Business Plan

Best Practices

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What is the purpose of a business plan ?

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"Writing a business plan forces you intodisciplined 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 Capitalist

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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 ismuch more

than a financial plan !

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The business plan – contentThere is no prescribed format, the following sections are usually included.

1. Executive summary2. Mission3. Problem4. Solution5. Technology6. Market and industry analysis7. Marketing and sales8. Manufacturing and operations plan9. Team: why you?10. Financial plan11. Sensitivity analysis12. Status and timeline13. Proposed investment

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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.

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1. Executive summary

Mimics your pitch

Should be very compelling and inviting to read the rest

“Summary” -> try one page

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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 sentences

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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?

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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 appendix

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6a. Market and industry analysisThis 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?

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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?

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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.

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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?

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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?

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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 chart

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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?

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12. Status and timeline

Step #1 - Set Up the Outline for Your TimelineHighlights of your business' projected growth and development

Step #2 - Research Your PointsBack up your predictions with viable research

Step #3 - Use Your Data to Refine Your TimelineStep #4 - Add References to Your Business Timeline

How did you generated your data and predictions ?

Step #5 - Clean Up Your Business TimelineFormatting the graphic so that it looks professional and easy to read

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13. Proposed investment

Nature of the deal

What are you asking and offering?

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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 Now

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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.

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Questions & Answers

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Download this presentation and an example of Business Plan from Mc Kinsey: http://www.slideshare.net/xaviercorman