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How to Write a Great Business Plan

How to Write a Great Business Plan. Steve Tennant Tennant Consulting www.tennantconsulting.com. You Might Be Thinking…. How do I write a business plan? What do I include? How does this process work in the real world? What separates “good” from “great”? How do I get started?

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How to Write a Great Business Plan

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  1. How to Write a Great Business Plan Steve Tennant Tennant Consulting www.tennantconsulting.com

  2. You Might Be Thinking… • How do I write a business plan? • What do I include? • How does this process work in the real world? • What separates “good” from “great”? • How do I get started? • Is there any more pepperoni?

  3. Customers’ Really Big Problem Valuable, Differentiated Solution What’s Our Solution? How “Really Big” Is The Problem? How Are We Different? What are Their Needs and Wants? How Do We Deliver Value? How Do They Solve It Today? What Do We Build/Buy/Partner? How Do They Buy? How to Balance Speed & Quality? What Do They Value/Pay? The “Business Concept”

  4. Your “Investor Toolkit” • Executive Summary (of the Business Plan) • 1-3 page standalone Word or PDF document • Investor Pitch • 10-16 Slide PowerPoint • Business Plan • 15-40 Page Word or PDF document • Financial Plan • 5-20 Page Spreadsheet • 2-3 pages in Business Plan • 1 Slide in Investor Pitch

  5. Investors Due Diligence Advisors Sum Sum Sum Fin Terms BP Sum Negotiations Investor Pitch $ Sum Investor Pitch You PPT Fin BP Funding Investor Presentations PPT All Partners Meeting How This Works I’d like to meet Great, send me your business plan & financials

  6. Business Plan • Sample Table of Contents • Executive Summary • Problem/Market Opportunity • Business Concept & Vision • Solution • Competitive Landscape • Intellectual Property • Customer Value Proposition • Revenue Model • Sales, Marketing & Alliances • Manufacturing/Operations • Financials • Investment/Uses of Funds • Team Lead with your strength • Team • Customers • Solution • IP What’s in a business plan? No “right or wrong” – just “complete” and “incomplete” Adjust sequence to tell your story

  7. Executive Summary • Tips • Draft first, finalize after long business plan is completed • Use to provide “routing information” for VC firms • Leave investors wanting to learn more • Used twice: stand-alone email doc and as intro in your longer business plan • Have other laypeople review & provide feedback • Used to get investor meetings • 1-3 pages • Industry, category, stage • May be required to complete an application • Include short answers to each of the other sections • No NDA: Keep jewels close • Lead with your strength • Show compelling vision • Make the story interesting

  8. What’s the REALLY BIG PROBLEM you’re solving? What’s the market size? How much is spent ON THIS PROBLEM today? How fast is the market growing? Compound Annual Growth Rate (CAGR) Hubcaps vs. cars What are the market trends? Why invest now? Problem/Market Opportunity

  9. Market: Tips for Success • Think Big • $1-1.5B market size hurdle for many VC’s – or their economics don’t work • Include global, not just domestic markets • Have customer purchase knowledge before meeting investors • Bottoms Up • Start with the economics of one customer • Then build it up to a customer base: “Bottoms Up” analysis means this many customers, spending this much = market size • Do “bottoms-up” math: • (# of customers) x (% who buy each year) x (average amount spent annually) = market size • Top Down • Compare to “tops-down” • “Gartner says this will be a $50B market by 2011 – we just need “__%”. This doesn’t work – but it can be used to reconcile your bottoms up analysis.

  10. Terminology • “Available Market” • Everyone who has this problem, that could someday buy your solution • “Addressable Market” • Everyone you plan to address with this version of your solution • “Demand side” vs. “Supply side” • Demand = measure of customer spending • Supply = measure of supplier revenues • Both are valid

  11. Business Concept • Introduce your company - what’s your idea? • What kind of company are you? • “We sell software”, “We license IP to pharmaceuticals” • Who will you sell to? • Specific titles, demographics, examples • What are their biggest problems? • How being addressed today? • What are people willing to pay for your solution?

  12. Examples • “We replace redundant local accounting systems with a single global system…” • “We use a specialized, customized, online survey tool to replace in-person tax interviews by expensive tax accountants…” • “75% of computer users have pictures, music, or other valuable data that is not backed up...” • “Most data security has focused on the corporate perimeter, yet most breaches are internal. We stop internal users from accessing stored data they should not be accessing.”

  13. Solution • What is your solution to the problem? • What is your technology? • Underlying technology? • Platform decisions? • Development tools? • How does it work? • How is it better? • Functions? Features? • What are you actually selling? • Answer, “So what?” Describe benefits.

  14. Solution: Tips • Include 1-2 pictures, diagrams, graphs, flowcharts, screenshots. • What’s your vision? Roadmap? • What is your role in the value chain? What other components to the “Whole Product”? • Layperson language for angel investors and BP competition – assume VCs have experience • Save technical details and secret recipes for due diligence • Show some restraint!

  15. Customer Use & Value Proposition • Include your protagonist, the customer, in the story. • How is their life better after using your solution? • How do economics work for one customer? • How does that customer justify purchase? • Include “Whole Product” cost

  16. Competition • From the buyer’s perspective • Who else do buyers consider as substitutes? • From the investor’s perspective • If you prove there’s a profitable market, who else would enter? Then how will you beat them? • What’s your strategy to win long term?

  17. Barriers to Entry/ Intellectual Property • Brief (1-2 sentence) patent description & number • Patent approval status • Status of key regulatory approvals (e.g., FDA approval, NSA certification, Gorilla vendor certification) • Also different business model, limited distributors or partners, few global players, financials required to be successful, etc.

  18. Revenue Model / Business Model • Describe revenue streams & pricing, e.g.: • License fees, subscription revenues, service contracts, consulting fees, gain share, etc. • Distinguish 1-time vs. ongoing • Distinguish by product and market • What is pricing based on? • How does price compare to customer value? • What PROOF do you have that customers will actually pay this for your solution?

  19. Sales, Marketing & Alliances • A.K.A. “Go to Market” strategy • How will your reach your customers? • How much website traffic? • Type of sales model (direct, keywords, telesales, through partners, etc.) • What will it cost to sell the product? • What are the risks? • How long before the sales model is proven? • What will it take to prove the cost of sales?

  20. Sales, Marketing, Alliances Tips • Your product is unlikely to “sell itself” • Examine sales models and financials from similar companies to see what works; estimate costs • Compare (total expenses spent selling to date) / (number of customers) = sales & marketing costs • Compare sales & marketing to product cost • Factor in: • Sales ramp up time • Customer education time • Customer budget cycles • Sales compensation requirements • Not all reps make quota • Typical # accounts/representative • # contacts per account

  21. Operations/Manufacturing • For product companies • How will product be built? • Who on the team is managing? • Are costs known? Contracted for? • Offshoring? Outsourcing? Your team’s experience with this?

  22. Financials • Quarterly for two years, 5 years total • Income • Expenses • Margin • Cash Requirements • Summarize financials in a table • Include hockey-stick graph • Include key assumptions • Reference your financial model (the spreadsheet in your investor kit)

  23. Financing/Uses of Funds • How much capital are you raising? • Debt/equity? • How will the money be used? • Complete prototype • Customer acquisition • Management team • Product development • Etc. • If this is such a good deal, who are the previous investors, and where are they now? • Be prepared for exit strategy w/ angels; exclude for meetings with VCs • Do not include a valuation

  24. Team • Describe the team members and advisors • Their role & responsibility relative to the plan, and • Their relevant experience achieving similar results • CEO • Prior relevant experience? • Who is accountable for the investment? • Avoid “Three musketeers”

  25. Cover • Company name • Industry • Date • Contact information • Name of primary contact • Email • Office phone • Mobile phone • Company website

  26. Tool: Business Concept Questionnaire Writer’s block? Make this your first stop – 12 page questionnaire

  27. Questions? • Why a business plan • What is your concept • What to include • How to get started • Q&A

  28. How to Write a Great Business Plan Steve Tennant Tennant Consulting www.tennantconsulting.com

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