1. 1 Building The Business Plan Workshop

2. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 2 Questions for the Group

3. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 3 How Many of You… Have prepared a business plan in the past? Have prepared financial statements for a business plan? Have taken accounting? Are familiar with the concepts of income statements, balance sheets and cash flow statements?

4. 4 Business Plan Essentials

5. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 5 What is a Business Plan? A comprehensive, stand-alone document that: –Describes a viable market need –Describes how your business will meet that need –Highlights required resources

6. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 6 What is the Purpose of a Business Plan?

7. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 7 The Purpose of A Business Plan Capture the essence of your business idea Raise awareness Raise capital Identify priorities, risks and opportunities for you and potential investors Help recruit early customers and employees

8. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 8 Your Initial Blueprint for Gateway Your Business Plan is:

9. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 9 One of Your First Marketing and Sales Tools Your Business Plan is:

10. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 10 A Business Plan Outline EXECUTIVE SUMMARY OVERVIEW Introduction Mission Objectives Products and Services Competitive Edge Keys to Success Ownership Legal Structure Copyright / Intellectual Property PRODUCTION REQUIREMENTS Locations and Facilities Suppliers Capacity Resources availability Production Plan Product / Service Development Patents, Copyrights, Trademarks MARKET SITUATION ANALYSIS Industry Analysis Market Segments Competition Analysis Product Cost Analysis Pricing Analysis Niche Market Analysis MARKETING Marketing Strategy Distribution Sales Forecast: Sales/Collection cycle/timeframe Partnership MANAGEMENT Organizational Structure Management Team Personnel Plan

11. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 11 A Business Plan Outline SWOT / RISK ANALYSIS Business Model Business Planning Commercializing Strategy IP Strategy Financial Planning Market Research The Team Revenue Model Assess Potential Sources of Revenue Pricing Strategy for each source of revenue Execution and Rollout Business Incorporation Key Milestone Product Development Key Milestones Marketing and Sales Key Milestones Critical Success Factors FINANCIAL Financial Plan Key Assumptions Projected Balance Sheet Projected Income Statement Projected Cash Flow Ratios Analysis Net Present Value/ Internal Rate of Return Financial modeling – running alternative scenarios

12. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 12 Mission Statement A brief description of the project concept. In particular, the following question should be addressed: –Why should this business exist? –What is the value to its users? –Will the users be significantly better off because of the business? –State specific measurable objectives –State revenue/profitability objectives

13. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 13 Strategy / Approach & Org Structure The overall approach towards meeting the goals defined in the mission statement –understanding the market –developing the content on that basis –focussed roll out, revenue and costs, etc. Appropriate corporate and legal structure of the venture Mechanisms for coordinating the relationships among the various stakeholders

14. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 14 Description of approvals/permits required or potential regulatory hurdles Organization structure Establishing for profit company Overall management structure Strategy / Approach & Org Structure

15. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 15 Market Clear definition of the market, potential customers within each market segment and their key characteristics geographic concentration, location, language, age, professional background, fragmentation size of the market –potential users, total volume of business major growth trends, factors driving this growth, significant barriers to entry, etc.

16. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 16 Market Niche market identification –define needs of each type of audience –assess what value Your business brings to them

17. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 17 Product/Service Various products to meet target market needs –Within each product segment, a detailed description of the type of service/product –Do other vendors/competitors provide this product/service in the specific market? –How does this product/service differentiate itself from that supplied by other competitors/vendors?

18. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 18 Product/Service What will be needed to bring each product to the market? –Define how long will it take to develop these products/services? –What resources will be required? –How much will it cost? –How should the products be priced? –How should these products be rolled out? Keep in mind the mission of Your business and its profitability

19. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 19 Competition Who are the competitors (direct and indirect)? What are their strengths and weaknesses? How does their product or service differ from Your business? What are their business models? What can be learnt from their operations? How do they market themselves? Does it make sense to partner with them? What was their service/product roll out strategy? What are our competitive advantages?

20. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 20 Comparables Companies that have comparable products/service Compare their success, type of service, users, costing, pricing, profit/loss, staffing/resources, partnerships, execution/timing, market capture, cash burn rate, etc.

21. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 21 Marketing Plan What marketing mediums will be used to reach the target audience? What will be the marketing budget? What are the components for building a credible brand equity?

22. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 22 Technology Open access, replicability and scalability of the technology solution is critical for success In order to define the technology platform, analyze the various technology solutions and associated costs and benefits of each of these solutions –Examples of comparable companies and their technological solution will be critical in assessing how Your business should proceed in this area

23. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 23 Partnerships The kinds of partnerships that will be required to make Your business a reality What value would they bring? Key partners in each area should be identified

24. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 24 Partnerships How should the business be set-up Partnership Joint Venture Private sector only, etc. A strategy for raising funds via the partnership route should be explored. What value does the funding organization/company sector see in the business? which companies/organizations should be targeted for funding what kinds of returns would investors seek?

25. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 25 Revenue Model Assess the potential sources of revenue –franchise/co-branding/referral fees –focussed advertising –specific content sales –fees from e-commerce transactions, etc. –direct sales

26. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 26 Revenue Model Pricing strategy for each source of revenue –What is the pricing strategy of the direct or indirect competitors? –What level of gross margins (revenue less cost of the product/service) would be reasonable? –How should the pricing of the competitors be monitored? –How does the pricing reflect the brand image of the product/service?

27. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 27 Project Costs and Financial Plan The budget, financing requirements and potential revenue generation. –Define the actual amount of money needed to set- up the business operation (capital costs) –and the amount needed to keep it going (operating costs) Capital costs should include –all initial development costs personnel, technology, legal/professional services, and marketing

28. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 28 Project Costs and Financial Plan Forecasts of the different sources for meeting these capital costs Pro-forma income projections (profit and loss statement) and pro-forma cash flow projections –based on revenue generation and cost assumptions –income statement and cash flow projections should cover up to 5 years of operations

29. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 29 Management and Staffing What Staff Resources (including senior management) will be needed and at what cost? What should be the backgrounds of the senior team and what expertise should they have? What are the plans for hiring and training personnel? Any incentives?

30. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 30 The Team Where possible list key management and staff by name Include previous accomplishments to show these are people with a record of success Summarize number of years of experience in this field

31. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 31 Execution/Roll out The steps necessary for a successful implementation of the business –How should the development of the business be phased? –What are the key milestones and their timing? –What are the critical success factors?

32. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 32 Potential Risks Key risks of the plan Details on mitigating factors to these potential risks –staffing, budget/financing, marketing, service/product focus. What is the window of opportunity? What are the foreseeable legal and regulatory roadblocks? What other vulnerabilities exist?

33. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 33 Key Issues Near Term –Isolate key decisions and issues that need immediate or near-term resolution Long Term –Isolate issues needing long-term resolution –State consequences of decision postponement

34. 34 Business Plan Financials

35. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 35 What is the Purpose of Your Business Plan Financials?

36. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 36 Business Plan Financials Helps you: –test various potential business models –isolate critical assumptions –determine whether this is a viable business opportunity –determine how much money you’ll need –persuade investors to invest

37. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 37 Business Plan Financials Helps potential investors: –test the viability of your business model –evaluate your critical assumptions Are they credible? Do you understand your business? –evaluate you as someone who understands how business works from a financial perspective –determine whether the investment is potentially attractive –evaluate your true financial needs

38. 38 “The Taste Test” Can you taste the revenues? Is the revenue scenario credible or will you have to achieve miracles to hit your forecast numbers?

39. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 39 So, how do you convince someone that your revenue scenarios are credible?

40. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 40 Tips for Credibility Show your assumptions and be able to back them up with FACTS based on market research and/or some compelling rationale

41. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 41 Showing a Potential Market

42. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 42 Mistakes to Avoid Assumptions you can’t justify –Too high a market share Too much detail Too little detail Not enough growth Too much profit (in later years)

43. 43 Summary Financials

44. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 44 Income Statement

45. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 45 What is an Income Statement? Shows financial results of a company over a given period of time Includes: –Revenues –Cost of Sales (costs directly attributable to the products/services sold) –Other Operating Expenses Marketing, Sales Research and Development General and Administrative –Earnings before Tax –Operating Income –Tax –Earnings after Tax

46. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 46 Sample Income Statement

47. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 47 Income Statement Questions What is Revenue? What is Cost of Goods sold? What are some of the components of operating expenses? What is operating profit?

48. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 48 Pro-forma Income Statement Income Statement ($m) 21.4%20.6%17.3%-12.2%- 201.2% Operating Margin $68.8$47.4$24.8-$6.6-$26.3Operating Income $140.3$100.4$64.5$32.1$23.8Other Operating Expenses $112.1$82.4$54.1$28.8$15.6Cost of Goods Sold $321.2$230.2$143.3$54.3$13.1Revenues 54321Years A B C D=A-B-C E=D/A

49. 49 Detailed Financials (“Appendix”)

50. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 50 Exhibits for Detailed Financials Typically: 5 years on an annual basis and month-to-month for the first year Components: –Assumptions and Outcomes Page –Income Statement –Detailed Revenue –Detailed Expenses –Headcount –Return on Investment –Balance Sheet –Cash Flow

51. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 51 Assumptions and Outcomes Shows key assumptions and the outcomes in terms of profits, etc. Helps show the reasonableness of your analysis Tells the story in summary form, in case someone only looks at this page

52. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 52 Income Statement Revenues –Summarizes components of revenue Expenses –Cost of goods sold –Other major components of operating expenses Sales, marketing, general and administrative Research and Development, etc. Earnings before income and tax (or operating income) Tax Profit after tax

53. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 53 Detailed Revenue Shows revenue over time divided into key components: –Product areas –Geographies –Any components that make sense Documents assumptions and their effects

54. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 54 Detailed Expenses Summarizes key expense categories in major detail Documents assumptions not summarized elsewhere

55. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 55 Payroll and Headcount Who are you going to hire When will they start? How much will they earn? Cost of benefits, etc.

56. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 56 Return on Investment Expected investment Expected share of ownership Change in share of ownership due to other investments Returns on the investment, including dividends and some “terminal value” Discount cash flows to show Internal Rate of Return and Net Present Value

57. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 57 Balance Sheet

58. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 58 What is a Balance Sheet? A snapshot of a company’s financial position at a moment in time Left hand side = Assets Right hand side = Liabilities and Equities Assets must equal liabilities plus equities (hence it is a “balance” sheet)

59. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 59 Balance Sheet

60. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 60 What is an Asset? Assets are valuable resources owned by an entity and include: –Cash –Things that are likely to become cash soon (inventories, accounts receivable) –Valuable things that help the business produce revenues over a longer period (property, plant, and equipment, etc.)

61. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 61 What is a Liability? Liabilities are the claims of creditors and include: –Accounts payable –Notes payable this year –Longer term obligations, such as long term debt

62. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 62 What is an Equity? Equities reflect the “claims” of investors and include: Paid in capital “Retained Earnings” or the sum total of profits after tax that haven’t been paid out through dividends Note: You can’t cash in equities—they represent a claim on the business not an asset.

63. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 63 Cash Flow Statement

64. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 64 Cash Flow Statement Records the Flow of Cash during a given period Cash inflows include: –Profits –Sale of assets –Reduction in: Accounts Receivables Other assets Cash outflows include: –Losses –Purchase of assets –Increase in: Accounts Receivables Other assets

65. INNOVATION, CREATIVITY, INGENUITY @ PALESTINE © 65 Cash Flow Statement

66. 66 Q and A

67. 67 Thanks and