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The Full Business Plan Paul Kirsch Samuel Zell & Robert H. Lurie Institute For Entrepreneurial Studies January 20, 2006 Executive Summary Core Idea Elevator Pitch Business Plan Power Point Parts of a Coordinated Message The Message of your Business Idea

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the full business plan

The Full Business Plan

Paul Kirsch

Samuel Zell & Robert H. Lurie Institute

For Entrepreneurial Studies

January 20, 2006

parts of a coordinated message

Executive Summary

Core Idea

Elevator Pitch

Business Plan

Power

Point

Parts of a Coordinated Message

The Message of your

Business Idea

parts of a coordinated message3
Parts of a Coordinated Message
  • Core Idea
    • 5 Breaths
  • Executive Summary
    • 2 – 5 pages generally accepted
  • PowerPoint
    • 8 – 15 minutes
  • Elevator Pitch
    • 1 – 3 minutes
    • 3 minutes for MBC on 12/9
  • Full Business Plan
    • 15 pages + Financials

S.S.D.D.

SameStuff, Different Delivery

- 20 pages + up to 10 pages appendices

the business plan
The Business Plan
  • Always a work in progress
    • About the process NOT the document
  • 20 pages, plus appendices
  • Ties everything together
  • Offers clear linkage between ideas and vision and business entity to bring them to life
understand your audience
Understand Your Audience
  • Investors

FFF | Banks | Private investors | VCs | Grantors

  • Business partners

Beta customers | Suppliers | Distributors

  • Management team
    • Current – talking from the same script
    • Potential – need to understand business
b p includes executive summary
B.P. includes Executive Summary
  • Products & Services
  • Sales & Marketing
  • Operations
  • Management
  • Risk Mitigation
  • Action Plan, Milestones
  • Key Financials
  • Exit Strategies
  • What is it?
  • Market Need or Pain, Size
  • Value Proposition & Business Model
  • Competitive Advantage
  • Competition & Industry
what is your idea why now
What Is Your Idea & Why Now?
  • Be clear and complete
  • Plain English but use technical language, schematics where necessary
  • Origin of the idea: Paint a picture
    • Linear development or disruptive?
    • Improvement or new?
    • Evolutionary or revolutionary?
  • Connect timeliness of idea to market “pain”
  • Staying power and permanence
market need or pain size
Market Need or Pain, Size
  • What is the pain in the market
  • Market need drives idea, the product fills the need
    • Products do NOT create a market
  • Quantify “pain” in terms of true market opportunity
    • Just how “big” is this opportunity?
  • What are potential customers doing now?
    • A current solution DOES exist
  • Connect the listener to the problem
market need or pain size9
Market Need or Pain, Size
  • Which product, products segments are in the initial focus and planning horizon?
    • Three to five years is acceptable
  • Describe your customers, segments:
    • Geographic
    • Demographic
    • Psychographic
    • Business, economics, SIC codes
      • http://www.osha.gov/pls/imis/sicsearch.html
value proposition business model
Value Proposition & Business Model
  • How valuable is your idea to your customers?
  • How are you going to extract this value from the marketplace?
  • Be specific. Who else do you need to make this happen?
  • What is the business model? *
value proposition business model11
Value Proposition & Business Model
  • What is the business model? *
  • *This is really two questions

What do you do?

½ of the Business Model Answer

How are you going to make money?

½ of the Business Model Answer

comp adv competition industry
Comp. Adv., Competition & Industry
  • What is your #1 competitive advantage?
    • Intellectual Property
    • Management Team
    • Exclusive customer relationships
  • How are you going to protect it?
    • Being the “first mover” IS NOT a sustainable competitive advantage
  • Who is your competition?
    • Porter’s 5 Forces
    • Value Chains?
    • How will they respond?
products and services
Products and Services
  • Detailed description
  • Where in the product life cycle
  • Where in the development process
    • Other R&D concerns?
  • IP protection
sales marketing management
Sales, Marketing, Management
  • How are you going to sell your product?
  • What “beta” relationships exist? Why?
  • Who are your first prospective customers
  • Be realistic, don’t overpromise or oversimplify
  • Highlight team’s ability to deliver. Past success is a good indicator of future performance
  • Be honest about team’s missing skills
operations
Operations
  • What activities will you be doing?
  • Do any operational components deliver key advantages?
  • Important relationships
risk mitigation
Risk Mitigation
  • Commonly explored classes of risk
    • Technical
    • Market
    • Competitive
    • Management
    • Execution
action plan milestones
Action Plan, Milestones
  • Overview of timeline
  • Demonstrates understanding of KEY issues
  • Shows that the team knows what is whose responsibility
    • Only items that are your responsibility can be a milestone
  • Easy win: include product launch/first sales in ANY discussion of milestones
key financials
Key Financials
  • Provide credible financial measures

Sales | Margins | # of Customers | Market share

  • Cash flow is king
  • KNOW you assumptions
  • “The Good, The Bad and the Likely”
  • Be realistic, don’t overpromise or oversimplify
key financials19
Key Financials
  • What do you need NOW?
  • What are your start-up costs? Estimating Startup Costs
  • Working capital is a legitimate use of funds
  • Estimate costs and revenues to the best of your ability
  • Allowing a percentage of “cushion” is okay
slide20
Exit
  • Document “ballpark” returns
  • Offer feasible exit strategies
  • What is “typical” in your industry?
    • Acquisition
    • IPO
    • Management buyout
slide21
Exit
  • Acquisition
    • Who?
    • How many “who’s”
  • IPO
    • Recent market track record IPO Monitor
    • What performance measures are important?
  • Management buyout is not necessarily a desireable exit
    • Dividend payments are viewed similarly
format
Format
  • Cover page (not included in page total)
    • Company name
    • All team member names, and full contact information for at least team leader
  • Body of plan – 20 pages - includes the executive summary and summary financial data
  • Appendices – not to exceed 10 pages
    • Include only when they support the findings, statements and observations in the plan. No new information.
    • Judges may not be able to read all the material in the appendices. Therefore, the text portion must contain all pertinent information in a clear and concise manner.
format25
Format
  • Limited to 20 pages, including the executive summary and summary financial data.
    • Typed, double-spaced
    • 12-point font
    • 1-1-1-1 margins
    • Numbered pages
  • In total, the plan is limited to 30 pages.
  • Hard copies of business plans should be professionally bound.
  • Soft copies of business plans should be in a SINGLE .pdf document
to stand out
To Stand Out…
  • Captivating idea with growth potential
  • Sustainable competitive advantage
  • Strong, core team
  • Logical go-to-market strategy
  • Sound financial plan
  • Don’t give evaluators a reason to mistrust or disbelieve plan or the authors
typical pitfalls
Typical Pitfalls
  • Core idea not linked to market need
  • Gross over-simplification of the issues
  • No credible go-to-market strategy
  • The “1% market share” objective
  • Team composition and experience
  • Sources and uses of funds
  • Unclear role for the audience, investor
challenges
Challenges
  • Many plans are product- or technology- centered rather than market-driven
    • FIX: Focus on the real, supported market need
  • Many plans are usually written in an academic style (read: boring)
    • FIX: Put your passion for the business in the plan
challenges29
Challenges
  • Many entrepreneurs address preparing the plan and giving the pitch as a necessary evil
    • FIX: Treat “marketing” your company as essential as “running” your company
    • FIX: View these opportunities for feedback as invaluable instances that will be difficult if not impossible to duplicate in the “real world”
challenges30
Challenges
  • Oft-heard: “no way to do this in 20 pages”
    • FIX: Succinct and concise understanding AND presentation of key issues is paramount
    • FIX: View assembly of plan and presentation as much a communication challenge as it is a business issue
    • NOTE: teams have NO option
this is your story
This is YOUR story
  • Infuse delivery with personality and passion
  • Not a “right” way to tell the story
  • Different aspects of a plan will be emphasized differently for different types of businesses
of the business model answer
½ of the Business Model Answer
  • What do you do? Value Proposition & Business Model

Technology

Raw Materials

Product Design

Mfg

Marketing

Sales

Distribution

of the business model answer33
½ of the Business Model Answer
  • How do you make money? Value Proposition & Business Model

Can you use a diagram for each of these?

    • Retail sales: direct to wholesalers
    • Internet sales: direct to customer
    • B2B: commercial purchase on terms
    • Licensing: per unit revenue, payable (?)
    • Consulting: fee for service or impact
    • Services: per unit charges
business model
Business Model
  • Business Model integrates
    • Value created for the users
    • Target market
      • the purpose of the product to those users
    • Value chain
    • Sharing value across the network
    • Competitive strategy
    • Specify the revenue generation mechanisms
      • cost structure, margins

REF: Open Innovation, Henry Chesbrough © 2003.

value chain implications
Value Chain Implications
  • Creating and Capturing Value
    • Number and power of players
    • Amount and type of “value” to be shared

YourCompany

Lower Tiers

Tier Ones

OEMs

Dealers

Individual Drivers

estimating startup costs
Estimating Startup Costs
  • Working it backwards from the Steady-state numbers:
  • Obtain steady state costs (GS&A, etc, as % of sales from industry data)
  • Make costs constant over transition
  • Add development costs
  • Ramp down develop costs while ramping up operating costs

Costs

Sales

Development

Transition

Modest Growth

Time

top down bottoms up forecasts
Top-Down & Bottoms-Up Forecasts
  • Top down and bottom up forecasts are complementary
  • One is a reality checks for the other
  • Top-down forecasts:
    • Usually industry analysts’ worldwide estimates for a large market, which are then split into segments by major product group, region or vertical industry
  • Bottoms-up forecasts:
    • Build up revenue forecasts by defining the key underlying variables and estimating how they will change over the next 3-5 years.
top down bottoms up forecasts38
Top-Down & Bottoms-Up Forecasts
  • Are the assumptions realistic & believable
  • Market timing & adoption rate assumptions are critical
  • Does the methodology reflect deep understanding of the target market segments?
  • How “close” are the to bottom-up and top-down perspectives?
mullins assessment framework
Mullins’ Assessment Framework

Market Domain

Industry Domain

Market

Attractiveness

Industry

Attractiveness

Macro-level

Missions, aspirations,

Propensity for risk

Ability to execute CSFs

TEAM

DOMAIN

Connectedness up, down, and across value chain

Micro-level

Target segments benefits and attractiveness

Sustainable advantage

REF: The New Business Road Test, John Mullins © 2003.

the critical success factors
The Critical Success Factors
  • Which assumptions are critical to the success of your business?
  • What are the “big levers”?
    • Sensitivity analysis
    • Typically time (to develop and through the transition)
    • Market size (total sales)
next session presenting your business plan

Next Session:Presenting Your Business Plan

February 3, 2006

12:00 – 1:30

E0540