AI, Inc. proposes a patented sperm sorting technology that will allow cattle producers to select the gender of offspring. The business plan outlines the dairy and beef cattle markets that could benefit from this technology, current competition, AI, Inc.'s competitive advantages and business model. Financial projections indicate $400,000 is needed initially for research and development to bring the technology to market.

1. Writing and Presenting Effective Business Plans Dr. Anne S. York Associate Professor of Entrepreneurship Creighton University Nebraska EPSCoR Innovation Forum March 21, 2007

2. Agenda for Today Why write a business plan? Mystery product exercise The importance of cash flow Presenting your business plan Resources at Creighton and in Omaha…

3. Business Plan Components Executive summary Concept statement (position, industry) Industry analysis Marketing (research, pricing, promotion) Operations (start-up and ongoing growth) Management (team) Financial (profit, cash flow, funding) Critical risks and milestones

4. Business Plan for Mystery Product…. What is your product? Who are your likely competitors? Who are your target customers? How will you price and promote it? What skills do you need on your team? How and where will you produce? How much money do you need? Critical risks?

5. Why Forecasting Cash Flow Is Important! P&L Summary

6. What Happened? Signs of Rapid and Unplanned Growth Sales Growth: major awards Operations: scheduling impact Staffing: increasing and turnover Inventories: increasing and outsourcing Equipment: unfamiliar, distant Receivables: increasing Capital: needed!!!!!

7. Cash Flow

8. Options Improve earnings Borrow more money Capital investment

9. Financial Forecasting Purposes Planning for start-up Adjusting for changes in plans What-if exercises, sensitivities Point: Need Something That Can Be Easily Changed! Tools: Excel Mostly Often Used to Create Financial Statements, but Best Used for Cash Flow Budgeting

10. Cash Flow Budgets Simpler, More Logical than Financial Statements Purpose: To Determine How Much Cash You Need and When Involves Same Forecasting Tools as Financials Elements Assumptions Initial Investment/Startup Costs Cash Receipts (record when cash comes in) Cash Disbursements (record when cash goes out)

11. Questions that Affect Cash Flow What initial investments are required before you open the door? What are your ongoing sales and costs? How and when will people pay you? How and when will you pay suppliers?

12. More Questions… What choices can you make to improve your cash flow? What options do you have if you need more cash? Can your business fail if you are making a profit?

13. Example Assume you want to start a restaurant Initial investment Ongoing sales and costs Sources of capital: loans, investors, savings Where do you get this information? Ask people Do research at the CU/UNO library, SBA Internet

14. Cash Flow vs. Profit Cash Flow +Sales (cash/credit/terms) +Bank Loan - Eqpt./Invent. (lease/buy) - Materials (cash/credit) - Labor (plus training) - Interest/Principal - Taxes - Advertising and admin. Only record when cash comes in or goes out ! Accounting Profit Revenue Expense Supplies and materials Labor Depreciation Advertising and admin Interest and taxes Asset (eqpt./inventory) Liability (loan) Expenses must be matched with revenues!

15. Assumptions You purchase your eqpt./invent. for $9,000. Month 1 you sell $25,000. Your sales are doubling every month. You make 50% of sales to corporate customers, who take 30-45 days to pay. Your direct costs (labor,materials) are 50% of sales. Your suppliers require cash on delivery. You lease your building for $1,000 per month. You need two weeks to get your restaurant ready to go and help trained.

16. Accounting Income Statement June July August Revenues 25.0 50.0 100.0 Cost of goods sold 12.5 25.0 50.0 Gross margin 12.5 25.0 50.0 Adv/admin 5.0 10.0 20.0 Operating profit 7.5 15.0 30.0 Depreciation (3 yr.) .3 .3 .3 EBIT 7.2 14.7 29.7 Interest 0.0 0.0 0.0 Taxes (40%) 2.9 5.9 11.9 Net profit 4.3 8.8 17.8

17. Cash Budget May June July August Cash Sales 0 12.5 25.0 50.0 Corp. Sales 0 12.5 25.0 Net Cash In 0 12.5 37.5 75.5 Labor/Mtls. 12.5 25.0 50.0 100.0 Equipment 9.0 Adv./Admin. 5.0 10.0 20.0 40.0 Interest/Principal ? ? ? ? Taxes 2.9 5.9 11.9 Net Cash Out ( 26.5) (37.9) (75.9) (151.9) Net cash flow (14.0)* (25.4) (38.4) (76.4) Loan Needed 14.0 39.4 77.8 153.8

18. Why Are the Two So Different? Same Reason as First Case Inventory/Materials Paid Ahead of Sales Corporate Accounts Receivable Equipment Paid Ahead of Sales Training Paid Ahead of Work Employee Turnover

19. What You Can Do…. Credit Policy/Discounts for Cash Lease Equipment Reduce Employee Turnover Slow Growth Rate (less advertising)

20. Common Presentation Issues Using common language to describe product/service Identifying the target market Describing how product adds value Knowing how you compare with your competition Identifying alternative markets

21. Common Presentation Issues Being realistic about adoption hurdles Estimating longevity of the product Clarifying role of founder/inventor Understanding what will excite customers Identifying interim sources of funding

22. AI, Inc. Business Plan Presentation Example

23. AI, Inc. Concept Statement Business Plan Objectives Industry Need Dairy Beef Market Potential Competition Positioning Business Model Company Status Milestones Management Financial Projections Requirements

24. AI, Inc. : Concept Statement Mission: to be the premier supplier of sperm sorting technology for gender selection in the livestock industry. Patented technology will allow AI, Inc. to claim the position of superior product provider at equal or lower cost.

25. Business Plan Objectives To describe the current market and the growth potential for the market To define the competition within the market To outline the research and business development milestones to be met for commercial availability of the technology To demonstrate the financial viability of AI, Inc. for success in the market

26. Cattle Industry Need Standard breeding techniques result in 50% male and 50% female offspring Sorted semen/sperm allows producer to select the sex of the offspring Sperm Offspring Sector X Heifer Dairy Y Bull Beef

27. Need for Sorting: Dairy Selective breeding of high-producing lactating cows Increased calf income- half no. of cows bred Herd management- biosecure & easier calving Faster progress- meeting breeding goals Got Milk? Heifer Calf Bull calf Sperm X Y

28. Need for Sorting: Beef Males for steers for commercial unit Replacement females from select population of herd Female breeding to reduce calving difficulties Males for bulls for seed stock producers Superior Heifer Superior Bull Where’s the Beef? Sperm X Y

29. The Market: Immediate 2005 Inventory Dairy 9 million Approximately 5.9 million (65%) bred by AI Beef 33 million Approximately 3.3 million (10%) bred by AI 2004 Total Semen Sales by Sector Dairy 26.8 million units @ $5/unit $134,116,710 Beef 3.9 million units @ $10/unit $39,212,180 Source: National Association of Animal Breeders March 11, 2005

30. The Market: Long-term Increased use of AI creates access to: 35% of Dairy sector 90% of Beef sector Technology R&D efforts to develop gender selection capabilities for additional sectors of livestock industry including: Swine Sheep Equine

31. The Market: Competition TransOva XY Inc. AI, Inc. Commercially Available FY06 Acceptable Conception Rate Industry Interest Efficient and Effective Sorting Affordable Price

32. The Market: AI, Inc. Market research 20 National Association of Animal Breeders members 8 Certified Semen Services members Nebraska Resources Feed lot owners Seed stock suppliers Cattle breeders Trade association representatives Congressman’s office

33. AI Suppliers Genex Cooperative (CRI Int’l) Select Sires, Inc. Accelerated Genetics Androgenics Taurus Service, Inc. Seed Stock Supplier Vogler Semen Centre Reagent Supplier Minitubes of America The Market: AI, Inc. Ready Customers:

34. Quick entry into market Expect FY2006 Multiple revenue sources Technology license fees Proprietary reagent sales Potential for royalty income Compatible with Industry Consolidation trends Uses existing infrastructure Shared risk Business Model: Franchising

35. AI, Inc.: Milestones Technology R&D Demonstrate proof of principle Field trials with AI Industry partners Establish improved separation approach Develop technology for different species Business Development Negotiate license for technology rights Submit SBIR/STTR funding proposals Formalize AI subsector partnerships Establish first franchise Identify and secure management team First round of fundraising

36. AI, Inc.: Team XXXX, PhD: founder, inventor, Medical School faculty, 30 + yrs research experience, scientific advisory role CEO: position open, entrepreneur experienced in launching company & products in high technology agriculture business environment, and fundraising Research Scientist: position open for PhD in biochemistry XXXX.: business development support, equity partner, technology licensor

37. AI, Inc.: Financials

38. AI, Inc.: Funding Needed Pessimistic - $400,000 100% from angel investors and venture capitalist for a % of ownership in the company Optimistic - $400,000 100% from grants. Expected - $400,000 75% from grants 25% from investors for ownership in the company ( Approximately $100,000)

39. AI, Inc. For Additional Information… XXXXXXXXXXX Office phone: Direct phone: Email:

40. Creighton Options Ask to be considered as an outside project (semester time frame, call early) Take an elective course Undergrad: entrepreneurial planning (fall, spring) Grad: entrepreneurial planning (spring), business innovation consulting (fall), technology commercialization (spring), technology entrepreneurship (fall)

41. Omaha Options…. Nebraska Business Development Center Small Business Administration/Score Internet The Successful Business Plan: Secrets and Strategies , Abrams Other? Search http://entrepreneurship.creighton.edu [email_address] 402-280-2440