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Developing Your Business Plan

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What to include in a business plan

What to include in a business plan


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  • 1. Developing Your Business Plan What to Include in a Business Plan Resources: Angel Capital Foundation  Angel Resource Institute  Ohio TechAngels The Entrepreneur’s Handbook
  • 2. The Most Successful Business Plans Are Always Written by the Entrepreneur. Business Plan Checklist 1. The Importance of Your Business Plan 2. The Mind Set 3. Tips from Savvy Entrepreneurs 4. Terms, Statements, and Beliefs to Avoid 5. Key Questions to Answer 6. Summary Business Plan Table of Contents 1. Executive Summary 2. Elevator Pitch 3. Company Overview and Background 4. Problem/Solution 5. Products and Technology 6. Market Opportunity 7. Competition 8. Marketing Strategy and Execution 9. Management Team 10. Financials, Use of Funds, Investment Strategy 11. Risk Assessment 12. Exit Strategy
  • 3. Business Plan Checklist: The Importance of a Business Plan • If you plan to ask someone for money…you must have a business plan. • Investors, potential board members, and strategic partners are all audiences. • Writing a business plan gets everyone in the company working together to formally outline the intentions of the business. • The business plan outlines the key milestones to be achieved. • It is the all important first impression and is an appeal for raising money, forming relationships, or promoting the company.
  • 4. Business Plan Checklist: The Mind Set • Writing the business plan helps the founding team learn the business and identify risks. • Express your ideas and passion in your own voice and words. • Be disciplined about organizing the information you gather on the market, competitors, and customers. • Divide your plan into sections and write on it at least an hour a day until you have a complete first draft. • Focus on the business opportunity and the milestones to be achieved—not the technology. • A Business Plan is not just an exercise; potential investors base their decisions on what you write.
  • 5. Business Plan Checklist: Tips from Savvy Entrepreneurs • Target the correct audience: investors, partners, or Board of Directors. • Rewrite the Executive Summary until it’s a page and a half of perfect. • Avoid technical jargon. • Use charts, graphs, headings. • Aim for 15 pages – Do not exceed 30. • Hold the financial projects to 3 pages. • Write a Plan that’s easy to read, with accurate, current, factual data.
  • 6. Business Plan Checklist: Terms, Statements, and Beliefs to Avoid • This is the best deal you will ever see. • We are chasing billion dollar markets. • Our intellectual property is solid. • No one else does what we do. • Big corporations are too slow to be a threat. • We have no competition. • Our financial projections are conservative. • We need 1% market share to meet our conservative projections. • Our margins exceed 10%. • Key employees will join us at funding. • A big corporate partner is about to sign on. • Several angels and/or VCs are interested in funding our plan. • Revenues are not our current focus.
  • 7. Business Plan Checklist: Thinking About an Investor’s Questions is a Great Way to Begin Crafting Your Plan • What problem does your product or service solve and how? • What unique thing about your company will make it succeed? • What are you assumptions? • What do you know about the market and the competition? • What are the barriers to entry? • What is management team like? Have they worked together before? • How are you going to make money for yourself and your investors? • What are the key milestones? • How much money do you need to accomplish these? • How has the company been funded before? • How are you going to use the money? • What are the risks? When you have answered these questions, you have the draft of your business plan.
  • 8. Business Plan Checklist: The Summary • Dedicate the plan to the business, not the innovation or product. • Illustrate a solution to a problem. • Explain how that solution generates revenue and profits for the business.
  • 9. Business Plan Table of Contents 1. Executive Summary 2. Elevator Pitch 3. Company Overview and Background 4. Problem/Solution 5. Products and Technology 6. Market Opportunity 7. Marketing Strategy and Execution 8. Management Team 9. Financials, Use of Funds, Investment Strategy 10. Risk Assessment 11. Exit Strategy
  • 10. 1. Executive Summary • Your “Do or Die” opportunity to grab an investor’s attention. • Tell your story in a compelling way. • Hit the major highlights. • Follow the same format as the full Plan. • Make the Executive Summary easy to skim. • Strive for a two page summary. • Remember active angel investors and VCs receive 3 to 5 business plans a week.
  • 11. 1. Executive Summary (cont.) Limit to a 2 to 3 page detachable document. Include these key points: Problem and solution Funds sought and use of funds Company overview and background Products and technology Market opportunity Competition Marketing strategy and execution Management team Financial projections and exit strategy
  • 12. 2. Elevator Pitch • A compelling description of your company that can be delivered in the time it takes an elevator to reach the next floor. • An effective elevator pitch lasts about a minute. • It’s no more than three lines on a page. • Practice it until you know it better than your email address.
  • 13. 3. Company Overview and Background • Convey the founding team’s direction and foresight through progress achieved to date. • Convey , confidence, knowledge of market and customers, and credibility when describing future plans. • Lightly touch on product and technology and market development. • Mention strategic partnerships or relationships. • Include these key points: Founding history A short mission statement Significant milestones achieved to date
  • 14. 4. Problem/Solution • Outline the current or emerging problem that your company can solve. • Emphasize your solution. • Show how solving that problem will generate revenue and profits for your business. • Demonstrate that your knowledge is both quantitative and based on real conversations with customers, industry experts, and competitors. • Answer these key questions: How will customers use your product? Why will people pay money for the product/service your company plans to sell? Why will there be high demand in the near future?
  • 15. 5. Market Opportunity • Demonstrate your market knowledge. • Prioritize and focus on the markets you intend to serve. • Speculate on the long-term growth prospects of the market and the company. • Cite third-party research to support your claims. • Avoid top-down assessments. • Highlight demonstrated interest from companies/customers. • Outline size and growth trend of target market.
  • 16. 6. Products and Technology • Focus on results, not research. • Cover important aspects of the product. • Include technical specs in appendices only. • Focus on unique or competitive advantages. • Discuss how you will protect you IP and use IP to create a barrier to competition. • Include helpful diagrams to help the reader. • Emphasize the benefit to the end-user. • Test your effectiveness on your non-technical friends.
  • 17. 7. Competition • Be exhaustive in your research. • List your market competitors. • Include a comparison chart of competitor attributes with your solution. • Identify future and potential competition. • Don’t neglect that nemesis of change—inertia and status quo.
  • 18. 8. Market Strategy and Execution • Illustrate how you will attack the market and produce revenue. • Include key milestones chart for the next 6-24 months. • Identify early adopters, beta customers, or niche markets. • Explain your pricing strategy. • Include a chart of milestones for the next 6 to 24 months. • Outline the following points: Marketing, channels, sales, and promotional strategy Partnering goals Operational strategies key to execution of the overall business mission
  • 19. 9. Management Team • Investors invest in people first and technology second. • Convince investors of team’s worthiness and credibility. • Include a paragraph for key executives covering depth and all relevant experiences. • Acknowledge the team’s limitations. • Summarize key hires for the immediate, intermediate, and long-term. • Recognize the limits of the founding staff in relation to the future company. • Cite when and where the company will most benefit from changes in management.
  • 20. 10. Financials • Limit to a two or three page summary of 3 to 5 years. • Link assumptions and financial projections to the key milestones identified in the marketing section. • Reserve the detailed financial worksheets for the appendices. • Investment opportunity details Form of investment Pre/post money valuation and ownership percentage Funds sought Use of funds Subsequent funding rounds required. • Key Points to Include: Sales volumes (units and revenue) Revenue growth, gross margin and operating expense Income statement, cash flows, and balance sheet Exit Strategies Return on Investment
  • 21. 11. Risk Assessment • Experienced investors know there is risk in every business plan. • They want to know that you know it too. • Perform a detailed risk assessment encompassing business model, technology, market, execution, and finance risk. • Decide how to reduce as much risk as possible and then how much to say about the rest.
  • 22. 12. Exit Strategy • Realistically relay the specifics of your exit options • Acquisition • Identify at least two buyers and why they would be interested • Describe recent comparable transactions • Express any current relationships with potential acquirers • IPO • Describe recent comparable offerings • Be prepared to explain why your company could be an IPO candidate