’s… • • • • • Be realistic with yourself. Define long term objectives for 3 to 5 years. projections.

Substantiate with accepted market research. Describe the barriers to entry for others • Convince your reader about success.The 25 Do’s… • • • • • Support strategies with detailed tactics. Discuss very objectively your risks. Answer the question of why customers buy. Company Confidential .

Define exactly how the funds will be used.The 25 Do’s… • • • • • State how much money you will need. Don't try to be cute! Company Confidential . Stick with proven and accepted plan formats. State clearly your exit strategy.

Create revenues that you won’t make. Use highly technical buzz & descriptions. Focus only on you & your technology. Forget about objective customer research. Company Confidential . Make unsubstantiated statements or claims. Focus on the future.The 15 Don’ts… • • • • • • • Write about history. Include detailed budgets.

The 15 Don’ts… • Forget what makes your plan different… – – – – – Experienced management Large and growing markets Proven sales models & channels Experienced sales penetration tactics. Innovative technologies Company Confidential .

Forget what your reader wants. Include copies of resumes & technical papers.The 15 Don’ts… • • • • • • • Assume anything. Attempt to write the business plan alone. Company Confidential . proofread & proofread. Forget to proofread. Define valuations in the actual plan. Extend the process more than two months.

– – – – – – What’s my Vision? Can I say it so that anyone understands it? What business are we in today? What about in 3 years? Are we really innovative? What about in 3 years? Company Confidential .Don’t just start writing • Preparation…The Key to Success.

The market data. trends. – What do we really know about… • • • • • • Our future product roadmap What our service offerings could be. The new technologies in development The competition Who are our customers will be in 3 years? Company Confidential . & forecasts.Don’t just start writing… • Preparation…The Key to Success.

– Externally.One more preparation task… • Think about your starting assumptions. what do I think will happen about… • • • • Economic trends Markets that I am entering Technology changes Regulations Company Confidential .

& capital models. what do I want & expect for… • • • • • Sales revenue growth rates Product costs and margins Sales expense percentages G&A expense percentages Receivables. financing.One more preparation task… • Define your starting assumptions – Internally. payables. Company Confidential .

.Now. – Start working by yourself. • What you need… – A quiet place and time. – Get the content down quickly. – Send a first rough draft to others quickly. – All of your data easily available. Company Confidential . you can finally start writing. – Write draft after draft after draft after….

products & technologies • Business Plan Lite – 2 sections: – 8-10 pages with financials – An extended Executive Summary Company Confidential .You have two options today • The Traditional Business Plan – 7-8 sections – 20-30 pages with financials – More detail: markets.

– Details the business and sales models What follows here is the traditional format – 7-8 sections – 20-30 pages Company Confidential .The traditional plan • • Certainly preferred by sophisticated VCs – Provides an opportunity to provide clear details – Brings out the richness of the business idea.

Sections 1 & 2 & 7 create the BP Lite Company Confidential .Business Plan Lite • • • A result of the times – Today. time to read is the driver. Requires you to… – Be an excellent writer – Provide great detail with very well chosen words – Get your points across succinctly & with clarity.

What’s included? Vision Strategies Tactics Operations Actions Company Confidential .

What’s included? • 7-8 Sections… – – – – – Executive Summary Introduction to the business Definition of your products & services Overview of your markets Overview of your sales & marketing plans Company Confidential .

What’s included? – Overview of product development roadmap – Summary of manufacturing & operations – Bios of your management team – Four pages of financials – Brief appendices if necessary Company Confidential .

Section 1: The Executive Summary • 2-3 pages – Make it compelling… • • • • • • Your Idea Your Markets Your business and sales models Your competitive advantages Your management team Your use of the funds Company Confidential .

Company Confidential .

What’s the Business? • This section is focused on… – – – – The Business Opportunity The Markets The Technology The Products Company Confidential .Section 2.

What’s the Business? • This section must define… – – – – – a clear Vision clear strategies a well defined business model a dedicated. believable Mission a strong sense of management experience Company Confidential .Section 2.

technology The markets – research data – competition The customers – who they are & their needs Company Confidential . What’s the Business? • • • The products & their value add services – features & benefits. innovation.Section 2.

Section 3: Sales & Marketing • The most important section – 3.1 What’s the Market? • • • • Customer analysis & their needs Worldwide market size & trends Competitive strengths & weaknesses Value creation for your products & services Company Confidential .

2 The Marketing Plan – What are your marketing strategies? • • • • What are the data points to measure success? What is your price positioning & why? What are your primary tactics in years 1 & 2? What are your primary events in year 1? Company Confidential .Section 3: Sales & Marketing • 3.

Section 3: Sales & Marketing • 3.3 The Sales Plan – What’s your Sales strategy? • What standard channels will you use? • Is there an innovative channel? • What are your penetration tactics? – What’s your sales model? – What’s your hiring & training plan? – What’s your measurement & reporting? Company Confidential .

• Detail the technical team’s background. • What is your development status? – Describe your primary milestones. Company Confidential . detail.Section 4: Engineering and R&D • What are your core technologies? – Provide sufficient. – Assume development will be late. but not numbing. – Be conservative.

Company Confidential . – If not. define why not in a positive manner. What your IP & patent strategy? – What is your IP strategy? – If you have patents. provide a status table.Section 4: Engineering and R&D • • What is your strategy for future products? – Define in text with graphics your roadmap – Define common platforms and architectures.

Section 5: Operations/Manufacturing • • • • What’s your Manufacturing strategy? – Outsource or not? – Why & why not? What is core in Manufacturing? What are your unique capabilities What are your unique processes? Company Confidential .

Section 5: Operations/Manufacturing • Focus on your customers in your… – Distribution strategy – Quality strategy – Value added services that you will employ Company Confidential .

Section 5: Operations/Manufacturing • What is your Customer Support strategy? – Customer order fulfillment tactics – Primary objectives • Delivery • Response time – Primary policies – Outsource or not? – Future services that you will provide? Company Confidential .

Section 6: Senior Management • Management – – – – – The #1 reason that investors do not invest. Dedication counts second. Experience counts first. Ability to rapidly learn is third Too strong an ego is a negative. Company Confidential .

Your expenses must reflect standard percentages.Section 7: The Financials • The Rule: Everything Must Hang Together – – – – – – Your vision and strategies in text must tie in. Your business and sales models must tie in. Your margin percentages must tie in. Company Confidential . Your cost of goods must tie in. Your market growth objectives must tie in.

Section 7: The Financials • You need… – P&L’s • 1st year by month • 2nd year by quarter • 3rd year by year – Balance Sheets for each year – Cash Flows for each year – 3-4 pieces of paper only Company Confidential .

do not list any.Section 7: The Financials • You need to list your… – Primary assumptions – Primary categories for the use of the funds – What are the primary risks? • Other than the normal of early stage companies • If nothing specific. – What’s your exit strategy? Company Confidential .

Section 8: The appendices • Provide only the compelling things… – – – – Product data sheets for primary products Any critical publication. Do not provide resumes. Do not include patents. Company Confidential .

com Startup.com MIT Enterprise Forum workshops • • • Company Confidential . Gumpert – Anything from HBS Press – Anything from Inc.Where do I go for help? • Good textbooks – Rich. Inc Magazine & inc.wsj.

Where do I go for help? • • • • • • • MIT Enterprise Forum seminars Entrepreneurship schools – MIT Sloan . Mintz Levin. Fortune Small Business Company Confidential . Smith Professional Mentors & Coaches Venture capital investors The big CPA firms: – PWC. Babson. Ernst. Deloitte. The big law firms – Cooley. HBS. Hale INC.

– What do you want to do in 3-5 years? – Be acquired.6^n (n=years before cash out) – It includes 50% ROI and 10% inflation – Time horizon is 3-7 years • Evidence of focus through concentration of a limited number of products and services – Don’t chase butterflies • • Proprietary position Exit Strategy – Patents. Company Confidential . etc.Goals for a Successful Venture • Evidence of customer acceptance of the product – – – – Letters of reference Data generated at their facilities Abstracts White paper • An appreciation of the investors needs – Investors want a 1. trade secrets. go public.

not product driven It is easier to sell in an already established field than in a new market Investors want their money to be productive – Producing and selling the product – Therefore. develop the product with other funds – You are better off developing the product by any means necessary – Don’t be a one person band – Find people w/complimentary skills – Hire gray hairs or no hairs – Pay all key folks the same – Have employment agreement. limiting disclosure and competition – Describe employment agreement in management section Company Confidential • Management Matters .Important Things to Keep in Mind • What is the value of the product – Questions to ask• How much does it save the customer($ and non$) • How much does it earn the customer ($ and non$) • What non monetary benefits do customers realize • • • Be market driven.

break-even analysis – Look at 10K and annual reports of companies in the same space – Make a critical staffing chart and describe when they are coming in Company Confidential .Financials – Avoid too many spread sheets – Real numbers are usually 20-80% right from original estimates – Most VC seek a min of 20 million of sales revenue in 5 years – Include income statement. cash flow forecast. balance sheet.

Investor Presentation – First Impressions • • • • • Eye contact Hand shake Dress like you can be trusted with their money Impressions are made within first few seconds Once impression is made. practice. and practice Company Confidential . it is virtually irreversible – Introduce management team – Have executive team (2-3) partake in presentation – Don’t dim lights – Talk about the market or need first! – Present technology half way through – Important things in presentation (order of importance) • • • Market User benefits How investment will grow for them – Practice.

What Matters • Who you run with – – – – Legal advisors Business advisors Key Executives Investors • Your performance record – Nothing predicts future performance like historical performance – Don’t burn bridges • Integrity – Reputation: Your most valuable asset Company Confidential .

” “(Insert Fortune 50 company name) is going to sign our purchase order next week.” “No one can do what we're doing.” “Hurry because several other venture capital firms are interested. 5.The Top Ten Lies Told By Entrepreneurs (okay…really eleven) 1.” 10.” “Key employees are set to join us as soon as we get funded. 9. 7.” “We have a proven management team. 4. 8. 2. “Our projections are conservative. “Patents make our product defensible. 3.” 11. “All we have to do is get 1% of the market.” “No one is doing what we're doing.” “(Insert reputable market research firm) says our market will be $50 billion in 2010.” Company Confidential Source: Guy Kawasaki . 6.” “(Insert Fortune 50 company name) is too big/dumb/slow to be a threat.

3.” “We can open up doors for you at our client companies.” “We like early-stage investing. 5. but my partners didn't. 8. and we'll invest. 9. 7. 4.” “If you get a lead. 2.The Top Ten Lies Told By Venture Capitalists (okay…really nine) 1. “I liked your company. 6.” “I have lots of bandwidth to dedicate to your company.” “We love to co-invest with other venture capitalists. we will follow.” “This is a vanilla term sheet.” Company Confidential Source: Guy Kawasaki .” “We're investing in your team.” “Show us some traction.

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