1. 1 Confidential - for classroom use only The Business Plan

2. 2 Confidential - for classroom use only Idea Opportunity Acquisition Alliance Other Business Assessment Environmental Assessment Technology Assessment Viable Business Concept Business Case Business Plan Market Research Sales Input Customer Interviews Customer Value Proposition Financial Analysis ARINC New Business Evaluation Process Investment $ Current BU Business Development New Business Seed Money <$250K Capital Request Personnel BU – Champion, Financial Analyst CBD – Advisory, Environmental Assessment BU – Project Leadership, Sales – Customer Input CBD – Advisory, Market Research, Financial Modeling Business Unit - New Team Timeline1-2 months3 months Dependent on Scope Business Unit(s) Corp Bus Develop Sales and Marketing Financial Decision Points Responsibilities Financial Assessment

3. 3 Confidential - for classroom use only What is a Business Plan A business plan is a formal statement of 1.clear business goals, 2.the reasons why they are believed attainable, and 3.the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

4. 4 Confidential - for classroom use only Why Write a Business Plan? Per Jeffrey Timmons, –A business plan is a selling document that conveys the excitement and promise of your business to any potential backers or stakeholders A business plan 1.Is used to interest and attract support –marketing document –legal document to raise capital 2.Is a document that articulates –critical aspects of the business –how to create and keep customers –basic assumptions –financial projections 3.Forces entrepreneurs to think through the business in a systematic way

5. 5 Confidential - for classroom use only Preparing to Write the Business Plan Macro Level Micro Level Market DomainsIndustry Domains Mission, Ability to Aspirations, Execute Propensity on CSFs for Risk Connectedness up and down Value Chain Team Domains Market Attractiveness Target Segment Benefits and Attractiveness Industry Attractiveness Sustainable Advantage John Mullins, The New Business Road Test (Prentice Hall: 2003).

6. 6 Confidential - for classroom use only

7. 7 The Business Plan Requires Hard Evidence Clayton Christensen, et. al., The Innovator’s DNA (Harvard Business Review Press: 2011) …business innovators actively try out new ideas by creating prototypes and launching pilot tests. Good experimenters understand that although questioning, observing, and networking provide data about the past (what was) and the present (what is), experimenting is best suited for generating data on what might work in the future. In other words, it’s the best way to answer our “what-if” questions as we search for new solutions. Often, the only way to get the necessary data to move forward is to run the experiment.

8. 8 Confidential - for classroom use only Business Plans: Structure

9. 9 Confidential - for classroom use only Structure of the Business Plan 1 Per William Sahlman (Harvard), –The opportunity –The context –The risks and rewards –The deal –The people

10. 10 Confidential - for classroom use only Structure of the Business Plan 2 Per David E. Gumpert, –Cover page –Table of contents –Executive summary –The company –The market –The product/service –Sales and promotion –Finances –Appendix

11. 11 Confidential - for classroom use only Structure of the Business Plan 3 Per Michael J. Roberts (Harvard), –Executive summary –The company –The product or service –The market –Competition –Sales and marketing –Operations –Financials –Appendix

12. 12 Confidential - for classroom use only Structure of the Business Plan 4 Per Jeffrey Timmons, –Executive summary –Industry, company, and product/service –Market research and analysis –Economics of the business –Marketing plan –Design and development plans –Manufacturing and operations plan –Management team –Overall schedule –Critical risks, problems, and assumptions –Financial plan –Proposed company offering –Appendices

13. 13 Confidential - for classroom use only Structure of the Business Plan 5 Per Looser and Schlapfer (McKinsey), –Executive summary –Project idea –Management team –Marketing –Business systems and organization –Realization schedule –Risks –Financing

14. 14 Confidential - for classroom use only Structure of the Business Plan 6 Per Lynda Applegate (Harvard): 1.Title slide 2.Executive summary 3.Market positioning or problem description 4.Product positioning (solution) 5.Competition or substitutes 6.Benefits 7.Operations 8.Financials 9.Risks 10.Implementation, Status and Traction, Financing 11.The “ask” 12.The team 13.Appendices

15. 15 Confidential - for classroom use only Structure of the Business Plan 7 Per Henry Kressel (venture capitalist): 1.High-level vision statement. 2.The team. 3.Current state of the market problem. 4.Why now? 5.Product or service solutions to the market pain points. What is your differentiation? 6.Quantified benefits of the product or service solution to the market. 7.Go-to-market plan. 8.Business model—your revenue, pricing, and profitability. 9.Analysis and deep understanding of the competition. 10.Risks, and your plan to mitigate them. 11.Investment—goals, schedule, and milestones for the investment needed. 12.Summary of the financial plan. 13.Technical designs. Kressel, Henry; Winarsky, Norman (2015-09-29). If You Really Want to Change the World: A Guide to Creating, Building, and Sustaining Breakthrough Ventures (pp. 102-104). Harvard Business Review Press. Kindle Edition.

16. 16 Confidential - for classroom use only Structure of the Business Plan 8 1.Cover page 2.Executive summary Opportunity Context Risks and rewards The deal 3.Product or service offering Description of product or service Origin of the opportunity Description of market/industry Sources of competitive advantage 4.Market analysis Size of market Competition – both companies and products/services List of likely customers Evidence of market research Sales and promotional plans, including timelines 5.Operational analysis Description of how the product or service will be manufactured or created Action steps necessary to deliver the product or service to customers Timelines Description of any necessary vendors Organizational structure required 6.Financial analysis Summary of annual cash flows Three year monthly cash flows Required start-up capital and usage Returns to investors 7.The deal Sources of start-up capital – the combination of equity and loans Cost of equity and loans Ownership structure 8.The team Team members, qualifications, and roles Outside advisors 9.Appendices

17. 17 Confidential - for classroom use only My Own Favorite 1.What is the problem? 2.How is it currently being solved? 3.What are the problems with the current solution? 4.What is your solution and how does it fix these problems? What are its key advantages? 5.Who will be impacted by your solution? What are their characteristics (i.e. market segments)? How many of them are there (i.e. market size)? Who will benefit the most (i.e. initial target segment)? 6.How hard will it be to get into the market space? And maintain any sort of competitive advantage? What is your market entry strategy? 7.How will you actually accomplish this? What are the operational details (i.e. intellectual property, regulatory approvals, reimbursement, manufacturing, sales and distribution)? 8.Can you define critical success factors and then map them to a project plan with milestones (i.e. deliverables) and funding requirements? 9.Can you delineate key revenue and cost drivers and prepare a reasonable financial forecast? 10.Who is on the team?

18. 18 Confidential - for classroom use only What Investors are Looking For (at least what they told me) 1.Is the value proposition realistic? 2.Are the competitive advantages believable? 3.Is the target market clearly identified and sensible? 4.Are the market and competitive landscapes clearly analyzed? 5.Considering the value proposition, competitive advantage and target market prediction, does the revenue and profit model make sense? 6.Are the people necessary to make this plan happen in reality clearly identified? 7.What is the expected timeframe and pay-off for new investors? 8.Is it likely the business will be around in five years? 9.Is the plan clear and well written? 10.Is the plan well documented?

19. 19 Confidential - for classroom use only Summary The business plan must answer these questions: 1.What is the customer benefit? –What problem does the business model solve? 2.What is the market and how large is it? –How can the market be segmented and what is the target market? –How can your offering be positioned in the minds of customers? –How can these customers be reached, i.e. informed and influenced? –What will customers pay and how much will they buy? –Who else is in the market? –Is your business idea scalable? –What is your evidence for all of this? 3.How will the venture make money? What is the profit formula? 4.How will you accomplish this? Can you assemble the resources and manage the risks?