The Art of Writing the Business Plan

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The Art of Writing the Business Plan

• Presented by
• Jeffrey A. Robinson, Ph.D.
• Assistant Professor of Management
  Entrepreneurship

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Capital
What is a good framework for entrepreneurship?
Opportunity
Innovation
Networks
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Capital

• Capital can be acquired, exchanged converted
• Five forms of capital
• Financial (debt, equity, etc.)
• Human (skills, education)
• Social (networks of people)
• Cultural (social resources, family background and
  knowledge of cultural nuances)
• Intellectual (IP in firms, transferable)

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Opportunity

• The identification, evaluation, exploration, and
  exploitation of a venture opportunity
• The structures around an opportunity or context

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• The cultivation and management of innovation and
  innovative practices
• The innovation of business models
• The protection of innovations

Innovation
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• Networks connect people within organizations and
  between organization
• Networks connect entrepreneurs to capital,
  innovation, opportunities
• Networks tie everything together
• Personal Networks/Professional Networks/
  Entrepreneurial Networks

Networks
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Opportunity
Capital
Innovation
Networks
The success or failure of your venture depends
upon how your put these pieces together.
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Why is this important?

• because good entrepreneurs leverage capital,
  opportunities, innovation and networks to create
  viable ventures
• because good business plans demonstrate how an
  entrepreneurial team will leverage capital,
  opportunities, innovation and networks to create
  a new venture

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Traditional Ventures Types of Firms

• Lifestyle firms
• generally lt 1M in revenues
• founders have no desire to expand
• founders usually are pursuing their passion
• Growth Firms
• 1 M to 20 M revenues, 10-20 growth
• 20M revenues, gt20 growth gazelles
• Founders want to expand and grow the firm
• Scale and Sustainability are key!!

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Social EntrepreneurshipFormal Definition

• Social entrepreneurship uses entrepreneurial and
  business skills to create innovative approaches
  to social problems. These are mission driven
  organizations focused on the double bottom line
  of social impact and financial sustainability or
  profitability.

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Examples of Social Entrepreneurship across sectors

• Charter/Contract/New Schools
• New Schools
• Social Service/ Social Action
• One Economy
• Poverty Solutions
• Simultel
• Underserved/Underrepresented
• CitySoft
• CityFresh Foods
• Economic Development/Workforce Development
• Greyston Foundation (Greyston Bakery)

Social Ventures can be for profit or non-profit
organizations
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The Questions Every Entrepreneur Must Answer
Are my goals well defined? Personal
Aspirations Business sustainability and
size Tolerance for risk
If the answer is yes
Do I have the right strategy? Clear
definition Profitability and potential for
growth Durability Rate of growth
If the answer is no
Can I execute the strategy? Resources Organization
al infrastructure The founders role
Source Amar Bhide
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Questions for the New Venture

• New Venture Idea
• What existing need or want does the concept fill?
  In other words, what is the problem you solve?
• Describe the service/product will it change the
  way people live, work, or do business?
• Who is your customer? What is your market
  segment? Is there more than one customer group?
• What is the unique selling benefit? (Why will
  they buy?)

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Opportunities Evaluation, Exploration, and
Improvement
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The real big opportunities are here

• Untapped Markets
• Underserved Markets
• Underdeveloped Markets
• Unique Perspectives

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Examples

• Dogloo
• Dell
• TV One
• Altitunes/Laptop Lane/WayPort
• ZipCar
• FUBU/Sean Jean/Phat Farm

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Opportunities Evaluation, Exploration and
Improvement

• Where do opportunities come from?
• Evaluating and Exploring Venture Opportunities
• Developing the Venture Idea and Concept

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Current Trends

• Baby boomers entering their 50s
• New boomer crop of children
• Growing disparity between rich and poor
• Increasing globalization of business
• Reinvention of religion
• Yearning for high-touch product and services
• Mass Customization

From the Business Owners Toolkit --
www.toolkit.cch.com/text/p01_0595.asp
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Other trends

• Healthy food/healthy living
• Hyper-customization
• For profit social service providers
• Outsourcing

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Common Mistakes in Choosing a Business

• Error 1 Converting a hobby or interest into a
  small business without first finding out if there
  is sufficient demand for a choices
• Error 2 Starting the business without adequate
  planning
• Error 3 Resisting the urge to ask for help.

From the Business Owners Toolkit --
www.toolkit.cch.com
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Assessing and Evaluating Venture Opportunities

• All ideas are not venture opportunities!
• All ideas are not created equal!

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The Entrepreneurial Process Simplified
Opportunity Identification
Opportunity Evaluation Exploration
Opportunity Exploitation
Analysis
Action
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Evaluating an Opportunity
Does the opportunity
Fill a need?
Show evidence of product/service acceptance?
Show that a market/opportunity exists now?
Reflect that your product/service/solution is
better than the competitions?
Show an upside gain potential? (scale and
sustainability)
Describe the cost to achieve this potential?
Source Modified from Patterns of
Entrepreneurship by Jack Kaplan
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The Management Team

• Are you the right team to pursue this opportunity?

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Why a team?

• Most successful ventures are led by teams!!
• Teams leverage the strengths/creativity of team
  members.
• Solo entrepreneurs have limited capital
  (financial, human, social, cultural and
  intellectual)

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Survivor
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The Management

• Are you the right team to pursue this
  opportunity?
• Do you have some experience in the venture area
  you are exploring?
• Do you have some contacts in the venture area you
  are exploring?
• Does your team have most of the
  business/technical skills covered (marketing,
  finance, operations, etc.)

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Characteristics of the A-Team vs. B-Team

• The A-Team
• Knows something about the industry/market/issue
• Has previous entrepreneurship experience
• Has a solid team including advisors/mentors who
  have influence

• The B-Team
• Knows very little about the industry/market/issue
• Is starting their first venture
• Have a loosely committed team with no
  advisors/mentors with influence

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The Role of Advisors and Mentors

• Advisors and Mentors
• Volunteers
• Provide contacts to resources and key people
• Are good sounding boards for your ideas,
  strategies, etc.
• Provide an outsiders perspective
• May become investors

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Key Hires

• Understand where the gaps are in the
  entrepreneurial team
• Develop a list of key future hires for your
  venture
• Explain in your plan what role these key future
  hires will have in your company

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Elements of the Business Plan
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Executive Summary

• Business Concept
• Market Size and opportunity
• Product/Service Description
• Intellectual Property Summary (if any)
• Business Model (i.e. how you will make revenues
  and profits)
• Key Competition
• Key Points of Advantage and Difference
• Management biographies (1 paragraph)
• Financial Summary

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Business Concept

• Company Overview/History
• Description of Industry
• Product/Service Overview
• Factors giving rise to opportunity
• Market opportunity and strategy to exploit it
• Industry segment and current participants
• Target addressable market and projections
• Sources of revenue
• Milestone
• Key drivers for success and critical assumptions

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Business Model Economics

• Gross and Operating Margins
• Fixed and Variable Costs
• Cash Flow Analysis (time and money to cash flow
  positive)
• Break-even analysis (time and money to
  break-even)
• Product or service unit analysis (cost and profit
  margins)

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Market Analysis and Research

• Demonstration of market need
• Customer Base
• Market Size and Trends
• Target addressable market and projections
• Pricing
• Willingness of Customers to Pay Above Corporate
  Cost
• Value Added For Customers, Customer
  Benefits/Problems Solved
• Competition and Competitive Advantage
• Overall marketing and selling strategy
• Projected sales and market share

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Marketing Plan

• Strategy and positioning
• Tactics
• Pricing
• Distribution and selling
• Communication strategy (Advertising, promotion
  and PR)
• Selling and Collection Cycle
• Critical Mass/Reference Customers Required for
  Market Traction
• Implementation Strategy (Customer service,
  retention, warranty)

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Product Development

• Development Status and Next Steps
• Risk Factors
• Costs and Budget
• Opportunity Specific Issues

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Operations Plan

• Operating Cycle
• How the Business Works
• Manufacturing Process (or Retail Locations)
• Shipping/Product Delivery
• Geographic Locations and Local Resources
• Physical Facilities and Equipment
• Human Capital (hiring, requirements, training,
  compensation)
• Regulatory and Legal issues
• Business timeline and schedule

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Management Team

• Organization (Chart)
• Key Management Personnel (biographies, esp. key
  relevant accomplishments)
• Management compensation and ownership
• Employee Incentive Plans
• Board of Directors and other advisors

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Critical Risk Factors and Mitigation of
them/Contingency Plans

• (What are the risks and what are you able to do
  about them?)

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Financing Requirements and Opportunity

• Target financings (equity and debt)
• Current Offering
• Capitalization
• Use of Proceeds

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Financial Projections

• 5 year summary projections
• 3 year detailed, quarterly projections
• Balance Sheet
• Income Statement
• Cash Flow Operational
• Break-even Analysis

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Appendices

• Exhibits, articles, tables, specifications,
  references

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Developing the venture idea and concept
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Tips on developing the venture idea

• Describe your new venture idea in compelling
  terms. Be persuasive but not over-the-top!
• Be clear about your target customer/client/
  community.
• Remember to frame your venture idea in terms of
  the benefits to the consumer/client/community.

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Framing Your Business as Benefits to the
Customer/Consumer/Community

• The best benefits are the ones that a potential
  customer can hold on to. For example
• The consumer can make money with your product or
  service
• The consumer can save money (time) with your
  product or service
• The consumer can feel good (or feel better) with
  your product or service

This approach feeds into the Marketing Strategy!
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Questions Answers .
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great websites
Inc Magazine --- www.inc.com click on article
by topic Entreworld www.entreworld.com
Business Owners Toolkit www.toolkit.cch.com