Business Plan Preparation

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Business Plan Preparation

• Frank MoyesLeeds College of Business
• University of ColoradoBoulder, Colorado

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Tonight

• Financial Plan
• Customer acquisition costs
• In the Fire preliminary Customer Survey results
• Team meetings

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November 10 11

• Financial Projection Model Workshop
• Room 302
• 600 to 700pm
• Download model v6.8.9 play with example

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November 12

• In the Fire - Marketing plan
• Prepare 6 to 10 slides (this is not a DECK)
• 10 minutes
• 2 marketing experts
• Hand-in
• Marketing Plan - draft
• Customer surveys summary of results
• Customer acquisition costs

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Title Slide

• Name of venture
• Team member names
• Date
• Introduce team

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Introduction

• Grab investors attention
• Describe the venture
• Elevator speech (not on slide)
• Value proposition (not on slide)
• 3 key points want investors to remember

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Presenting the Marketing Plan

• Show that you really understand the target
  customer
• Make it real - tell a story
• Show prototypes, exhibits, short videos
• Focus on the key strategies that you want the
  investor to remember
• Less is better - use graphs charts
• Put content in bullets, not a marker

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(No Transcript)
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Attractive Market (Example)

• Low barriers to entry
• Large market and growing
• Favorable trends

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Attractive Market

• Fragmented, no brand loyalty
• Addressable market 100 million, 10 growth
• Trends aging baby boomers, social networking,
  cost of oil

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Marketing Plan

• Customer Research
• Target Customer Strategy
• Channel Strategy
• Positioning
• Product/Service Strategy
• Pricing Strategy
• Internet Strategy
• Communications Strategy
• Sales Strategy
• Revenue Model

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Business Plan Elements
0

• Executive Summary
• Company Overview
• Product or Service Description
• Industry and Marketplace Analysis
• Marketing Plan
• Operations Plan
• Development Plan
• Management
• Financial Plan
• Offering, Funding Requirements, Valuation

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Financial Plan

• Financial Projections
• Key Assumptions
• Business Risks

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Business Plan Perspective
People write-up their business plan with a
top-down mentality. They invariably talk about a
particular vertical market that has X billions of
dollars in sales each year. Theyll tell us that
they can get 10 of that market. But when we ask
them for the average sale or the cost of customer
acquisition, the answer almost always is Ill
get back to you.
Dan Beldy, Hummer Winblad Venture Partners
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Financial Projections

• Income Statement
• By years for 5 years
• By months for years 1-2 by quarters for years
  3-5
• Balance Sheet by years for 5 years
• Cash Flow
• By years for 5 years
• By months for years 1-2 and by quarters for years
  3-5
• Break-even Analysis

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Focus Your Attention

• Profitability
• Assets (resources)
• Cash Flow
• Funding

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Focus Your Attention

• Profitability
• Assets (resources)
• Cash Flow
• Funding

• Revenue
• Margins prices vs. costs
• Major operating expenses
• Cap Ex - Property Equipment
• Working capital
• Increase/(Decrease) in Cash
• Equity Debt

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Common Weaknesses

• Gross margins are too high
• Operating expenses are too low
• Working Capital (must be based on industry)
• Fixed Assets Capital Expenditures not addressed
• Seasonality
• Growth not anticipated

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Financial Drivers (2-3 Key)

• Revenue model roll out, market share, new
  products, customers/day
• Margins (price/labormaterials) cost goal
• Operating Expenses hire 10 sales persons,
  prototype cost, legal expenses, etc.
• Capital Expenditures major
• Working Capital A/R days, Inventory days
  (turns) A/P days

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Risks I

• What major risks does the venture face?
• What can go wrong?
• What must go right
• How mitigate?

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Risks II

• Market
• Size of market
• Competitors response
• Sales cycle
• Closing window (12 VC funded companies)
• Strategic - establishing partnerships or
  agreements
• Operational - large number of interrelated
  components

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Risks III

• Technology
• Will it work
• Time and cost to development
• Scalability
• Financial
• Risk/return
• Dilution
• Macro-economic
• Volatile industry
• Government approval
• Exchange rates

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Financial Plan Sections

• Financial Projections
• Summary goes in Plan
• All Financial Statements go in Appendix
• Assumptions
• 2-3 key assumptions go in Plan
• Detailed assumptions go in Appendix
• Business Risks

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0
Summary of Financial Projections
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Break-even
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Customer Acquisition Costs
Costs to Get a Customer Number of Customers

• Costs to get a customer
• Sales salaries commissions
• Advertising promotion
• Customer tech support
• Website
• Travel entertainment
• Number of customers

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Business Plan Perspective
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Entrepreneurs have got to display a clearly
articulated vision for what they want to do. And
they must tell their story from the bottom up. A
bottom-up approach means that they know with
absolute certainty whom theyll sell to, how much
it will cost, and what the sales per week will be
next March. Sure, a lot of assumptions are
involved, but entrepreneurs need to break their
business down to the molecular level. That
information leads logically to the next step
which is saying to an investor, I am going to
take this money and do X, Y, and Z with it and
heres what will happen in the end. Your
survival depends on knowing that stuff cold.
Dan Beldy, Hummer Winblad Venture Partners
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Critical Mistakes I

• Lets go smoke something
• These trees sure are pretty
• We can get orders in a month
• Sales cycle
• No one knows you
• We can whip this puppy out in 6 months
• Development time-line longer
• More expensive
• Look at how much they spend on marketing! We
  wont have to spend that much

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Critical Mistakes II

• Sure, operating expenses are high at the
  beginning, but then they will go down.
• Operating expenses dont decline
• Salaries must be realistic
• Growth requires spending money
• Well lean on our suppliers and not pay them
  for 90 days.
• Our customer will pay us in 30 days.

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Financial Dynamics
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• Who does the financial projections?
• Should my projections be optimistic or
  pessimistic?
• What kind of questions do investors ask why?