New VenturePlan and Prep Process

Major factors in planning for business Planning worksheets Overview of startup process Q & A

Plans are nothing; planning is everything. - Dwight D. Eisenhower

Agenda

Planning for business, not writing business plan

Emphasize projections, not written narrative Test of new presentation content

Participant expectations◦ Type business being considered◦ Desired takeaways

Expectations

The Ms of Business

Now Future Evidence Impact Contingencies Action

Framework for the M Topics

the method, approach, or system that will be used to obtain money for your products or services

MODEL

World is not likely to beat a path to your door Best quality does not always win Convenience of transactions is becoming

more important Lots of ingenious products with anemic sales Needed to explain the business

*Expect that technical feasibility of product/service has been proven

MODEL

Describe the problem. Explain current solution(s). What are pitfalls? What is the customer pain? Describe the preferred solution. Explain benefits to your solution - not just features. Summarize how the product/service is produced and flows to

market. Offer meaningful evidence that your solution is preferred/desired. Discuss functional performance. Describe customer response to prototypes/demonstrations. Provide measures of how capabilities are superior. Define magnitude, seriousness, cost of problem. Quantify how solution reduces problem or improves situation. Describe IP status.

MODEL

Describe each of specific product(s)/service(s) and bundles/packages that will be developed to produce revenue streams for the business.

Project typical frequency and quantity of customer purchase for each type of revenue stream.

Explain your strategy for maintaining proprietary information and competitive advantage.

Know and clearly communicate the type of business you are conducting - manufacturing, wholesaling/distribution, or retailing.

Essential Elements for MODEL

the people or organizations that will pay for your product or service

MARKET

Your market creates revenue or sales Strong, continuing market sustains

revenue/sales Large and growing market offers greater

economic potential, helps attract investment, and indicates more promising future

MARKET

Characterize initial market - demographics. Describe behavior of initial market - psychographics. Describe anticipated future market, changes expected? Obtain evidence of what motivates market’s behavior. May provide information about industry trends or sales of

competing/alternative products/services. Quantify how target market will produce revenue/sales for

proposed product/service. Identify competitors, contingencies and threats (never

none), all competitors/substitutes both direct and indirect. Compare in chart contrasting your solution with

competition based on important purchase decision factors.

MARKET

Describe target market(s) and specific market segments that are most relevant for your enterprise.

Numerically quantify the addressable (initially feasible) target market size for each revenue stream.

Estimate the unit sales that can be logically justified for each revenue stream based on target market - monthly for initial year and quarterly/annually for years 2 - 5.

Explain introductory and long-term/continuing sales strategy.

Know and clearly explain whether you are selling to consumers, businesses, or government.

Essential Elements for MARKET

the amount of profit your business will generate to keep the founders motivated, to repay the investors, and provide for growth

MARGIN

Most businesses operate on very small profit margins

If profit margins are large, competitors will enter

Many founders do not understand pricing and distribution channels

MARGIN

Document price and profit information for similar. Describe how similar products/services are priced and

sold. Detail components used in cost of goods for your

product/service - materials and labor cost. Describe expected pricing and selling methodology Obtain competitor pricing and industry margin. Justify your cost estimates with actual quotes. Contrast your projections against industry standards -

justify any significant differences. Anticipate competitor response (existing and potential). Explain protection measures that may deter competition. Consider other factors influencing.

MARGIN

Project your cost of goods sold: estimate raw material and labor cost to produce a unit/bundle.

Establish prices for proposed units/bundles for each revenue stream.

Establish projections for revenue (price per unit * unit sales) - preferred to market share percentages, OK to validate projections through market share estimates.

Understand basics: Sales/Revenue – Cost of Goods = Gross Margin – Operating Expenses = Profit

Essential Elements for MARGIN

the group of people with talent, experience, and commitment to start and run the business

MANAGEMENT

Owner cannot do everything needed Even if owner can do everything at the

beginning, to grow, others will be needed Easy to become confused about best suited

role for founders Complementary skills and extended

networks make the business stronger Investors fund people, more than ideas

MANAGEMENT

Inventory and plan to utilize founder’s strengths and capacity. Determine what needs to be accomplished. Define essential characteristics for chief executive. Identify current talent/skill gaps and those needed within 3

years. Determine how to supplement founder’s abilities. Complete management needs thru advisors, contracts, hiring. Develop organizational chart and job descriptions. Obtain resumes/credentials, conduct interviews, seek referrals. Research competitive salaries/wages, consider incentive pay. Project hiring needs and estimate cost. Challenges of attracting to existing business location. Difficulty offering pay commensurate with value. Effective utilization of founder(s) abilities.

MANAGEMENT

Establish hiring priorities by creating to do list, then group into “jobs” by common tasks or around people/founder(s) strengths.

Identify tasks that can be contracted/outsourced.

Project staffing budget. Build advisory team to supplement existing

capabilities and fill gaps.

Essentials for MANAGEMENT

the resources, financial and otherwise, that are required to start and operate the business

MONEY

Almost all businesses require initial investment

Resources are needed to get started, survive, and grow

Most businesses need much more money than anticipated

Access to capital determines rate of growth Money is expensive

MONEY

Quantify resources invested in venture, categorize as sunk cost or asset with value and calculate cost/value of each.

Estimate pre-venture and startup needs (one-time and ongoing) plus cost of these items, include cost of financing.

Project the business needs and cost of items through initial 3-5 years of operation.

Document assumptions for all estimates and include footnotes with projections.

Combine estimate of revenues and expenses to create basic cash based budget presented in conventional format.

Prepare what-if budget scenarios integrating contingencies.

MONEY

Project revenue - monthly for initial year and quarterly/annually years 2 - 5.

Project cost of goods - monthly year 1 and quarterly/annually years 2 - 5.

Project operating expenses - monthly year 1 and quarterly/annually years 2 - 5.

Identify potential sources of funding/financing for the venture.

Essential Elements for MONEY

the passion and inspiration that compels the founders to persist against incredible odds and tremendous obstacles

MOTIVATION

Begin with an exit strategy Need to know where you are going to get

there Entrepreneurship is a full-contact sport, be

prepared to commit absolutely everything Best to pursue only those things so totally

engrossing that you would do them without pay or the promise of any tangible reward

Most overnight successes represent decades of grueling work, punishing hours, and enormous sacrifice

MOTIVATION

Inventory meaningful outcomes already achieved for venture. Describe personal factors compelling your decision/desire to

launch venture. Highlight significant next steps for venture along with

resources/funds needed to reach them, and how success will be measured at each step, more detailed 1st year.

Describe personal rewards expected – ultimate personal goals for founder(s).

Explain preferred business exit scenario. Provide examples of commitment – demonstrated personal

investment of time, talent, and money. Measures demonstrating you have “skin in the game”. Foreseeable obstacles and challenges related to personal

commitment of founder(s) and key management.

MOTIVATION

Establish timeline with measures of success for major steps - investment needs, hiring, product/service introduction, sales levels, break-even, exit.

Essentials for MOTIVATION

#1 Estimate Cost of Goods #2 Potential Revenue Streams #3 Potential Business Revenue Operating Expense Estimate

Worksheets

Forms of Organization Choosing a Business Name Federal Registrations State Registrations Local Registrations

BASIC STARTUP PROCEDURES

Kathy Wyatt, DirectorTechnology Business Development CenterLouisiana Tech UniversityP.O. Box 3145, Ruston, LA 71272Phone: (318) 257-3537Fax: (318) 257-4442Email: kwyatt@latech.edu

 

Questions?

Planning for Your Business

Have Fun