Chapter 11 The Business Plan Copyright Houghton Mifflin

Overview • Some truths about business plans • Feasibility analysis versus business plan • Types of business plans • Overview of the components • Oral presentation Copyright © Houghton Mifflin Company 2

Dispelling Some Myths • A business plan means you can raise money • A

Some Truths • There isn’t a customer you don’t have to convince • Don’t use cliché approaches—hockey stick growth • Seek the highest valuation needed to get the right amount of capital from the right investor • Plan to outperform expectations • Don’t put yourself in the position of having to start the business to answer key questions Copyright © Houghton Mifflin Company 4

Feasibility: Test the Concept Opportunity Environment—Industry-Concept Market/Distribution Risks/Benefits Product Service Risks/Benefits Market Analysis Customer Test C Sta once tem pt en t Team Product/Service Development & Management Competition Grid ve IP lo pm ne De t Go Forward/Rework Ti m eli en t Financial Risks/Benefits er om ion t s it u C efin of D s rn ge e t n t Pa Cha Industry Status Copyright © Houghton Mifflin Company 5

Business Plan: Build the Company From the Inside Out Opportunity Environment Extended Business l. M ar n ct io nt s s or tit Customers m ta Finance pe pi Mission EM s Ca t tin g ke ts Suppliers Co O Core Contributions od u ke Pr ar ta M Purpose ns ul Mo Values Co ne y Core Business Government Copyright © Houghton Mifflin Company 6

Feasibility Study versus Business Plan • Feasibility = screening opportunities to decide the conditions under which you are willing to go forward • Business Plan = execution plan for implementing the business Copyright © Houghton Mifflin Company 7

Purpose of the Business Plan • Reality Check—What’s it going to take? • Living Guide to the Business • Statement of intent for third parties – Investors – Bankers/lenders – Potential management – Strategic partners – Suppliers Copyright © Houghton Mifflin Company 8

Bankers/Lenders • Margins – How much room for error? • Cash flow – Can you pay them back? • Qualifications and track record of management team – Do they have what it takes to execute the plan? Copyright © Houghton Mifflin Company 9

Investors • Predictors of growth • Qualifications and track record of the management team

Strategic Partners • Growth plans indicate potential business • Ability to pay • Future

Types of Business Plans • The traditional plan – About 20 pages plus appendices – Inductive approach • The e-commerce business plan – Timeline to launch and trigger points for rapid growth – Technology standards – Software and hardware needed to operate – Internet service provider and capabilities – A storyboard of the product or service Copyright © Houghton Mifflin Company 12

What Every Plan Needs • What need is being served? • Do you have a team that can serve that need? • Why is now the right time to launch this business concept? • Can you make money at it? Copyright © Houghton Mifflin Company 13

The Components • The business concept • The industry/market analysis • The founding team

The Components (cont. ) • Marketing plan • Financial plan • Contingency plan •

The Executive Summary • Arguably the most important part of the business plan • Stimulates an investor, bankers, or other interested party to read the business plan • Should be no more than two pages • Contains the most important points from all sections of the plan • Must capture the reader’s attention instantly Copyright © Houghton Mifflin Company 16

For a Business Plan to Be Successful… 17

You Must Tell a Compelling Story • How do you plan to change the

You Must Move in with Your Customer • Talk with the customer • Shadow

You Must Have a Pricing Strategy • Who’s doing what in your market and why? • Don’t compete on price; compete on value • Margins are everything • Justify what you’re asking Copyright © Houghton Mifflin Company 20

You Must Support What You Claim • Primary and secondary research • Cite your

What Business Plans Look Like Today • Shorter • Larger appendix • Bigger focus on intellectual property and other intangible assets • Demonstrate use of technology as a competitive asset Copyright © Houghton Mifflin Company 22

Technology Plan • Because technology may be at the core of your concept – IP: patents, trademarks, know-how • Because technology enables the achievement of business goals – Expands possibilities – Creates efficiencies – Facilitates information sharing Copyright © Houghton Mifflin Company 23

Bottom Line • The business plan carries your vision • The business plan is

Oral Presentation • Answer the fundamental questions • Be under a half hour • Catch the audience’s attention in the first sixty seconds • Involve the key members of the founding team • Demonstrate the product or service where possible Copyright © Houghton Mifflin Company 25