4. crafting a successful business plan

Crafting A Business Plan

May 2014

Carlos Ruiz Gómez-Ibáñez !

www.linkedin.com/in/carlosruiz

A Business Plan Reveals The Ability To …

Create or add significant value to a customer or end user !Solve a significant problem, or meet a significant want or need for which someone will pay a premium !Have robust market, margin, and moneymaking characteristics !Fit well with the founder(s) and management team at the time, in the marketplace, and with the risk-reward balance

And It Does So By Answering To …

… What is the problem and pain killer? !… What is the product-solution that solve that problem? !… What is the opportunity now? !… How big is the market? !… Who is the competition, existing and potential? !… Who is the team that is needed?

A Business Plan Helps YOU To …

… Think in a disciplined way about your idea !… Make assumptions and test them !… Detect and mitigate risks !… Share ideas with others (FFF, VC, team members, …)

It Allows To Never Go To War Without A Map

start-ups success factors

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2459

Three Main contents Of A Business Plan

I. Market study !

Market segmentation — Customers — Competitors — Market size …

!II. Strategic plan !

Business model — Pricing — Sales — Marketing — operations — HHRR …

!III. Financial plan !

Numbers, Sales forecasts, Cash flow, Margins, …

Details Of The Contents Of A Business Plan

I. EXECUTIVE SUMMARY !

Description of the business concept and of the business opportunity and strategy The offering Target market and projections Competitive advantage(s) The costs The team

Details Of The Contents Of A Business Plan

II. THE INDUSTRY AND THE COMPANY AND ITS PRODUCT(S) OR SERVICE(S)

!The industry The company and the concept The product(s) or service(s) Entry and growth strategy

!III. MARKET RESEARCH AND ANALYSIS

!Customers Market size and trends Competition and competitive edge Estimated market share and sales Ongoing market evaluation

Details Of The Contents Of A Business Plan

IV. THE ECONOMICS OF THE BUSINESS !

Gross and operating margins Profit potential and durability Fixed, variable, and semivariable costs Months to breakeven Months to reach positive cash flow

!V. MARKETING PLAN !

Overall marketing strategy Pricing Sales tactics Service and warranty policies Advertising and promotion Distribution

Details Of The Contents Of A Business Plan

VI. DESIGN AND DEVELOPMENT PLAN !

Development status and tasks Difficulties and risks Product improvement and new products Costs Proprietary issues

!VII. MANUFACTURING AND OPERATIONS PLAN !

Operating cycle Geographical location Facilities and improvements Strategy and plans Regulatory and legal issues

Details Of The Contents Of A Business Plan

VIII. MANAGEMENT TEAM !

Organization Key management personnel Management compensation and ownership Other investors Employment and other agreements and stock option and bonus plans Board of directors Other shareholders, rights, and restrictions Supporting professional advisors and services

Details Of The Contents Of A Business Plan

IX. SUSTAINABILITY AND IMPACT !

Issues of sustainability of the venture Impact on the environment Impact on the community, nation

!X. OVERALL SCHEDULE !XI . CRITICAL RISKS, PROBLEMS, AND ASSUMPTIONS

Details Of The Contents Of A Business Plan

XII. THE FINANCIAL PLAN !

Actual income statements and balance sheets Pro forma income statements / forma balance sheets Pro forma cash flow analysis Breakeven chart and calculations Cost control Highlights

Details Of The Contents Of A Business Plan

XIII. PROPOSED COMPANY OFFERING !

Desired financing Offering Capitalization Use of funds Investor’s return

!XIV. APPENDICES

Dont’s Of Business Plans

Don’t use top-down model when estimating the market !

“1000 mill internet users … … 1% potential audience …. … 10$/year per potential account/user … … so 100 mill $ market size”

!Do use bottom up if needed !Tell a VC member that you have no competition … !… or forget about a relevant competitor !Be unclear about your competitive advantage

But it is NOT about the business plan !

!

It IS about the BUSINESS MODEL

However, A Business Plan Is The Basis …

What Is An Elevator Pitch?

www.youtube.com/watch?v=Tq0tan49rmc

“If you can’t describe your business !

plan in 10 WORDS OR LESS, !

you DON’T have a business model”

!Guy Kawasaki

Be Clear When Describing Business Models

Versus…

Example: Amazon

So Now What? Iterate and Pivot

http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2289

You Need To Iterate and Pivot Initial Plans

Why Start-Ups Might Fail?

Part-time commitment !Solo founder or 4+ founders !No technical co-founder !Wrong team composition !Don’t pivot or pivot too often !Don’t listen to customers !Scale without validating the market

www.youtube.com/watch?v=kzcQtXA5Gc8&feature=related

Pitching Time