Ia Nbv 10

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Ia Nbv 10

  1. 1. Innovation and New Business Ventures X Prof. Dr. Arthur Sybrandy Cairo, Egypt January 2007
  2. 2. The Business Plan <ul><li>The business plan pulls together the information developed up to this point and adds more. It’s a written summary of the entrepreneurial </li></ul><ul><ul><li>Business venture </li></ul></ul><ul><ul><li>Operational and Financial details </li></ul></ul><ul><ul><li>Marketing opportunities </li></ul></ul><ul><ul><li>Strategy </li></ul></ul><ul><ul><li>Management team’s capabilities </li></ul></ul><ul><li>The business plan helps to </li></ul><ul><ul><li>Have the entrepreneur take a realistic look at the proposed business </li></ul></ul><ul><ul><li>Guide the venture while in operation </li></ul></ul><ul><ul><li>Convince investors to provide capital – equity and loans: </li></ul></ul><ul><ul><ul><li>Reality test </li></ul></ul></ul><ul><ul><ul><li>Competitive test </li></ul></ul></ul><ul><ul><ul><li>Value test </li></ul></ul></ul>
  3. 3. Business Plan Advantages <ul><li>Reality check </li></ul><ul><ul><li>Details not part of the feasibility analysis may show additional problems. There’s still time to back out! </li></ul></ul><ul><li>May reveal new opportunities on the operational side of the business not revealed by feasibility analysis </li></ul><ul><li>“Living Guide” to the business </li></ul><ul><ul><li>All aspects are included </li></ul></ul><ul><ul><li>Needs regular (quarterly/semiannually) updating </li></ul></ul><ul><li>Statement of intent to others </li></ul><ul><ul><li>Investors </li></ul></ul><ul><ul><li>Bankers </li></ul></ul><ul><ul><li>Potential management </li></ul></ul><ul><ul><li>Strategic partners </li></ul></ul><ul><ul><li>Suppliers </li></ul></ul><ul><ul><li>Lessors </li></ul></ul>
  4. 4. Investors <ul><li>Look more at quality of the founding team and factors that predict growth  They want to increase value of their investment </li></ul><ul><li>They want to know </li></ul><ul><ul><li>What deal structure you are offering (equity interest) </li></ul></ul><ul><ul><li>How they can liquidate their investment in the future (sell shares) </li></ul></ul><ul><ul><li>Whether your team has a proven track record and can make the venture successful </li></ul></ul><ul><li>Common mistakes include </li></ul><ul><ul><li>Projecting growth that exceeds the capability of the founding team </li></ul></ul><ul><ul><li>Trying to be a jack-of-all-trades </li></ul></ul><ul><ul><li>Projecting business performance beyond industry averages </li></ul></ul><ul><ul><li>Underestimating the need for capital </li></ul></ul><ul><ul><li>Confusing strategy and tactics </li></ul></ul><ul><ul><li>Focusing too much on price </li></ul></ul><ul><ul><li>Being proud of not investing cash in the business </li></ul></ul>
  5. 5. Lenders & Bankers <ul><li>More concerned with how you are going to repay the loans they made to you </li></ul><ul><li>They tend to look at gross margins, cash flows, and capital base </li></ul><ul><ul><li>Revenues – COGS (Cost of Goods Sold) </li></ul></ul><ul><ul><li>Slim margins (5-10%) won’t leave much room for error </li></ul></ul><ul><li>Common errors include </li></ul><ul><ul><li>Not supporting the amount of capital required </li></ul></ul><ul><ul><li>Using the loan to pay off old debt </li></ul></ul><ul><ul><li>Not having any assets to use as collateral </li></ul></ul><ul><ul><li>Not showing an ability to repay the loan </li></ul></ul><ul><ul><li>Not demonstrating the bank how it is protected in case of failure </li></ul></ul><ul><ul><li>Not demonstrating an adequate stake in the business </li></ul></ul>
  6. 6. Five Cs of Credit <ul><li>Capital </li></ul><ul><ul><li>Banks will lend you money when you don’t need it </li></ul></ul><ul><ul><li>Banks will look for a strong equity base </li></ul></ul><ul><li>Capacity </li></ul><ul><ul><li>Cash Flow (remember, this is not profitability!) </li></ul></ul><ul><ul><li>Lenders require the business to be liquid enough to make payments </li></ul></ul><ul><li>Collateral </li></ul><ul><ul><li>Assets to back loans </li></ul></ul><ul><ul><li>Banks make very few unsecured loans </li></ul></ul><ul><li>Character </li></ul><ul><ul><li>Intangible </li></ul></ul><ul><ul><li>Present yourself and your credentials adequately </li></ul></ul><ul><li>Conditions </li></ul><ul><ul><li>How big is the opportunity, how risky, etc. </li></ul></ul>
  7. 7. Business Plan Contents <ul><li>Proof of Concept (1 page summary) </li></ul><ul><li>Expanded Executive Summary (6 pages) </li></ul><ul><li>Business Concept </li></ul><ul><li>Management Team </li></ul><ul><li>Market Analysis </li></ul><ul><li>Process Analysis </li></ul><ul><li>Organization Plan </li></ul><ul><li>Marketing Plan </li></ul><ul><li>Financial Plan </li></ul><ul><li>Growth Plan </li></ul><ul><li>Appendices </li></ul><ul><li>Contingency Plan </li></ul>
  8. 8. Business Concept <ul><li>Business Concept </li></ul><ul><ul><li>Product/Service </li></ul></ul><ul><ul><li>Customer </li></ul></ul><ul><ul><li>Benefit (value proposition) </li></ul></ul><ul><ul><li>Distribution </li></ul></ul><ul><li>Purpose of the business </li></ul><ul><ul><li>Why you’re in the business </li></ul></ul><ul><li>Core values </li></ul><ul><li>Description and uses, unique features/benefits of the product or service </li></ul><ul><li>Primary customer </li></ul><ul><li>Spin-offs </li></ul><ul><li>Environment impact (if relevant) </li></ul>
  9. 9. Management Team <ul><li>Team itself, with </li></ul><ul><ul><li>Knowledge in </li></ul></ul><ul><ul><ul><li>Marketing </li></ul></ul></ul><ul><ul><ul><li>Finance </li></ul></ul></ul><ul><ul><ul><li>Operations </li></ul></ul></ul><ul><ul><li>Knowledge of industry </li></ul></ul><ul><ul><li>Good credit ratings </li></ul></ul><ul><ul><li>Network of contacts </li></ul></ul><ul><li>Board of Advisors/Board of Directors </li></ul><ul><li>Other parties </li></ul><ul><ul><li>Lawyer </li></ul></ul><ul><ul><li>Accountant </li></ul></ul><ul><ul><li>Banker </li></ul></ul><ul><ul><li>Insurance broker </li></ul></ul>
  10. 10. Market Analysis <ul><li>Industry description </li></ul><ul><li>Target market </li></ul><ul><li>Competitors </li></ul><ul><li>Your product/service differentiation & competitive advantage </li></ul><ul><li>Pricing </li></ul>
  11. 11. Process Analysis <ul><li>Technical description of products/services </li></ul><ul><ul><li>Engineering specs where appropriate </li></ul></ul><ul><li>Status of development and related costs </li></ul><ul><ul><li>Prototype description </li></ul></ul><ul><li>Distribution channels & Physical distribution plan </li></ul>
  12. 12. Organization Plan <ul><li>Philosophy of management and company culture </li></ul><ul><li>Legal structure of the company </li></ul><ul><li>Organizational chart </li></ul><ul><ul><li>Especially key management personnel </li></ul></ul><ul><li>Compensation and Policies </li></ul>
  13. 13. Marketing Plan <ul><li>Purpose of the plan differs from feasibility analysis </li></ul><ul><ul><li>Market analysis already looked at customer in general; how they buy, when, where, and how much as background for structuring strategy </li></ul></ul><ul><li>Plan to reach first customer </li></ul><ul><ul><li>Niche selected </li></ul></ul><ul><ul><li>Customer perceptions of product and company </li></ul></ul><ul><ul><li>Tools/Tactics to reach customer </li></ul></ul><ul><ul><li>Budget </li></ul></ul><ul><li>Strategy: Who, What, How </li></ul><ul><li>Tactics: Specific implementation </li></ul>
  14. 14. Financial Plan <ul><li>Summary of key points and capital requirements </li></ul><ul><ul><li>Refers to complete set of statements in appendix </li></ul></ul><ul><li>Needs assessment breakout </li></ul><ul><ul><li>Hard costs </li></ul></ul><ul><ul><li>Working capital </li></ul></ul><ul><ul><li>Start-up </li></ul></ul><ul><li>Break-even analysis and payback period </li></ul><ul><li>Plan for funding </li></ul><ul><li>Should support all the other claims made in the business plan, showing that your business can survive and grow in the long run </li></ul>
  15. 15. Growth Plan <ul><li>Looking ahead past the start-up phase </li></ul><ul><ul><li>Start-up </li></ul></ul><ul><ul><li>Initial growth </li></ul></ul><ul><ul><li>High growth </li></ul></ul><ul><ul><li>Stable growth </li></ul></ul><ul><li>Possible new markets </li></ul><ul><li>Possible new products </li></ul><ul><li>Global markets </li></ul>
  16. 16. Appendices <ul><li>Financial Statements </li></ul><ul><ul><li>Assumptions underlying the statements </li></ul></ul><ul><ul><li>Proforma financial statements </li></ul></ul><ul><li>Process Plan Supporting Documents </li></ul><ul><ul><li>Manufacturing or Operating requirements and associated costs </li></ul></ul><ul><li>Marketing Plan Supporting Documents </li></ul><ul><ul><li>Marketing tools </li></ul></ul><ul><ul><li>Media plan </li></ul></ul><ul><ul><li>Marketing budget </li></ul></ul><ul><li>Organizational Plan Supporting documents </li></ul><ul><ul><li>Compensation programs and incentives </li></ul></ul><ul><li>Business plans are more concise these days, putting more information in the appendices </li></ul>
  17. 17. Contingency Plan <ul><li>Sometimes included to show you are aware that things may not go as planned </li></ul><ul><ul><li>Reacting to market/demand downturns </li></ul></ul><ul><ul><li>Lawsuits, including product liability </li></ul></ul><ul><ul><li>Losing a key employee </li></ul></ul><ul><ul><li>Etc. </li></ul></ul>
  18. 18. Executive Summary & Proof of Concept <ul><li>Written last, when the plan is done  in about 6 pages </li></ul><ul><li>Read first by investors, lenders, etc! Making it the most important part of the whole plan </li></ul><ul><ul><li>The summary (and proof of concept) must capture the reader’s attention immediately (less than 30 seconds) </li></ul></ul><ul><li>Make sure to </li></ul><ul><ul><li>Describe concepts </li></ul></ul><ul><ul><li>Define customers </li></ul></ul><ul><ul><li>Establish market sizes </li></ul></ul><ul><ul><li>Show ability to scale out </li></ul></ul><ul><li>You can sometimes use the summary separately, handing it out without the complete plan. </li></ul><ul><li>Proof of concept is a shorter, 1-pager in the front of the plan </li></ul>
  19. 19. Summary Checklist <ul><li>Did you immediately grab the reader’s attention? Did your concept generate excitement? </li></ul><ul><li>Is the business concept absolutely clear? (purpose, customer, value proposition, and distribution strategy) </li></ul><ul><li>Is the reader convinced you have the right team? </li></ul><ul><li>Does the Industry/Market analysis support the concept and show demand? </li></ul><ul><li>Are you clear on how the product can be produced and distributed? </li></ul><ul><li>Does the organization plan support the objectives? (Form follows function) </li></ul><ul><li>Does the marketing plan clearly show how you are going to reach customers and create long-term relationships? </li></ul><ul><li>The financial plan shows potential of high ROI? </li></ul><ul><li>Is the potential for growth clear to the reader? </li></ul>
  20. 20. Final Tips <ul><li>Get started, anywhere (Internet?) </li></ul><ul><li>Don’t be discouraged if all information is not instantly available </li></ul><ul><li>Answer key questions </li></ul><ul><li>Always include sources </li></ul><ul><li>Use outlining/mindmapping </li></ul><ul><li>Make the plan look good </li></ul><ul><ul><li>Investors read lots of them, yours has to stand out </li></ul></ul><ul><li>Prepare a presentation </li></ul><ul><ul><li>Match presentation to requirements </li></ul></ul><ul><ul><li>Be ready to answer questions, but don’t bluff </li></ul></ul><ul><li>Think about your one-minute business plan </li></ul>

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