Business Planning

:
12 points ‘to trigger thinking’

Anjana Vivek anjana@bizkul.com
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BACKGROUND

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I: A Business

Plan is a Communication Tool

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COMMUNICATION TOOL
Both substance and form are important Often, a reader’s perception of your business/idea will be based on the business plan you prepare

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II: Think about
whom are you communicating to
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COMMUNICATION TOOL
Is it - a VC - an angel investor - a strategic investor or - someone else? Each one of these will look at the business plan differently

COMMUNICATION TOOL
Is it an expert who has some understanding of your business, i.e. such as a technologist or domain expert? Is it someone who is a an expert in some other area without knowledge of your industry?

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III: Logical

structure to the plan

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STRUCTURE OF THE PLAN
The plan must have structure and include the following: - Business / idea - People behind idea/project - Market size expected - Marketing strategy - Competition - Financials - Other information which makes this complete

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SOME PRACTICAL ASPECTS
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IV: Projections
in new or uncertain markets

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TARGET MARKET SIZE
The markets may be: - new - unexplored - latent - uncertain Think of testing markets or doing market research in creative ways as well as through standard practices

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V: Financial

Projections when the future is unpredictable
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FORECAST FINANCIALS
There are so multiple variables in a business, which impact the financials, including, but not limited to:
revenue streams costs, capital and revenue in nature capital infusion at different stages resource constraints

FORECAST FINANCIALS
These uncertainties can be factored in to some extent by using the tools of
- scenario analysis and - sensitivity analysis

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VI: Valuation

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VALUATION
Valuation is based on: - intangibles and - tangibles Valuation can be computed in multiple ways, the popular methods: - multiples of revenue; profit etc. - multiples of key drivers, eg.user base - cash flow based

VALUATION
Valuation may be driven by - the stake the entrepreneur is willing to give up at a particular stage of investment in the business and - the amount of money required by the business at that stage

VALUATION
Different persons can value the same business differently because they may - use different methods of valuation - use variations in the methods - have different inputs in the methods Thus, valuation perceptions can vary, and we do have situations where there are divergent views on valuation

VALUATION
Deals can sometimes be structured in such a way that the differences in valuation perception are factored, e.g. linking valuation to performance

VALUATION
Valuation is also the outcome of negotiations, so it is important to identify one’s bargaining power in relation to the deal issues

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VII: Protection
of Intellectual Property

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IP PROTECTION
If you do not disclose your plan; you cannot expect an investor to evaluate your business idea and fund you If you do disclose this, you may lose the idea to someone else, i.e. there is a chance of your idea being stolen or adapted and misused by someone else What do you do?

IP PROTECTION
You need to do your homework and background check on the potential investor/partner; i.e. you also need to do a due diligence on them just as they do a due diligence on you If you are looking for investment, at some stage, you will need to disclose much of your idea, so be prepared for this; a VC typically does not sign an NDA

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Miscellaneous points to think about
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VIII: Do you

disclose weak points ?

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DISCLOSURE
If you do not disclose the negatives, the investor will not automatically assume that you do not have any negatives in your project/idea

DISCLOSURE
Prepare for due diligence by identifying pitfalls upfront and taking steps to mitigate/de-risk to the extent possible

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IX: What are

the deal drivers

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DEAL ISSUES
Every business has issues which are - deal drivers and - deal breakers Try to identify key deal issues from - your perspective and - the investors perspective

DEAL ISSUES
This can help you plan on how you can leverage on your strengths This can help in negotiating a better deal

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X: Roles of team
members ?
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TEAM MEMBERS
Plan on roles and responsibilities of team members in terms of execution Plus think through issues of members’ contribution - in money - in kind - in intangibles

TEAM MEMBERS
Human egos can be fragile and can lead to the break up of the team Recognise this and try to have realistic expectations of yourself and others

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XI: Getting

educated on the basics of managing a business
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MANAGEMENT & EXECUTION
Educate yourself about the basics of managing your business Some things cannot be outsourced

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XII: Issues of

transition to be thought through
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TRANSITION
Look at the stage of your business and plan accordingly Growing to the next level may lead to issues such as - letting go of control - letting go of leadership Are you ready for this?

THANK YOU

Wishing you all success