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Writing The Winning Business Plan

George [email protected]

Derby Management Proprietary Content-2015 ©

The Art of Creating…

The Winning Business Plan

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A Business Planning Architecture

Overview

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The Chris Columbus Plan Process…

Pre-planning…

• I have a pretty good Vision • I will bring back gold and riches• I need some money and ships• I am not too sure how to get there• I am also not sure of how long it will take• But, I’ll be back soon…

Derby Management Proprietary Content-2015 © 4

The Chris Columbus Plan Process…

Post Planning Follow Up…

• I’m not too sure where we went• I do know it was not where we expected to be • There were a lot of strange people there• It took a lot longer than I expected.• I did not bring back the gold that I said I would• I’d like some more money & ships to try again



Planning Architecture…

Why do you need one? 3 reasons

1. You need a plan constantly in your head to identify where you and your managers are along the path to growth.

2. You need to keep your month-to-month activities in balance with your longer term Tactics, Strategies and Vision.

3. You need something to be able to quickly and easily translate to the rest of your managers.

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Just What Are Business Plans?

Elevator Speech

Executive Summary

Presentation Pitch

The Business Plan

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NOTE: can be ineither MS Wordor Powerpoint

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Marketing& Market Analysis

Plans

Company Business

Plan

Product & Services

Plans

A Business Planning Architecture( Everything needs to fit )

Sales Plans

FinanceMetrics

& Review=Strategy

Engineering &

Manufacturing

Service Plans

Management’s Job is One Simple Thing:Create Highly Scalable Growth

8Derby Management Proprietary Content-2015 ©

Vision: Future State in 24-36 plus months

Strategies: Primary Directions in 1-18 months

Tactics: Operating Plans in 1-6-12 monthsEvery Tactic has Objectives

Objectives: Measurements in 1-6-12 months.

Planning Terms & Timelines




The Details

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The Traditional Business Plan…

• An Executive Summary• 7-9 sections• 20-30 pages with financials

• Excites the reader, does not try to educate

• Provides clear details on how we make money• Brings out the richness of the business idea.• Details the market opportunity & complexity• Details the business and sales models

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What’s included?• 7-9 Sections…

1. Executive Summary2. Introduction to the business3. Definition of products & services 4. Overview of markets5. Overview of sales & marketing plans6. Overview of products and roadmap7. Summary of manufacturing & operations8. Management team bios 9. Four pages of financials

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…at least these

You Must Tell Me

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1. Target customers.– Whom do you serve? – Ideal customer: industry, location, size, type and so on– Create personas of your target customer – Craft messages that will resonate with them.– Resonate and differentiate.

2. Need/business problem.– What needs and business problems do you address? – How do you help?

You Must Tell Me-1

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3. How are you going to Market, Sell & Solve that need?– Processes, math, metrics & technologies– You must understand the New Rules of Sales & Marketing– What are the rational & emotional benefits of solving the need

4. Your offerings.– What’s your product and service approach?– How do you solve problems and work with customers? – Notice that company and offerings are # 4 here.

• Think “buying” first “Why does your Customer buy?”• Selling is second • Frame your offerings within the context

of Needs & Value

You Must Tell Me-2

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5. Proof of concept.– Demonstrate your approach has worked – Define similar solutions for similar problems for others– How do you substantiate your claims?

6. Differentiation – Why is your offering preferable to other options?– What’s special? – What differentiated?– WHAT IS THE VALUE?

You Must Tell Me-3

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How do you start?

Pay attention to The Rules…

– Be compelling– Be brief, focused, & deliberate– Focus on the markets & on your customers – Provide solid market research & hard data– Be innovative and provide unique value – Define an experienced management team



Don’t just start writing…

Preparation is The Key to Success.

– Question everything…• What’s our Vision?• Can we explain it to others ?• What business are we in today?• Who are our customers in 3 years ?• How are we going to sell them? • Do we have a 3 year product map?

Vision

Strategies

Tactics

Business Plan Focus

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One more preparation task…

• Analysis of assumptions…

– Internally, what do we want for…• Revenue, margin and profit growth rates• Cost of goods• Sales acquisition costs & Sales channel models• Hiring rates and ramp speed• Technology investment rates• Product costs & expected margins• G&A expense percentages• Receivables, payables, and financing costs


Now, you can start writing…

What you need…

– A quiet place and time.– All of your data easily available.– Start writing by yourself. Not a team effort.– Get the content down quickly.– Send a first rough draft to others quickly. – Write draft after draft after draft after…..



The Pain

• Describe the problem that you’re solving?– Describe that pain in detail– Quantify the size and level of pain

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The Business Model-1

• Clearly define the business. What do you do?– Use really Clear, Concise, Consistent language – What’s the basic architecture of the business?– How are you going to make a lot of money?– What are the Value Differentiators ?

• Summarize: Product and/or services you’re selling• What’s the status today?

– Product development– Customers– Management Team (full and part time)– Important partnerships or affiliations– Funding to date.

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The Business Model-2

• What’s In & What’s Out?– What are the core competencies you want in?– What is insourced? – What is outsourced? Who are your “partners”?

• What’s the sales channel structure– Direct? Indirect? Distributors? VARs? OEM?

• What’s your pricing strategy?

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The Compelling Value Proposition• What’s the #1 reason that buyers will buy?

– Use concise and clear language• Define the ROI model and what your customers

can expect by using your product and service.

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The Market Section

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The Market-1: Create the Overview

• Quickly and succinctly move from “Total Available Market” to “Served Available Market” to “Our Sweet Spot”– These are your specific one or two focal points

in the market where you are going to make your mark for the first year or two.

• What are the industry trends?• Detail Our Sweet Spot by outlining the…

– Decision Makers, Champions, & Influencers– If you do not, and you tell me your selling into

healthcare, government or education, I will ask anyhow.

TAM

SAM

OSS

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The Market-: Where & Why You?

• What’s the opportunity in Our Sweet Spot?– How big can it be in 2 years? In 5? Why?

• Answer the question… “Why us?”– What’s the magic?– Do not tell me “First Mover Advantage”

• If you do, I’m going to look at my watch

– What is the – What are

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An Example of Market Size

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The Solution

• Detail the product and/or service offerings– Very clear and concise explanations– If there are multiple products and services,

clearly delineate which is which and which is the product or service that you’re starting with.

– Use a timeline trajectory– Use graphics

• Define the technology – Provide a general overview– Build an architectural block diagram if possible– Show a roadmap over time

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The Competition• Do not tell me there is none

– I’m looking at my watch if you do• Build a comparison matrix graphic or table

– Assign weighting factors – Indicate which advantages are most important

• What are the competitive advantages or disadvantages of your product compared to?– Build a summary grid and show me

• What are competing technologies?• Why will you win against the other guys?

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Examples of Competitor Matrices


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Competitive Analysis

Bravesof t Tech

Buerlson Remot e DBA

Cint ra

Connect t r ia (Lot us)

Core Services

Dat aBASE dba

Dat abase Specialist

DBA Direct

DBA Group

DBA Zone

FAMSOFT

Marlabs

Nt iret y

Pics Remote DBA (Progress)

PYTHIAN

Rapidigm

Remote DBA Expert s

Sensible DBA

Sof t ware Int ernat ional Concepts

Spar row Consult ing

St rat avia

Topaz Technologies

TUSC

Virt ural DBA - Xt ivia

0

20

40

60

80

100

0 20 40 60 80 100

Focus on Managed DB Services

Serv

ice

Qua

lity

“Quality, Top Reason For Choosing Vendor”

Market Overview



Management

• Who is on your management team? – Roles & responsibilities?

• Do not tell me you have a CEO, COO & President– Very brief one liners on backgrounds

• Who, What success, Why?– Define key positions TBH

• Board of Directors if any• Primary Advisors

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Status Today

• Exactly where are you.– Product– Customers– Team– Funding

• The critical milestones for the next 12 months

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An Example of a Milestone Timeline

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Product MilestonesPre-Release with SGI in 2005 with GA release Oct 2006

2004 2005 2006 20082007

Star-P Development

SGI SMP Latex Server Initial Alpha test

MATLAB® focus

Star-P V2.4

Limited Availability Release for SGI Latex SMPs (Q2)

General Availability Release for SGI Altix SMPs, x86-64 Clusters & SMPs, Star-P Connect SDK(Q4)

Star-P V2.5 (Q2)

GA Release for x86 Clusters, work load manager integration,Python Beta

Star-P V2.6 (Q4)

Python GA + R BetaEvaluation Download

Star-P V2.7 (Q2)

GA R Language, Limited Availability of parallel compiler optimizationsDevelopment

initiated to commercialize M.I.T. code base

Technology licensed from M.I.T.

Star-P V3.0 (Q4)

Enterprise scalabilityFull Multilanguage Advanced CompilerOptimizations



The Financial Section…

What Professional Investors Expect

Lots of numbers is not the answer !


Assembling a Bottoms-Up Plan80 % of your effort should be spent on the top line

• Define the market opportunity– revenues, potential customers, units available

• Project an achievable penetration rate– What is your go to market plan?

• Revenue– ASP per unit – consider product cost and distribution

• Depict the economics surrounding a single sale– How will the customer measure ROI?– What is the economic impact to you? Price, cost, futures?

• Define the model and scale it!


Forecast Content / Format

Investors expect to see…

• Five-year summary projections • Full, cohesive set of financial statements

• Statements should correlate • Changes in each statement should agree

• Statements that are supported by monthly detail • Until breakeven point / profitability, • Then quarterly for two years and yearly thereafter

• List of major assumptions


Sensitivity Analysis…

Models must be able to quickly assess cash impact of…

• What happens if sales are +/- 20%?• What if unit sell ramp is slower?• What if average sell price is 20% less than planned?• What if we accelerate Sales hiring?• What if product development is delayed?• What if a management change is necessary?


Typical Finance Presentation Formats


$(200)

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

jan feb mar apr may jun jul aug sep oct nov dec jan feb mar apr may jun jul aug sep oct nov dec

1700

$1700 Investment to cover 18 Months of Cash Burn

The Cash Curve is your most important Financial Report





I’m going to need some money

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Sources of funding for Early Stage entrepreneurs

• You• Your family and/or your friends• Others -- grants, government, customers, banks• Then there are professional investors:

– Angels– Super Angels– Micro VCs– Angel Groups– Venture Capital firms

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Where can it fall apart

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1. Undervaluing importance of management team

– Staffing with friends or neighbors; delaying personnel decisions; devoting too much time to your technology or your product and too little to developing your team

2. Attempting to build your business around rocket science

– Zealously pursuing technology; overlooking the business– Failing to address how the technology solves a real problem– Failing to focus on the needs of potential customers– No balance between technology & the value proposition.

The Top 10 Mistakes

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3. Not understanding the new rules of Sales & Marketing– Sales & Marketing dramatically changed 5 years ago– They are dramatically changing again right now– All about process & tools, math & metrics and technology– And, of course, hiring the most experienced people

4. Over-valuing the business – Overvaluing when fundraising or selling– Not fully evaluating term sheets that affect valuation

5. Failing to communicate with important constituencies • Over-promising & under-delivering• Overlooking or not addressing the evolving needs of investors or

of customers

The Top 10 Mistakes

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6. Failing to tap knowledgeable advice – Not seeking tax, accounting or IP advice– Failing to properly utilize the Board– Listening to the wrong people– Selecting an unnecessarily complicated capital structure

7. Fear of dilution or loss of control – Raising too little capital– Investing too many personal assets in the business

The Top 10 Mistakes

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8. Spending too much for too little – Spending too much of what little you have for small benefit

9. Partnering too early – Losing control:

• Opportunity or brand to a customer or strategic partner

10. Failing to understand the changing roles of founders – Recognizing the appropriate time to transition

Top 10 Mistakes

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Thank-you

George SimmonsDerby Management

[email protected]

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