Business plan - best practices

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Business plan - best practices

  1. 1. Business Plan Best Practices12/22/2010 Xavier CORMAN 1
  2. 2. What is the purpose of a business plan ?12/22/2010 Xavier CORMAN 2
  3. 3. "Writing a business plan forces you into disciplined thinking, if you do an intellectually honest job. An idea may sound great, but when you put down all the details and numbers, it may fall apart.“ Eugene Kleiner, Venture Capitalist12/22/2010 Xavier CORMAN 3
  4. 4. Why to write a business plan ? 1. To look at the idea in an objective way. 2. To study the feasibility of the idea 3. To check the business model 4. To understand the financial needs 5. To have an operational tool to start the business 6. To help the management A business plan is much more than a financial plan !12/22/2010 Xavier CORMAN 4
  5. 5. The business plan – content There is no prescribed format, the following sections are usually included. 1. Executive summary 2. Mission 3. Problem 4. Solution 5. Technology 6. Market and industry analysis 7. Marketing and sales 8. Manufacturing and operations plan 9. Team: why you? 10. Financial plan 11. Sensitivity analysis 12. Status and timeline 13. Proposed investment12/22/2010 Xavier CORMAN 5
  6. 6. Presenting to investors  Investors are not familiar with the technology of your product or the industry jargon.  Describing your concept clearly and incisively is your goal.  You must be able to convey the basic mechanics of your business idea to an investor with credibility.  There will be plenty of time at a later point for detailed descriptions and exhaustive financial calculations.12/22/2010 Xavier CORMAN 6
  7. 7. 1. Executive summary  Mimics your pitch  Should be very compelling and inviting to read the rest  “Summary” -> try one page12/22/2010 Xavier CORMAN 7
  8. 8. 2. Mission statement  Define your business at the most basic level  In less than 30 seconds, explain:  Who your company is ?  What you do ?  What you stand for ?  Why you do it ?  Explain what business you are in, purpose, strategic goals and business values. SHORT ! 3-4 sentences12/22/2010 Xavier CORMAN 8
  9. 9. 3&4. From problem to solution  SOLVE A PROBLEM!  Show the problem and for whom this is a problem  Why are incumbents (if they exist) not able to address this problem?  SOLUTION?  What is it?  Show it (sample, picture, demo, …)  Why is it attractive?  Is it durable?  Is it timely ?  Does it do something better? Does it create VALUE?12/22/2010 Xavier CORMAN 9
  10. 10. 5. Technology  How does it work?  Does it work? Has it been successful elsewhere?  Why has nobody else come up with it?  Is it patented / licensed? Who owns the rights?  Full detailed description in appendix12/22/2010 Xavier CORMAN 10
  11. 11. 6a. Market and industry analysis This section of the plan should include:  A general description of your market  The niche you plan on capitalizing on and why  The size of the niche market. Include supporting documentation  A statement and supporting documentation as to why you believe there is a need for your product or offering by this market  What percentage of the market do you project you can capture?  What is the growth potential of the market? Include supporting documentation  Will your share of the market increase or decrease as the market grows?  How will you satisfy the growth of the market?  How will you price your goods or services in the growing competitive market?12/22/2010 Xavier CORMAN 11
  12. 12. 6b. Competition Identify your closest competitors. Where are they located? What are their revenues? How long have they been in business? Define their target market. What percentage of the market do they currently have? How do your operations differ from your competition? What do they do well? Where is there room for improvement? In what ways is your business superior to the competition? How is their business doing? Is it growing? Is it scaling back? How are their operations similar to yours and how do they differ? Are there certain areas of the business where the competition surpasses you? If so, what are those areas and how do you plan on compensating?12/22/2010 Xavier CORMAN 12
  13. 13. 7. Marketing and sales  How will you make money?  Who is your target customer?  Mix (4 Ps):  Product and production - can you provide what the customer wants.  Pricing policy - right price and quality (do you have prove of willingness to pay?!!!!)  Promotion - how do you communicate to your potential customers.  Place – where will you be selling.12/22/2010 Xavier CORMAN 13
  14. 14. 8. Operations and production  How are you going to produce the product or provide the service at a profit?  Manufacture or sub contract out.  What resources are required?  Infrastructure, staff, equipment  Now/future?  How do you ensure the right quality?12/22/2010 Xavier CORMAN 14
  15. 15. 9. Team  Often read the first!  Why you?  What is your history?  What do you know?  What are your skills?  Whom do you know and who knows you?  What is your reputation?  How does the team profile fit with the opportunity, the context and the deal struck?  How committed are the people to the venture?  Lacking or critical team members?12/22/2010 Xavier CORMAN 15
  16. 16. 10. Financial plan  Gross margins and operating margins  Projection of the cash inflows and outflows of the business.  Actual and expected revenues  Actual variable and fixed costs  Use benchmarks if possible  Prepared monthly in year one (could be quarterly in years 2 to 5).  Takes into account the timing of receipts and payments.  Includes both capital and revenue income and expenditure.  Shows the cash requirements of the business.  Pro-forma P&L and balance sheets  Pro-forma break-even chart12/22/2010 Xavier CORMAN 16
  17. 17. 11. Sensitivity analysis  Know your critical assumptions  “Delhaize will love our green product because they focus a lot on their environmentally friendly image”  “Consumers will love our this new IT platform, because it is cheaper”  …  Best case / worst case scenarios  Identify risks in your business model  What happens if the market changes, you run out of cash before your first order, you don’t reach your targets…  What will you do when that happens?12/22/2010 Xavier CORMAN 17
  18. 18. 12. Status and timeline Step #1 - Set Up the Outline for Your Timeline Highlights of your business projected growth and development Step #2 - Research Your Points Back up your predictions with viable research Step #3 - Use Your Data to Refine Your Timeline Step #4 - Add References to Your Business Timeline How did you generated your data and predictions ? Step #5 - Clean Up Your Business Timeline Formatting the graphic so that it looks professional and easy to read12/22/2010 Xavier CORMAN 18
  19. 19. 13. Proposed investment Nature of the deal What are you asking and offering?12/22/2010 Xavier CORMAN 19
  20. 20. The 12 deadly sins in business plans (Gordon Baty / Zero stage capital) 1. Too Long 2. Poor Writing: grammar, redundant, unpersuasive 3. Poor Layout: illogical, illegible, poor illustration 4. No Executive Summary 5. Unclear Product Features: jargon, proprietary features, current development status 6. No Backup on Team 7. Unsupported Market Estimates / No Primary Research 8. Superficial Competitive Analysis 9. Creative Accounting Formats 10. Unfocused User Benefits: no Unique Selling Proposition 11. No Demonstrated Customer Knowledge 12. Lack of Compelling Reason to Invest Now12/22/2010 Xavier CORMAN 20
  21. 21. Conclusion  A business plan is a living story that demonstrates how an opportunity can become a new venture, not just the writer’s dreams and wishes  Always use a pitch / business plan presentation as an opportunity to learn. There is no better critic than an investor.12/22/2010 Xavier CORMAN 21
  22. 22. Questions & Answers Download this presentation and an example of Business Plan from Mc Kinsey: http://www.slideshare.net/xaviercorman12/22/2010 Xavier CORMAN 22

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