Writing a Winning Business Plan Lari E. Mobley, MBA, Ph.D. Jeff McHugh, MBA, CMA Explain name Welcome them and tell them why we’re here Portions adapted from Katan Associates, UCI, 2015

Agenda What is a business plan? Guidelines and judging criteria Sections Tips and suggestions Q & A

Dilbert on Business Plans

A brief explanation https://youtu.be/PDWvcsTloJo We are intended to use our God-given resources most effectively Everything belongs to the Lord, and we are just stewards Ask: How would you define an entrepreneur? What does an entrepreneur do? What is he or she like?

What is a business plan? A business plan is a written description of your business’s future Statement of goals Reasons they are attainable Plans for reaching them People who will make it happen Plans don’t sell new business ideas to investors. People do. Risk taker? Manager? Celebrity? Inventor?

Guidelines for Biola Start-up Business plans must not be over fifteen pages, excluding the cover page and table of contents. Cover page should include company name, team member names, school affiliations, undergraduate, graduate, alumni status. Margins must be one inch on all sides. Body text should be 12 pt. font.

Guidelines for Biola Start-up Document text should be single-spaced. Submit documents only as a single file in Adobe Acrobat format (.pdf format). Due Date: Must post Written Business Plan to: BiolaStartup2016.istart.org by March 14, 2016, 11:59PM.

Judging criteria Quality of business plan = 30% Executive summary & company overview Products or services Market need Market potential Competitive advantage Management Financial forecasts

Judging criteria Faith-based component = 20% Are Biblical values and principles represented? Does the business serve the common good and impact the world for Christ? Impact of presentation = 30% Evidence of a market, ability to execute, and return on investment Judges’ assessment of idea= 20% Would they invest their own money?

Glossary of business plan terms What they say What they mean Customers are clamoring for our product We have not yet asked them to pay for it, and all of our current customers are relatives We are looking for a passive, dumb-as-rocks investor We seek a value-added investor We did not modify any of the assumptions in the business plan template we downloaded from the Internet We project a 10% margin

Executive summary The executive summary is clear and effective as a stand-alone document What problem are you solving? How will your business solving the problem? Who are your customers? Who are your competitors? How viable is your business? How do you make money? Innovations of the past:   Installment buying (gave farmers purchasing power to buy equipment) Containers for shipping (minimized time in port) Systematic training of teachers (made universal schooling possible) Textbooks Hospitals Management (rendering productive people of different skills and knowledge working together in an organization)

Products or services What is the product or service? What are its attributes? What are the advantages and potential drawbacks? Ask: Is entrepreneurship an art or a science?

Products or services Why/how is your product/service more compelling than existing ones or the competition? What is the stage of development? Do you have a proprietary position or intellectual property protection planned or in place? Ask: Is entrepreneurship an art or a science?

Market need It can be learned

Market need What specific conditions in the market have created the problem you are solving? How will your product/service take advantage of the opportunity? It can be learned

Market need Who are your customers and what are their attributes? Clearly define your potential customers and why they will pay for your product or service It can be learned

Marketing by Guy Kawasaki https://youtu.be/uFDnT_xgqJ0?t=5m4s It can be learned

Market potential What are the characteristics of the market for your product or service? How will you reach the market? Hint: “word of mouth” is not a strategy. It means “we have no clue.” How big is the market opportunity: number of potential customers & annual sales? How do you know this? How believable are your numbers? Relate this to the parable of the talents, remind them that the resources are God’s, not ours

Market potential Can you narrow the market to a manageable segment? Demographic, psychographics, geography, behavior No, “everyone” is NOT your customer How will you dominate the market? e.g. through pricing, quality, geography Is there a market niche where you will have competitive advantage? Can you sustain this advantage? How? Relate this to the parable of the talents, remind them that the resources are God’s, not ours

Build a bottom-up model NOT this: There are 1.3 billion people 1 percent want Internet access We’ll get 10% of that potential audience Each account will yield $240 per year 1.3 billion people x 1% addressable market x 10% success rate x $240/customer = $312 million! And—added bonus—look at how conservative these principles are! Source: The Art of the Start, by Guy Kawasaki Relate this to the parable of the talents, remind them that the resources are God’s, not ours

Build a bottom-up model BUT this: Each salesperson can make 10 phone calls per day that get through to a prospect There are 240 working days per year 5% of sales calls will convert within 6 months Each successful sale will bring in $240 worth of business We can bring on board 5 salespeople 10 calls/day x 240 days/year x 5% success rate x 5 salespeople = $144,000 in sales the first year Source: The Art of the Start, by Guy Kawasaki Relate this to the parable of the talents, remind them that the resources are God’s, not ours

Competitive advantage Competitive Matrix: Who are your competitors? Their strengths & weaknesses? Your strengths & weaknesses? How will you close the gap? How easily can competition close gap? So, is this inherently risky? How risky?

Competitive advantage Yes, you have competitors The “old way of doing things” can be a competitor Doing nothing can be a competitor Saying you have no competition is a nonstarter It’s your job to show how you are superior to the competition, not that it does not exist So, is this inherently risky? How risky?

Competitors by Guy Kawasaki https://youtu.be/uFDnT_xgqJ0?t=5m42s So, is this inherently risky? How risky?

Competitors: what NOT to do It’s the best use of our God-given resources. Convince us through your concept paper that it would be risky NOT to start your business Source: The Art of the Start, by Guy Kawasaki

Competitors: what to do Source: The Art of the Start, by Guy Kawasaki

Management Who are key team members and their respective roles? What are their relevant experiences and accomplishments? What other areas of expertise are you lacking? When will you need additional team members? Market = customers Solution = your business model

Financial forecasts Income statement Balance sheet Funds required & uses Key assumptions Financial model

Tips and suggestions Don’t forget key expenses Salaries and payroll taxes Unless you are independently wealthy Licenses, permits, patents, and trademarks Insurance Business, workman’s comp, vehicles, other Websites are not free Social media is not free A man buys a Cadillac because he wants prestige, not a car A woman buys cosmetics because she wants hope You buy a drill because you need to make a hole, not because you need a drill

Tips and suggestions Explain your “go to market strategy” How will you get your first customers? How exactly will they hear about you and decide to buy your product or service? Are they both willing and able to pay? A man buys a Cadillac because he wants prestige, not a car A woman buys cosmetics because she wants hope You buy a drill because you need to make a hole, not because you need a drill

Tips and suggestions Do your research Be realistic Read sample business plans Have others read your plan Check your numbers for accuracy and believability Be realistic A man buys a Cadillac because he wants prestige, not a car A woman buys cosmetics because she wants hope You buy a drill because you need to make a hole, not because you need a drill

Final thoughts Our success comes from the Lord “He did this all so you would never say to yourself ‘I have achieved this wealth with my own strength and energy.’ Remember the Lord your God. He is the one who gives you power to be successful…” - Deuteronomy 8: 17-18 (NLT)

Questions Any questions?