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© Copyright Dr. Barbara M. Fossum

2001 - 2003

Business Planning

Session Two

STC 396Technology Enterprise Design and

Implementation


2001 - 2003

Learning Outcomes

Describe new-venture business planning as a necessary process

Defend the importance of venture planning prior to business planning

Defend the importance of addressing uncertainty in the new-ventures business plan


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First, let’s address some issues or questions surrounding new-venture business planning . . .


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Must you write a business plan?

Enables the determination of whether the proposed business is possible and worth the effort

Provides the strategy and mechanism to test assumptions and change course as required

Source: Block and MacMillan, Corporate Venturing


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“Realize that business plans are everything and nothing.”

John Nesheim, High-Tech Startup, 2000

What does Nesheim mean?


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What are the Differences?

Independent versus corporate venture plan:

(Corporate) Strategic relationship with parent firm

Others?


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What are the Differences?

Plans for new venture versus ongoing operation:

New venture plans include actions to test assumptions

– New ventures -- relatively unknown and unstable environment

– New ventures – shifting assumptions and reactions

Others?


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New-Venture Planning Subprocess

1. Identify important events and actions that must occur

2. Determine sequential dependencies of events and actions

3. Develop a critical path milestone chart

4. Identify significant “go/no go” assumptions

5. Develop additional test actions for critical assumptions as needed

6. As events occur, change assumptions and planned future actions as necessary


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Candidate Milestones

1. Completion of concept and product testing

2. Completion of feasibility study

3. Product development

4. Pilot testing

5. Market testing

6. Production startup

7. Bellwether sale

8. First competitive response

9. Reaching breakeven volume

Source: Block and MacMillan, Corporate Venturing


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A New-Venture Business Planning Process

1. Determine information/knowledge requirements2. Gather information/create knowledge3. Enhance the business model4. Create the launch plan

1. Define actions, milestones required for launch and early growth2. Carefully document assumptions3. Develop actions to test assumptions

5. Execute the plan1. Perform actions2. Test assumptions

6. Adapt1. Change course if necessary2. Cycle back to any step

1.0 2.0 3.0 4.0 5.0 6.0


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What is the relationship between a business plan and a business model?

Value Proposition or Value Cluster

Marketplace Offering

Resource System

Financial Model

Rayport, Jeffrey F. and Bernard J. Jaworski. “Business Models” in E-Commerce. NY: McGraw-Hill, 2001.


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Relation to key factors?

Pain – Big value provided

customer Solution

– Clearly addresses pain

– Innovation Market

– Size, growth, ancillary opportunities

Customer– Is reachable, and will buy

Team– Execution skills

Sustainable competitive advantage

Ability to make money Window of opportunity


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FACTOR t

CONTENT (MIDDLE)The Pain (problem

addressed or "wow" product)

Key factor: value creation. The presentation makes clear that the product or service creates value in the marketplace (meets a real need, solves a burning problem) at a price customers will pay. The payback is obvious and it occurs within one year. Do not overstate the impact of the product or service.

SolutionThe presentation clearly describes what the envisioned product/service is and does.Key factor: uniqueness, innovativeness. The presentation makes clear that the envisioned product or service has innovativeness and/or uniqueness (based on some proprietary aspect). Product has low barriers to adoption.

Customers The presentation makes clear who the initial customer is, and includes characteristics of the customer and examples. Customers are reachable.

Market

Key factor: a market. The presentation makes clear that there is a large and growing market for product/service. The presentation includes a brief description of the market and industry.-- The target market is clear.-- The source of/rationale for market size is credible.-- The market growth rate is realistic.-- The projected market potential is adequate to support the business and provide the return to stakeholders.-- The market is emerging or fragmented, and imperfect. -- There are barriers to entry.Key factor: timing. The presentation makes clear that a window of opportunity exists.

CompetitionThe presentation clearly defines/shows that the team knows who the competition is, and provides the key characteristics and differentiators of the competitors, relative to what is important to the customer.Do not dismiss the competition. Do not list only the obvious competitors. Do not miss a key competitor.

Competitive advantage

The presentation clearly defines the competitive advantage of the product or service offering, including possible barriers to entry by the competition.The presentation clearly shows that the venture can sustain a competitive advantage. Key factor: sustainable competitive advantage. The presentation clearly states what is or will be the intellectual property (IP) protection be for the product/service or the enabling technology.

R & D and Product Development

The presentation describes clearly:-- Current product or service development status -- What must be done to get it market-ready-- The risk of any enabling technology development remaining-- Ability to continue to produce innovative products-- Competitive advantage in these processes.

Production or Operations

The presentation clearly states how the team will build the product or provide the service.The presentation describes clearly:-- The team's ability to produce the products and services in adequate quantity, at acceptable quality and at competitive or targeted cost-- Any outsourcing of non-core-competencies or non-core technologies for production or logistics.

Distribution and Sales Channels

The presentation describes clearly:-- The team's ability to get the product to the customer with a reasonable distribution plan-- Extent to which channels can be controlled.

Financials and Funding

Requirements

The presentation describes cleary how the team will make money in the business. Key factor: financial viability.-- The first-year sales projections are realistic-- The cash flow fits with funding needs-- The profit and loss projections make sense-- The balance sheet projections make sense-- The funding requirements and projected use of funds are reasonable-- A sufficient return to stakeholders is shown.The presentation clearly articulates the key assumptions on which the financials are based.

Relation to Mid-Level Venture Screening Criteria?


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Let’s look at the following traditional new-venture business plan template to see how well it fits:

Your context Uncertainty


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Business Plan Outline Cover sheet Table of contents Executive summary Industry, company, products and services Market research and analysis Economics of the business Marketing plan Design and implementation plans Manufacturing and operations plan Management team Overall schedule Critical risks, problems, and assumptions Financial plan Proposed company offering Appendices

Cover Sheet

Table of Contents

Executive Summary

Industry, Company, Products and Services

Market Research and Analysis

Economics of the Business

Marketing Plan

Design and Implementation Plans

Manufacturing and Operations Plan

Management Team

Overall Schedule

Critical Risks, Problems and Assumptions

Financial Plan

Proposed Company Offering

Appendices


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The Cover Sheet

Contents Contact

information Tracking

number

Suggestions Keep the tracking

number low

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Second Page

“The business plan has been prepared by management to be used in the operation of the company. The data contained herein are confidential and proprietary and only for use by management. By acceptance hereof, the recipient of this Business Plan agrees that neither he, she, it, nor any of its officers, directors, employees, agents, associates or affiliates, will divulge to any other party any information contained herein or any notes, summaries or analysis derived there from, reproduce or redistribute this plan in whole or in part, and agree further to return this Business Plan promptly to the Company upon request.”


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Table of Contents

Contents Page numbers

and corresponding headings

Suggestions Include the titles of

exhibits, tables, charts etc. if you list them.

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Executive SummaryContents Business concept and

the business The opportunity and

strategy The target market and

projections Competitive

advantages The economics,

profitability, and harvest potential

The team [The offering]

Suggestions Three-page max Expanded version of

elevator speech 3/4 page focus on

management

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Clarification

Executive summary of a business plan -- less than or equal to 3 pages

Another use of the term “Executive Summary” – a “dehydrated” business plan -- 5 to 10 pages


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Contents The industry The company and

the concept The products or

services Entry and growth

strategy

Suggestions Show trends Use charts and

graphs

Cover Sheet

Table of Contents

Executive Summary

Industry, Company, Products and

Services



Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Customers Market size and

trends Competition and

competitive edges

Estimated market share and sales

Ongoing market evaluation

Suggestions Show trends Use charts,

tables and graphs

Use geographical segmentation ++

Show size in monetary figures and units

Explain surveys

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Competition

and competitive edges

Suggestions Provide lots of info

on each Use appendix for

extra detail (e.g., brochures)

On matrix, note features carefully

Clarify your uniqueness relative to EACH competitor

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Estimated market

share and sales

Suggestions Show trends Use charts, tables

and graphs Use geographical

segmentation ++ Show size in

monetary figures and units

Explain surveys

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Gross and operating

margins Profit potential and

durability Fixed, variable and

semi-variable costs Months to breakeven Months to reach

positive cash flow

Suggestions Link to the market

analysis via your revenue (sales) projections and selling price

Factor in your sales cycle, “close” cycle

Show breakeven as a % of market share

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Marketing Plan

Contents Overall marketing

strategy Pricing Sales tactics Service and

warranty policies Advertising and

promotions Distribution

Suggestions Describe pricing

strategy Describe

partners Include

promotion budget

Provide details

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Development

status and tasks Difficulties and

risks Product

improvement and new products

Costs Proprietary

issues

Suggestions Specify actions

for market readiness

Discuss risks specific to development

Explain releases in terms of the market

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan

Design and Implementation

Plans


Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Operating cycle Geographical

location Facilities and

improvements Strategy and

plans Regulatory and

legal issues

Suggestions Provide sources for

key costs If you outsource,

describe how you will manage the quality

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Management TeamContents Organization Key management

personnel Management compensation

and ownership Other investors Employment and other

agreements, and stock option and bonus plans

Board of directors Other shareholders, rights

and restrictions Supporting advisors and

services

Suggestions Include relevant

skills, experience and accomplishments

Put full resumes in an appendix

Identify gaps

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Overall Schedule

Contents Schedule

Suggestions Use a timeline to

show major business and technology events

Include a milestone chart

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Risks Known problems Assumptions

Suggestions Summarize the

risks in a table: risk or potential problems, mitigation, risk level

Discuss each risk thoroughly

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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The Financial Plan

Contents Actual income

statements and balance sheets

Pro Forma income statements

Pro Forma balance sheets

Pro Forma cash flow analysis

Breakeven chart and calculation

Cost control Highlights

Suggestions Statements are put

in an appendix, with summary at the beginning

Discuss the statements in this section of the plan

Include a summary chart in this section : units sold, revenue, expenses, cash flow for each of three years

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Contents Desired

financing Offering Capitalization Use of funds Investor’s return

Suggestions Include a

traditional sources and uses of funds statement

Do not specify amount of equity to be “given” for the investment

Cover Sheet

Table of Contents

Executive Summary




Marketing Plan



Management Team

Overall Schedule


Financial Plan


Appendices


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Miscellaneous

Terms of license Descriptions of lab trials or approvals Explanations of charts, tables, diagrams

etc. A formal ending


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According to Nesheim, what is the most important, but most poorly

communicated, factor in most plans?

Do you agree?


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“Essentially, every new venture is an industrial experiment (with the assumptions being the hypotheses), and the experiment must be designed to ensure that the hypotheses are tested.”

Block and MacMillan, Corporate Venturing, 1995

What do Block and MacMillan mean?


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Will your plan include these elements?

Go/no-go assumptions and the basis for them

Action plans and objectives, with defined milestones to test go/no go assumptions in each area

Sensitivity analysis (how certain contingencies will impact the venture)

Definition of failure


2001 - 2003

Learning Outcomes

Describe new-venture business planning as a process

Defend the importance of venture planning prior to business planning

Defend the importance of addressing uncertainty in the new-ventures business plan

Download It

Documents

business plans

newventures business

proposed business

business marketing plan

assumptions financial

corporate venture plan

launch plan

business planning session