Business planning

1. Business planning An investor’s outlook A presentation for the EIIL workshop LPG 2 on Business planning Brussels, March 15th 2010 by Mr Ties van der Laan Ties Corporate Finance 10, rue des Alouettes, L-1121 Luxembourg-Cents Luxembourg m +352 691 427 566, t/f +352 427 566 e ties@ties.lu, i www.ties.lu

2. Who am I? After nearly ten years in Dutch venture capital companies (ING Group) I have been coaching entrepreneurs and management teams since 1999 to raise finance, first through LIFT and from mid 2002 as an independent financial consultant (interim controller/CFO and raising finance)‏

3. Agenda • The how and why of business plans • Some do's and don'ts • Outline and contents • Conclusion Please feel free to interrupt me @ any time

4. Selling yourself A business plan is a document in which you sell yourself, your team and your company in such a manner that you receive an appointment with a potential financier

5. Other functions • Operating manual for you, your team • Tool to • organise your thoughts and ideas • examine basic assumptions in detail Attention: regular updates necessary

6. Information and assistance • Internet • Libraries • Bookshops • Market research specialists • Legal experts (IPR, ...)‏ • Technicians • Accountants / financial consultants • Etc.

7. Some do's and don'ts (I)‏ Content (I): • Fully written by you (and your team)‏ • Your “brain”, your vision, not reality • Focus on market, marketing, sales • Practical: focus on doing • No Q&A • Minimise use of graphics • Logical story and no bullets

8. Some do's and don'ts (II)‏ Content (II): • Not a thesis so no footnotes • No repetition • Attention: grammar and typing • Avoid the use of negative words • Concise, to-the-point • Easy to understand language (no jargon)‏

9. Some do's and don'ts (III)‏ Presentation: • Send by mail in hard copy, no email • No NDA (except to prevent sending on)‏ • Separate documents (ES, BP, Annex)‏ • ES: maximum 1-2 pages • BP: maximum 20-25 pages • Annexes: unlimited

10. Business plan outline Executive summary • Market • Product • Management • Marketing • Cash flow: history and forecasts • Investor Annexes

11. Executive Summary • The single, most important chapter • First part read (and maybe the last)‏ • Powerful and persuasive message • < 500 words (1-2 pages, 5 min.)‏ • Whole argument • Danger: last written • Attention: grammar, typing • Concise, to-the-point • Easy to understand language (no jargon)‏

12. Market The place where it is happening: • Definition • Customers • Competitors NB. Around 5/7 pages

13. Market: definition • No generic stories • Be very exact and practical both in • Geography (local market)‏ • Sector (“no competition”)‏ • Potential to go global

14. Market: customers • Potential customers in detail • Figures: • present size • projected growth • Independent sources

15. Market: competitors • Companies not technologies • Describe them precisely and in detail • Don’t be negative • Barriers of entry • Do not go up against the “big guys”

16. Product • No jargon and KISS! • Focus on competitive advantage = unique selling points (USP) = why would customers buy your product • Technology, features etc. in annex • IPR protection (if relevant)‏ NB. Maximum 1-2 pages

17. Management • Investors are looking for experienced (“serial”) entrepreneurs and teams • CVs in annex • 1. Why you and you alone can make this happen (investors invest in people so sell yourself)‏ • 2. (Non financial) achievements: more than just an idea or proof of concept NB. Around 2 pages

18. Marketing / sales • Attracting new customers • Practical e.g. in B2B • No. of visits per week/month • Value of sale • Success rate • Projected milestones • Reaction of competitors • Partnerships • No prices of products or services NB. Around 6/7 pages

19. Cash flow: history, forecasts (I)‏ • “Cash is king” • Focus on cash not P&L/balance-sheet • Monthly / quarterly liquidity analysis • Full history plus three years future • Neutral in time • Sensitivity analysis • Minimal salary demands

20. Cash flow: history, forecasts (II)‏ • Spreadsheets in annex • Especially now: DIY or do-it-yourself 1. Assumptions 2. Summary of ratios 3. Conclusion NB. Maximum 2 pages

21. Investor • Cash • Exit analysis • Risk analysis NB. Around 2-3 pages

22. Investor: cash • Derived from your liquidity forecast • How much money (cash only!): • invested by you (and the team)‏ • raised already and from whom • do you need, when and for what • Staggering your cash need • For marketing or growth • Board seat for investor • Nothing on VALUATION • Focus on making a “value proposal”

23. Investor: exit analysis • The business of an investor is buying shares and selling shares • “Built to be bought” • No emphasis on IPO • Trade sale: extensive analysis of possible buyers and why they will be interested

24. Investor: risk / SWOT analysis • Risks connected to investing or • SWOT analysis • Focus on mitigation • Financial situation is no risk/weakness

25. Challenge Put your vision on paper in such a way that you convince an outsider that there is money to be made by investing in your company

26. One very important note If an investor decides not to invest in you, your team and your company it does not mean that you can not be successful

27. Investors vs. entrepreneurs Generalisation: • Investors know a lot about markets but not a lot about products • Entrepreneurs know a lot about products but not a lot about markets Consequence: misunderstanding

28. My passions • Bridging the gap between investors and entrepreneurs • Coaching entrepreneurs and management teams • Bookkeeping • Personal financial planning • Interim controller/CFO

29. Contact details Ties Corporate Finance Ties van der Laan 10, rue des Alouettes L-1121 Luxembourg-Cents Mobile: (+352) 691 427 566 Fax: (+352) 427 566 Email: ties@ties.lu Internet: www.ties.lu