1. Chapter 11 The Business Plan

2. Copyright © Houghton Mifflin Company11-2 Overview Some truths about business plans Feasibility analysis versus business plan Types of business plans Overview of the components Oral presentation

3. Copyright © Houghton Mifflin Company11-3 Dispelling Some Myths A business plan means you can raise money A well-written plan = a better valuation and more money

4. Copyright © Houghton Mifflin Company11-4 Some Truths There isn’t a customer you don’t have to convince Don’t use cliché approaches—hockey stick growth Seek the highest valuation needed to get the right amount of capital from the right investor Plan to outperform expectations Don’t put yourself in the position of having to start the business to answer key questions

5. t Timeline Go Forward/Rework Product/Service Development & Management Product Service Risks/Benefits Market/Distribution Risks/Benefits Opportunity Environment—Industry-Concept Competition Grid Customer Definition Market Analysis Industry Status Patterns of Change Concept Statement Financial Risks/Benefits Team Feasibility: Test the Concept Customer Test IP Development

6. t Business Plan: Build the Company From the Inside Out Marketing Production Finance Core Contributions Core Business Extended Business Opportunity Environment Suppliers Consultants Money Government Capital Markets ValuesPurpose Mission Customers OEMs Competitors

7. Copyright © Houghton Mifflin Company11-7 Feasibility Study versus Business Plan Feasibility = screening opportunities to decide the conditions under which you are willing to go forward Business Plan = execution plan for implementing the business

8. Copyright © Houghton Mifflin Company11-8 Purpose of the Business Plan Reality Check—What’s it going to take? Living Guide to the Business Statement of intent for third parties –Investors –Bankers/lenders –Potential management –Strategic partners –Suppliers

9. Copyright © Houghton Mifflin Company11-9 Bankers/Lenders Margins –How much room for error? Cash flow –Can you pay them back? Qualifications and track record of management team –Do they have what it takes to execute the plan?

10. Copyright © Houghton Mifflin Company11-10 Investors Predictors of growth Qualifications and track record of the management team Deal structure Exit

11. Copyright © Houghton Mifflin Company11-11 Strategic Partners Growth plans indicate potential business Ability to pay Future management –Where do they fit in?

12. Copyright © Houghton Mifflin Company11-12 Types of Business Plans The traditional plan –About 20 pages plus appendices –Inductive approach The e-commerce business plan –Timeline to launch and trigger points for rapid growth –Technology standards –Software and hardware needed to operate –Internet service provider and capabilities –A storyboard of the product or service

13. Copyright © Houghton Mifflin Company11-13 What Every Plan Needs What need is being served? Do you have a team that can serve that need? Why is now the right time to launch this business concept? Can you make money at it?

14. Copyright © Houghton Mifflin Company11-14 The Components The business concept The industry/market analysis The founding team Operational analysis Organization plan Technology plan

15. Copyright © Houghton Mifflin Company11-15 The Components (cont.) Marketing plan Financial plan Contingency plan Growth plan Deal structure

16. Copyright © Houghton Mifflin Company11-16 The Executive Summary Arguably the most important part of the business plan Stimulates an investor, bankers, or other interested party to read the business plan Should be no more than two pages Contains the most important points from all sections of the plan Must capture the reader’s attention instantly

17. Copyright © Houghton Mifflin Company11-17 For a Business Plan to Be Successful…

18. Copyright © Houghton Mifflin Company11-18 You Must Tell a Compelling Story How do you plan to change the world? How will you solve the customer’s pain? Who are you? What have you done?

19. Copyright © Houghton Mifflin Company11-19 You Must Move in with Your Customer Talk with the customer Shadow the customer Put the customer on your development team

20. Copyright © Houghton Mifflin Company11-20 You Must Have a Pricing Strategy Who’s doing what in your market and why? Don’t compete on price; compete on value Margins are everything Justify what you’re asking

21. Copyright © Houghton Mifflin Company11-21 You Must Support What You Claim Primary and secondary research Cite your sources and interrelate Don’t rely on one source Talk to strangers

22. Copyright © Houghton Mifflin Company11-22 What Business Plans Look Like Today Shorter Larger appendix Bigger focus on intellectual property and other intangible assets Demonstrate use of technology as a competitive asset

23. Copyright © Houghton Mifflin Company11-23 Technology Plan Because technology may be at the core of your concept –IP: patents, trademarks, know-how Because technology enables the achievement of business goals –Expands possibilities –Creates efficiencies –Facilitates information sharing

24. Copyright © Houghton Mifflin Company11-24 Bottom Line The business plan carries your vision The business plan is an execution plan The business plan demonstrates that you know what you’re doing

25. Copyright © Houghton Mifflin Company11-25 Oral Presentation Answer the fundamental questions Be under a half hour Catch the audience’s attention in the first sixty seconds Involve the key members of the founding team Demonstrate the product or service where possible

26. Copyright © Houghton Mifflin Company11-26 Take-Aways List what students took away from the discussion in real time