Comprehensive Business Plan Guide

1. Comprehensive Business Plan Guide Presented By

2. “Writing a Business Plan forces you into disciplined thinking, if you do an intellectually honest job. An idea may sound great, but when you put down all the details and numbers, it may fall apart” Eugene Kleiner, Venture Capitalist

3. Table of Contents

4. What is a Business Plan? • A Business Plan is the most preferred route of communication between Entrepreneurs/Management of a organization with potential Investors. • It is an indispensable tool to plan the organizations goals and objectives and direct activities to achieve them. • A document that demonstrates the ability of the business to operate efficiently, effectively and productively to make a satisfactory profit and be attractive to potential backers. • Most importantly, a business plan is a document that sells your VISION, and opening the door to investors.

5. Reason for writing a Business Plan • BIG IDEA! Put pen to paper. • To help you understand an opportunity and how to exploit it. • To re-focus a business following start-up. • Motivate and focus the management team. • Attract key employees. • Obtain large contracts. • Obtain bank financing. • Obtain investment / growth funds from investors. • Arrange the most suitablestrategic alliances. • Complete Mergers & Acquistions.

6. Where does the Business Plan fit in? Established company Growth Entry to Capital Market Business Start Up Financing decision – Strategic Investors/VC’s BUSINESS PLAN Business IdeaGeneration Interest of Angel Investors

7. Time Horizon • It takes at least 30- 45 days to prepare a Business Plan after all Market & Business Information such as financials, management information is received. • Funding Raising itself takes anywhere between 2- 6 months to complete, from the first meeting to close.

8. Points to keep in mind

9. What should be the Contents? • Cover Page • Executive Summary • Company Overview • Market Overview • Strategic Overview • Financial Overview • Use Of Proceeds • Current Offering

10. Contents of a Business Plan • Executive Summary • A Good summary • Captures the reader’s interest and imagination • Conveys a clear picture of what you are trying to do • Highlights the salient features of the proposition • Establishes the Management’s credentials at the outset • Encapsulates Financial Opportunity & Key projection And thus persuades the reader to keep reading !

11. Contents Contents of a Business Plan • Company Overview • The Industry & its Size (Historical,Current,In 5 years) • The Company (Vision, Mission, Objectives) • Founders and their brief profiles • The Products / Services • Funding till date and funds sought • Overview of Service and Value proposition

12. Company Lifecycle Understand what stage your company is at and what exactly is your need The Wall The Chasm Strategic Investors / Venture Capital Capital Market Angel Investors / Founders IPO Early Stage Start Up/Seed Capital Secondary Offerings Later Stage Mezzanine Revenue C B A Time Idea Generation Testing Start-up/Seed Capital: Market research and product development. Early Stage: Funding full-scale operations and selling products/services. Not yet profitable. Later Stage: Funding expansion and new products. Near break-even.

13. Contents Contents of a Business Plan • Company Overview • Management overview • Profile of Key Management • What are the core competencies of each team member? • What value addition does each bring to the company/project? • Do not hesitate to explain their relevant industry experience, skills, achievements and track records. • What are the gaps in the team and how would you fill them? • Use all opportunity in the plan to highlight the ability of your team to pursue any venture

14. Contents Contents of a Business Plan • Market Overview • Market need & opportunity - • What unfulfilled need the product satisfies? • What is the gap in the market that can be exploited? • Define and quantify the opportunity - future and complementary market • Target Customers and demographics Market size & analysis • Market Size & Growth rate • Is it a new market, growth market, or established market • Current market share

15. Contents Contents of a Business Plan • Market Overview • Competitor analysis • Overview of landscape • Point of differentiation of product/offering as compared to competitor • Substitute products • How the dynamics of competition might evolve over time in terms of price, margin erosion, etc. • How existing competitors are likely to respond to your market entry • Other potential entrants to the market and SWOT analysis BARRIERS TO ENTRY Be thorough – leave no stone unturned

16. Contents Contents of a Business Plan • Strategic Overview • Summarize your GO TO MARKET strategy • Define with respect to the 4 P’s – Product, Pricing, Place and Promotion Mix, 7 P‘s for service offerings. • Lay out the design and development plans • Development status and tasks • Difficulties and Risks • Product improvement and New products • Costs • Chalk out the Revenue channels • Chalk out Revenue Models • List the key customers

17. Contents Contents of a Business Plan • Financial Overview • Provide 5 Year Projections • ALL KEY ASSUMPTIONS SHOULD BE STATED OUT CLEARLY • Provide the Revenue Projections (top line) • Financial projection of related expenses • Financial projections of Balance Sheet • Create Pro forma cash flows Statements + Analysis • Provide Breakeven chart BE PREPARED TO EXPLAIN NUMBERS – Investors will “drill down“

18. Contents Contents of a Business Plan Financial Overview : Break Even Analysis Break Even Point is that point at which sales value, sales volume or production makes no profit or loss. This is the level at which all costs are covered, leaving Nil profits or losses. Break even analysisis a mathematical model that provides answers to many important questions. e.g. (1) If prices increase by 5%, what is the effect on profits? (2) If Fixed Cost decrease by 10%, what happens to the break-even point? (3) If Fixed Cost decrease by 10% prices increase by 5% and you want to increase profits at the rate of 10% how many units must you sell? • Variable Costs: Costs that vary directly with number of units sold; they include materials plus labour plus a percentage of overhead directly allocated to the sale of a given number of units.

19. Contents of a Business Plan • Fixed Cost:Costs that remain unchanged with the number of units sold; they include rent, utilities, insurance, salaries, etc. • Total costs:Variable costs plus fixed costs. • Selling price per unit = Total Fixed Cost ----------------------------------------------------------------------------------------------------------------------------------- Selling Price (Per Unit) – Variable Cost (Per Unit) Break Even Point (units) : = Selling Price (in Rs/ $) * Break Even Point (In Units) Break Even Point (in Rupees / Dollars)

20. Financial Overview :Format for Developing Cash Flows

21. Contents Contents of a Business Plan • Financial Overview • RISK FACTORS • Define the key risk factors • What steps have you undertaken and your plans to combat them in future Project the possible “UPSIDES“ and “DOWNSIDES“ Provide a sensitivity analysis - what if situations.

22. Contents Contents of a Business Plan • Use of Proceeds • Describe the funding sought • Define the need: Plant, premises, technology, staff, research and development • Detail the usage and stages of fund infusion required • Show the fund utilisation for the projected tenure • Define the milestones • What are the key success factors • What would be the key milestones against which funds would be drawn • Clearly map the risk reduction matrices

23. Contents Contents of a Business Plan • Current Offerings • ValuationDefine the basis for valuation • BE PREPAREDto justify the same by reference to Industry standards, recent market deals and the tempo of the stock markets. • Are there any special factors that drive up the valuation, e.g. – Management, technology, orders in hand, brand strength • What percentage of the company are you offering • What is the current capital structure • What is the securities that you can offer • What are the planned exit routes for investors / Company

24. FAQ’s While Writing Business Plans

25. Why do I need a business plan? A business plan is often theentry-level requirement to getting investor capital or bank loans. How many pages is the typical business plan? The length of a typical business plan can greatlyvary from a 10 page to a 50 page document. Key is to keep it short simple and yet concise. What ‘tone’ should the plan have?Keep the tone of your business plan factual. FAQ’s for making a Business Plan Don't use generalizations to describe the Business potential. Investors and lenders use the factual information you present to reach their own conclusions

26. Are extensively detailed plans better?Keep your plan succinct. People tend to use too much detail when creating plans. Details could be added in a separate section called “Appendix” How technical should the Business Plan be? Do notmake extensive use of Jargon – as that presumes that audience members are experts in your field. FAQ’s for making a Business Plan Also too much technical details distracts from the main overall focus.

27. How much money do you need? More than you think, less might be offered. Taking too much money dilutes the stock.Be realistic – raise sufficient cash to last for 2 to 3 years and resist the temptation to sell out early. How to benchmark costs & profits?Get data for firms in your field or industry association.Compare the numbers with firms of FAQ’s for making a Business Plan similar size in the same industry.

28. How detailed should budgets be?Budgets musthighlight all financial aspects in a Budget Summary and have supporting details available Which pro forma is most important?Cash flow would be the key. It is nice to project a profit,but if you run out of cash, your business will be dead,so keep your projection updated. FAQ’s for making a Business Plan However due importance must be given to the Balance Sheets as well as P&L Accounts

29. Should I hire an expert to prepare the financials?A potential lender or equity investor wants to see not only that the numbers look good, but also that you understand them inside and out. Be a major decision maker in the preparation of your financials but look for professional help with respect to creation, presentation and negotiations. FAQ’s for making a Business Plan This is because Professionals / Advisors/ Consultants possess the expertiserequired in putting together a Winning Business Plan

30. Advisors help you to create a robust Business plan, which will be concise and yet comprehensive, and can convey the BIG PICTURE and your COMPANY POTENTIAL to the prospective audience. And also help with respect to creation, presentation and negotiations. Theyguide you extensively to pitch your Business Planto VC’s Private Equity, HNI’s as well as Strategic Investors How does a Consultant / Advisor help? • Consultants additionallyhelp you to streamlineyour organizations operations, so as to successfully implement the BIG IDEA

31. Be selective Look for experience Look for diversified skill sets Clearly articulate your expectations Demand active involvement Also assistance to help build & run the company can be sought What to look for when Recruiting Business Plan Consultants?

32. Commonly Made Mistakes

33. Procrastination :- Delay Too Much Information Hiding Weaknesses No clear business model No real Assessment of Risks Financial Projections Hockey-stick shaped growth projections Generalized Market Size Commonly Made Mistakes • The Big Deal • Distribution Channels • Competitor Analysis

34. Procrastination: Many business owners under estimate the time & effort required to write a business plan. Don't delay. If your organization is not functioning as desired or you need capital in six months, now is the time to put it together Too Much Information:Objective is to focus on key elements of the plan & make your case as succinct as possible. Pages of detailed information can be put in an Appendix and referenced when required. Hiding Weaknesses:Most Business plan writers think Why draw unnecessary attention to negative aspects If we ignore the weaknesses, they may go away Once we get funding, we can deal with the problematic areas What investors don't know won't hurt them Commonly Made Mistakes If there is a weakness in your business model or Plan the savvy investor will find it within minutes. Once this blunder is uncovered it is obvious that you haven't beencompletely forth-right.

35. No clear business model:You may have an idea but the business model that you would be following needs to beexplained in clear precise words,such as how will you make money, what is the path to profitability etc.Very often writers also loose focus while writing Business Plans, thus it is essential to have a clear focus Financial Projections:You should be able to provide some rationale as how your projections were put together. Data that is inconsistent with industry norms and overly aggressive should be avoided. Hockey-stick shaped growth projections:Haveprojectionsthat areconservative so you can defendthem. When in doubt, be less optimistic. Generalized Market Size :Claiming your market size as hugewill lose credibility of your plan. In the future you can target different segments but for now focus on specific segments you can serveeffectively. Commonly Made Mistakes • No real Assessment of Risks:Risks are normally outside the realm of your business. Anassessmentof what market forces are there that could prevent your plan from being successful in the future.

36. Commonly Made Mistakes • Assessment of Risks:Description of Risk • Cost Overruns in R&D and Production • Failure to meet production deadlines • Problems with Suppliers and Distributors • Sales Projections not attained • Unforseen Economic, Political,Social,Technological Developments • Competitive Price Cutting • Unforseen industry trends • Capital Shortage • Cyclical Fluctuations • Other Risks

37. The Big Deal:Your business may have signed a big contact with a major Client andover-emphasis of this dealcan be viewed as a weakness. If 80% of your revenues are based on a one-company contract, your company could tank if the deal goes bust. Highlight that your company is adept atwinning big contracts or forging strategic partnerships and this skill will be utilized to diversify the client base. Distribution Channels :How the product / service reaches the market is an important aspect of the business plan.Resist the temptationto cover all modes by listing every channel possibility it just shows that you lack a channel strategy. Commonly Made Mistakes • Competitor Analysis:Listing names and addresses of your competitors isNOTa competitive analysis. The investor is interested in knowing what you see from your competitors in the near term; their strategic direction, core competencies, why do customers opt for them, their weaknesses and if they can be exploited.

38. Write a nice covering letter Explicitly add confidentiality clause in the beginning Provide a table of contents Check all Financials numbers are in consistency with Summary & Projections Check that all sections are complete Make sure all Appendices are included Get your plan reviewed by others Write in bullet format, rather than narrative Look for spelling mistakes Final checklist • Check page number consistency • Dont use too many colours & fonts • Do not bind in a hard folder

39. What are investors looking for?

40. A keen sense of the pulse of the market A passionate and never say die attitude A large market opportunity A reality based/grounded proposition Scalability and growth potential A competitive value test A sound financial value proposition Strong Team What are investors looking for? • A path way to success with quick returns and high liquidity • Exit Route

41. Team / Key Personnel:Explain the team, their background& working experience (relevant to the venture). Financial Projections:Explain the3-5 year forecast of all revenue streams, as well as cash flows. Clients:Who are the current clients? And in the pipeline Business Model:How do you sell and at what price points, What market segments are youtargeting? Competition:Who are the majorcompetitors? Strategies & Tactics:Your USP & differentiation Commonly Asked Questions on Business Plan by Investors • Use of Proceeds:Explain the use of the capital to be raised. • Investors:Who are the other investors in the round?

42. Investors/VC’s do not expect you to spend your own money BUT they expect you to spend money as though it were your own Investors/VC’s do not want you to starve BUT they do want you to be hungry Investor/VC Observations

43. D’Essence is a Management Consulting, Business Planning & Strategy, M&A Advisory and Consulting boutique firm. We assist organizations to :- Build, Grow and Remain Competitive We advise companies on Start-ups, Entry strategy, Building markets and Sales, Improving productivity and Bottom line performance. Provide Market access and funding through Venture Capital, Private Equity Funds, HNI’s as well as Professional Corporate Bodies We also aid organizations grow through organic and inorganic routes using tools like M&A - forming Joint Ventures , Partnerships and Strategic Alliances Since we have operating experience, have set up organizations and created Business Plans for our clients, we could also help you write your WINNING BUSINESS PLAN About Us Contact us- info@dessenceconsulting.com chandni@dessenceconsulting.com Other Services Include:- India Entry Strategy, Strategic planning , Feasibility studies, Sales and Marketing Strategy, Management Audit & Review, Post-Merger Integration