Business Plan Guidelines

Transcription

1 Business Plan Guidelines

2 Overview of evaluation process Jurors Entrepreneurs and VCs: Grade business plans Give constructive feedback Components of evaluation 1. Grade 2. Nominate Total pts based on avg. of 2 jurors Total pts = accumulation grade & nomination pts 20 extra pts when nominated as winner by juror 3. Feedback + Ranking Top 25 Teams* Evaluated aspects of business plan Executive Summary Product/ Service Idea Management Team Marketing Business System/ Organization Implementation of Plan Finance Risk Overall Impression * Details can be found further in the document 1

3 Evaluation process: besides the grade evaluation, jurors can nominate teams to increase chances for the Top Grade Each business plan is graded by 2 jurors Jurors rate each area of the business plan TOTAL GRADE BY 1 JUROR 5 = very good 4 = good 3 = fair 2 = poor 1 = very poor 0 = not covered Sum of rates of each area + nomination points 2. Nominate Jurors nominate teams as potential winners A nomination adds 20 points to the total grade given by the juror Jurors can nominate as many teams as they wish, but we recommend them to only nominate 1 TOTAL GRADE 1 Average of grades of 2 jurors 3. Feedback Juror feedback constitutes a valuable part of the»venture» experience for the teams. Constructive and critical feedback helps teams to further develop their business plan. 1 Determines final ranking 2

4 Evaluation criteria (1/3) Executive summary 1-2 pages Gives the reader a concise and complete overview of the product/service Highlights key topics of the business plan and guides the reader through it Presents the product/service attractively and spark the reader s interest Product / service 2 4 pages The customer need/benefit is clearly identified in detail. Target customer is clearly identified and specified as a subset of the population The proposed product/service has as a defined unique selling proposition and can be patented/protected otherwise (e.g. trade secret, first mover advantage) Management team 1 2 pages Highlights experience, skills and competencies of team members The management team brings in the necessary content related skills (e.g. technical expertise) and business acumen or is aware of current gaps Convinces potential investors that the team unites managerial and technological expertise 3

5 Evaluation criteria (2/3) Marketing* 6 8 pages Provides thorough understanding of markets and competitors Market size Market growth Overall competition Determines segmentation and selection of target markets Relevant market segmentation for proposed product/service Selection of target segment Positioning of product vis-à-vis competition Outlines planned marketing and sales activities (e.g. four Ps framework) Business system/ organization 2 3 pages The paying customer is clearly defined (e.g. Google end-users don t pay for the service, advertisers do) The chargeable product is clearly defined (e.g. Google sells traffic, not search results) Strategic partnership requirements are outlined The revenue mechanism is effective and realistic for the product/ service * Deep-dive for marketing section further in the document 4

6 Evaluation criteria (3/3) Implementation Plan 1 2 pages Finance* 4 6 pages Risks 1 2 pages Overall Impression Describes the most important activities and milestones for the development of the business The implementation plan is action-oriented and can realistically be executed Highlights the interdependence of milestones and activities on critical path Presents plausible financial forecasts including base/worst/best case scenarios for income statement, balance sheet and cash flow statement Outlines plausible liquidity planning and forecasts on capital requirements Outlines deal proposal for investors Identifies risks and assesses their potential impact (e.g. worst case scenarios) Develops suitable countermeasures against risks The business plan is readable (also for non-expert readers) and interesting The document is well structured, concise and consistent The document can be established in MS Word or Powerpoint * Deep-dive for finance section further in the document 5

7 Deep-dive: Marketing Section 6

8 There are 3 essential steps to undertake for a good marketing strategy 1 Overall market potential Segmentation and selection and competition 2 of target market 3 Determine your marketing strategy Overall Market Size Number of potential customers Number of units sold Total potential sales (CHF) Overall Market Growth Market growth during the last five years Forecast for the next five years Overall Competition Most important current and potential competitors Strategy of competitors SWOT 1 analysis 1 Strengths, weaknesses, opportunities, threats Segmentation Meaningful grouping of potential customers (e.g., with similar needs, attitudes and behavior) Selection of target segment Match between offered product/service and customer needs Financial attractiveness and growth potential of the segments? Positioning in target segment Differentiation from competition Estimate market share in segment Development of market share and sales volume Customers per segment Product Product meets relevant needs of customers in the selected segments Adjustment of product to each target segment Price Place Promotion Pricing strategy Objective of pricing strategy Market penetration Skimming How are customers reached Potential outsourcing of distribution Means of communication (advertising, direct marketing, etc.) "Unique Selling Proposition 7

9 1 The overall market needs to be assessed in terms of size, growth and competition Market Size Key questions Number of (potential) customers? Number of units sold? Total sales in CHF in product-relevant areas? Hints Analyze total market size and each segment Possible sources: investment banking reports, official statistical bureaus, specialist associations, specialist journals, surveys Market Growth In the last five years? Forecast for the next five years? Forecasts regarding market growth need to be realistic and understandable Competitive Environment Most important current competitors? Their market share? Their strategy? Their strengths and weaknesses? Potential new competitors? Can business idea be copied? How quickly? Possible substitute products? An attractive market is ideally characterized by: Few competitors High entry barriers No (foreseeable) substitutes Many equally good suppliers Many potential customers 8

10 2 Within the overall market, attractive segments need to be identified and approached Segment Market Choose Target Market Position Yourself Against Competitors Estimate Market Shares and Sales Volume Key questions How to meaningfully group potential customers with similar needs? Which customer needs will our product primarily satisfy? Which customers/customer groups are especially financially attractive? How is our offer differentiated from the competition? What additional benefits does our product offer? What share of market and what sales can we probably achieve with our customers? How many customers can we reach in each target segment? Convert from the competition? How will our market share and sales develop over time? Hints Segmentation is possible, e.g., by industry, geography, purchasing power, intensity of customer needs Simple & feasible segmentation Get to know the markets that you can serve with your products very well Set target to dominate first a part of the market, in order to later expand into neighboring segments Possible additional benefits: easier to use, greater safety, etc. Be aware of the non-linear market penetration dynamic Be aware of the 6-12 month delay in the sales process for expensive products (B2B) 9

11 3 Target segments need to be served with orchestrated marketing strategies based on the 4P s (1/2) Product Key questions Does our product meet the relevant needs of customers in the selected target segments? Do we want to adjust our product to each target segment? Hints Customer needs can be defined along three dimensions Functional level: product attributes, value, quality, etc. Process level: user-friendly transactions, easy access, etc. Relationship level: personal service, loyalty program, etc. Price What price can we ask for the product? What objective are we following with our price strategy? Market penetration: quick penetration with low price? Skimming: fewer customers at a high price in order to later gradually expand the target segment? There are three approaches to pricing Market price Costs plus margin Customer benefit as basis (valuebased) Customer benefit is ideal as a basis, costs plus margin is not recommended As a rule, start-ups use the skimming strategy, as higher prices can be justified by an innovative product Avoid price wars! 10

12 3 Target segments need to be served with orchestrated marketing strategies based on the 4P s (2/2) Place Promotion Key questions How do we want to reach the customer with our product? Do we want to outsource distribution or do it ourselves? With which means of communication do we want to convey the advantages of our product to customers? (advertising, direct marketing, PR, trade fairs, visits to customers, etc.) Is our "Unique Selling Proposition 1 precise, brief (two lines) and formulated from the customer's perspective? 1 One-time sales argument Hints Possible criteria for selecting distribution channel: # of potential customers, companies vs. private individuals, need to explain the product; upper vs. lower price segment Sales focus changes with time: Convince the first five customers through outstanding service Convince the next fifty customers with your first five references Convince other customers through segment-specific standardization Focus your energies on fewer but more effective means Calculate how much advertising you can allow for each sales completion Differentiate between Users Technically-focused buyers (IT dept.) Economically-focused buyers (e.g., CFO). Note: an economically focused buyer has the last word on the budget! 11

13 Deep-dive: Finance Section 12

14 The financial section can be structured into two pillars 1 Financial projections 1 2 Finance requirement & deal structure Plausible revenue model and cost projection Cash flow projection (for 5 years and detailed for first 24 months) Capital needs resulting from projected cash flows Planned financing rounds Detailed profit & loss forecast (for 5 years) Balance sheet forecast (for 5 years) Best/base/worst case scenario Underlying assumptions Usage of funds Current shareholder structure and funding history Investor shares for each financing round Internal rate of return (IRR) for investors Exit strategy 1 For teams in startup phase we advise to show also historical/actual financials 13

15 1 Key financial data and financial projections should be provided Key Components Assumptions Key aspects Plausible revenue model and cost projection Cash flow projection (for 5 years and detailed for first 24 months) Detailed profit & loss forecast (for 5 years) Balance sheet forecast (for 5 years) Best/base/worst case scenario Underlying assumptions Integrate this in each section (cfr. Key components) Hints Cash flow, P&L and balance sheet projections: be realistic! Startups rarely achieve enormous growth rates, or become a unicorn in no time. Be transparent on the logic and assumptions. Investors like to see a graph of the cash balance Figures should demonstrate that you understand the major financial implications of your business plan and that you have not been over-optimistic Highlight your action plan if things do not go as planned. What logic has been used for the sales forecasts? Make clear it was not invented. Provide assumptions behind costs (production, offices, staffing, etc.) Mention policies adopted (depreciation of assets, number of days credit to customers, etc.) Provide detail behind any loan (expected interest rate, etc.) 14

16 2 Elaborate on finance requirements and deal structures with investors Finance Requirements Key aspects Capital needs resulting from projected cash flows Planned financing rounds Usage of funds Hints Mention how much money you need to execute the plan, and when it is needed Elaborate on the sources of this money (e.g. Business Angels, Venture Capitalists, Bank Finance, or a mixture) Specifically how will that money be used? What is your financial safety margin if your plans or forecasts are delayed? Deal structure Current shareholder structure and funding history Investor shares for each financing round IRR for investors Exit strategy Provide details on what you offer, in terms of ownership (shares) in the company, and for which price Clearly mention what you expect investors to receive in return for the risk taken Mention details behind any banking facility or other forms of finance you expect Exit strategy: how do you expect investors to get their investment and return and when. Will this be through a trade sale, a flotation, or a management buy-out? 15

17 For further information please take a look at our supporting material Recommended book: Planen, Gründen, Wachsen Mit dem professionellen Businessplan zum Erfolg (in German only) This handbook gives you answers to the essential questions that rise during the planning of a startup project. The goal is to establish a professional business plan that can convince potential investors. Numerous novice entrepreneurs have already made use of this handbook on their way to a successful business plan. Using this manual does not require any prior knowledge, as the business language used is easy to understand. Two case studies demonstrate how a real business plan is constructed. Further reading: Richard Stutely: The Definitive Business Plan: The fast-track to intelligent business planning for executives and entrepreneurs (Financial Times Series), 3 rd edition, 2012 Guy Kawasaki: The Art of the Start 2.0: The Time-Tested, Battle-Hardened Guide for Anyone Starting Anything, 2 nd edition, 2015 Bart Clarysse: The Smart Entrepreneur,