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The Art of Writing the Business Plan

The Art of Writing the Business Plan. Presented by Jeffrey A. Robinson, Ph.D. Assistant Professor of Management & Entrepreneurship. Capital. What is a good framework for entrepreneurship?. Opportunity. Innovation. Networks. Capital. Capital can be acquired, exchanged & converted

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The Art of Writing the Business Plan

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  1. The Art of Writing the Business Plan Presented by Jeffrey A. Robinson, Ph.D. Assistant Professor of Management & Entrepreneurship

  2. Capital What is a good framework for entrepreneurship? Opportunity Innovation Networks

  3. Capital • Capital can be acquired, exchanged & converted • Five forms of capital • Financial (debt, equity, etc.) • Human (skills, education) • Social (networks of people) • Cultural (social resources, family background and knowledge of cultural nuances) • Intellectual (IP in firms, transferable)

  4. Opportunity • The identification, evaluation, exploration, and exploitation of a venture opportunity • The structures around an opportunity or context

  5. The cultivation and management of innovation and innovative practices • The innovation of business models • The protection of innovations Innovation

  6. Networks connect people within organizations and between organization • Networks connect entrepreneurs to capital, innovation, opportunities • Networks tie everything together • Personal Networks/Professional Networks/ Entrepreneurial Networks Networks

  7. Entrepreneurship Opportunity Capital Innovation Networks The success or failure of your venture depends upon how your put these pieces together.

  8. Why is this important? • … because good entrepreneurs leverage capital, opportunities, innovation and networks to create viable ventures • … because good business plans demonstrate how an entrepreneurial team will leverage capital, opportunities, innovation and networks to create a new venture

  9. Traditional Ventures: Types of Firms • Lifestyle firms • generally < $1M in revenues • founders have no desire to expand • founders usually are pursuing their passion • Growth Firms • $1 M to 20 M revenues, 10-20% growth • $20M + revenues, >20% growth {gazelles} • Founders want to expand and grow the firm Scale and Sustainability are key!!

  10. Social Entrepreneurship:Formal Definition Social entrepreneurship uses entrepreneurial and business skills to create innovative approaches to social problems. These are mission driven organizations focused on the double bottom line of social impact and financial sustainability or profitability.

  11. Examples of Social Entrepreneurship across sectors • Charter/Contract/New Schools • New Schools • Social Service/ Social Action • One Economy • Poverty Solutions • Simultel • Underserved/Underrepresented • CitySoft • CityFresh Foods • Economic Development/Workforce Development • Greyston Foundation (Greyston Bakery) Social Ventures can be for profit or non-profit organizations

  12. “The Questions Every Entrepreneur Must Answer” Are my goals well defined? Personal Aspirations Business sustainability and size Tolerance for risk If the answer is yes… Do I have the right strategy? Clear definition Profitability and potential for growth Durability & Rate of growth If the answer is no … Can I execute the strategy? Resources Organizational infrastructure The founder’s role Source: Amar Bhide

  13. Questions for the New Venture • New Venture Idea • What existing need or want does the concept fill? In other words, what is the problem you solve? • Describe the service/product – will it change the way people live, work, or do business? • Who is your customer? What is your market segment? Is there more than one customer group? • What is the unique selling benefit? (Why will they buy?)

  14. Opportunities: Evaluation, Exploration, and Improvement

  15. The real big opportunities are here … • Untapped Markets • Underserved Markets • Underdeveloped Markets • Unique Perspectives

  16. Examples • Dogloo • Dell • TV One • Altitunes/Laptop Lane/WayPort • ZipCar • FUBU/Sean Jean/Phat Farm

  17. Opportunities: Evaluation, Exploration and Improvement • Where do opportunities come from? • Evaluating and Exploring Venture Opportunities • Developing the Venture Idea and Concept

  18. Current Trends • Baby boomers entering their 50s • New boomer crop of children • Growing disparity between rich and poor • Increasing globalization of business • Reinvention of religion • Yearning for high-touch product and services • Mass Customization From the Business Owner’s Toolkit -- www.toolkit.cch.com/text/p01_0595.asp

  19. Other trends • Healthy food/healthy living • Hyper-customization • For profit social service providers • Outsourcing

  20. Common Mistakes in Choosing a Business • Error #1 – Converting a hobby or interest into a small business without first finding out if there is sufficient demand for a choices • Error #2 – Starting the business without adequate planning • Error #3 – Resisting the urge to ask for help. From the Business Owner’s Toolkit -- www.toolkit.cch.com

  21. Assessing and Evaluating Venture Opportunities All ideas are not venture opportunities! All ideas are not created equal!

  22. The Entrepreneurial Process: Simplified Opportunity Identification Opportunity Evaluation & Exploration Opportunity Exploitation Analysis Action

  23. Evaluating an Opportunity Does the opportunity … Fill a need? Show evidence of product/service acceptance? Show that a market/opportunity exists now? Reflect that your product/service/solution is better than the competition’s? Show an upside gain potential? (scale and sustainability) Describe the cost to achieve this potential? Source: Modified from Patterns of Entrepreneurship by Jack Kaplan

  24. The Management Team Are you the right team to pursue this opportunity?

  25. Why a team? • Most successful ventures are led by teams!! • Teams leverage the strengths/creativity of team members. • Solo entrepreneurs have limited capital (financial, human, social, cultural and intellectual)

  26. Survivor

  27. The Management • Are you the right team to pursue this opportunity? • Do you have some experience in the venture area you are exploring? • Do you have some contacts in the venture area you are exploring? • Does your team have most of the business/technical skills covered (marketing, finance, operations, etc.)

  28. The A-Team Knows something about the industry/market/issue Has previous entrepreneurship experience Has a solid team including advisors/mentors who have influence The B-Team Knows very little about the industry/market/issue Is starting their first venture Have a loosely committed team with no advisors/mentors with influence Characteristics of the A-Team vs. B-Team

  29. The Role of Advisors and Mentors • Advisors and Mentors • Volunteers • Provide contacts to resources and key people • Are good sounding boards for your ideas, strategies, etc. • Provide an outsiders perspective • May become investors

  30. Key Hires • Understand where the gaps are in the entrepreneurial team • Develop a list of key future hires for your venture • Explain in your plan what role these key future hires will have in your company

  31. Elements of the Business Plan

  32. Executive Summary • Business Concept • Market Size and opportunity • Product/Service Description • Intellectual Property Summary (if any) • Business Model (i.e. how you will make revenues and profits) • Key Competition • Key Points of Advantage and Difference • Management biographies (1 paragraph) • Financial Summary

  33. Business Concept • Company Overview/History • Description of Industry • Product/Service Overview • Factors giving rise to opportunity • Market opportunity and strategy to exploit it • Industry segment and current participants • Target addressable market and projections • Sources of revenue • Milestone • Key drivers for success and critical assumptions

  34. Business Model Economics • Gross and Operating Margins • Fixed and Variable Costs • Cash Flow Analysis (time and money to cash flow positive) • Break-even analysis (time and money to break-even) • Product or service unit analysis (cost and profit margins)

  35. Market Analysis and Research • Demonstration of market need • Customer Base • Market Size and Trends • Target addressable market and projections • Pricing • Willingness of Customers to Pay Above Corporate Cost • Value Added For Customers, Customer Benefits/Problems Solved • Competition and Competitive Advantage • Overall marketing and selling strategy • Projected sales and market share

  36. Marketing Plan • Strategy and positioning • Tactics • Pricing • Distribution and selling • Communication strategy (Advertising, promotion and PR) • Selling and Collection Cycle • Critical Mass/Reference Customers Required for Market Traction • Implementation Strategy (Customer service, retention, warranty)

  37. Product Development • Development Status and Next Steps • Risk Factors • Costs and Budget • Opportunity Specific Issues

  38. Operations Plan • Operating Cycle • How the Business Works • Manufacturing Process (or Retail Locations) • Shipping/Product Delivery • Geographic Locations and Local Resources • Physical Facilities and Equipment • Human Capital (hiring, requirements, training, compensation) • Regulatory and Legal issues • Business timeline and schedule

  39. Management Team • Organization (Chart) • Key Management Personnel (biographies, esp. key relevant accomplishments) • Management compensation and ownership • Employee Incentive Plans • Board of Directors and other advisors

  40. Critical Risk Factors and Mitigation of them/Contingency Plans • (What are the risks and what are you able to do about them?)

  41. Financing Requirements and Opportunity • Target financings (equity and debt) • Current Offering • Capitalization • Use of Proceeds

  42. Financial Projections • 5 year summary projections • 3 year detailed, quarterly projections • Balance Sheet • Income Statement • Cash Flow Operational • Break-even Analysis

  43. Appendices • Exhibits, articles, tables, specifications, references

  44. Developing the venture idea and concept

  45. Tips on developing the venture idea … • Describe your new venture idea in compelling terms. Be persuasive but not over-the-top! • Be clear about your target customer/client/ community. • Remember to frame your venture idea in terms of the benefits to the consumer/client/community.

  46. Framing Your Business as Benefits to the Customer/Consumer/Community The best benefits are the ones that a potential customer can hold on to. For example: • The consumer can make money with your product or service • The consumer can save money (time) with your product or service • The consumer can feel good (or feel better) with your product or service This approach feeds into the Marketing Strategy!

  47. Questions & Answers ….

  48. 3 great websites Inc Magazine --- www.inc.com – click on article by topic Entreworld – www.entreworld.com Business Owner’s Toolkit – www.toolkit.cch.com

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