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  • 1. © Copyright Dr. Barbara M. Business Planning Session Two STC 396 Technology Enterprise Design and Implementation
  • 2. © Copyright Dr. Barbara M. Learning Outcomes Describe new-venture business planning as a necessary process Defend the importance of venture planning prior to business planning Defend the importance of addressing uncertainty in the new-ventures business plan
  • 3. © Copyright Dr. Barbara M. First, let’s address some issues or questions surrounding new-venture business planning . . .
  • 4. © Copyright Dr. Barbara M. Must you write a business plan? Enables the determination of whether the proposed business is possible and worth the effort Provides the strategy and mechanism to test assumptions and change course as required Source: Block and MacMillan, Corporate Venturing
  • 5. © Copyright Dr. Barbara M. “Realize that business plans are everything and nothing.” John Nesheim, High-Tech Startup, 2000 What does Nesheim mean?
  • 6. © Copyright Dr. Barbara M. What are the Differences? Independent versus corporate venture plan: (Corporate) Strategic relationship with parent firm Others?
  • 7. © Copyright Dr. Barbara M. What are the Differences? Plans for new venture versus ongoing operation: New venture plans include actions to test assumptions – New ventures -- relatively unknown and unstable environment – New ventures – shifting assumptions and reactions Others?
  • 8. © Copyright Dr. Barbara M. New-Venture Planning Subprocess 1. Identify important events and actions that must occur 2. Determine sequential dependencies of events and actions 3. Develop a critical path milestone chart 4. Identify significant “go/no go” assumptions 5. Develop additional test actions for critical assumptions as needed 6. As events occur, change assumptions and planned future actions as necessary
  • 9. © Copyright Dr. Barbara M. Candidate Milestones 1. Completion of concept and product testing 2. Completion of feasibility study 3. Product development 4. Pilot testing 5. Market testing 6. Production startup 7. Bellwether sale 8. First competitive response 9. Reaching breakeven volume Source: Block and MacMillan, Corporate Venturing
  • 10. © Copyright Dr. Barbara M. A New-Venture Business Planning Process 1. Determine information/knowledge requirements 2. Gather information/create knowledge 3. Enhance the business model 4. Create the launch plan 1. Define actions, milestones required for launch and early growth 2. Carefully document assumptions 3. Develop actions to test assumptions 5. Execute the plan 1. Perform actions 2. Test assumptions 1. Adapt 1. Change course if necessary 2. Cycle back to any step 1.0 2.0 3.0 4.0 5.0 6.0
  • 11. © Copyright Dr. Barbara M. What is the relationship between a business plan and a business model? Value Proposition or Value Cluster Marketplace Offering Resource System Financial Model Rayport, Jeffrey F. and Bernard J. Jaworski. “Business Models” in E-Commerce. NY: McGraw-Hill, 2001.
  • 12. © Copyright Dr. Barbara M. Relation to key factors? Pain – Big value provided customer Solution – Clearly addresses pain – Innovation Market – Size, growth, ancillary opportunities Customer – Is reachable, and will buy Team – Execution skills Sustainable competitive advantage Ability to make money Window of opportunity
  • 13. © Copyright Dr. Barbara M. FACTOR t CONTENT (MIDDLE) The Pain (problem addressed or "wow" product) Key factor: value creation. The presentationmakes clear that the product or service creates value inthe marketplace (meets a real need, solves a burning problem) ata price customers willpay. The payback is obvious and itoccurs withinone year. Do not overstate the impact of the product or service. Solution The presentationclearlydescribes what the envisioned product/service is and does. Key factor: uniqueness, innovativeness. The presentationmakes clear that the envisioned productor service has innovativeness and/or uniqueness (based onsome proprietaryaspect). Producthas lowbarriers to adoption. Customers The presentationmakes clear who the initialcustomer is, and includes characteristics ofthe customer and examples. Customers are reachable. Market Key factor: a market. The presentationmakes clear that there is a large and growing marketfor product/service. The presentationincludesa brief descriptionof the market and industry. -- The target market is clear. -- The source of/rationale for marketsize is credible. -- The marketgrowthrate is realistic. -- The projected market potentialis adequate to support the business and provide the returnto stakeholders. -- The marketis emerging or fragmented, and imperfect. -- There are barriers to entry. Key factor: timing. The presentationmakes clear thata windowof opportunityexists. Competition The presentationclearlydefines/showsthat the teamknows who the competitionis,and provides the keycharacteristics and differentiators of the competitors, relative to whatis important to the customer. Do not dismiss the competition. Do not listonly the obvious competitors. Do notmiss a key competitor. Competitive advantage The presentationclearlydefines the competitive advantage of the productor service offering, including possible barriers to entrybythe competition. The presentationclearlyshows that the venture cansustaina competitive advantage. Key factor: sustainable competitive advantage. The presentationclearlystates whatis or willbe the intellectualproperty(IP) protectionbe for the product/service or the enabling technology. R & D and Product Development The presentationdescribes clearly: -- Current product or service developmentstatus -- Whatmust be done to get it market-ready -- The risk of anyenabling technologydevelopment remaining -- Abilityto continue to produce innovative products -- Competitive advantage inthese processes. Production or Operations The presentationclearlystates howthe team willbuild the productor provide the service. The presentationdescribes clearly: -- The team's abilityto produce the products and services inadequate quantity,at acceptable qualityand atcompetitive or targeted cost -- Anyoutsourcing ofnon-core-competencies or non-core technologies for productionor logistics. Distribution and Sales Channels The presentationdescribes clearly: -- The team's abilityto get the productto the customer witha reasonable distributionplan -- Extentto whichchannels canbe controlled. Financials and Funding Requirements The presentationdescribes clearyhow the teamwillmake moneyinthe business. Key factor: financialviability. -- The first-year sales projectionsare realistic -- The cashflow fits withfunding needs -- The profit and loss projections make sense -- The balance sheetprojections make sense -- The funding requirements and projected use of funds are reasonable -- A sufficientreturnto stakeholders is shown. The presentationclearlyarticulatesthe keyassumptions onwhichthe financialsare based. Relation to Mid-Level Venture Screening Criteria?
  • 14. © Copyright Dr. Barbara M. Let’s look at the following traditional new-venture business plan template to see how well it fits: Your context Uncertainty
  • 15. © Copyright Dr. Barbara M. Business Plan Outline Cover sheet Table of contents Executive summary Industry, company, products and services Market research and analysis Economics of the business Marketing plan Design and implementation plans Manufacturing and operations plan Management team Overall schedule Critical risks, problems, and assumptions Financial plan Proposed company offering Appendices Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 16. © Copyright Dr. Barbara M. The Cover Sheet Contents Contact information Tracking number Suggestions Keep the tracking number low Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 17. © Copyright Dr. Barbara M. Second Page “The business plan has been prepared by management to be used in the operation of the company. The data contained herein are confidential and proprietary and only for use by management. By acceptance hereof, the recipient of this Business Plan agrees that neither he, she, it, nor any of its officers, directors, employees, agents, associates or affiliates, will divulge to any other party any information contained herein or any notes, summaries or analysis derived there from, reproduce or redistribute this plan in whole or in part, and agree further to return this Business Plan promptly to the Company upon request.”
  • 18. © Copyright Dr. Barbara M. Table of Contents Contents Page numbers and corresponding headings Suggestions Include the titles of exhibits, tables, charts etc. if you list them. Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 19. © Copyright Dr. Barbara M. Executive Summary Contents Business concept and the business The opportunity and strategy The target market and projections Competitive advantages The economics, profitability, and harvest potential The team [The offering] Suggestions Three-page max Expanded version of elevator speech 3/4 page focus on management Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 20. © Copyright Dr. Barbara M. Clarification Executive summary of a business plan -- less than or equal to 3 pages Another use of the term “Executive Summary” – a “dehydrated” business plan -- 5 to 10 pages
  • 21. © Copyright Dr. Barbara M. Industry, Company, Products and Services Contents The industry The company and the concept The products or services Entry and growth strategy Suggestions Show trends Use charts and graphs Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 22. © Copyright Dr. Barbara M. Market Research and Analysis Contents Customers Market size and trends Competition and competitive edges Estimated market share and sales Ongoing market evaluation Suggestions Show trends Use charts, tables and graphs Use geographical segmentation ++ Show size in monetary figures and units Explain surveys Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 23. © Copyright Dr. Barbara M. Market Research and Analysis Contents Competition and competitive edges Suggestions Provide lots of info on each Use appendix for extra detail (e.g., brochures) On matrix, note features carefully Clarify your uniqueness relative to EACH competitor Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 24. © Copyright Dr. Barbara M. Market Research and Analysis Contents Estimated market share and sales Suggestions Show trends Use charts, tables and graphs Use geographical segmentation ++ Show size in monetary figures and units Explain surveys Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 25. © Copyright Dr. Barbara M. Economics of the Business Contents Gross and operating margins Profit potential and durability Fixed, variable and semi-variable costs Months to breakeven Months to reach positive cash flow Suggestions Link to the market analysis via your revenue (sales) projections and selling price Factor in your sales cycle, “close” cycle Show breakeven as a % of market share Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 26. © Copyright Dr. Barbara M. Marketing Plan Contents Overall marketing strategy Pricing Sales tactics Service and warranty policies Advertising and promotions Distribution Suggestions Describe pricing strategy Describe partners Include promotion budget Provide details Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 27. © Copyright Dr. Barbara M. Design and Implementation Plans Contents Development status and tasks Difficulties and risks Product improvement and new products Costs Proprietary issues Suggestions Specify actions for market readiness Discuss risks specific to development Explain releases in terms of the market Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 28. © Copyright Dr. Barbara M. Manufacturing and Operations Plan Contents Operating cycle Geographical location Facilities and improvements Strategy and plans Regulatory and legal issues Suggestions Provide sources for key costs If you outsource, describe how you will manage the quality Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 29. © Copyright Dr. Barbara M. Management Team Contents Organization Key management personnel Management compensation and ownership Other investors Employment and other agreements, and stock option and bonus plans Board of directors Other shareholders, rights and restrictions Supporting advisors and services Suggestions Include relevant skills, experience and accomplishments Put full resumes in an appendix Identify gaps Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 30. © Copyright Dr. Barbara M. Overall Schedule Contents Schedule Suggestions Use a timeline to show major business and technology events Include a milestone chart Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 31. © Copyright Dr. Barbara M. Critical Risks, Problems and Assumptions Contents Risks Known problems Assumptions Suggestions Summarize the risks in a table: risk or potential problems, mitigation, risk level Discuss each risk thoroughly Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 32. © Copyright Dr. Barbara M. The Financial Plan Contents Actual income statements and balance sheets Pro Forma income statements Pro Forma balance sheets Pro Forma cash flow analysis Breakeven chart and calculation Cost control Highlights Suggestions Statements are put in an appendix, with summary at the beginning Discuss the statements in this section of the plan Include a summary chart in this section : units sold, revenue, expenses, cash flow for each of three years Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 33. © Copyright Dr. Barbara M. Proposed Company Offering Contents Desired financing Offering Capitalization Use of funds Investor’s return Suggestions Include a traditional sources and uses of funds statement Do not specify amount of equity to be “given” for the investment Cover Sheet Table of Contents Executive Summary Industry, Company, Products and Services Market Research and Analysis Economics of the Business Marketing Plan Design and Implementation Plans Manufacturing and Operations Plan Management Team Overall Schedule Critical Risks, Problems and Assumptions Financial Plan Proposed Company Offering Appendices
  • 34. © Copyright Dr. Barbara M. Miscellaneous Terms of license Descriptions of lab trials or approvals Explanations of charts, tables, diagrams etc. A formal ending
  • 35. © Copyright Dr. Barbara M. According to Nesheim, what is the most important, but most poorly communicated, factor in most plans? Do you agree?
  • 36. © Copyright Dr. Barbara M. “Essentially, every new venture is an industrial experiment (with the assumptions being the hypotheses), and the experiment must be designed to ensure that the hypotheses are tested.” Block and MacMillan, Corporate Venturing, 1995 What do Block and MacMillan mean?
  • 37. © Copyright Dr. Barbara M. Will your plan include these elements? Go/no-go assumptions and the basis for them Action plans and objectives, with defined milestones to test go/no go assumptions in each area Sensitivity analysis (how certain contingencies will impact the venture) Definition of failure
  • 38. © Copyright Dr. Barbara M. Learning Outcomes Describe new-venture business planning as a process Defend the importance of venture planning prior to business planning Defend the importance of addressing uncertainty in the new-ventures business plan

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