creating a business plan
Summary business plan
10-15 pages, works best for new ventures in the early stages of development that want to "test the waters" to see if investors are interested in their idea
what is a business plan?
- "Dual use" document - For most new ventures, the business plan is a dual-purpose document with both internal and external uses
content of the business plan
- As we'll discuss, the business plan should give clear and concise information on all the important aspects of the venture. - For most (full) plans, 25 to 35 pages is sufficient (max.)
Section 7: Financials and Financial Projects
- Basic logic of how profits are earned in the business and how many units of a business's profits must be sold for the business to "break even" and to start earning a profit. Also referred to as "Unit Economics" -- what are the economics involved in making a single unit of your product? - include: Revenue drivers and profit margins, Fixed and variable costs, Start-up costs, Break-even chart and calculations
why write a business plan?
- Forces you to intensely study every aspect of the business - Can't just do this in your head.
section 3c: marketing strategy/plan
- How will the business market and sell its product or service? - include: overall marketing strategy (info from market analysis, how find consumers and persuade to buy?) - product, price, promotions, and distributions - sales process (or cycle), sales tactics (how will be sold)
section 4: production, logistics, and intellectual property
- How will your business be run and how will your product or service be produced? - A useful way to illustrate how your business will be run is to describe it in terms of "back stage" (unseen to the customer) and "front stage" (seen by the customer) activities. - include: general approach to operations, business location, & facilities and equipment
what is a business plan?
- It is an iterative process - Do not expect it to be a linear process - Do not become overly locked-in to one specific model (or idea); maintain flexibility (simple example)
section 3b: market analysis
- More specific and more marketing oriented than the industry analysis - breaks the industry into segments and zeroes in on the specific segment (or target market) to which the firm will try to appeal - include: market segmentation and target market selection, consumer/buyer behavior (demonstrate that you understand buying habits/processes, deep knowledge of your customer)
section 6: critical risks
- Need to demonstrate that you've considered what could possibly go wrong and have thought of contingency plans - What potential problems could arise? - How likely are they? - How do you plan to manage these potential problems?
Section 8: Overall Schedule and Major Milestones
- Overall Schedule: A schedule should be prepared that shows the major events required to launch the business. - The schedule should be in the format of milestones critical to the business's success. - examples: incorporating the venture, Completion of prototypes, Rental of facilities, Obtaining critical financing, Starting production, Obtaining the first sale
section 5: management team and org. structure
- Probably the second most important part of the business plan - The management team of a new venture typically consists of the founder or founders and a handful of key management personnel. - include: management team description, board of directors, board of advisors, company structure
internal uses
- Road-map for employees; provides them with a unified vision / conception of the business; recruiting tool
external uses
- Road-map for investors / analysts; helps to draw attention to the firm
do you really need a business plan?
- Serves as a very important "sense making device" for the founders of a company - Putting your ideas on paper forces you to solidify your own thinking about the business - "How do I know what I think until I see what I say" (K. Weick) - Entrepreneurs should write the business plan, not a consultant, advisor, etc.
section 8 continued
- What are your next steps? - How do you plan to scale / grow the business? - What is your "ask" for investors?How will it be used to grow the business?
section 2: business description/overview of the opportunity
- begins with a general description of the company - include: detailed discussion of the problem you are addressing & your solution - company description, history, products and services, current status - why is this an attractive opportunity?
guidelines for writing a business plan
- don't want the actual content to seem too generic - Beware relying too heavily on biz plan software packages - Avoid a boilerplate plan that looks as though it came from a "canned" source. - The power of (subtle) emotion! - Sense of Excitement - Along with facts and figures, a business plan needs to project a sense of anticipation and excitement about the possibilities that surround a new venture.
executive summary
- investors make as for - Want to spend a disproportionate amount of time on this section of the plan - This is what should "hook" the reader
section 7 continued
- items to include in this section: Sources and uses of funds statement, Assumptions sheet (What are the assumptions that underlie your financial projections (ex. that the market segment will grow by X% per year), Pro forma income statements, Pro forma balance sheets, Pro forma cash flows, Ratio analysis
section 3a: industry analysis
- should begin by describing the industry the business will enter in terms of its size, growth rate, and sales projections. - include: nature of competition/rivalry, supplier/buyer power, key success factors, trends, long-term prospects - want to answer the following question: what is the *attractive* (profitable) gap in the industry that this venture will fill?
Section 1: Executive Summary
- the most important section of the business plan - short overview of the entire business plan (no more than 2 pages) - provides the reader with everything they need to know about what makes the venture distinctive and attractive - focus on the problem you are solving and your solution - abstract
business plan
- written narrative, typically 25 to 35 pages long - covers: what is a new venture going to accomplish and how (is future oriented, but grounded in facts and evidence) - typically written after you've developed a solid understanding of the business opportunity, feasibility, industry, business model, etc.
Presenting the Business Plan to Investors - powerpoint
1. Title Slide 2. Problem 3. Solution 4. Opportunity and target market 5. Technology 6. Competition 7. Marketing and sales 8. Management team 9. Financial projections 10. Current status 11. Financing sought 12. Summary
10 slides pitch example
1. elevator pitch 2. the problem 3. the solution 4. market size 5. business model 6. proprietary tech 7. competition 8. marketing plan 9. team 10. money
full business plan
25-35 pages, works best for new ventures who are at the point where they need funding or financing; serves as a "blueprint" for the company's operations.
operational business plan
40-100 pages; is meant primarily for an internal audience; works best as a tool for creating a blueprint for a new venture's operations and providing guidance to operational managers
2 primary audiences - A Firm's Employees
A business plan helps the employees of a firm operate in sync and take action
2 primary audiences - investors and other external stakeholders
A firm's business plan must make the case that the firm is a good use of an investor's funds or the attention of others.
benefits of BP (not obvious)
Can serve as a signal of legitimacy - Conveys professionalism Demonstrates that you "know the game" - Helps to reduce information asymmetry - With investors
structure of business plan
To make the best impression a business plan should follow a conventional structure, such as the outline for the business plan shown in the chapter. Although some entrepreneurs want to demonstrate creativity, departing from the basic structure of the conventional business plan is usually a mistake. Typically, investors are busy people and want a plan where they can easily find critical information.
presenting the business plan
Use each pitch as a feedback session - Incorporate / address any concerns - Every version of your pitch should be stronger than the previous version
