YDC – E-Challenge The Business Plan 14th March 2009

1. YDC – E-Challenge The Business Plan 14th March 2009 Roger T. Marshall Managing Director Persimmon Capital Limited roger.marshall@persimmoncapital.com.hk (852) 3105-1580

3. Some General Points • No universal applicable format • Let it be your own work and thoughts… not the consultant’s • It is a selling document … not a textbook to teach your business • Presentation is critical • Keep it Simple- it needs to be an enjoyable read

4. The Purpose • Let people understand your business, dreams, aspirations … an element of vision is important! • Attract Support • Investors & Bankers • Suppliers • Customers • Employees • Government • Must be relevant to the audience you are addressing

5. Some helpful observations • “ A good business plan is one in which the entrepreneurs have asked themselves all the tough questions before the potential investors do” (Allan Stephen, Greenfields Venture Capital) • “The biggest mistake I see is no clearly defined objectives about where the business should be in three months, six months from now” (Allan Stephen) • “A battle plan is only good until the fighting starts” (General Karl von Clausewitz) • “You have to always reevaluate the idea, take a step back and look at where its going” (Caron Tauri, Founder, Carich New Zealand)

6. The Start of a long road…. Business Plan(ning) is a continuous exercise in business “If you want to start your own company because you’re interested in flexible hours, forget about it. You’re never not working” • (Tom Neir, Founder, Pacific Coffee Co)

7. The Index 1. The Executive Summary/Overview 2. Business description 3. The Market 4. Marketing and Selling • Competition • Technology • Strategy 8. Operations 9. Management/Board of Directors 10. Funds required 11. Financial data 12. Appendices

8. Vmedia - an example Products 8 page summary Distribution A lot of information on the market place, the market for the product and the environment IP Competition People

9. Leisure Capital

10. The Body of a BP - 1 Leisure Capital • Executive Summary • what is the business proposition? • strategy and market potential • business model • major milestones • financial results • product/service development • the investment proposal • “Fifteen minutes of fame”

11. The Body of a BP - 2 • Business description • What …. • Where…. • And to whom? • And what is the objective? • Does it have focus? China Heart Group

12. Leisure Capital Objective

13. The Body of a BP - 3 • The Market • What is the industry ? • Size and growth of the market • Trends of the industry • Target Markets • Customers, penetration, share …. • Modern business is very complex – so think about how an industry works and which segment you will play in it China Heart Group

14. The Body of a BP - 4 • Marketing Strategy • Segmentation • Relationship with supply chain • Partners – development, manufacturing • Selling activities • New/existing customers • Distribution network/partners • Critical wins Eton International

15. Leisure Capital China Heart Group

16. The Body of the BP - 5 • Competition • Analysis of competition • What distinguishes your business? • Market share • Pricing Eton International

18. The Body of a BP - 6 • Technology • What technology required? • Is the technology proprietary? If not, how will use of the technology be secured? • R & D activities • Regulatory requirements Separate Solutions

19. The Body of a BP - 7 • Strategy • Given the macro analysis, what is the business model? • Performance targets • Positioning of the business • Expectations of competition • Other business relationships

20. The Body of a BP - 8 China Heart Group • Operations • Procurement • Capacity • Critical parts and process • Availability of people • Costs

21. The Body of a BP - 9 • Management • Key managers • Options/incentives • Advisers • Board of directors • Non-executives • Governance

22. Leisure Capital

23. The Body of a BP - 10 • Funds required and their uses • Present requirement • Future requirement • Use of proceeds • Debt vs equity

24. Leisure Capital

25. The Body of a BP - 11 • Financial data • Financial statements & projections • Full explanations on assumptions • Sensitivity Analysis • Capital/Working capital budget • Cashflow projections (month by month)

26. The Body of a BP - 12 • Other useful attachments • CV of key managers • Company brochure/product specifications • Market study • Independent assessment of technology/products • Patents • Audited financials

27. Financial projections • Purpose • Methodology • Analysis • Interpretation

28. Leisure Capital

29. Financials - purpose • Define critical metrics • Analyse the business from a financial perspective • Understand the resources required e.g. people, capacity • Validate the investment argument • Put flesh on the bones

30. Financials - methodology • Assumptions • Detailed workings • An interactive model • Sensitivity analysis • Ratio analysis • Valuation • Evaluation of returns

31. Financial Analysis (1) • Bottom up approach • What are the key metrics of the business? • Normally revenue driven • Volume and price • Capacity issues • Costs – normally follow the revenue model • Variable and fixed • % revenue? # of outlets/sales staff • Establishment costs – fixed • Depreciation Beijing International Hospital

32. Financial Analysis (2) • An interactive model enables you to analyse different scenarios (i.e. what if revenues are 20% below forecast?) • Ratio analysis enables you to see at a glance the pattern of the business (i.e. is the gross margin going up or down?) • Balance sheet ratios also important - working capital is also critical to the development of the business

33. Financial Analysis (3) • Financial forecasts consist of: • the financial model • Profit and Loss Account • Balance Sheet, and (most importantly) … • … Cashflow Statement • The cashflow statement ensures that you know when you will run out of money! • The cashflow helps you identify the funding required i.e. debt rather than equity

34. Beijing International Hospital

35. Evaluation • What are the expected returns from investment? • What are the returns on • assets • equity • capital employed • etc? • Annualised return - IRR • Cash on cash return • Valuation measures

36. The proposition • What are you asking for? • How much money do you want? • What % of the business are you offering? • What is the structure of the offering? • Valuation • Exit - how is the investment to be realised? Beijing International Hospital

37. Leisure Capital

38. Other Issues • The changes to the business….. • Additional governance • More formalisation • Need to work with others • You may lose 51% control • Confidentiality issues • Telling your employees, suppliers, customersetc…..

39. Hints • Length - maximum 25 pages, with 3-4 pages for the exec summary • Write good English/Chinese • Attention to layout - make it easy to follow/enjoyable to read • Draw conclusions • Use appendices if necessary

40. Summary • Keep the length down • The executive summary is key • The financials must be comprehensive - provide plenty of statistical information • Importance of presentation - multimedia? • It is a selling document