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Art of Business Planning

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Presentation by Darlene Newman, founder of Ivy Capital Technologies, on how to write a business plan, presented at the Business4U event in New York City on February 5, 2011.

Presentation by Darlene Newman, founder of Ivy Capital Technologies, on how to write a business plan, presented at the Business4U event in New York City on February 5, 2011.

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Art of Business Planning Art of Business Planning Presentation Transcript

  • Art of Business Planning
    Darlene Newman, Founder, Ivy Capital Technologies
    Email: darlene@ivycapitaltechnologies.com
    Copyright 2011, Ivy Capital Technologies
  • Who am I?
    Someone who loves the art of starting up. . .
    Classically Trained
    • Bachelors of Science from the top seeded McGuire Entrepreneurship Program at the University of Arizona
    • MBA from the University of Oxford in venture capital and social entrepreneurship
    Practical Experience
    • Helped launch over 7 startups
    • Competed in over 10 business plan competitions
    • Worked with three venture capital funds
    • Taught business plan development at Fordham University and the Grace Institute
    • Now I spend my days helping entrepreneurs launch new businesses
  • Why do a business plan?
    If you want to drive from NYC to Las Vegas, would you use a navigational tool?
    Of course, and starting a business is no different! A business plan should;
    • Act as a blue print for your business, a roadmap to help you get to where you want to go
    • Serve as a feasibility study for the chances of success and growth
    • Define your purpose, your competition and your management team
    • Act as a communication tool for investors, suppliers, employees and others interested in your business
    • Be a strong reality check!
  • Who should write it?
    The founder of the business should ALWAYS write the business plan. . .
    Why? You are the one that knows the most about the business idea and needs to know the most about the direction it’s going. . .
    What can you do to help ease the pain of writing it? There are many resources that are available to help guide you;
    • Business Planning Software:www.Bplans.com
    • Templates and guidelines: www.Wickedstart.comor www.Bplans.com
    • Consultants: Various companies and individuals to help, although you should do most of the work
  • The role of a business plan
    A good business plan is a compelling storyboard about your business
    In short, it explains. . .
    • Who you are
    • Why you are in business
    • What you do and how you do it
    • Where you operate
    • How you will generate money
    • Who your customers are
    • Why your business is needed!
  • Where do I start?
    “The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one”
    – Mark Twain
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • Executive summary
    No. of Pages 2
    The executive summary is the most important part of your business plan
    Why? Most people will make a decision about your company simply by reading the executive summary
    • It should provide a snapshot of your business plan, including who you are, what you do and why you’ll be successful
    • It should be less than two pages, single space
    • It should be the last thing you write, pulling it all together in a clearly and concisely
    Executive summary template available at
    https://docs0.google.com/document/d/1zX_eg39hyjkk-FSEFNDj_-ii6ijuIjxtVkpBtfLq1g4/edit?hl=en&authkey=CPWjvokE#
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • Vision and mission statement
    No. of Pages ½
    In short, the mission and vision provide your company with direction
    • Vision: Where do you see your business in the future? Think in terms of something you’ll always strive for, but never quite reach. . .
    • Mission: Where do you see your over the next few years? Think in terms of the goals that will get you to achieve your vision. . .
  • Vision statement in use
    When preparing you vision statement, think “BIG”
    • YES: We provide “state-of-the-art” duplication technology for schools
    • NO: We provide duplication technology for schools
    • YES: We “bring high-quality music” to the home
    • NO: We install record players and speakers
    “Organize the world’s information and make it universally accessible and useful”
  • The mission statement
    Think in terms of “goals” that are measureable
    Mission statements should. . .
    • Summarize the core competencies of your business
    • Give employees a sense of purpose
    • Help to concentrate your efforts on the desired focal points
    Test of a good mission statement. . .
    • It should be simple and precise
    • No more than one to three sentences
    • Act as an internal guideline, not public
    • Cover a two-year timeframe
    • Stretching but realistic
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Industry and Product Description section of the business plan should include;
    • Industry analysis
    • Company description
    • Product and / or service description
    • Key accomplishments
    Section details
    No. of Pages 2
  • Importance of knowing your industry
    “A problem well-defined is a problem half-solved” - John Dewey
    Knowing your industry helps determine
    • The viability of the business
    • Your potential for growth
    • Who your competitors are
    • Who your target market is
    Gives the “Big Picture” of what NEED your company fills and WHY you’ll be successful
  • What about the industry makes it attractive for new entrants
    • Chief characteristics: Industry profile, size, growth, barriers to entry, etc.
    • Major players: Competitors you’re up against, both direct and indirect, where do you fit among those competitors
    Industry analysis basics
    • Trends:Where is the industry going
    • Problems:What are the challenges facing the industry
    • Opportunities:Where can new players enter the market
  • Company & product basics
    Describe, to the most basic user, what you do and what you sell
    At a minimum;
    • Describe your company in easy to understand language
    • Cover the basics of your product or service;
    • “What” you sell
    • “Where” will you sell it
    • “How” you will sell it
    • “Why” it exists as designed
    • What’s your pricing
    • Provide diagram, graphics or examples
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Market Analysis and Competitor section of the business plan should include;
    • Market Opportunity
    • Target Market / Customer Profile
    • Competition
    • Competitive Advantage
    Section details
    No. of Pages 3
  • “Keep Your Friends Close and Your Enemies Closer”
    At a minimum this section should cover;
    Your friends. . .
    • Who are you selling to
    • Why are you selling to them
    Your enemies. . .
    • Who are you up against
    • What makes you better
    Why do I care. . .
  • You can’t be everything to everyone so. . .
    Understand your target market and what motivates them;
    • Who: Who’s going to buy what you have (i.e. age, demographics, etc. . . be narrow and specific)
    • How: How do they buy it now, or will they most likely go to buy it in the future (i.e. retail store, Internet, etc.)
    • Where:Where do they go to find information about it (i.e. magazines, television, social network sites, etc.)
    • What: Is the motivation for buying (i.e. necessity or a luxury)
    • When: When do they go to buy it (i.e. when needed, when desired, etc.)
    • How often: What’s the frequency in which they purchase it (i.e. daily, monthly, seasonally)
    The target market, who are they?
  • It’s amazing what you can find with just a little bit of leg work
    • Libraries
    • Trade Associations
    • Business Periodicals
    • State and Federal Resources
    • Local Resources (Chamber of Commerce, SBDCs, BICs)
    • Professional Research Companies
    • Studying the Competition
    • Surveys (focus groups and interviews)
    • Observations
    The market, where do I look?
  • The competition, need to know. . .
    Knowing who your competing against and how they do what they do is important
    What should you know about your competition;
    • Who they are, both direct and indirect?
    • What do they offer, products and services?
    • Years they’ve been in business?
    • What are their price points?
    • What are their strengths?
    • What are their weaknesses?
    • Recent trends?
    Consider Creating a Matrix
  • Competitive advantage, what’s yours?
    You need to be better, faster or cheaper in a way that is difficult to replicate
    No idea is truly unique, so what makes yours better?
    • Uncompromising obsession with “One Thing” that’s hard to replicate (e.g. Apple & design)
    • Personal authority on the subject (e.g. Dell)
    • The “Dream Team” that has expertise hard to bring together (e.g. Google)
    • Existing customers that give you unparallel information (e.g. Facebook)
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Marketing and Sales Plan section of the business plan should include;
    • Unique Value Proposition
    • Pricing Strategy
    • Sales and Distribution Plan
    • Marketing Plan
    • Budget
    Section details
    No. of Pages 4
  • First thing you need to do is determine your secret ingredient, your “special sauce”
    Develop your unique value proposition in two phases;
    Your unique value proposition
    Better
    Faster
    Cheaper
    Internally : You and your senior management team need to decide what makes you unique from your competitors
    Externally: Craft your value proposition into an outbound message to your market
  • Pricing is not only a key to your sales success but also for the health of your startup
    Your pricing strategy depends on the following key factors;
    • First, determine the PER UNIT COST of your product or service,
    • then, compare your products and services to COMPARABLE OFFERINGS from other companies, and
    • finally, understand what VALUE your product or service offers the CUSTOMER
    How to price your product / service
    Possible pricing structures
    • Bundled packaging
    • Flat price
    • Subscription
    • Intro Packages
    • Free offerings or samples
  • What’s your distribution strategy?
    How you are going to move products from creation to consumption, cost-effectively
    Distribution decisions have significant implications for
    • Product margins and profits
    • Marketing budgets
    • Final retail pricing
    • Sales management practices
    Possible distribution channels
    • Wholesale
    • Retail (Physical / Online)
    • Distributors
    • Sales Force
    Distribution partners are a great way for a small business to enter a market
  • Marketing plan basics
    Marketing is EVERYTHING you do to promote your business!
    Don’t brush through your marketing plan, include at a minimum;
    • What specific marketing mediums will you use to reach your customer? What are the costs of each?
    • How often will each be used? What will they cost? Why did you choose these marketing avenues over others?
    • What marketing materials will you need? What will it cost you? (brochures, website, etc)
    • Who will design your marketing materials? What will they cost?
    • What is the cost of marketing materials per prospect or client
    • Detail out your budget – is it realistic?
    • What is your customer acquisition cost (cost to acquire each customer)
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Operating Plan section of the business plan should include;
    • Design and development
    • Production / Operations process
    • Start-up schedule
    • Regulatory and intellectual property (IP)
    • Capital requirements and budget
    Section details
    No. of Pages 2
  • The operational plan should layout exactly how you will operate;
    • Design & Development: Outline how your product is designed and how you foresee getting your design into a working prototype
    • Production & Operation Processes: Outline the process by which you will produce, distribute and sell your product or service, include;
    • Facilities and equipment you’ll need
    • Quality assurance processes
    • Labor requirements
    • Startup Schedule: How long will it take to get your product market ready and what are your key milestones you want to hit?
    • Intellectual Property: Will you file for patent, trademarks / service mark?
    • Budget: What will it take to startup and maintain operations?
    The operational plan
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Management Team section of the business plan should include;
    • Legal structure
    • Key executive team members
    • Executive compensation and ownership
    • Board of directors
    • Board of advisors and / or consultants
    • Organization chart (if appropriate)
    Section Details
    No. of Pages 2
  • Importance of this section
    It’s not only about who’s on your team, but how their skills will contribute to the bottom line
    Include key management and their profile;
    • Role they play in the company
    • Strengths that align with the company’s product or service
    • Prior startup successes
    If management team needs more strength, consider other ways in which to fill the gaps;
    • Board of directors: Equity and voting rights
    • Board of advisors: Possible equity but no voting rights
    • Consultants: Paid, no equity or voting rights
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • Section Details
    No. of Pages 1
    The Risk & Contingency section of the business plan should include;
    • Risks: The key risks facing the company
    • Contingencies: The plans to avoid them
  • Being prepared is important. . .
    Preparing for the “What if” scenario could mean the difference between success & failure
    What risks should you focus on;
    • Those with high likelihood of occurrence
    • From that, those with the more sever outcomes
    How to handle the contingencies;
    • Speak to people with experience, management team, advisors, mentors
    Remember: Anticipating every possible risk factor is neither possible nor practical, so don’t obsess, just be prepared
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • Section Details
    No. of Pages 4
    The Financial Plan section of the business plan should include;
    • Business model
    • Statement of assumptions
    • Key financial data
    • Break-even analysis
    • Desired financing and structure
    • Use of funds
    • Valuations and return
    • Exit strategy
  • How do you plan to make money?
    Starting the company is relatively simple, actually making money is completely different
    What are all the avenues you plan to generate revenue?
    • Are you B2B or B2C?
    • Are you selling a product or service?
    • Are you going to be home-based / online or will you have a store front / physical location?
    • Are you going to license or offer subscription based pricing or pay as you go?
    • Are you going to use multi-level marketing / affiliates?
    How do you plan on keeping your business afloat?
  • Calculating your assumptions
    To come up with your financial projections, start by listing out the basics. . .
    Determine your estimated costs for year 1 to 3;
    • Startup expenses: what do you need before even opening the doors
    • Cost of goods sold (COGS): what does each unit sold cost you?
    • Operating costs: what do you need each month to maintain operations?
    ‘BURN RATE’
    KNOW your burn rate – what do you spend each month, know it 6, 12 even 18 months out
  • Calculating your assumptions, con’t
    To come up with your financial projections, start by listing out the basics. . .
    Determine your estimated revenues for year 1 to 3;
    • Price per unit: how much will each unit sold bring in terms of revenue
    • No. of units sold: how many units of your product will you sell each month
    Note: may want to base your sales off of your marketing spend
    BE REALISTIC!
    Few companies make money right out of the starting gate
  • Key financial data basics
    Don’t let preparing your pro-forma scare you, but don’t move forward without it
    Key statements you’ll need for 1 to 3 years (year 1 monthly)
    • Income statement
    • Cash flow statement
    • Balance sheet (less important)
  • Preparing your statements
    Learn the basics, but let someone help you if you aren’t familiar
    Basic income statement and cash flow statements;
  • Break even. . .
    Companies need money to make money and they need to make more than they spend
    Make sure you know your break-even point;
    • Total Sales = Total expenses
    • Break-Even = Total fixed costs / margin
    • Margin = Revenue per unit - Cost per unit
    Knowing how much you have to sell to cover your costs is key
  • Desired structure: debt or equity?
    There are various ways in which you can fund your startup
    Funding sources
    • Debt: Loans that must be repaid over time, usually with interest.
    • Friends / family
    • Banks / SBA (Small Business Association)
    • Equity: Money obtained from investors in exchange for an ownership
    • Friends / family
    • Angel investors
    • Venture capitalist
    • Convertible Debt: Financing is simply a loan that can be turned into equity
  • Exit strategy
    An exit strategy is exactly that; the method by which you “cash out” of the investment
    There are several methods by which most entrepreneurs exit;
    • Let it run dry
    • Sell your shares
    • Liquidate; although not recommended as part of your business plan if you’re looking for investors
    • IPO (Initial Public Offering): sell shares on the open market
    • Trade Sale: selling to a larger, primarily strategic partner
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Summary and Conclusion section of the business plan should include;
    • Exactly that, a few paragraphs that summarize and conclude the key points – but not to the level of the executive summary
    Section details
    No. of Pages ½
  • Structure of a business plan
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
    Break it down in to key, manageable sections;
    • Executive Summary
    • Table of Contents
    • Vision and Mission Statement
    • Industry and Product Description
    • Market Analysis and Competitive Advantage
    • Marketing and Sales Plan
    • Operating Plan
    • Management Team
    • Risk and Contingency Plan
    • Financial Plan
    • Summary and Conclusion
    • Appendix
  • The Appendix of the business plan should include;
    Section details
    No. of Pages 15
  • Summary
    Your business plan should be thorough yet simple and concise;
    • Aim for 25 pages of content, no more than 15 pages of appendices
    • 1.5 line spacing, except the executive summary
    • Use clear font and fonts size that can be read, Arial, 11 pt or larger
    • Set generous margins
    • Use bullets – makes it easier for people to pinpoint what they need to know
    • Use simple terms, no big words
    • Use graphics whenever possible
    Executive summary template available at
    https://docs0.google.com/document/d/1zX_eg39hyjkk-FSEFNDj_-ii6ijuIjxtVkpBtfLq1g4/edit?hl=en&authkey=CPWjvokE#
    Investor deck template available at
    https://docs.google.com/present/edit?id=0AaXsMsxhFJBuZGM3YzRnazNfMTdncHJmbmhjeg&hl=en&authkey=CNb3sboK
  • Questions?