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Additional Resources Business Plan Development

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Presentation on theme: "Additional Resources Business Plan Development"— Presentation transcript:

1 Additional Resources Business Plan Development
This module is developed in partnership with NPower The Community Corps and from support by Accenture

2 Learning Objectives for this Module
Topic 1.1: Understanding your audience Students will learn about various parties they may need to communicate with as entrepreneurs, including customers, investors, suppliers, and other partners. Students will learn how to analyze the needs of their audience and target their communications to appeal to each group. Students will understand how a business plan is used and why it is important to create a business plan to communicate information about their app. Topic 1.2: The elements of a business plan Students will understand the components of a business plan using a simple example, including the following components of the Technovation Business Plan: Product Description Potential Market Size Competitive Analysis Potential Revenue Branding and Promotion

3 Topic 1.1: The Importance of a Business Plan
This module will introduce the various audiences an entrepreneur may need to communicate with to gain support for his or her business ideal, and the interests each party has in the business plan. Module outline: What is a business plan? Video: From Business Idea to Business Model Who will read your business plan? Investors as a key business plan audience Types of potential investors Activity: You be the Judge

4 What is a Business Plan? A business plan is a tool used by entrepreneurs to organize and communicate business ideas to external parties. A business plan is usually written in a narrative form and contains a series of sections outlining your idea and future plans. An entrepreneur may also develop a presentation with visual imagery for use in pitches. The contents of a business plan are often kept confidential; that is, not posted publicly and only shared with select parties, since many entrepreneurs want to prevent other companies from using their ideas. The Technovation Challenge business plan includes 5 sections: Product Description Potential Market Size Competitive Analysis Potential Revenue Branding and Promotion We will define these sections and give examples in Topic 1.2 of this module.

5 Video: From Business Idea to Business Model
This video introduces some of the questions you will be faced as you develop your business plan. Click on the icon below to watch the video. Coach notes: Getting from Business Idea to Business Model video link: While we will not be completing a full Business Model Canvas as part of this module, this video introduces many of the key questions our teams will face as they develop their business plans. Source: Strategyzer

6 Who Will Read Your Business Plan?
Students participating in the Technovation Challenge will submit their business plans to a panel of judges for review. The judges will provide feedback based on an evaluation rubric used to assess each team’s performance. Judges are technology and business professionals who volunteer their time with the Challenge. Please visit the Technovation Challenge website to view the current version of the judging rubric and to learn more about the evaluation process.

7 Who Will Read Your Business Plan?
Beyond the Technovation Challenge, the audience for your business plan will vary depending on the stage of your company and your needs for growth. Your team: Developing a business plan is an important activity for a company’s founders to develop a common vision for the business. As your team grows, also may be helpful to share your plans with new employees to communicate this vision. Advisors: Entrepreneurs seek guidance from trusted mentors and friends with relevant experience to help navigate important business decisions. Advisors can provide input on a business plan to help the entrepreneur strengthen his or her business plan. Suppliers: A business may need to interact with another company to provide materials and services needed for its operations. In some instances, it may be useful to share relevant portions of the business plan when discussing partnerships with prospective suppliers.

8 Investors as a Key Business Plan Audience
Many entrepreneurs create a business plan for use with potential investors who can provide funding to help get their business off the ground. Investors typically provide initial start up and operating expenses until the business brings in sufficient revenue to cover its costs, often referred to as “seed money.” In exchange for their funding, investors typically receive some type of “claim” to the business, often including a share in future profits and participation in key business decisions. Accepting investments is an important decision for a company. Be sure to consult trusted advisors before approaching potential investors!

9 Types of Potential Investors
There are many types of investors who may be interested in supporting your venture, including the following examples: Venture capitalists, (“VCs”) lend money in exchange for taking stock in a company to share in potential future profits. VCs typically invest in early stage ventures, involving high risk but potentially high returns from their share of future earnings. Banks make loans to be repaid in the future with interest on a defined schedule. Banks typically lend to companies with established revenues and existing assets (e.g., land, machines, inventory) to be used as collateral. Foundations, nonprofits, and government agencies may provide grants or low- cost loans for certain activities which align with their organizational mission. Crowdfunding is a newer source of start up funding, involving websites with platforms where many people can contribute small amounts of funding to a project or idea posted by an entrepreneur. Examples: Kickstarter and Indiegogo

10 It’s Your Turn! You be the Judge Activity
Scenario: Each team member will play the role of a person interested in learning more about a new business idea. Materials: Paper and pencil for each team member, clock or stopwatch Roles: A venture capital investor who created a successful app and wants to invest in the next generation popular of apps. A manager of a foundation interested in supporting youth Science, Technology, and Math (STEM) education. A new employee hired to be your Chief Operating Officer (COO) and manage all aspects of your company’s daily business. An executive a technology company which has offered to give your company free server space for its first year. Your task: Assign one role to each team member, then read the executive summary of the sample business plan provided. Each team member will work individually for 3-4 minutes to brainstorm 8-10 questions about the business idea, imagining that he or she has the assigned role. Once complete, each team member will share his or her questions with the group.

11 Team Debrief: You be the Judge Activity
Questions for discussion: Were any questions similar from one role to the next? If so, which questions? Were there topics that seemed of particular interest to any of the four roles? (e.g., marketing, finance, app technology)? If you were the entrepreneur, which questions would be the most difficult to answer? Why?

12 Topic 1.2: The Elements of a Business Plan
This module introduces the sections of the Technovation Challenge Business Plan, providing past examples of business plans. Module outline: Section 1: Product Description Section 2: Potential Market Size Section 3: Competitive Analysis Videos: Navigating Your Environment, Proving It Section 4: Potential Revenue Section 5: Branding and Promotion Video: Telling Your Story

13 Section 1: Product Description
The Product Description is the first section of the Technovation Challenge Business Plan, and serves as the introduction to your idea. Your Product Description should contain the following information: The problem: Describe the issue does your app addresses. How is the problem impacting your prospective customers? Your solution: Explain how does your app addresses the issue you identified. What are the main features of your app? Users: Who are the potential users of your app? Competitive advantage: What will make your app a success? (for example, your location, knowledge of the customer base, unique partnerships)

14 Product Description Example: HowFullAmI?
Coach Notes: Product Description example - questions for discussion: What is the problem the app is solving? Who are the potential users of the app? How does the app work?

15 Section 2: Potential Market Size
Market sizing helps an entrepreneur estimate future demand for its product, that is, how many people will use it. In your market analysis, you will develop a quantitative estimate of demand, helping with the following business decisions: Identifying your target customers. Who are your customers, and how will they learn about your product or service? Does sufficient demand exist? Planning business activities. Understanding how many people may use your product or service will help you design activities to obtain new customers and serve existing customers. For example, an app entrepreneur may need to consider if sufficient server space is needed to support its users. Estimating potential revenue. If you plan to charge a fee for your product or service, an estimate of your market size will help you develop an estimate of how much you will sell.

16 Market Sizing: Top Down Approach
This graphic shows one approach to estimate a realistic target market size from a using a high-level statistic as a starting point (“the top”) Example (fictional): Total Market: Revenue in the general product or service category, including competitors Total annual U.S. spend on health and wellness apps “Top” – a big, unrealistic statistic Total Addressable Market (TAM) Total Market Serviceable Available Market (SAM) Target Market Total Addressable Market: Revenue that could be captured with infinite resources Total annual U.S. spend on at home practice yoga apps on all platforms (e.g., iOS, Android, tablet) Coach notes: Starting at the top, teams may find estimates from industry publications describing the total market for a given industry This gives a starting point, but is not a realistic estimate for the team’s target market To get to a realistic target market estimate, you will need to make assumptions to more clearly identify your market segment (TAM), the share of the market your app could capture with current capabilities and channels (SAM), and the initial group of customers most likely to be your customer (Target Market – what you need for your business plan. Serviceable Available Market: Revenue that could be captured with the current business channels Estimated annual revenues from YogaApp iOS users with planned marketing strategy Target Market: Revenue from most likely initial customers for a product or service Estimated revenues from 10% of students currently taking yoga in its pilot location Goal: A realistic target market estimate

17 Market Sizing: Bottom Up Approach
A bottom up market size includes a target market estimate gathered from information about specific group(s) of individual customers (“the bottom”). A good source of data for your “bottom up” estimate is data collected from prospective customer surveys. This could then be used to develop a realistic estimate based on your initial target market. Example: Suppose the YogaApp team plans to target high school students and decides to conduct a survey of all 1,000 students at Everyday High School: 150 students respond indicating that they are interesting in downloading the app at $2 each There are 10 high schools in the region of similar size that YogaApp team could reach with its marketing plan to attend sporting events Initial target market is 1,500 students with a total value of $3,000 Coach notes: A bottom up market size is another route to get to a realistic market size estimate. Although we are most interested in identifying the initial target market, we could also use a bottom up approach to identify Serviceable Available Market (SAM) and Total Addressable Market (TAM), by making assumptions about additional customer groups and the team’s marketing capabilities.

18 Tips for Estimating Potential Market Size
Document your assumptions. As with any estimate, it is important to create a list of assumptions to help your audience understand the business activities you plan to undertake to reach your potential customers. Try out different approaches: Consider trying both a “top down” and “bottom up” model. Compare the estimates – are they close to each other? Be realistic: As entrepreneurs, it’s important to be optimistic about your business idea, however, a very unrealistic estimate could weaken your credibility among investors. Test and Refine: Since your estimate is based on your current knowledge of your idea, it will change as you learn new information or change your plans. Find as many ways as possible to test out your assumptions (for example, conducting a survey of potential users) and update with your findings.

19 Market Size Example: Mayo Freetime
Coach notes: Market Size example – questions for discussion: What was the starting point for the team’s estimate (i.e., how many patients)? What was the team’s final estimate? Who does that include? What were the assumptions the team made to identify a smaller target market? How did the team test their assumptions?

20 Video: Navigating Your Environment
The following video describes a process for conducting competitive analysis, including review of current trends and dynamics within your industry. Click on the icon below to watch the video. Navigating your Environment video link: Source: Strategyzer

21 Video: Proving It The next video describes the importance of testing your assumptions with potential customers, and how to incorporate feedback to improve your business plan. Click on the icon below to watch the video. Proving It video link: Source: Strategyzer Source: Strategyzer

22 Section 3: Competitive Analysis
Every business faces competition, whether from direct competitors with similar products, or from similar items that can serve as substitute, or alternative, to customers instead of using the product. Although your app may have a unique combination of features and visual identity, there are always alternatives to using your product. In competitive analysis, entrepreneurs must identify the alternatives that exist for their products, and compare the alternatives based on features offered. Adding features to your product involves time and cost. Ideally, you will focus on the most important features to your target customers. Customer surveys and interviews are excellent opportunities to gain feedback on which features are most important to your target customers.

23 Competitive Analysis Example: Yik Yak
Coach notes: Competitive Analysis example – questions for discussion: What are the competitors that the team identified for its app? What are the features the team identified for comparison? Which products have the most similar features to the team’s app? Based on the team’s assessment, which app seems to be its biggest competitor?

24 Section 4: Potential Revenue
Revenues are funds received by the business as a result of its activities during a certain time period. Revenue for a business can be defined by the following equation: Revenue = Price x Quantity Where price is the amount paid by each customer, and quantity is the number of products sold at that price. Examples of commonly used app revenue models include the following: Fee for purchase: Users pay a fee to download the app “Freemium”: A basic version of the app is available for free, and users may upgrade to a “premium” version of the product for a fee. Advertising: Paid advertisements are displayed in exchange for a fee paid to the app owners. If your organization is a not for profit, its revenue may also include contributions received for charitable purposes, including donations and grants. Coach notes: Potential revenue – questions for discussion: For each revenue model mentioned on this slide, can you think of an example of an app which uses it? Can you think of an example of a not for profit app?

25 Tips for Estimating Potential Revenue
Explain your price point: If your revenue model includes a price charged to customers, explain why the price is one your customers are willing to pay. Did you conduct a survey? What do your competitors charge? If possible, identify multiple revenue streams: Having multiple ways to create income for your business will strengthen your business plan. For example, the Be realistic: As with Potential Market Size, it’s important to be optimistic about your business idea, however, a very unrealistic estimate could weaken your credibility among investors.

26 Potential Revenue Example: GiftAway
Coach notes: Potential Revenue example – questions for discussion: What are the source(s) of revenue identified by the team? What was the market size for this product? What price are customers willing to pay for this product? Can you think of alterative sources of revenue for the app? How did the team test their assumptions? How will the team use its revenues? What are the team’s plans for the app in the future?

27 Section 5: Branding and Promotion
App Branding: Develop a distinctive app name and logo Personal Branding: Potential investors want to invest in strong teams, and may review your team members social media profiles. Review your team’s online image and update if necessary to match the brand you want to project. Promotion Messaging: How will your team tell the story of your app? Channels: Consider how you will reach your target customers. Will you promote your app directly, or work with a partner already familiar to your customers who will promote on your behalf?

28 Video: Telling Your Story
This video brings the elements of your business plan together and introduces how to present your idea. We will describe more on how to pitch your idea in Module 2. Click on the icon below to watch the video. Telling Your Story video link: Source: Strategyzer Source: Strategyzer

29 Branding and Promotion Example: Say It!

30 Appendix: Sample Business Plans
GoBi (Madhavi to add hyperlinks to sample business plans) Mayo Freetime Destiny’s Girls May I Help U?


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