Entrepreneurship 2: Executive Summary & Business Plan

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Lecture 2 focus on the executive summary and business plan, providing some basic outline to how one can construct the elements of the business plan: introduction, technology/product/service, team, marketing, business strategy, operations, financials & exit strategy. This is a series based on a course "MPS 812: Entrepreneurship" I have been teaching in School of Physical & Mathematical Sciences, Nanyang Technological University.

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Entrepreneurship 2: Executive Summary & Business Plan

  1. 1. Lecture 2: Executive Summary & Business Plan Dr Bernard Leong CTO & Co-founder MPS 812 Course Taught in: 1
  2. 2. The Big Picture 2
  3. 3. Layout  of  Business  Plan  &  Execu4ve  Summary• Execu&ve  Summary• Introduc&on  -­‐  Type  of  Business• Problem  &  Opportunity• Technology/Service/Product• Management  Team• Business  Strategy  &  Route  to  Market• Opera&ons  (Timelines  &  Milestones)• Financials  and  Valua&on• Exit  Strategy 3 3
  4. 4. The  Mantra• Name  of  your  Company/Project/Idea.• Logo  and  Tagline.• Mission  Statement 4 4
  5. 5. Type  of  Business• What  is  the  Industry?• Product  or  Service   based?• How  Product  or   Service  delivers?• Who  are  the   customers  to  your   business?  B2B,  B2C? 5 5
  6. 6. Industry Sample  Introduc2on MaterialSoX  aims  to  be  the  provider  in   crea&ng  proprietary  fabrics  that  can  withstand  Materials  Engineering  Product harsh  condi&ons.  We  sell  our  fabrics  to  the   users  in  the  defence  and  coal/mining  industry. RealTime  is  a  Singapore  based  company  that   focuses  on  delivering  an  innova&ve  real  &me   IT  based  Product adver&sing  solu&on  to  brands.  Our  chief   consumers  are  brand  marketers  and  digital   marke&ng  agencies.   6 6
  7. 7. Problem  &  Opportunity• You  are  selling  the  solu&on   to  a  problem.• What  is  the  “blue  ocean”   you  are  exploi&ng?• Is  there  any  interest  in  your   business  lately?• Lies,  Damn  Lies  &  Sta&s&cs 7 7
  8. 8. Opportunity Example  Descrip2on Recently,  the  Singapore  government  has   allocated  S$13.5B  into  high  technology   research  and  development  and  placed  their   efforts  in  three  industries:  biomedical  sciences  Facts/Sta&s&cs/News (S$5.75B),  renewable  energies  and  digital   media.  The  solu&on  we  proposed  is  in  the  life   sciences  market,  where  we  can  reduce  drug   development  process  by  a  half  with  our   technology. Based  on  the  assump&on  that  Singtel  has  sold   a  100K  iPhones,  we  es&mate  each  smart    Es&mate phone  will  purchase  about  5-­‐10  applica&ons   and  spent  on  average  S$10  on  them  each   month.   8 8
  9. 9. Technology  or  Idea• You  must  make  your   technology  or  idea   understandable  to  your   audience.• For  an  execu4ve  summary,   never  put  too  much  jargon   into  your  descrip4on.• Make  comparisons  on  how   your  solu4on  can  increase   produc4vity  and  efficiency. 9 9
  10. 10. Technology Example  Descrip2on MaterialSoX  uses  an  improved  composite   ceramic  material  to  build  fibres  which  can   efficiently  hold  vehicles  on  muddy  grounds.   Materials Our  solu&on  supercedes  the  present  ones  with   half  the  cost  but  twice  the  material  strength  to   hold  vehicles  above  muddy  grounds. Our  solu&on  uses  a  proprietary  based   algorithm  developed  to  resolve  blurred  objects  Digital  Media of  movies  in  a  format  1000  &mes  beher  than   the  formats  which  are  adopted  by  the   industry.   10 10
  11. 11. Team• Diversified  and   Complementary  Skill  Sets.• Get  Grey  Hairs  and  put   them  in  your  advisory   board.  • Don’t  give  too  much  4tles   to  your  team.  • Be  mature  about  your   experience. 11 11
  12. 12. People Example  Descrip2on John  Ho  is  the  CEO  of  MaterialSoX.  Prior  to   joining  this  company,  he  was  the  Vice   President,  Sales  in  Nippon  Fabrics,  a  MNC  Experienced specializing  in  fabrics.  His  experience  with  the   market  will  help  to  generate  sales  lead  for  the   company.   Larry  Pang  is  the  founder  of  Project  AceFire.   Currently  a  second  year  undergraduate,  he  has   spent  a  year  working  in  Prof  Johnston’s  Young  Rookie mul&media  laboratory.  He  will  act  as  the  CTO   of  AceFire  and  will  seek  to  find  a  CEO  who  can   mentor  and  guide  the  team.   12 12
  13. 13. Route  to  Market• Who  are  your  customers  and  how   do  you  reach  them?• 80-­‐20  rule  on  market   segmenta&on?• What  are  the  marke&ng  channels   on  your  product?• What  is  the  market  size  that  your   product  size  is  likely  to  reach? 13 13
  14. 14. Market  Research:  Customers• Who  are  the  customers  for  the   products  or  services?  Iden4fy   common  characteris4cs  &  behavior.• Who  and  where  the  major   purchasers  for  the  products  are  in   each  market  segment?• Indicate  the  rela4ve  reach  for   customers  and  how  they  purchase   the  product  or  service,  and  what   influences  their  buying  decision. 14 14
  15. 15. Market  Size  &  Trends• The  size  of  the  market  based  on   market  segment,  demographic   by  sex,  region  or  country  and   poten4al  profitability.• The  poten4al  annual  growth  for   at  least  3  years  or  the  compound   annual  growth  rate  (CAGR)  of   the  business  based  on  industry.• Major  factors  affec4ng  market   growth,  for  e.g.  industry  trends,   socio-­‐economic  trends,   popula4on  changes,  government   regula4on.     15 15
  16. 16. Compe&&on  &  Compe&&ve  Edges• Realis4c  assessments  of  compe4tors   based  on  strengths  &  weaknesses.   Iden4fy  disrup4ve  or  alterna4ve   products/services.• Unique  Selling  Point:  how  does  your   product  differ  from  exis4ng  products   and  what’s  the  addi4onal   requirements.• Unfair  Advantage:  How  do  you  use   your  strength  to  covet  market  share   for  your  product/service? 16 16
  17. 17. Es4mate  Market  Share,  Sales  &  Evalua4on• Determine  the  scalability  of   the  product.• Iden4fy  possible  partnerships,   clients  and  trends  of  sales  per   unit  in  the  next  3  years.  • Evalua4on  based  on   profitability  and  plan  for   expansions  for  the  produc4on   facility  or  manpower  into   other  markets. 17 17
  18. 18. How  to  Es&mate  Market  Size• Start  with  simple,  reasonable   and  valid  assump&ons.• Approximate  to  the  closest   figure  (10K,  1M)?• Prac&ce  makes  perfect  by   making  es&mates  to   problems. 18 18
  19. 19. Prac&ce  Problems• What  is  the  average  number  of  internet  users  are   there  per  household  in  Singapore?  (Hint:  Think  about   how  many  people  per  household.)• How  many  hospitals  are  there  in  the  first  &er  ci&es  in   China?  (Hint:  define  the  first  &er  ci&es  -­‐  how  many  of   them,  then  work  out  how  many  hospitals  per  city  on   average  based  on  a  certain  radius?• How  many  seats  are  there  on  a  A380?  (Think  from   the  numbering  of  seats) 19 19
  20. 20. • How  many  seats  are  there  on  a  A380?  (Think   from  the  numbering  of  seats): –Start  from  seat  number  30-­‐65  in  economy   class,  take  an  average  of  10  seats  =  350  seats. –First  Class:  4  seats  per  land  and  only  4  rows  =   16  seats –Business  Class:  6  seats  per  row,  and  15  rows  =   90  seats –Economy  class  on  2nd  floor  =  11  x  8  =  88   seats  • Total  number  of  seats  =  544  seats• Actual  number:  450-­‐654  (depending  on  which   airline).   20 20
  21. 21. Route  to  Market• Who  are  your  customers  and  how   do  you  reach  them?• 80-­‐20  rule  on  market   segmenta&on?• What  are  the  marke&ng  channels   on  your  product?• What  is  the  market  size  that  your   product  size  is  likely  to  reach? 21 21
  22. 22. 4  Ps  of  Marke4ng 22 22
  23. 23. 23 23
  24. 24. Business  Strategies 24 24
  25. 25. Business  Strategies• How  do  you  generate  revenues   and  subsequently  profits  for  your   business?• What  is  your  business  model?• How  are  the  revenue  sources   available  for  your  startup?• What  business  strategies  do  you   use  to  generate  revenues? 25 25
  26. 26. Business  Model• Business  Model:  the  summa4on   of  the  core  business  decisions  &   trade-­‐offs  employed  by  a   company  to  earn  a  profit.• Business  decisions  and  trade-­‐ offs  fall  in  4  groups: –Revenue  Sources –Cost  Drivers –Investment  Size –Cri4cal  Success  Factors 26 26
  27. 27. Revenue  Sources• How  many  different  revenue   streams  will  the  business  model   generate?  • What  is  the  source  of  each   revenue  stream  (sales,  service   fees,  adver4sing,  subscrip4on)?• What  is  the  rela4ve  size  &   importance  of  each  revenue   stream?• How  quickly  is  each  revenue   stream  likely  to  grow? 27 27
  28. 28. Case  Study:  Travel  Search  Engine  Consumers Travel  Agent Flights  -­‐  Air  Tickets Revenue  Stream:  Travel  Agent  charges  a  referral   fee,  an  admin  fee  from  the  consumers. 28 28
  29. 29. Case  Study:  Travel  Search  Engine  Consumers Travel  Search  Engine Flights  -­‐  Air  Tickets Revenue  Stream:  Online  adver&sing  which   replaces  the  consumer’s  admin  fee,  and  possible   referral  fee.   29 29
  30. 30. Business  Strategy Example  Descrip2on MaterialSoX  engages  directly  with  known   industry  partners  in  the  fabric  industry.  The   company  does  not  deal  directly  with  customer   base  but  sells  via  resellers  or  fabric  Partnerships/Licencing distributors.  One  alterna&ve  strategy  to   generate  revenues  is  done  via  licensing  of  the   proprietary  technology  to  other  fabric   producing  companies. Real&me  offers  the  customers  a  free  beta   version  of  the  soXware  with  limited  features   so  that  they  can  en&ce  them  to  buy  the   Freemium  Model premium  version  (with  addi&onal  features)  of   the  soXware.  The  company  is  currently  in   nego&a&ons  on  strategic  rela&ons  with   different  gaming  companies. 30 30
  31. 31. Risks  &  Barriers  to  Entry• Who  are  your  compe&tors?• How  do  you  prevent  your   compe&tors  trumping  you?• What  are  the  problems  you   face  against  them?• Don’t  assume  that  you  are   the  only  one  or  have   indefensible  patents. 31 31
  32. 32. Barriers  to  Entry/ Example  Descrip2on Compe2tors MaterialSoX  faces  the  risk  of  a  saturated  and   tradi&onal  ceramics  industry  mindset  not  to   adopt  new  technologies.  To  mi&gate  the  risk,  Tradi&onal  Industry  Mindset the  company  will  launch  marke&ng  campaigns   and  present  the  product  in  various   conferences  to  provide  industry  players  an   awareness  of  the  product. The  compression  format  of  RealTime  soXware   cannot  be  replicated  based  on  the  proprietary   algorithm  used  in  performing  the   Unique  Selling  Point compression.  We  are  in  the  process  of   paten&ng  the  product  to  act  as  a  deterrence   against  our  compe&tors. 32 32
  33. 33. SWOT  Analysis 33 33
  34. 34. 34 34
  35. 35. Financials• How  much  do  you  need?• How  much  equity  you   want  to  give?• How  do  you  raise  that   amount  of  money?• Can  you  bootstrap  without   raising  funds? 35 35
  36. 36. Investment  Size• How  much  cash  is  required  to   launch  the  business  model?• How  much  working  capital  is   required  to  sustain  the   business?• What  are  the  4mings  of  these   cash  needs?• Will  the  cash  expended   produce  a  sustainable  and   profitable  business  en4ty? 36 36
  37. 37. 37 37
  38. 38. Financials Example  Descrip2on MaterialSoX  seeks  US$300K  as  an  ini&al   investment  to  build  a  proof  of  concept  and  will   raise  US$2M  to  bring  the  prototype  to  market.   Fundraising The  company  generates  revenues  via  sales  in   producing  fabric  for  the  defence  and  coal/ mining  industries.   Real&me  generates  revenues  via  the  number   of  purchases  made  on  the  premium  version   and  online  adver&sing  with  the  huge  traffic  Bootstrapping generated  by  visits  from  the  site.  The  company   seeks  to  bootstrap  via  hiqng  1M  sales  target   within  two  years.   38 38
  39. 39. 39 39
  40. 40. Who do you raise funds from?• Friends, Family and Fools.• Business Angels.• Super Angels*• Venture Capitalists.• Government Institutions.• Foundations and Agencies.• Private Equity Firms• Banks 40 40
  41. 41. 41 41
  42. 42. Source:  Meng  Weng  Wong  and  published  on  SGEntrepreneurs.comhhp://sgentrepreneurs.com/dummys-­‐guide/2009/03/05/a-­‐map-­‐on-­‐venture-­‐capital-­‐in-­‐singapore/ 42 42
  43. 43. Exit  Strategy• What  happens  to  the  company  in   3  to  5  years  4me?•  Possible  Exits: – Ini4al  Public  Offerings  (IPO) – Trade  sale/Merger/Management   Buyout – Family/Company  Succession – Wind  it  Down!• Exit  Strategy  depends  on  industry   that  the  start-­‐up  is  in. 43 43
  44. 44. Exit  Strategy Example  Descrip2on MaterialSoX  hopes  to  exit  in  3  years  with  a   profit  margin  of  20M  via  a  trade  sale  to  a  Trade  Sale/Buyout larger  player  within  the  industry,  for  example,   Cepheus  Ceramics.   RealTime  seeks  to  IPO  in  3  years  as  an  exit   IPO strategy.   44 44
  45. 45. References• McKinsey & Co., “Starting Up”• Robert et al, “New Business Ventures & the Entrepreneur”• Kotler et al, “Marketing Management: An Asian Perspective”• Megginson & Byrd, “Small Business Management”• Timmons & Spinelli, “New Venture Creation”• Thompson, Strickland & Gamble, “Crafting & Executing Strategy” 45

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