how to write a great business plan berkeley

© Copyright 2008 Tennant Consulting

How to Write a Great Business PlanSteve TennantTennant Consultingwww.tennantconsulting.com

© 2008 Tennant Consultingwww.tennantconsulting.com

About the SpeakerSteve Tennant, Managing Director, Tennant Consulting

2

■ After PeopleSoft, Steve was VP Business Development at Ninth House Network, a broadband Internet e-learning company; then VP Marketing at Planitax, a startup software-as-a-service application financial software provider, a Tennant Consulting client which he helped to secure venture financing in 2003.

■ Past roles include advising over 20 high-tech firms at Technology Ventures Corporation and as a member of the Keiretsu Forum, an angel investor group.

■ Steve founded the 2,000-member PeopleSoft Alumni Network and co-chairs the East Bay Innovation Groups' Startups and Venture Capital SIG, a monthly networking and educational forum for high-tech entrepreneurs.

■ Mr. Tennant graduated with a BBA with high distinction from the University of Michigan Business School in Ann Arbor, Michigan and lives with his family in Orinda, California.

■ Steve publishes a free monthly newsletter with tips and tools for entrepreneurs. To subscribe, visit www.tennantconsulting.com

■ Steve Tennant is a marketing consultant to software and technology firms looking to attract more customers and venture capital.

■ Since 2001, Steve Tennant has been managing director of Tennant Consulting, helping software and Internet executives accelerate growth of their businesses through strategy, marketing, alliance, and product management consulting services.

■ Steve has over 20 years of software and technology industry experience. He is a former VP of Business Development and director of Product Strategy at PeopleSoft. Prior to that, he was a senior manager at Andersen Consulting (now Accenture).

http://www.tennantconsulting.com/




Representative Clients

■ Employer tax collection system – State of Michigan■ Project management system■ Professional service billing system■ Government accounting system – Puerto Rico■ Receiving, inventory, shipping system■ Utility billing system■ Member information system■ Disaster recovery system■ AI-based mortgage loan origination system■ Retail banking system■ Bank of the Future solution center■ Portfolio accounting system■ Investment management customer reporting

4

First Nationwide Bank




Experience – As an employee

■ Global accounting enterprise packaged software■ Activity-based accounting software■ Knowledge management software

■ Broadband e-learning / management training

5




Representative Clients■ Hosted corporate tax software■ Accounting & audit software■ Enterprise pricing software■ RFID supply chain application software solution■ Hosted medical billing software■ Expandable USB hard drive ■ IT asset management software■ Building energy analysis software■ Networking skills e-learning■ Data storage security■ Wireless power products for consumer electronics■ Corporate training materials printing software■ Credit and collections software■ Grid computing solutions■ Hosted bio-computing software■ Offshore product management services■ Collaborative software solution■ Global capital markets trading software

6

Rolling Thunder





7

You Might Be Thinking…■ How do I write a business plan?

■ What do I include?

■ How does this process work in the real world?

■ What separates “good” from “great”?

■ How do I get started?

■ Is there any more pepperoni?




8

An idea to make your plan great




9

The “Business Concept”

Customers’ReallyBig

Problem

Valuable,Differentiated

Solution

What are Their Needs and Wants?How Do They Solve It Today?

How Do They Buy?What Do They Value/Pay?

How “Really Big” Is The Problem?How Are We Different?

How Do We Deliver Value?What Do We Build/Buy/Partner?

How to Balance Speed & Quality?

What’s Our Solution?




10

Your “Investor Toolkit”

1. Executive Summary (of the Business Plan)■ 1-3 page standalone Word or PDF

document2. Investor Pitch

■ 10-16 Slide PowerPoint3. Business Plan

■ 15-40 Page Word or PDF document4. Financial Plan

■ 5-20 Page Spreadsheet■ 2-3 pages in Business Plan ■ 1 Slide in Investor Pitch




11

How This Works

Sum

You

AdvisorsSum

Sum

Sum

Investors

Sum

InvestorPitch

InvestorPresentations

PPT

BP Fi

n

Due Diligence

BPFin

Terms

Negotiations

Funding

$

Great, send me your business plan & financials

I’d like to

meet

InvestorPitch

All PartnersMeeting

PPT




12

Now on to the nuts and bolts…




13

What’s in a business plan?

Business PlanSample Table of Contents

1. Executive Summary2. Problem/Market Opportunity3. Business Concept & Vision4. Solution5. Competitive Landscape6. Intellectual Property7. Customer Value Proposition8. Revenue Model9. Sales, Marketing & Alliances10. Manufacturing/Operations11. Financials12. Investment/Uses of Funds13. Team

No “right or wrong” – just “complete”

and “incomplete”

Adjust sequence to tell your story

• Team• Customers• Solution• IP

Lead with your strength




14

Executive Summary■ Used to get investor

meetings■ 1-3 pages■ Industry, category, stage■ May be required to

complete an application■ Include short answers to

each of the other sections■ No NDA: Keep jewels close■ Lead with your strength■ Show compelling vision■ Make the story interesting

■ Tips Draft first, finalize after long

business plan is completed Use to provide “routing

information” for VC firms Leave investors wanting to

learn more Used twice: stand-alone

email doc and as intro in your longer business plan

Have other laypeople review & provide feedback




15

This section speaks volumes…

about your thought process




16

Problem/Market Opportunity

■ What’s the REALLY BIG PROBLEM you’re solving?

■ What’s the market size? How much is spent ON THIS PROBLEM today?

■ How fast is the market growing? Compound Annual Growth Rate (CAGR)

■ Hubcaps vs. cars■ What are the market trends? ■ Why invest now?




17

Market: Tips for Success■ Think Big

$1-1.5B market size hurdle for many VC’s – or their economics don’t work

Include global, not just domestic markets Have customer purchase knowledge before meeting investors

■ Bottoms Up Start with the economics of one customer Then build it up to a customer base: “Bottoms Up” analysis

means this many customers, spending this much = market size Do “bottoms-up” math:

• (# of customers) x (% who buy each year) x (average amount spent annually) = market size

■ Top Down Compare to “tops-down”

• “Gartner says this will be a $50B market by 2011 – we just need “__%”. This doesn’t work – but it can be used to reconcile your bottoms up analysis.




Terminology■ “Available Market”

Everyone who has this problem, that could someday buy your solution

■ “Addressable Market”Everyone you plan to address with this

version of your solution■ “Demand side” vs. “Supply side”

Demand = measure of customer spending

Supply = measure of supplier revenuesBoth are valid

18




19

Now the stage is set…




20

Business Concept

■ Introduce your company - what’s your idea?■ What kind of company are you?

“We sell software”, “We license IP to pharmaceuticals”

■ Who will you sell to? Specific titles, demographics, examples

■ What are their biggest problems?■ How being addressed today?■ What are people willing

to pay for your solution?




Examples■ “We replace redundant local accounting systems

with a single global system…” ■ “We use a specialized, customized, online survey

tool to replace in-person tax interviews by expensive tax accountants…”

■ “75% of computer users have pictures, music, or other valuable data that is not backed up...”

■ “Most data security has focused on the corporate perimeter, yet most breaches are internal. We stop internal users from accessing stored data they should not be accessing.”

21




22

Typically the longest section

(and unnecessarily so)




23

Solution■ What is your solution to the problem?■ What is your technology? ■ Underlying technology?

Platform decisions?Development tools?

■ How does it work? ■ How is it better?■ Functions? Features? ■ What are you actually selling?■ Answer, “So what?” Describe benefits.




24

Solution: Tips

■ Include 1-2 pictures, diagrams, graphs, flowcharts, screenshots.

■ What’s your vision? Roadmap?■ What is your role in the value chain? What

other components to the “Whole Product”?■ Layperson language for angel investors and

BP competition – assume VCs have experience■ Save technical details and secret recipes for

due diligence■ Show some restraint!




25

Show Them The Money…If You Want Them to Show

You The Money




26

Customer Use & Value Proposition

■ Include your protagonist, the customer, in the story. How is their life better after

using your solution?

■ How do economics work for one customer?How does that customer

justify purchase? Include “Whole Product” cost




27

Just don’t ever, ever say, “We have none”




28

Competition

■ From the buyer’s perspectiveWho else do buyers consider as substitutes?

■ From the investor’s perspective If you prove there’s a profitable market, who else

would enter? Then how will you beat them?What’s your strategy to win long term?




29

Barriers to Entry/ Intellectual Property

■ Brief (1-2 sentence) patent description & number

■ Patent approval status■ Status of key regulatory approvals (e.g., FDA

approval, NSA certification, Gorilla vendor certification)

■ Also different business model, limited distributors or partners, few global players, financials required to be successful, etc.




30

“So, how do you make money?”




31

Revenue Model / Business Model

■ Describe revenue streams & pricing, e.g.:License fees, subscription revenues, service contracts,

consulting fees, gain share, etc.Distinguish 1-time vs. ongoingDistinguish by product and market

■ What is pricing based on?How does price compare to customer value?What PROOF do you have that customers will actually

pay this for your solution?




32

What happens when you actually go try to sell this?




33

Sales, Marketing & Alliances

■ A.K.A. “Go to Market” strategy■ How will your reach your customers? ■ How much website traffic? ■ Type of sales model (direct, keywords,

telesales, through partners, etc.)■ What will it cost to sell the product?■ What are the risks?■ How long before the sales model is proven?■ What will it take to prove the cost of sales?




34

Sales, Marketing, Alliances Tips■ Your product is unlikely to “sell itself”■ Examine sales models and financials from similar

companies to see what works; estimate costs■ Compare (total expenses spent selling to date) /

(number of customers) = sales & marketing costs■ Compare sales & marketing to product cost■ Factor in:

Sales ramp up time Customer education time Customer budget cycles Sales compensation requirements Not all reps make quota Typical # accounts/representative # contacts per account




35

How will you build it?




36

Operations/Manufacturing

■ For product companies■ How will product be built?■ Who on the team is managing?■ Are costs known? Contracted for?■ Offshoring? Outsourcing? Your team’s

experience with this?




37

Probably requires the most effort after

“customers”




38

Financials■ Quarterly for two years, 5 years total

IncomeExpensesMarginCash Requirements

■ Summarize financials in a table■ Include hockey-stick graph■ Include key assumptions■ Reference your financial model (the spreadsheet in

your investor kit)




39

The Ask




40

Financing/Uses of Funds■ How much capital are you raising?■ Debt/equity?■ How will the money be used?

Complete prototype Customer acquisition Management team Product development Etc.

■ If this is such a good deal, who are the previous investors, and where are they now?

■ Be prepared for exit strategy w/ angels; exclude for meetings with VCs

■ Do not include a valuation




41

This Section Speaks Volumes About

You As A Leader




42

Team■ Describe the team members and advisors

Their role & responsibility relative to the plan, and Their relevant experience achieving similar results

■ CEOPrior relevant experience?Who is accountable for the investment?Avoid “Three musketeers”




43

Cover

■ Company name■ Industry■ Date■ Contact information

Name of primary contactEmailOffice phoneMobile phoneCompany website




Tool: Business Concept Questionnaire

44

Writer’s block? Make this your first stop – 12 page questionnaire




Steve, your business concept questionnaire is AWESOME. It really helped to expand how to describe our business and structure our investor presentation.

We had our first VC meeting today, and it went very well – the questionnaire helped us crystallize our business concept and anticipate the vast majority of their questions…. Thank you!

- Phil Cullen President, Acqua Consulting

45

“ “




46

Questions?

■ Why a business plan

■ What is your concept

■ What to include

■ How to get started

■ Q&A



how to write a great business plan berkeley

Business

tennant consulting

business plan

steve tennant

marketing

sales model

managing director

amp

plan