Training Track #9: How to Write A Business Plan

1. TED
ROGERS
SCHOOL OF RYERSON
MANAGEMENT UNIVERSITY
Business Plan Seminar
Dr. Dave Valliere
Entrepreneurship & Strategy

2. Investor’s Screening Criteria
• How much money can be made?
• How quickly can it be made?
• How will it be made?
• How much investment is required?
• How liquid is the investment?
• How involved do I have to get?
• Who else is involved?
Valliere

3. What Investors Like
• Large and rapidly expanding market
• Complete team of “stars”, with proven
track records
• “10X” improvement
• Compelling strategy, competitive
advantage, and business model
• Sustainability
Valliere

4. What Scares Them Off
• High risk, relative to the expected returns
• Seeking too much capital, or too little
– High tides hide the rocks
• Quibbling over deal terms
• Lack of commitment, integrity, realism
• Weak managers
– Poorly thought out Bizplans
– Lack of Investor’s Perspective
Valliere

5. Your Business Opportunities
• An opportunity is not just an idea
– “it can be done” is insufficient
– “is it worth doing?”
• Think big, high-potential
– Not “what can I do with what I have?”
– Instead, “what will it take to do the right
thing, and how can I get it?”
– People like to back winners
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6. Opportunity Evaluation
• What product or service will be sold?
• Who will it be sold to?
• How much will it cost to produce? Average selling?
• How big is the target market?
• What percentage of that market must be penetrated to
reach $50 million in sales?
• Who is the direct and indirect competition?
• What is the sustainable competitive advantage?
• Who is on the team?
• Is the product complete? If not, when?
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7. DEVELOPING THE PLAN
• It doesn’t matter how flashy the document
or the presentation, if the ideas are lame
or half-baked
• You should want to wirebrush it more than
anyone else
– Not the case? Then you are wasting your time
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8. The Business Plan
• Audience: people with resources to invest
– Financial, talent, relationships
• Help these investors understand the business
– Why they should invest their resources
• Typically “poor” and not well-received
– Not thought through
– Ignores the key questions for investors
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9. Bizplan Answers
• Why does the market care?
– the only problem money can’t solve
• What is your competitive advantage?
– how you can sustain it
• Can you handle your Unforeseen Killer
Variables?
– by definition, you won’t know your UKVs
• Can you make money at it?
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10. Bizplan Contents
• Executive Summary
• Customer Need & Market Opportunity
• Business Strategy & Key Milestones
• Marketing Plan
• Operations Plan
• Management & Key Personnel
• Financial Projections & Requirements
• Appendices
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11. Some Questions You Need to
Think Through
• Market • Regulatory Issues
• Competitors • Location
• Pricing • Risks
• Customers • Physical Assets
• Suppliers • People Assets
• Service • Financial
Which ones are most important in YOUR business?
Valliere

12. Financial Forecasting
• Project your expected sales
• Associated COS
• Infrastructure ramp-up, staff, and G&A
• Working capital policy implications
• Fixed asset requirements
• Adjust for
timings, depreciation, interest, taxes
• Cashflow with negative balance
• Impact of various financing scenarios
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13. Sensitivity Analysis
• What assumptions in your business are
reasonable to vary?
– Pricing trends
– Duration of sale cycle
– Magnitude and timing of revenues
– Launch expenses
– Cost of key supplies
– Lead time to hire staff
– Working capital days
– Cost and lead time for financing…
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14. Scenarios
• Monthly for first 1 or 2 years
• Yearly for 5 years
• Most likely case
– Credibility test: how realistic are you?
• Best case
– Credibility test: how good can it get without
dreaming in Technicolor?
• Worst case
– Credibility test: can you face up squarely?
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15. General Tips
• Model the dependencies
– COS= f(sales), G&A = f(staff), Pricing = f(time)
• Avoid specious precision
– Use $000s
– Follow GAAP
• Summarize into charts
– Sales hockey stick
– Cashflow and profit J-curves
– Key ratios (which ones do you think?)
• Investors love/hate hockey sticks
– Watch for synchronization
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16. PACKAGING THE PLAN
• The most important sales document you
will ever produce
• Understand the how/why of the reader
• What does the artifact signal about you?
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17. How to Read a Bizplan
• Executive summary
– 2 pages max
– Are they out to lunch?
• Team bios at the end
– Any credibility?
• Market description
– Real need?
• Everything else
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18. Appearances Matter
• How many pages?
• Binding?
• Colour?
• Multimedia?
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19. Details Matter
• Spelling, grammar
• Page numbers, TOC
• Organization, headings
• Consistency between figures and text
• What belongs in an appendix?
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20. LIFE’S A PITCH
• What are you really selling?
• What does your ability to pitch say about other
important things?
– Communicate
– Connect with people
– Persuade and convince
– Understand the audience
– Anticipate objections
– Handle unforeseen problems
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21. Understand the Investor
Perspective
• Understand the judges as your customer – your product
is your company
– Judges are sophisticated, BS-proof sounding boards
• The judges want to help you to
– See the truth, for better or worse
– Iron out the bugs in your plan/pitch
– Avoid going after the wrong opportunity
– Survive after the $25k runs out
– Raise even more money from professional sources
– Become rich and famous (remember those who helped you :)
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22. The Basic Idea…
• You are a group of people who
– Have identified something that solves a
problem for somebody willing to pay
– Have a plan to
• Create the company
• Build and market the solution
• Use an initial investment wisely
• Protect yourselves from competitors
– Can adapt to changing situations
– Are smart and get things done
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23. Be Prepared
• Complete, concise business plan with good
executive summary
• Be prepared to market your company to the
judges
• Be “Up” and show the “Fire in the Belly”
• Be realistic in terms of your requirements
• Anticipate additional information which may be
required – and be ready!
• Don’t BS judges, or yourself…
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24. Be Realistic
Have a realistic idea of:
• Your strengths and weaknesses
• The amount of money you will need to achieve
your objectives
– Seeking too little is worse than seeking too much!
• The amount of time required to fill the gaps in
your plan
– Raising more money, hiring good people, landing
reference customers
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25. Judges Ask Themselves
• Screening Criteria
– Is it worth it?
• Use of proceeds
– VA or overhead?
• Spending enough to ensure success
– Thinking big but realistically?
• Depth of market knowledge
– How do people buy?
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26. Judges Evaluate You
• How good is the selected Opportunity?
– Should we encourage this student to go for it,
or think of something even better?
• How good is the Plan?
– Has this student really thought it through?
• How likely is this business to survive?
– What happens when the prize is spent?
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27. Go for the Close
• Recap your main messages
• Ask for what you want!
– There’s more available than just the $25k
• Mine the valuable feedback
– Pay attention to what questions get asked
– Hot leads and referrals
Valliere