entrepreneurship and technological management

1Entrepreneurship and tehnological management

Course 9

Business Plan Structure 2

15.04.2011


Bogdan Secara

Internet Development Director

Web Optimiser at Strategic Shift

Internet Development Director at MediaPro

Marketing Director at Project Management

Institute - New Zealand

2005 - 2007

Country Manager at netBridge

2000 - 2005

http://nz.linkedin.com/in/bogdansecara

http://www.dragosroua.com

@ beliverable

Entrepreneurship and tehnological management

Speaker corner


Summary

Market strategy

Development and barriers of entry

Manufacturing and operation plans

Management team and organization

Financial Plan


Market strategy -Pricing and communication

Chapter 6


Pricing Strategy

Possible strategies: Commodity pricing

Set by the market

Supply and demand

Based on competitor(s) price

Value pricing - how much the customer is willing to pay for value received

Payback period – depends on impact on company profit

Introductory low price to get customers to use

Cost plus + markup

Razor & razor blade

[ 5. Market strategy ]

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Pricing Strategy

Respond to following questions:

List the prices for each of the products/services that you offer. What will the prices be in years 2 to 5?

What is the channel pricing, i.e. what discount does each element of the channel receive at each stage.

• For example, the consumer of salmon pays to the retailer $10.00 per pound; the retailer pays the wholesaler $7.50 per pound; the wholesaler pays the salmon company $5.00 per pound.

How does your pricing strategy compare with your major competitors?

What evidence do you have that your target market will accept your price?


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Communication Strategy

Channels / strategies:

Media advertising (TV, radio, newspaper and magazines)

Direct response advertising (mail, email, text messaging, infomercials)

Outdoor advertising (billboards, posters, cinema, vehicles)

Brochures, catalogs, specifications, manuals

Point-of purchase

Trade and consumer promotions

Sponsorships and event

Exhibitions and conferences

Public relations

E-commerce

Strategic alliances

Advertising budget

Total advertising cost for 1 paying costumer


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Development and barriers of entry

Chapter 7


Development strategy

Identify 5 to 10 key events that must take place for your venture to succeed. The focus should be over the next 2 to 3 years. For each step indicate the completion date. Consider the following:

Product and process development

Intellectual property

Marketing strategies, e.g. advertising launch, catalog mailing, website launch

Agreements with key customers, distributors or suppliers

Strategic alliances

Roll-out strategies, e.g. by regions, new products, new channels

Facility construction and equipment installation

Market and beta tests

Key hires, e.g. sales manager

Funding

[ 6. Development and barriers of entry ]

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Product improvement and new products

In order for your company to succeed, you will need to:

Respond to competition improvements

Take lead and impose new trends

Periodically impose new products

Plan the next improvements

Do not include all your ideas in the first phase

• Not economical feasible to include them all

• Harder to respond to competition responses if you do not have something prepared

Examples: the IPAD – apple did not include simple extra options / better hardware in the first versions in order to have a easy way to upgrade the next versions



Barriers to entry

What barriers to entry can you pose against the competition?

Economies of scale?

Customer loyalty?

Agreements with customers, suppliers, strategic partners ?

Control of the distribution channel?

Switching costs?

Intellectual property: patents, trade secrets, copyrights, trademarks, know-how

Government regulations: defense contracts, import restrictions



Manufacturing and operation plans

Chapter 8


Scope of Operations and manufacturing

Describe which operations you will do in-house and which you will subcontract. Why does this make sense for your business?

Consider the following:

Production

Product development

Order fulfillment

Customer service

Warehouse and shipping

Tech support

Installation

Warranty service and repairs

[ 8. Manufacturing and operation plans]

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Ongoing operations, Facilities and Improvements

Describe how your company will operate on an ongoing basis

Identify the key vendors, suppliers, strategic partners, and associates. (possible arrangements)

Based on your sales forecast, estimate how much production or service capacity is required over the next five years

What type of operations facility is required:

size, type of space (office, laboratories, production, warehouse and shipping).

Where will you be located?

Why this particular location? (supply and distribution advantages)

What capital assets do you require?

Describe the major items (equipment, vehicles, buildings, fixtures, decorations, computers and software, etc.) and how much each will cost. Will you lease or purchase?


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Ongoing operations, Facilities and Improvements

Determine your manpower requirements to produce and deliver the product/service.

What types of employees are needed (skilled, technical, supervisory, manual, etc.)?

Provide a layout of the production or service process.

How will your product/service flow through the facility?

Determine how much inventory is required to support the marketing strategy.

Express it in terms of days or turns. Keep in mind that it is very difficult in the early stages of a new business to operate a just-in-time system. The order quantities are too small for suppliers to produce economically in small batches and deliver to your warehouse every day. Lead times from receipt of order can also be quite extended for small quantities


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Management team and organization

Chapter 9


Organization structure

Describe how your company will be organized.

Organization chart.

Board of directors?

• Who will be on it?

• What will be their role?

Board of advisors?

• Who will be on it?

• What will be their role?

What is the ownership structure of your company?

• What percent of the company do each of the founders own?

[ 9. Management team and organization ]

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Key management personnel

Describe the founders and principal managers who will run your firm.

Write a short paragraph on each of the key managers? (Include resumes in the Appendix)

What will be their duties and responsibilities?

What unique skills do they bring to the venture?

How will they be compensated?

Is there a significant “hole” in the team? How do you propose to fill it?

[ 9. Management team and organization ]

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Financial Plan

Chapter 10


Important assumptions and risks

Explain the key financial drivers of the venture. What assumptions have you made that will determine the financial success of the business?

[10. Financial Plan ]

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What are the customer acquisition costs? Very important.

What minimum number of customers per day and average selling price is assumed?

What level of costs per unit must be achieved?

What level of discount is assumed for

the distribution channel?

What are the lease costs for the site?

What is the development cost and

timing of a new product


Important assumptions and risks

Market

Size of market

Competitor’s response

Long sales cycle

Price that customers are willing to pay

Closing window

Strategic

Establishing strategic partnerships

Operational

Large number of interrelated components

Costs

Quality level

Technology

Will it work?

Patentability

Time and cost to development

Scalability

Financial

Risk/return

Dilution

Macro-economic

Volatile industry

Government approval

New regulations and laws

Exchange rates

Interest rates


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Important assumptions and risks[10. Financial Plan ]


Startup founding requirements

Estimate the initial capital requirement

Start-up expenditures (legal, administrative)

Buffer money for all costs until sales completely cover expenditures

Investors do not like to invest all the money at once

If you need 100 units for the first 6 months, 100 units for the next 6 months and 100 units for the next 12 months, do not ask for 300 in month 1 (this would mean 200 units stuck in the bank)



Break-even analysis

Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs) → units needed to sell



Sales Forecast

What growth rates are you expecting for the more important lines, and what growth rates in units, and in dollars?

Why are you projecting your sales at this level? Why not less or more?

What are the main driving forces behind the sales forecast?

How does it relate to your market analysis, your main target segments, your sales strategy and marketing strategy?

Is your sales forecast believable? Why?

What events might turn the sales forecast downward?

What kind of things are you assuming will happen to make sure the sales happen?


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Financial projections (details beyond the scope of this course) [10. Financial Plan ]

Projected Profit and Loss

Projected Cash Flow

Projected Balance Sheet

Business Ratios

Check an working example @

http://blog.guykawasaki.com//RedfinFictitiousModel.xls

http://blog.guykawasaki.com/RedfinFictitiousModel.xls


Financial projections (details beyond the scope of this course) [10. Financial Plan ]

Profit & Loss Statement:

Revenues & Expenses accruing over a period of time

Balance Sheet:

Assets & Financing at a point in time

Cash Flow:

A detailed look at actual cash inflows and outflows over a period of time


Profit & Loss (P&L) Statement

• Revenue (after discounts)

• Cost of Goods Sold (COGS)

•Direct product cost

•Mfg but NOT R&D

• Gross Margin or Gross Profit

• Departmental Expenses

• Operating Profit / Loss

•Earnings before interest and taxes (EBIT)

•EBITDA (Earnings before interest, taxes, depreciation, amortization)

Revenue 50.0$ 100%

Cost of Goods Sold 20.0$ 40%

Gross Margin 30.0$ 60%

Sales & Marketing 15.0$ 30%

R&D 5.0$ 10%

G&A 2.5$ 5%

Total Expenses 22.5$ 45%

Operating Profit 7.5$ 15%

How it looks



Practical Considerations

Chapter 11


Business Plan in a Slide[11. Practical Considerations]

What is the pain? What problem is being solved?

What is the market we shall be in?

What is our business model?

Who is going to hurt us and how bad?

How we are going to achieve our objectives?

How am I going to clone and complement myself?

How are we going to make money?


Practical Considerations11. Final thoughts


Reasons for Having a Business Plan[11. Practical Considerations]

Helps asking better questions

Helps with organizing the business

Helps drawing boundaries

Helps focus on the essentials

Helps keeping things untangled

Enhances communication

Offers a balanced perspective


Common Business Plan Temptations to Avoid[11. Practical Considerations]

Temptation to elaborate it too much

False sense of security

Temptation to create a too rosy future

Illusion of control, especially in the long run


Is It Worth the Whole Effort?[11. Practical Considerations]

It disciplines you

Leaving your emotions out of the equation. Keeping the score better though milestones, deadlines, KPIs.

It opens your eyes

Separate Real from Fantasy, Present from Future, Strategy from Tactics, Project from Operations.

It sells your business and your idea

Partners, Colleagues, Investors

entrepreneurship and technological management

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