Winning Business Plan

7/18/2019 Winning Business Plan

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A Winning Business Plan

Susan A. Block

Technology Management Program

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BOWMAN &

ASSOCIATES, LLC



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What Is a Business Plan?

Structured thought process/market validation

Structure to collect thoughts

Test assumptions

Leads to otherwise overlooked realizations(markets, pricing, etc.)

Capital Raising Document



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Capital Raising Document

Conveys:

Idea – Product/Service and target Market

Prospects – Market Potential

Why you will be successful

• Competitive advantage

• Management team

Purpose: Sell the idea, yourself and the

magnitude of the opportunity



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Ideal Business Plan

Addresses an Identified Need

Is Customized With Different Versions

Is Well Thought out and Researched

• Takes a minimum of 2-3 months (200-300 hours)

• Length: Typically 30-50 pages (excluding exhibits)



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A Winner

Great Executive Summary

High potential revenue projections

Addresses defined need

Huge market potential

Thoroughly researched (did their homework)



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What I Look For

Is it a good idea?

Market potential

Revenue potential

Is it fundable?

Can the team do it? (or can a team bepulled together?)



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Tips to Differentiate Your Plan

Easy to read

Exploit uniqueness

Qualify competition

Emphasize

management strength

Market drivenapproach

Cite distribution plan

Substantiate

statements with

market informationand references

Use of funds

Exit strategy



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General Profile of a “Winner” Business Plan:

Addresses a defined need

Strong Management Team (or Board)

Great Executive Summary

High Revenue Projections ( but totally

justified and conservative)

Huge Potential Market

Thoroughly Researched Plan – with

References to Statistics/Published Studies

Industry is still in growth phase



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Address Defined Need

If Unfulfilled Need Exists:

• Providing product/service to a market sittingthere waiting to buy

• Easier marketing task

• Less competition initially• Constraint is how quick can scale up rather

than marketing

• Often better margins available (higher prices)



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Other cases:

Customer doesn’t know they need it

• Huge educational task – need to educate market and then sell

to them

• Will take a long time and a lot of $

• Often first one is not successful

A “Me Too” product (need already being fulfilled)• Need to show how you are better/less expensive etc.

• Need to take the customer away from existing solution

• Takes a lot of marketing time and money

• Margins lower (prices lower)



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Strong Management Team

For most investors, Management Team is themost important indicator of success

• Experience• Diversity

• Synergy

Ideally includes a successful entrepreneurthat has done this before

Reduces Risk



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Importance Of Executive Summary

Less than 5% of those plans are ever reviewed beyond

Executive Summary

Typical VC invests in < 1% of the business plans they

reviewGuidelines:

• Should be 1 – 3 pages in length

• Written LAST



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Key Components of an Executive Summary

1. What is the problem?

2. How are you solving that problem?3. Why can YOUR COMPANY win in

this business?4. How real is the product and

technology?



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Key Components of an Executive Summary

5. How real is the market? Who is the

customer, how much will they pay,do they pay for similar products now

etc. etc?

6. How will you enter the market - who

are the competitors, what is the

channel?

7. Why do you need money and how

will it help you?



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Detailed Evaluation of Business Plan

What investors want to see or

will look at



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Market Validation

First step to evaluating a business plan

Is there a desirable market opportunity?

Can they profitably exploit this?

Is their sufficient long term potential or an

attractive exit?



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Industry Attractiveness

Size - now and

estimated future

Growth rate

Competitive structure

Price

Branding

Quality

Technology

Economies of

scale

Firm dominance



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Market Opportunity

Competition - Firms

Size of competitors

Profitability

Is there a niche for you?



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Market Validation

Competition - Products

Direct competitors or substitutes

• Feature/benefit comparison with your

product/service

Pricing

BusinessPlanNeeds toConvey:



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Business Plan Needs to Convey:

Business Model

How are you going to make $

License technology

Sell product to someone else to package and sell

Buy components and repackage




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Promotion Plan

The communication channels you will use

to make the customer aware of your

product/service and convince them to purchase

e.g.: advertising, on-line demonstrationvideos, packaging

PR

Collateral




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Distribution Plan

The distribution channel you will

use to move the product or service

to the customer

e.g.: direct sales, wholesaledistributors, brokers




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Demand Forecast

Estimates of product or service

sales, based on the market analysis

and assumptions about the

effectiveness of the pricing, promotion, and distribution

strategies



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Common Oversight

Do not take market analysis far

enough

Do not define addressable and

target markets



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Proper Scope

Determining the proper scope of the targetmarkets is critical.

If the definition of a target market is too broad, it will be hard to identify theirinformation needs and you will waste

money on promotion that won't get theresults you want.

If the target market is too narrowly defined,

it will be difficult to find and generate acustomer base that is profitable.



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Potential Market

The total number of people who could buy

from your business.

For example, if you are selling solely over

the Web and only accepting credit cards for

payment the potential market would beeveryone in the world who owns a credit

card and has access to the Internet.

Obviously, this is a huge, but illusory,market.



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Addressable Market

The group of individuals in the

potential market who are likely to havean interest in what your business has to

offer.

For example, for Santa Barbara Roasting

Company the addressable market is persons

who live in Santa Barbara or travel thru here.



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Target Market

The group(s) of individuals in the

addressable market that are likely to buy,

based on the segmentation factors.

In other words, who will buy your product

or service provided consumer-environmentconditions are perfect and there is no

competition.

Not everyone in target market will buy fromyou

S



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Market Share

The individuals in the target market who can be

expected to make a purchase from your business.

Your market share is affected by the structure of the industry, the impact of

competition,

strategies for market penetration, and

the amount of capital the business is willing to

spend in order to increase its market share.

Market share is estimated in the demand forecast

section of the marketing plan, which is beyond

the scope of this lesson.

Id tif i T t M k t



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Identifying Target Markets

With this background and market-

definition description in mind, it is

time to identify your primary,

secondary, and, if necessary,tertiary markets.

P i M k t



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Primary Market

The primary market is the group of

individuals in the addressable market most

likely to buy your product or service.

Think of the primary market as your

"premium customer" or "who is most likelyto find my site and buy something from it"

or "who is chiefly interested in what I have

to sell".

S d M k t



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Secondary Market

The secondary market is another class of

individuals who are "second most" likely

to buy your product or service. In other words, look for another distinct

group in the addressable market withdifferent segmentation factors from the

primary target market.

T t M k t R h



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Target Market Research

With 1-2 target markets identified, the

next step is to conduct market research to

provide some concrete data about them.

In this section you are seeking answers to

questions such as: What are the specific demographics (age,

education, income, etc.) of these markets?

How many individuals are in the target

market?

Are these markets growing? stable?declining?

R hR



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Research Resources

Trade associations and

publications

Company websites

Hoovers -

http://www.hoovers.com

Edgar Online - http://www.edgar-online.com

ResearchResources (cont)



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Research Resources (cont)

Research consultants

Boston Consulting Group -

http://www.bcg.com

Cahners - http://www.cahners.com

Forrester Research -http://www.forrester.com

Gartner Group - http://www.gartner.com

IDC - http://www.idc.com

Jupiter Communications -

http://www.jup.com

EntrepreneurialResources



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Entrepreneurial Resources

Business Magazines

http://www.redherring.com

http://www.thestandard.com

http://www.entrepreneur.com

http://www.inc.com

http://www.business2.com

Organizations http://www.lava.org

http://www.socalTECH.com

http://www.nvca.org

http:/www.larta.org

VC Listings and

Information http://www.vfinance.com

http://www.corpfinet.com

http://www.pwcmoneytree.co

m

http://www.internetvcwatch.c

om

http://privateequity.dowjones.

com

OnlineBusinessPlanResources



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Online Business Plan Resources

http://www.sba.gov/starting_business/planning/basic.html

http://www.bizplanit.com/vplan.htm

http://www.businessplans.org

http://www.americanexpress.com/smallbusiness/resources

/starting/biz_plan/

http://www.entrepreneur.com/article/0,4621,287355-

1,00.html



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