Business Plan Preparation Frank Moyes Leeds College of Business  University of Colorado Boulder, Colorado Financial Plans
Tonight <ul><li>Financial Plan </li></ul><ul><li>Customer acquisition costs </li></ul><ul><li>In the Fire – preliminary Cu...
November 10 & 11 <ul><li>Financial Projection Model Workshop </li></ul><ul><li>Room 302 </li></ul><ul><li>6:00 to 7:00pm <...
November 12 <ul><li>In the Fire - Marketing plan </li></ul><ul><ul><li>Prepare 6 to 10 slides (this is not a DECK) </li></...
Title Slide <ul><li>Name of venture </li></ul><ul><li>Team member names </li></ul><ul><li>Date </li></ul><ul><li>Introduce...
Introduction <ul><li>Grab investor’s attention </li></ul><ul><li>Describe the venture </li></ul><ul><ul><li>Elevator speec...
Presenting the Marketing Plan <ul><li>Show that you really understand the target customer </li></ul><ul><li>Make it real -...
Financial Plans
Attractive Market (Example) <ul><li>Low barriers to entry </li></ul><ul><li>Large market and growing  </li></ul><ul><li>Fa...
Attractive Market <ul><li>Fragmented, no brand loyalty  </li></ul><ul><li>Addressable market $100 million, 10% growth </li...
Marketing Plan <ul><li>Customer Research </li></ul><ul><li>Target Customer Strategy </li></ul><ul><li>Channel Strategy </l...
Business Plan Elements <ul><li>Executive Summary </li></ul><ul><li>Company Overview </li></ul><ul><li>Product or Service D...
Financial Plan <ul><li>Financial Projections </li></ul><ul><li>Key Assumptions </li></ul><ul><li>Business Risks </li></ul>...
Business Plan Perspective “ People write-up their business plan with a top-down mentality. They invariably talk about a pa...
Financial Projections <ul><li>Income Statement </li></ul><ul><ul><li>By years for 5 years  </li></ul></ul><ul><ul><li>By m...
Focus Your Attention <ul><li>Profitability </li></ul><ul><li>Assets (resources) </li></ul><ul><li>Cash Flow </li></ul><ul>...
Focus Your Attention <ul><li>Profitability </li></ul><ul><li>Assets (resources) </li></ul><ul><li>Cash Flow </li></ul><ul>...
Common Weaknesses <ul><li>Gross margins are too high </li></ul><ul><li>Operating expenses are too low </li></ul><ul><li>Wo...
Financial Drivers (2-3 Key) <ul><li>Revenue model – roll out, market share, new products, customers/day </li></ul><ul><li>...
Risks I <ul><li>What major risks does the venture face? </li></ul><ul><ul><li>What can go wrong? </li></ul></ul><ul><ul><l...
Risks II <ul><li>Market </li></ul><ul><ul><li>Size of market </li></ul></ul><ul><ul><li>Competitor’s response  </li></ul><...
Risks III <ul><li>Technology </li></ul><ul><ul><li>Will it work </li></ul></ul><ul><ul><li>Time and cost to development </...
Financial Plan Sections <ul><li>Financial Projections </li></ul><ul><ul><li>Summary goes in Plan </li></ul></ul><ul><ul><l...
0 Summary of Financial Projections Financial Plans
Break-even Financial Plans
Customer Acquisition Costs <ul><li>Costs to get a customer </li></ul><ul><ul><li>Sales salaries & commissions </li></ul></...
Business Plan Perspective “ Entrepreneurs have got to display a clearly articulated vision for what they want to do. And t...
Critical Mistakes I <ul><li>“ Let’s go smoke something” </li></ul><ul><li>“ These trees sure are pretty” </li></ul><ul><li...
<ul><li>“ Sure, operating expenses are high at the beginning, but then they will go down.” </li></ul><ul><ul><li>Operating...
Financial Dynamics <ul><li>Who does the financial projections? </li></ul><ul><li>Should my projections be optimistic or pe...
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Business Plan Preparation Frank Moyes

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  • Attractive Market No barriers to entry vs. fragmented, no brand loyalty Large market and growing – size $100 million, 10% growth Favorable trends – aging baby boomers, social networking, cost of oil
  • Step 5 says Timeline, Switch with Step 6
  • Step 5 says Timeline, Switch with Step 6
  • airlines, toothpaste (Tom’s of Maine) ; government
  • Smoke: virus- reason disappears Trees: get caught in the detail Sales time to get orders need to revise product or service Hi growth effects
  • Development Rapid prototyping Flexible Product Development Growth: requires investment in systems Funding: on-going process day you close one round is the day you start the next Full time Find investors Negotiate Term Sheet Due diligence Sign agreement
  • Questions Why does GP increase from 45% to 52% in yr 2? If we reduce the investment in year 3 from $3KK to $1KK? OR, increase from $3KK to $5KK? Optimism vs Pessimism Investors VC&apos;s want size Angels want to be involved &amp; a return Friends and Family want you to succeed Hostage to fortune VIDEO show
  • Business Plan Preparation Frank Moyes

    1. 1. Business Plan Preparation Frank Moyes Leeds College of Business University of Colorado Boulder, Colorado Financial Plans
    2. 2. Tonight <ul><li>Financial Plan </li></ul><ul><li>Customer acquisition costs </li></ul><ul><li>In the Fire – preliminary Customer Survey results </li></ul><ul><li>Team meetings </li></ul>Financial Plans
    3. 3. November 10 & 11 <ul><li>Financial Projection Model Workshop </li></ul><ul><li>Room 302 </li></ul><ul><li>6:00 to 7:00pm </li></ul><ul><li>Download model v6.8.9 & play with example </li></ul>Financial Plans
    4. 4. November 12 <ul><li>In the Fire - Marketing plan </li></ul><ul><ul><li>Prepare 6 to 10 slides (this is not a DECK) </li></ul></ul><ul><ul><li>10 minutes </li></ul></ul><ul><ul><li>2 marketing experts </li></ul></ul><ul><li>Hand-in: </li></ul><ul><ul><li>Marketing Plan - draft </li></ul></ul><ul><ul><li>Customer surveys & summary of results </li></ul></ul><ul><ul><li>Customer acquisition costs </li></ul></ul>Financial Plans
    5. 5. Title Slide <ul><li>Name of venture </li></ul><ul><li>Team member names </li></ul><ul><li>Date </li></ul><ul><li>Introduce team </li></ul>Financial Plans
    6. 6. Introduction <ul><li>Grab investor’s attention </li></ul><ul><li>Describe the venture </li></ul><ul><ul><li>Elevator speech (not on slide) </li></ul></ul><ul><ul><li>Value proposition (not on slide) </li></ul></ul><ul><li>3 key points want investors to remember </li></ul>Financial Plans
    7. 7. Presenting the Marketing Plan <ul><li>Show that you really understand the target customer </li></ul><ul><li>Make it real - tell a story </li></ul><ul><li>Show prototypes, exhibits, short videos </li></ul><ul><li>Focus on the key strategies that you want the investor to remember </li></ul><ul><li>Less is better - use graphs & charts </li></ul><ul><li>Put content in bullets, not a marker </li></ul>Financial Plans
    8. 8. Financial Plans
    9. 9. Attractive Market (Example) <ul><li>Low barriers to entry </li></ul><ul><li>Large market and growing </li></ul><ul><li>Favorable trends </li></ul>Financial Plans
    10. 10. Attractive Market <ul><li>Fragmented, no brand loyalty </li></ul><ul><li>Addressable market $100 million, 10% growth </li></ul><ul><li>Trends aging baby boomers, social networking, cost of oil </li></ul>Financial Plans
    11. 11. Marketing Plan <ul><li>Customer Research </li></ul><ul><li>Target Customer Strategy </li></ul><ul><li>Channel Strategy </li></ul><ul><li>Positioning </li></ul><ul><li>Product/Service Strategy </li></ul><ul><li>Pricing Strategy </li></ul><ul><li>Internet Strategy </li></ul><ul><li>Communications Strategy </li></ul><ul><li>Sales Strategy </li></ul><ul><li>Revenue Model </li></ul>Financial Plans
    12. 12. Business Plan Elements <ul><li>Executive Summary </li></ul><ul><li>Company Overview </li></ul><ul><li>Product or Service Description </li></ul><ul><li>Industry and Marketplace Analysis </li></ul><ul><li>Marketing Plan </li></ul><ul><li>Operations Plan </li></ul><ul><li>Development Plan </li></ul><ul><li>Management </li></ul><ul><li>Financial Plan </li></ul><ul><li>Offering, Funding Requirements, Valuation </li></ul>0 Financial Plans
    13. 13. Financial Plan <ul><li>Financial Projections </li></ul><ul><li>Key Assumptions </li></ul><ul><li>Business Risks </li></ul>Financial Plans
    14. 14. Business Plan Perspective “ People write-up their business plan with a top-down mentality. They invariably talk about a particular vertical market that has X billions of dollars in sales each year. They’ll tell us that they can get 10% of that market. But when we ask them for the average sale or the cost of customer acquisition, the answer almost always is “I’ll get back to you.” Dan Beldy, Hummer Winblad Venture Partners Financial Plans
    15. 15. Financial Projections <ul><li>Income Statement </li></ul><ul><ul><li>By years for 5 years </li></ul></ul><ul><ul><li>By months for years 1-2 & by quarters for years 3-5 </li></ul></ul><ul><li>Balance Sheet by years for 5 years </li></ul><ul><li>Cash Flow </li></ul><ul><ul><li>By years for 5 years </li></ul></ul><ul><ul><li>By months for years 1-2 and by quarters for years 3-5 </li></ul></ul><ul><li>Break-even Analysis </li></ul>Financial Plans
    16. 16. Focus Your Attention <ul><li>Profitability </li></ul><ul><li>Assets (resources) </li></ul><ul><li>Cash Flow </li></ul><ul><li>Funding </li></ul>Financial Plans
    17. 17. Focus Your Attention <ul><li>Profitability </li></ul><ul><li>Assets (resources) </li></ul><ul><li>Cash Flow </li></ul><ul><li>Funding </li></ul><ul><li>Revenue </li></ul><ul><li>Margins – prices vs. costs </li></ul><ul><li>Major operating expenses </li></ul><ul><li>Cap Ex - Property & Equipment </li></ul><ul><li>Working capital </li></ul><ul><li>Increase/(Decrease) in Cash </li></ul><ul><li>Equity & Debt </li></ul>Financial Plans
    18. 18. Common Weaknesses <ul><li>Gross margins are too high </li></ul><ul><li>Operating expenses are too low </li></ul><ul><li>Working Capital (must be based on industry) </li></ul><ul><li>Fixed Assets & Capital Expenditures not addressed </li></ul><ul><li>Seasonality </li></ul><ul><li>Growth not anticipated </li></ul>Financial Plans
    19. 19. Financial Drivers (2-3 Key) <ul><li>Revenue model – roll out, market share, new products, customers/day </li></ul><ul><li>Margins (price/labor+materials) – cost goal </li></ul><ul><li>Operating Expenses – hire 10 sales persons, prototype cost, legal expenses, etc. </li></ul><ul><li>Capital Expenditures – major </li></ul><ul><li>Working Capital – A/R days, Inventory days (turns) & A/P days </li></ul>Financial Plans
    20. 20. Risks I <ul><li>What major risks does the venture face? </li></ul><ul><ul><li>What can go wrong? </li></ul></ul><ul><ul><li>What must go right </li></ul></ul><ul><li>How mitigate? </li></ul>Financial Plans
    21. 21. Risks II <ul><li>Market </li></ul><ul><ul><li>Size of market </li></ul></ul><ul><ul><li>Competitor’s response </li></ul></ul><ul><ul><li>Sales cycle </li></ul></ul><ul><ul><li>Closing window (12 VC funded companies) </li></ul></ul><ul><li>Strategic - establishing partnerships or agreements </li></ul><ul><li>Operational - large number of interrelated components </li></ul>Financial Plans
    22. 22. Risks III <ul><li>Technology </li></ul><ul><ul><li>Will it work </li></ul></ul><ul><ul><li>Time and cost to development </li></ul></ul><ul><ul><li>Scalability </li></ul></ul><ul><li>Financial </li></ul><ul><ul><li>Risk/return </li></ul></ul><ul><ul><li>Dilution </li></ul></ul><ul><li>Macro-economic </li></ul><ul><ul><li>Volatile industry </li></ul></ul><ul><ul><li>Government approval </li></ul></ul><ul><ul><li>Exchange rates </li></ul></ul>Financial Plans
    23. 23. Financial Plan Sections <ul><li>Financial Projections </li></ul><ul><ul><li>Summary goes in Plan </li></ul></ul><ul><ul><li>All Financial Statements go in Appendix </li></ul></ul><ul><li>Assumptions </li></ul><ul><ul><li>2-3 key assumptions go in Plan </li></ul></ul><ul><ul><li>Detailed assumptions go in Appendix </li></ul></ul><ul><li>Business Risks </li></ul>Financial Plans
    24. 24. 0 Summary of Financial Projections Financial Plans
    25. 25. Break-even Financial Plans
    26. 26. Customer Acquisition Costs <ul><li>Costs to get a customer </li></ul><ul><ul><li>Sales salaries & commissions </li></ul></ul><ul><ul><li>Advertising & promotion </li></ul></ul><ul><ul><li>Customer & tech support </li></ul></ul><ul><ul><li>Website </li></ul></ul><ul><ul><li>Travel & entertainment </li></ul></ul><ul><li>Number of customers </li></ul>Costs to Get a Customer Number of Customers Financial Plans
    27. 27. Business Plan Perspective “ Entrepreneurs have got to display a clearly articulated vision for what they want to do. And they must tell their story from the bottom up. A bottom-up approach means that they know with absolute certainty whom they’ll sell to, how much it will cost, and what the sales per week will be next March. Sure, a lot of assumptions are involved, but entrepreneurs need to break their business down to the molecular level. That information leads logically to the next step which is saying to an investor, ‘I am going to take this money and do X, Y, and Z with it and here’s what will happen in the end.’ Your survival depends on knowing that stuff cold.” Dan Beldy, Hummer Winblad Venture Partners 0 Financial Plans
    28. 28. Critical Mistakes I <ul><li>“ Let’s go smoke something” </li></ul><ul><li>“ These trees sure are pretty” </li></ul><ul><li>“ We can get orders in a month” </li></ul><ul><ul><li>Sales cycle </li></ul></ul><ul><ul><li>No one knows you </li></ul></ul><ul><li>“ We can whip this puppy out in 6 months” </li></ul><ul><ul><li>Development time-line longer </li></ul></ul><ul><ul><li>More expensive </li></ul></ul><ul><li>“ Look at how much they spend on marketing! We won’t have to spend that much” </li></ul>Financial Plans
    29. 29. <ul><li>“ Sure, operating expenses are high at the beginning, but then they will go down.” </li></ul><ul><ul><li>Operating expenses don’t decline </li></ul></ul><ul><ul><li>Salaries must be realistic </li></ul></ul><ul><ul><li>Growth requires spending money </li></ul></ul><ul><li>“ “ We’ll lean on our suppliers and not pay them for 90 days.” </li></ul><ul><li>“ Our customer will pay us in 30 days.” </li></ul>Critical Mistakes II Financial Plans
    30. 30. Financial Dynamics <ul><li>Who does the financial projections? </li></ul><ul><li>Should my projections be optimistic or pessimistic? </li></ul><ul><li>What kind of questions do investors ask & why? </li></ul>0 Financial Plans

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