1Entrepreneurship and tehnological management
Course 9
Business Plan Structure 2
15.04.2011
2Entrepreneurship and tehnological management
Bogdan Secara
Internet Development Director
Web Optimiser at Strategic Shift
Internet Development Director at MediaPro
Marketing Director at Project Management
Institute - New Zealand
2005 - 2007
Country Manager at netBridge
2000 - 2005
http://nz.linkedin.com/in/bogdansecara
http://www.dragosroua.com
@ beliverable
Entrepreneurship and tehnological management
Speaker corner
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Summary
Market strategy
Development and barriers of entry
Manufacturing and operation plans
Management team and organization
Financial Plan
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Market strategy -Pricing and communication
Chapter 6
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Pricing Strategy
Possible strategies: Commodity pricing
Set by the market
Supply and demand
Based on competitor(s) price
Value pricing - how much the customer is willing to pay for value received
Payback period – depends on impact on company profit
Introductory low price to get customers to use
Cost plus + markup
Razor & razor blade
[ 5. Market strategy ]
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Pricing Strategy
Respond to following questions:
List the prices for each of the products/services that you offer. What will the prices be in years 2 to 5?
What is the channel pricing, i.e. what discount does each element of the channel receive at each stage.
• For example, the consumer of salmon pays to the retailer $10.00 per pound; the retailer pays the wholesaler $7.50 per pound; the wholesaler pays the salmon company $5.00 per pound.
How does your pricing strategy compare with your major competitors?
What evidence do you have that your target market will accept your price?
[ 5. Market strategy ]
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Communication Strategy
Channels / strategies:
Media advertising (TV, radio, newspaper and magazines)
Direct response advertising (mail, email, text messaging, infomercials)
Outdoor advertising (billboards, posters, cinema, vehicles)
Brochures, catalogs, specifications, manuals
Point-of purchase
Trade and consumer promotions
Sponsorships and event
Exhibitions and conferences
Public relations
E-commerce
Strategic alliances
Advertising budget
Total advertising cost for 1 paying costumer
[ 5. Market strategy ]
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Development and barriers of entry
Chapter 7
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Development strategy
Identify 5 to 10 key events that must take place for your venture to succeed. The focus should be over the next 2 to 3 years. For each step indicate the completion date. Consider the following:
Product and process development
Intellectual property
Marketing strategies, e.g. advertising launch, catalog mailing, website launch
Agreements with key customers, distributors or suppliers
Strategic alliances
Roll-out strategies, e.g. by regions, new products, new channels
Facility construction and equipment installation
Market and beta tests
Key hires, e.g. sales manager
Funding
[ 6. Development and barriers of entry ]
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Product improvement and new products
In order for your company to succeed, you will need to:
Respond to competition improvements
Take lead and impose new trends
Periodically impose new products
Plan the next improvements
Do not include all your ideas in the first phase
• Not economical feasible to include them all
• Harder to respond to competition responses if you do not have something prepared
Examples: the IPAD – apple did not include simple extra options / better hardware in the first versions in order to have a easy way to upgrade the next versions
[ 6. Development and barriers of entry ]
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Barriers to entry
What barriers to entry can you pose against the competition?
Economies of scale?
Customer loyalty?
Agreements with customers, suppliers, strategic partners ?
Control of the distribution channel?
Switching costs?
Intellectual property: patents, trade secrets, copyrights, trademarks, know-how
Government regulations: defense contracts, import restrictions
[ 6. Development and barriers of entry ]
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Manufacturing and operation plans
Chapter 8
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Scope of Operations and manufacturing
Describe which operations you will do in-house and which you will subcontract. Why does this make sense for your business?
Consider the following:
Production
Product development
Order fulfillment
Customer service
Warehouse and shipping
Tech support
Installation
Warranty service and repairs
[ 8. Manufacturing and operation plans]
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Ongoing operations, Facilities and Improvements
Describe how your company will operate on an ongoing basis
Identify the key vendors, suppliers, strategic partners, and associates. (possible arrangements)
Based on your sales forecast, estimate how much production or service capacity is required over the next five years
What type of operations facility is required:
size, type of space (office, laboratories, production, warehouse and shipping).
Where will you be located?
Why this particular location? (supply and distribution advantages)
What capital assets do you require?
Describe the major items (equipment, vehicles, buildings, fixtures, decorations, computers and software, etc.) and how much each will cost. Will you lease or purchase?
[ 8. Manufacturing and operation plans]
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Ongoing operations, Facilities and Improvements
Determine your manpower requirements to produce and deliver the product/service.
What types of employees are needed (skilled, technical, supervisory, manual, etc.)?
Provide a layout of the production or service process.
How will your product/service flow through the facility?
Determine how much inventory is required to support the marketing strategy.
Express it in terms of days or turns. Keep in mind that it is very difficult in the early stages of a new business to operate a just-in-time system. The order quantities are too small for suppliers to produce economically in small batches and deliver to your warehouse every day. Lead times from receipt of order can also be quite extended for small quantities
[ 8. Manufacturing and operation plans]
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Management team and organization
Chapter 9
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Organization structure
Describe how your company will be organized.
Organization chart.
Board of directors?
• Who will be on it?
• What will be their role?
Board of advisors?
• Who will be on it?
• What will be their role?
What is the ownership structure of your company?
• What percent of the company do each of the founders own?
[ 9. Management team and organization ]
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Key management personnel
Describe the founders and principal managers who will run your firm.
Write a short paragraph on each of the key managers? (Include resumes in the Appendix)
What will be their duties and responsibilities?
What unique skills do they bring to the venture?
How will they be compensated?
Is there a significant “hole” in the team? How do you propose to fill it?
[ 9. Management team and organization ]
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Financial Plan
Chapter 10
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Important assumptions and risks
Explain the key financial drivers of the venture. What assumptions have you made that will determine the financial success of the business?
[10. Financial Plan ]
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What are the customer acquisition costs? Very important.
What minimum number of customers per day and average selling price is assumed?
What level of costs per unit must be achieved?
What level of discount is assumed for
the distribution channel?
What are the lease costs for the site?
What is the development cost and
timing of a new product
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Important assumptions and risks
Market
Size of market
Competitor’s response
Long sales cycle
Price that customers are willing to pay
Closing window
Strategic
Establishing strategic partnerships
Operational
Large number of interrelated components
Costs
Quality level
Technology
Will it work?
Patentability
Time and cost to development
Scalability
Financial
Risk/return
Dilution
Macro-economic
Volatile industry
Government approval
New regulations and laws
Exchange rates
Interest rates
[10. Financial Plan ]
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Important assumptions and risks[10. Financial Plan ]
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Startup founding requirements
Estimate the initial capital requirement
Start-up expenditures (legal, administrative)
Buffer money for all costs until sales completely cover expenditures
Investors do not like to invest all the money at once
If you need 100 units for the first 6 months, 100 units for the next 6 months and 100 units for the next 12 months, do not ask for 300 in month 1 (this would mean 200 units stuck in the bank)
[10. Financial Plan ]
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Break-even analysis
Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs) → units needed to sell
[10. Financial Plan ]
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Sales Forecast
What growth rates are you expecting for the more important lines, and what growth rates in units, and in dollars?
Why are you projecting your sales at this level? Why not less or more?
What are the main driving forces behind the sales forecast?
How does it relate to your market analysis, your main target segments, your sales strategy and marketing strategy?
Is your sales forecast believable? Why?
What events might turn the sales forecast downward?
What kind of things are you assuming will happen to make sure the sales happen?
[10. Financial Plan ]
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Financial projections (details beyond the scope of this course) [10. Financial Plan ]
Projected Profit and Loss
Projected Cash Flow
Projected Balance Sheet
Business Ratios
Check an working example @
http://blog.guykawasaki.com//RedfinFictitiousModel.xls
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Financial projections (details beyond the scope of this course) [10. Financial Plan ]
Profit & Loss Statement:
Revenues & Expenses accruing over a period of time
Balance Sheet:
Assets & Financing at a point in time
Cash Flow:
A detailed look at actual cash inflows and outflows over a period of time
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Profit & Loss (P&L) Statement
• Revenue (after discounts)
• Cost of Goods Sold (COGS)
•Direct product cost
•Mfg but NOT R&D
• Gross Margin or Gross Profit
• Departmental Expenses
• Operating Profit / Loss
•Earnings before interest and taxes (EBIT)
•EBITDA (Earnings before interest, taxes, depreciation, amortization)
Revenue 50.0$ 100%
Cost of Goods Sold 20.0$ 40%
Gross Margin 30.0$ 60%
Sales & Marketing 15.0$ 30%
R&D 5.0$ 10%
G&A 2.5$ 5%
Total Expenses 22.5$ 45%
Operating Profit 7.5$ 15%
How it looks
[10. Financial Plan ]
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Practical Considerations
Chapter 11
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Business Plan in a Slide[11. Practical Considerations]
What is the pain? What problem is being solved?
What is the market we shall be in?
What is our business model?
Who is going to hurt us and how bad?
How we are going to achieve our objectives?
How am I going to clone and complement myself?
How are we going to make money?
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Practical Considerations11. Final thoughts
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Reasons for Having a Business Plan[11. Practical Considerations]
Helps asking better questions
Helps with organizing the business
Helps drawing boundaries
Helps focus on the essentials
Helps keeping things untangled
Enhances communication
Offers a balanced perspective
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Practical Considerations11. Final thoughts
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Common Business Plan Temptations to Avoid[11. Practical Considerations]
Temptation to elaborate it too much
False sense of security
Temptation to create a too rosy future
Illusion of control, especially in the long run
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Practical Considerations11. Final thoughts
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Is It Worth the Whole Effort?[11. Practical Considerations]
It disciplines you
Leaving your emotions out of the equation. Keeping the score better though milestones, deadlines, KPIs.
It opens your eyes
Separate Real from Fantasy, Present from Future, Strategy from Tactics, Project from Operations.
It sells your business and your idea
Partners, Colleagues, Investors
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Practical Considerations11. Final thoughts