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BACKGROUND
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I: A Business Plan is a Communication Tool
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COMMUNICATION TOOL
Both substance and form are important
Often, a reader’s perception of your business/idea will be based on the business plan you prepare
II: Think about whom are you communicating to
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COMMUNICATION TOOLIs it - a VC - an angel investor - a strategic investor or - someone else?
Each one of these will look at
the business plan differently
COMMUNICATION TOOLIs it an expert who has some understanding of your business, i.e. such as a technologist or domain expert?
Is it someone who is a an expert in some other area without knowledge of your industry?
III: Logical structure to the plan
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STRUCTURE OF THE PLAN The plan must have structure and include the following:- Business / idea- People behind idea/project- Market size expected- Marketing strategy- Competition- Financials- Other information which makes this complete
SOMEPRACTICAL ASPECTS
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IV: Projections in new or uncertain markets
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TARGET MARKET SIZE
The markets may be:- new- unexplored- latent- uncertain
Think of testing markets or doing market research in creative ways as well as through standard practices
V: Financial Projections when the future is unpredictable
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FORECAST FINANCIALS
There are so multiple variables in a business, which impact the financials, including, but not limited to:
- revenue streams- costs, capital and revenue in nature- capital infusion at different stages- resource constraints
FORECAST FINANCIALS
These uncertainties can be factored in to some extent by using the tools of
- scenario analysis and
- sensitivity analysis
VI: Valuation
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VALUATION
Valuation is based on:- intangibles and - tangibles
Valuation can be computed in multiple ways, the popular methods:- multiples of revenue; profit etc.- multiples of key drivers, eg.user base- cash flow based
VALUATION
Valuation may be driven by - the stake the entrepreneur is willing to give up at a particular stage of investment in the business and - the amount of money required by the business at that stage
VALUATION
Different persons can value the same business differently because they may- use different methods of valuation- use variations in the methods - have different inputs in the methods
Thus, valuation perceptions can vary, and we do have situations where there are divergent views on valuation
VALUATION
Deals can sometimes be structured in such a way that the differences in valuation perception are factored, e.g. linking valuation to performance
VALUATION
Valuation is also the outcome of negotiations, so it is important to identify one’s bargaining power in relation to the deal issues
VII: Protection of Intellectual Property
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IP PROTECTIONIf you do not disclose your plan; you cannot expect an investor to evaluate your business idea and fund you
If you do disclose this, you may lose the idea to someone else, i.e. there is a chance of your idea being stolen or adapted and misused by someone else
What do you do?
IP PROTECTION
You need to do your homework and background check on the potential investor/partner; i.e. you also need to do a due diligence on them just as they do a due diligence on you
If you are looking for investment, at some stage, you will need to disclose much of your idea, so be prepared for this; a VC typically does not sign an NDA
Miscellaneous points to think about
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VIII: Do you disclose weak points ?
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DISCLOSURE
If you do not disclose the negatives, the investor will not automatically assume that you do not have any negatives in your project/idea
DISCLOSURE
Prepare for due diligence by identifying pitfalls upfront and taking steps to mitigate/de-risk to the extent possible
IX: What are the deal drivers
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DEAL ISSUES
Every business has issues which are
- deal drivers and- deal breakers
Try to identify key deal issues from- your perspective and - the investors perspective
DEAL ISSUES
This can help you plan on how you can leverage on your strengths
This can help in negotiating a better deal
X: Roles of team members ?
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TEAM MEMBERS
Plan on roles and responsibilities of team members in terms of execution
Plus think through issues ofmembers’ contribution- in money- in kind- in intangibles
TEAM MEMBERS
Human egos can be fragile and can lead to the break up of the team
Recognise this and try to have realistic expectations of yourself and others
XI: Getting educated on the basics of managing a business
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MANAGEMENT & EXECUTION
Educate yourself about the basics of managing your business
Some things cannot be outsourced
XII: Issues of transition to be thought through
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TRANSITION
Look at the stage of your business and plan accordingly
Growing to the next level may lead to issues such as- letting go of control- letting go of leadership
Are you ready for this?
THANK YOU
Wishing you all success
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