Ayla Matalon MIT Enterprise Forum of Israel Technion BizTech, 2005 The Business Planning Process The Business Planning Process.

Ayla MatalonMIT Enterprise Forum of Israel

Technion BizTech, 2005

The Business Planning ProcessThe Business Planning Process

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Motivation – why bother

Communications protocol Get acquainted with ‘battle field’ Plan for company growth Form and focus ideas Generate reliable business model Attract capital

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Stages in the forming of a start-up

1. Initial Idea

2. Idea Formation

3. Study - Meeting with Clients

4. Bringing people in

5. Developing a business plan

6. Raising Money

7. Saying goodbye to spouse, family, friends

Decision GOA fairly good understanding of the Idea

Most of know-how necessary 4 biz plan

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The Business Plan Who you are, What you are, What you wanna be

Executive Summary The Company / People The Need and Business Opportunity Product or Service Market and Competition Business Strategy, Marketing and Sales Operations Financials

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Seven questions asked by The Potential Investor about the idea

How clear is the Need Who is the client (/ user / decision maker) Competition, & how are things done now? Tech feasibility, Marketing feasibility Required investment Risks

Is it a good idea?

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Seven questions asked by The Potential Investor

Does the TEAM show

Proper Planning Understanding of the Target Markets

{including the marketing value chain} Focus Well planned financial strategy Openness and honesty Good Communication Skills

Can they execute?

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The Executive Summary

Clear, brief explanations on Need and business concept Company product, benefit to customer The opportunity and strategy Market and competition Financial required and how it will be used Finance prospects The Team

Is it Exiting? Convincing? Do you want to learn more?

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The Company

Origins, objectives and management History in brief, Key employees, Current status Strategy in short (historical)

Does it inspire confidence?

Can this team make it?

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The People

Is the team well balanced? Have they a history of outperforming? Do they have managerial experience? Do they have marketing experience? Does the team inspire confidence?

Can this team make it?Do we enjoy working with them?

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The Opportunity, the Need

Is TAM large, rapidly growing or both? When will the need be present? How will the product or service be priced?

Support? Customer switching costs Competitors and their resources Cash Flow analysis

The heart of the business proposal

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The Product or Service

The need the product meets -- Nice to have, Enabler, Must have

Product description and usage

Competitive advantage

Does it show distinct Benefits? Is it Unique? Operational pitfalls?

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The Market

The Business Environment Market need Size, growth rate, effective segmentation,

current and future markets, food chain: channels and purchasing characteristics

Market Drivers Expected reaction (deals, LOIs, ...)

Does the analysis suggest a strategy?Does it seem reliable?

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The Competition

Who they are– products– prices– customers– marketing approaches, culture– positioning– comparison (SWOT)

Is it open, revealing, specific?

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Business Strategy, Marketing and Sales

Defining a unique business proposition Identifying initial target customers: awareness Penetrating the market Distribution channels, the Food Chain Maintaining Focus !

Can it be executed? What if…Are the penetration levels reasonable?Do the Financials make sense?

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Organization, Operations and Manpower

R&D, Production and Distribution

How and when Facilities Subcontractors Milestones

Is it going to work?

Can they make it happen?

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Risks and Uncertainty Factors

How does management intend to control and minimize risk (Market Risks, Company Risks, people, opportunity and context)

Does it address risk openly?

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Financials – a reflection of your strategy

Realistic projections for a 5 year horizon Cash flow projections Breakeven and sensitivity analysis Highlight key dimensions (sales, earnings, cash

surplus)

Are the underlying assumptions

reasonable and clearly stated?

Do the results make sense?

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PLAN AHEA

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The Financial Forecast

Goal

Present business potential: ROI (return on investment)

Derive financial requirements

Message of reliability and thoroughness

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About the Financial Forecast

In high-tech companies the expenses is the easy part - mostly personnel

The difficult part is how to estimate the revenue stream

The number part needs to reflect Company Strategy: how the market for your product is going to work

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Common Mistakes

Too much emphasis on product and technology Weak marketing plan Failure to identify details regarding competition Unrealistic business strategy Profitability and growth not discussed in detail Weak financial model Over Optimism

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Summary

The business planning process is a continuous effort

the target of which is to– distill the business idea – support it with factual evidence through

extensive market research

– discover whether the company

can make it happen