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Presentation Outline....
Establishing Priorities and doing Market Research Conceptualizing your business Plan (Ten Questions that your Business Plan must answer) Business Plan Types, format and contents
-need
ROI
Barriers to entry
-customer
Capital requirement
Legal advantage
Sales growth
Cash flow Break even
Attractive
Timely
Opportunity
Durable
Anchored in a product,servic,or business that creates or adds value for its buyer or end user
Window of Opportunity
Its the -time for new product is established -market grows ,firms enter and try to established position -market matures and the window of opportunity closes
Is My Market Attractive?
attractiveness and market size are closely related
larger markets often have many reasonably sized segments growing markets also offer more room for competitors emerging markets offer prospects for different approaches
For entrepreneurs seeking venture capital, look for target markets that provide entrees into other market segments
Is My Industry Attractive?
Michael Porter five forces framework ...
threat of entry bargaining power of suppliers bargaining power of customers rivalry among existing competitors threat of substitutes
Business Plan .
New discoveries are made, new products and processes displace old Prices change, competitors enter, partners leave, suppliers merge, buyers change, investors commit You learn something new
pay a premium?
At the outset investors need to know whether your company has been incorporated; if yes when and by whom completed a design or developed a prototype developed or launched its first product/service secured customer commitments or orders generated any revenue; if so, how much, from where, etc. secured finance from any source (including government grants)
Start by providing an engaging snapshot of where you have got to. Underpin this with a compelling statement of who is involved and what their experience, track record and commitment to business are.
being so close to the product that you cannot describe it clearly providing excessive product detail - this can follow later assuming that the customer benefits are self-evident - they may only be so to you! failing to assess the durability of your advantage - how easily might others replicate it? not demonstrating how your skills and those of your team position you to exploit the opportunity in a timely fashion
Very early on in the plan you need to convey to the reader a clear picture
This is the market opportunity This is my product These are the key benefits: the value proposition This is the evidence that substantiates the value proposition And these are the people who will make it happen - and why
basis of competition - price, differentiation, range, discount structure, etc. nature and number of substitutes (and near substitutes) the ease or difficulty of gaining market entry the margin opportunity - current and future It is essential to demonstrate a real understanding of what makes the market tick, why it is an attractive market, and why it will remain so for some time.
You then need to explain where in the market you will compete ...
choice of target market segment and rationale for this precise description of target customers key buying factors the purchasing process: who buys and over what time frame?
market data unsupported by factual evidence lack of basic, first-hand market research the risks inherent in under-pricing equating a large, growing market with ease of gaining share
mechanics of promotion - direct mail, advertising, platform work, trade fairs, editorial/media coverage identifying target customers for promotion activities your promotion budget and its uses choice of sales method - in-house sales force, telemarketing, use of third parties role of distributors, wholesalers and retailers the mix of methods and their rationale order processing and fulfillment physical stockholding and dispatch use of third parties projected volumes and variations
But this is only a photograph: what you (and everyone else) can see!
The best business plans move beyond the surface to address ...
how the dynamics of competition might evolve over time in terms of price, margin erosion, etc. how existing competitors are likely to respond to your market entry other potential entrants to the market Typical weaknesses in this part of a business plan include
suggesting that the concept is so unique it has no competitors assuming that todays competitors will be tomorrows focusing only on direct competition, not indirect and substitutes
overburden the reader with excessive detail assume technological knowledge on the readers part use technical terms without explanation imagine that the reader finds the production process as fascinating as you (likely) do ignore the risks associated with production, particularly as volumes build up post start-up
directly relevant industry, market experience and skills accomplishments and track record (P&L responsibility) range, depth and quality of relevant contacts: customers, suppliers, key personnel and the like experience that the team has had in working together status and nature of the commitment of both yourself and the team key recruits still to be found
Do remember that the section on management is not the only place where the team is presented. Use any opportunity in the plan to demonstrate your and the teams suitability to pursue the venture.
Focus attention on articulating each core assumption, validating each assumption and demonstrating how it gives credence to your base case
how much money is needed what it is need for: staff, premises, capital expenditures, research & development, market testing, and so on when and in what stages it is required the key milestones against which funds will be drawn down the form in which the finance is required
Your prospective investor will also be interested in how he will get his money back. You should therefore outline ...
the projected timetable for the business to achieve lift off target time to break even, generate positive cash and profit the most likely exit route valuations achieved by comparable businesses
Do not feel obliged to propose a deal in the plan. Work out what this might look like but keep it in reserve.
list all risks relevant to key aspects of the business: product/service, market, technology, management team identify those risks that are more/less critical work out precisely what you can do to ameliorate key risks keep refining the list - and your intended actions - until you are left with a clear summary of the core risks: i.e. those that present the greatest threat but where you can do least to mitigate them, at least before start-up
Summary: 10 Questions
1. Where is the company now? 2. What is your product or service? 3. What is your market? 4. How will you reach the market? 5. Who will you be competing against? 6. How will your product be produced? 7. Who are the people? 8. What are your financial projections? 9. How much money will you need? 10What are the risks?
Business PlanFormat
Comprehensive Plan
10-40 pages, seeking capital or alliances
Operational Plan
40+ pages, for going concerns, part of an annual process
44
Marketing
Target Market, Competition, Advertising
Financials
Summary of Needs, Use of Funds, 3 Year Cash Flow Projections, Income Projections
45
Contd
No paragraph longer than 6 or 7 lines Present key subjects in a table, chart or graph Do not use we, our or I but use only the company name or initials Write each Section with summary first then follow with supporting detail (this is opposite of Univ. writing) Simple subject verb- adjective 8-12 grade writing
creative insights
These aspects are the heart of plan must be based on real investigation
exhaust secondary sources
industry analysis trade associations Trade periodicals
The investor wants to invest in professionally implemented creativity but the investor is cynical
Your distributors are family-run small businesses. What about Approvals. How do you contact them?
Product Liability will kill you
Financial Plan
THE PRIMARY EVALUATING TOOL
Support all information Make conservative projections
Start-up Budget: amount needed to open Operating Budget: ongoing expenses once open Sources and Uses Sheet
Methods of Financing
Personal funds Family/ friend loans and gifts Angel investor Venture capital Grants Personal loan Business loan
Year One 3 4
10
11
12 Total
Appendices
May Contain
Short CVs of team and profiles of partners Contracts, patents, correspondence Pictures of product Market research details Rollout schedule Pro-formas, assumptions and sensitivities
state fully sources of each data item Reader should be able to trace logic from raw data in appendix to statements in body
Summary Slide
planning
Conclusion
Entrepreneurship is a profession
Mediocrity