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Presentation by Blanche M. Johnson, Ph.D. February 2004 That First Lasting Impression A Business Plan is often the first contact entrepreneurs have with a funding source. Funding sources, e.g., VCs, “angels”, bankers, all review Business Plans.

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Presentation by blanche m johnson ph d february 2004 l.jpg

Presentation

by

Blanche M. Johnson, Ph.D.

February 2004


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That First Lasting Impression

  • A Business Plan is often the first contact entrepreneurs have with a funding source.

  • Funding sources, e.g., VCs, “angels”, bankers, all review Business Plans.

    • Due diligence performed by a funding source starts with the Business Plan.

    • A powerful, first class Business Plan

    leads to a meeting with a funding source.


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What is a Business Plan?

  • A document written for fund raising.

  • A description of the plans for a business.

  • The “road map to success” for company employees and the Board of Directors.

  • All the above….


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A Business Plan Describes…

  • The business - What business are we in?

  • The markets - Where is the opportunity?

  • Industry forces - What are the competitive threats? What’s our competitive edge?

  • Who is the team to implement the Plan?

  • What resources are available for success?

  • How much capital is required?

  • What are the financial rewards to investors?


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Questions to Ask Yourself Before You Write:

#1 Who will be reading the Plan? Who is my audience?

• Financial Investors are your audience IF…

you have expertise to develop/market your product BUT need money for employees and equipment

• Business Partners are your audience IF…

you need technical expertise to develop your product or marketing/distribution to reach customers


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Questions to Ask Yourself Before You Write:

#2 What do I want to accomplish with this Business Plan?

• Capture the interest of the audience with the unusual opportunity presented.

• Provide sufficient data to convince the audience your business is worthwhile.

• Show realistic economic returns justifying the requested funding/partnership.


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Questions to Ask Yourself Before You Write:

#3 How can I write this Business Plan to accomplish these objectives?

Address these core elements:

•Product

•Market

•Competition

•Management Team

•Finance


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Sections to a Business Plan

  • Executive Summary

  • Product or Service

  • Markets and Customers

  • Competitor/Industry Analysis

  • Company-Management-Operations

  • Financials

  • Appendices


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What VCs Read First

  • Executive Summary = #1

  • Company-Team-Operations = #2

  • Markets and Customers = #3

  • Competition = #4

  • Financials = #5 if start-up, they will ignore

  • Appendices


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Executive Summary Describes the Principal Determinants for Success

• Present an overview of the niche markets your product serves, show how you will market your product, compare your product to competitive products, show revenue/profit/cash flow.

• Present the amount and types of funds needed and what is the financial return to the investor or partner for funds/partnering.

• Present a concise Summary of the key points from each Section of the Business Plan.


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Product or Service Success

  • Describe your product or service in sufficient detail for the audience to understand its function and differentiating characteristics.

  • Pinpoint the value to your customer.

  • Present current stage of development and your plans to exploit the product fully in the market.

  • Describe the Life Cycle of your product, i.e., is it new, mature, a commodity? Proprietary? Protected by patent or copyright?


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Addressable Markets Success

  • Demonstrate the demand for your product: how many units can you sell at what price.

  • Support how you determined the above projections, e.g., market survey, current buying habits.

  • Define your markets – who will buy?

    e.g., individuals, businesses, government, overseas? Where are customers located?


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Addressable Markets continue… Success

  • Describe how you will reach these customers, e.g., direct mail, ads, sales force, trade magazines; describe how long it will take from initial contact to completing a sale to getting revenue (sales cycle).

  • Present the methods you will use to deliver your product, i.e., distribution.

  • Describe how your customer will pay for the products. Will you finance?


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Competitor/Industry Analysis Success

  • Identify competitors (domestic and foreign), potential competitors and possible substitutes in your marketplace. How do their products compare? How profitable are these competitors?

  • What are the Societal and Industry trends affecting your product? Describe regulatory issues - federal, state, local, foreign. Show potential for growth within the industry.

  • What advantages/disadvantages do you have versus the competition: price, quality, features, maintenance and service. How can you develop or sustain a competitive edge?


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Company -- Team -- Operations Success

Purpose: To convey to your audience a stable company (or your plan to set up a stable company) run by experienced and committed managers.

• Provide a description of your company – how long established, where located, number of employees, revenue generated (if any).

• Present description of each of the key managers responsible for the business; provide information about their direct and relevant experience, education/training and ownership interest (if any).

• Summarize the operating plan that supports how the company is organized to meet product/service projections.


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Financials Success

  • Discuss the amount and type of funding desired (debt, equity, convertible debt) and the timing of the funds needed to sustain the business for a five year period.

  • Show how the funds will be used.

  • Show how and when revenue will generated (accrual and cash) to pay back loans (if any) and to provide investors appropriate returns on their investment.


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Financials cont…. Success

  • Present 24-month and 5 year projections in the form of Summary Income Statements, Balance Sheets and Cash Flow Statements

  • Show Full Statements in Appendices

  • Support financial projections with analyses from competitors’ data and or industry averages (called “comparables”).


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Appendices Success

Purpose: to support information presented in the Business Plan

• Full Financial Statements

• Management Resumes

• Photos/drawings of product, brochures

• Competitive Analyses

• Industry Comparables for Investors’ Exit:

Show how others have made $$$$$ whose performance is similar to your business model


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Purpose of a Business Plan Success

  • Document written for fund raising

    Goal: get a first meeting w/ funding source

    • Description of plans for a business

    Goal: put in writing your plans for the business

    • Road map for employees and Board

    Goal: restate plans for an ongoing business


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What Resources are Available? Success

  • Text books on “how to”, BPlan “kits”

  • Consultants to write it…buyer beware!

  • Small Business Administration (sba.gov)

  • Univ. of Maryland Dingman Center

  • Check out Business Schools at Maryland, Loyola, Georgetown – business students to help with research, writing, financials for a fee

    • Hopkins Homewood Campus library

    • TEDCO; www.myownbusiness.org, incubators


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