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The Art and Science of Writing andPresenting a Business Plan
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Why create a Business Plan?
Most importantly, for you & your team
You need one for a startup
You need one for a corporation The actual process of planning is the
key.
It consolidates management direction.
It provides debate & finally consensus.
Its used as a guide when speed bumpshappen.
Its your company & your personalscorecard.
Source: Jack Derby, Derby Management
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Why else?
No Business PlanNo money.
The Six Stages of Successful Sources:
FF&A: Friends, Family & Acquaintances
Private angels
Venture capitalists
Corporate investors
Strategic partners
Banks
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Writing a plan is tough work
It requires disciplined balance
Its visionary, but logical.
Its financially perfect, but flexible. Its for today, but also for 3-5 years out
Its a formal Plan, but its easy to read.
Its creative, but it follows The Rules.
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How do you start?
Pay attention to The Dos & Donts.
Above all else
Be compelling
Be brief, focused, & deliberate
Focus on customers & how you will sell them.
Provide market research & hard data
Be innovative & describe barriers to others. Create an experienced managementteam
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The 25 Dos
Be brief & direct & detailed.
Get to the bottom line quickly.
Identify what the business is immediately
Identify the business model immediately.
Focus on your customers.
Define whats compelling.
Define whats unique.
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The 25 Dos
Be realistic with yourself.
Remember, you're investing your career.
Define long term objectives for 3 to 5 years.
Describe the 3 to 4 primary strategies.
Focus on your sales model & channelstrategies.
Include your ecommerce strategies.
Make realistic, but exciting, projections.
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The 25 Dos
Support strategies with detailed tactics.
Substantiate with accepted market research.
Discuss very objectively your risks.
Answer the question of why customers buy.
Describe the barriers to entry for others
Convince your reader about success.
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The 25 Dos
State how much money you will need.
Define exactly how the funds will be used.
State clearly your exit strategy.
Stick with proven and accepted plan formats.
Don't try to be cute!
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The 15 Donts
Write about history. Focus on the future.
Focus only on you & your technology.
Use highly technical buzz & descriptions.
Forget about objective customer research.
Make unsubstantiated statements or claims.
Create revenues that you wont make.
Include detailed budgets.
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The 15 Donts
Forget what makes your plan different
Experienced management
Large and growing markets
Proven sales models & channels
Experienced sales penetration tactics.
Innovative technologies
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The 15 Donts
Assume anything.
Forget what your reader wants.
Define valuations in the actual plan.
Attempt to write the business plan alone.
Extend the process more than two months.
Include copies of resumes & technical papers.
Forget to proofread, proofread & proofread.
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Dont just start writing
PreparationThe Key to Success.
Whats my Vision? Can I say it so that anyone understands it?
What business are we in today?
What about in 3 years?
Are we really innovative? What about in 3 years?
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Dont just start writing
PreparationThe Key to Success.
What do we really know about
Our future product roadmap
What our service offerings could be.
The market data, trends, & forecasts.
The new technologies in development The competition
Who are our customers will be in 3 years?
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One more preparation task
Think about your starting assumptions.
Externally, what do I think will happenabout
Economic trends
Markets that I am entering
Technology changes
Regulations
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One more preparation task
Define your starting assumptions
Internally, what do I want & expect for
Sales revenue growth rates
Product costs and margins
Sales expense percentages
G&A expense percentages
Receivables, payables, financing, & capital
models.
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Now, you can finally start writing.
What you need
A quiet place and time.
All of your data easily available.
Start working by yourself. Get the content down quickly.
Send a first rough draft to others quickly.
Write draft after draft after draft after..
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You have two options today
The Traditional Business Plan
7-8 sections
20-30 pages with financials
More detail: markets, products & technologies
Business Plan Lite 2 sections:
8-10 pages with financials
An extended Executive Summary
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The traditional plan
Certainly preferred by sophisticated VCs
Provides an opportunity to provide clear details
Brings out the richness of the business idea. Details the business and sales models
What follows here is the traditional format
7-8 sections
20-30 pages
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Business Plan Lite
A result of the times
Today, time to read is the driver.
Requires you to Be an excellent writer
Provide great detail with very well chosen words
Get your points across succinctly & with clarity.
Sections 1 & 2 & 7 create the BP Lite
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Whats included?
Vision
Strategies
Tactics
Operations
Actions
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Whats included?
7-8 Sections
Executive Summary
Introduction to the business Definition of your products & services
Overview of your markets
Overview of your sales & marketing plans
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Whats included?
Overview of product developmentroadmap
Summary of manufacturing &operations
Bios of your management team
Four pages of financials
Brief appendices if necessary
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2-3 pages
Make it compelling
Your Idea Your Markets
Your business and sales models
Your competitive advantages
Your management team
Your use of the funds
Section 1: The Executive Summary
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Section 2. Whats the Business?
This section is focused on
The Business Opportunity
The Markets
The Technology The Products
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Section 2. Whats the Business?
This section must define
a clear Vision
clear strategies
a well defined business model a dedicated, believable Mission
a strong sense of management experience
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Section 2. Whats the Business?
The products & their value add services
features & benefits, innovation, technology
The markets research data
competition
The customers
who they are & their needs
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Section 3: Sales & Marketing
The most important section
3.1 Whats the Market?
Customer analysis & their needs
Worldwide market size & trends
Competitive strengths & weaknesses
Value creation for your products & services
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Section 3: Sales & Marketing
3.2 The Marketing Plan
What are your marketing strategies?
What are the data points to measure success?
What is your price positioning & why?
What are your primary tactics in years 1 & 2?
What are your primary events in year 1?
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Section 3: Sales & Marketing
3.3 The Sales Plan
Whats your Sales strategy? What standard channels will you use?
Is there an innovative channel?
What are your penetration tactics?
Whats your sales model?
Whats your hiring & training plan?
Whats your measurement & reporting?
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Section 4: Engineering and R&D
What are your core technologies?
Provide sufficient, but not numbing, detail.
What is your development status?
Describe your primary milestones. Be conservative.
Assume development will be late.
Detail the technical teams background.
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Section 4: Engineering and R&D
What is your strategy for future products?
Define in text with graphics your roadmap
Define common platforms and architectures. What your IP & patent strategy?
What is your IP strategy?
If you have patents, provide a status table.
If not, define why not in a positive manner.
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Section 5: Operations/Manufacturing
Whats your Manufacturing strategy? Outsource or not?
Why & why not?
What is core in Manufacturing?
What are your unique capabilities
What are your unique processes?
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Section 5: Operations/Manufacturing Focus on your customers in your
Distribution strategy
Quality strategy Value added services that you will
employ
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Section 5: Operations/Manufacturing
What is your Customer Support strategy?
Customer order fulfillment tactics
Primary objectives Delivery
Response time
Primary policies
Outsource or not?
Future services that you will provide?
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Section 6: Senior Management
Management
The #1 reason that investors do not invest.
Experience counts first.
Dedication counts second. Ability to rapidly learn is third
Too strong an ego is a negative.
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Section 7: The Financials
The Rule: Everything Must Hang Together
Your vision and strategies in text must tie in. Your market growth objectives must tie in.
Your business and sales models must tie in.
Your margin percentages must tie in.
Your cost of goods must tie in.
Your expenses must reflect standard percentages.
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Section 7: The Financials
You need
P&Ls
1st year by month
2nd year by quarter
3rd
year by year Balance Sheets for each year
Cash Flows for each year
3-4 pieces of paper only
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Section 7: The Financials
You need to list your
Primary assumptions
Primary categories for the use of the funds What are the primary risks?
Other than the normal of early stage companies
If nothing specific, do not list any.
Whats your exit strategy?
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Section 8: The appendices
Provide only the compelling things
Product data sheets for primary products
Any critical publication.
Do not provide resumes. Do not include patents.
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Where do I go for help?
Good textbooks
Rich, Gumpert
Anything from HBS Press
Anything from Inc.
Inc Magazine & inc.com
Startup.wsj.com
MIT Enterprise Forum workshops
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Where do I go for help?
MIT Enterprise Forum seminars
Entrepreneurship schools
MIT Sloan , Babson, HBS, Smith
Professional Mentors & Coaches
Venture capital investors The big CPA firms:
PWC, Deloitte, Ernst.
The big law firms
Cooley, Mintz Levin, Hale
INC, Fortune Small Business
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Goals for a Successful Venture
Evidence of customer acceptance of the product Letters of reference Data generated at their facilities Abstracts White paper
An appreciation of the investors needs Investors want a 1.6^n (n=years before cash out) It includes 50% ROI and 10% inflation Time horizon is 3-7 years
Evidence of focus through concentration of a limited number ofproducts and services Dont chase butterflies
Proprietary position Patents, trade secrets, etc.
Exit Strategy What do you want to do in 3-5 years? Be acquired, go public.
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Important Things to Keep in Mind What is the value of the product
Questions to ask- How much does it save the customer($ and non$) How much does it earn the customer ($ and non$) What non monetary benefits do customers realize
Be market driven, not product driven
It is easier to sell in an already established field than in a newmarket
Investors want their money to be productive Producing and selling the product Therefore, develop the product with other funds You are better off developing the product by any means necessary
Management Matters Dont be a one person band Find people w/complimentary skills Hire gray hairs or no hairs Pay all key folks the same Have employment agreement, limiting disclosure and competition Describe employment agreement in management section
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Financials
Avoid too many spread sheets
Real numbers are usually 20-80% right from original estimates
Most VC seek a min of 20 million of sales revenue in 5 years
Include income statement, cash flow forecast, balance sheet,break-even analysis
Look at 10K and annual reports of companies in the same space
Make a critical staffing chart and describe when they arecoming in
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Investor Presentation First Impressions
Eye contact Hand shake Dress like you can be trusted with their money Impressions are made within first few seconds Once impression is made, it is virtually irreversible
Introduce management team
Have executive team (2-3) partake in presentation
Dont dim lights
Talk about the market or need first!
Present technology half way through
Important things in presentation (order of importance) Market User benefits How investment will grow for them
Practice, practice, and practice
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What Matters
Who you run with
Legal advisors
Business advisors
Key Executives
Investors
Your performance record
Nothing predicts future performance like historical performance
Dont burn bridges
Integrity
Reputation: Your most valuable asset
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The Top Ten Lies Told By Entrepreneurs
(okayreally eleven)1. Our projections are conservative.
2. (Insert reputable market research firm) says our market will be $50 billion in 2010.
3. (Insert Fortune 50 company name) is going to sign our purchase order next week.
4. Key employees are set to join us as soon as we get funded.
5. No one is doing what we're doing.
6. No one can do what we're doing.
7. Hurry because several other venture capital firms are interested.
8. (Insert Fortune 50 company name) is too big/dumb/slow to be a threat.
9. We have a proven management team.
10. Patents make our product defensible.
11. All we have to do is get 1% of the market.
Source: Guy Kawasaki
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The Top Ten Lies Told By Venture Capitalists
(okayreally nine)1. I liked your company, but my partners didn't.
2. If you get a lead, we will follow.
3. Show us some traction, and we'll invest.
4. We love to co-invest with other venture capitalists.
5. We're investing in your team.
6. I have lots of bandwidth to dedicate to your company.
7. This is a vanilla term sheet.
8. We can open up doors for you at our client companies.
9. We like early-stage investing.
Source: Guy Kawasaki