bmc guide on business planning

1

CONFIDENTIAL

Discussion document

5 November 2008

This presentation is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval. This material was used by Barnes Martin Consulting during an oral presentation; it is not a complete record of the discussion.

Dreamland An executive division of MojVideo d.o.o.

Prepared for:

Business Planning for Startups

2

ContentsContents

• Business start-up processBusiness start-up process

• Writing the Business PlanWriting the Business Plan

• Constructing the teamConstructing the team

3

ContentsContents




4

Stages of a Start-upStages of a Start-up

Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3

Business idea

generation

Business plan

preparation

Start-up and growth

Established company

Interest of Interest of investorsinvestors

Financing Financing decisiondecision

Exit of Exit of initial initial

investorsinvestors

5

5 key factors for success of innovative start-ups5 key factors for success of innovative start-ups

Ideas• Degree of innovation• Scope• Patent

Traditional service providers• Attorneys• Patent lawyers• Tax consultants/

accountants• Market researchers

People• Inventors• Entrepreneurs• Team members

Capital• Availability/amount• Needs/responsibilities• Exists for investors

Network & exchangeNetwork & exchange• CoachingCoaching• NetworkingNetworking• MatchmakingMatchmaking• Innovative service providerInnovative service provider

– Venture capitalistsVenture capitalists– HeadhuntersHeadhunters– Business angelsBusiness angels– Start-up consultantsStart-up consultants

6

Elements of a promising business ideaElements of a promising business idea

CLEAR CLEAR CUSTOMER CUSTOMER

VALUEVALUE

MARKET OF MARKET OF ADEQUATEADEQUATE

SIZESIZE

FEASIBILITYFEASIBILITYAND AND

PROFITABILITYPROFITABILITY

Successful ideas Successful ideas demonstrate how big demonstrate how big the market is, the target the market is, the target customers and how the customers and how the product differs from the product differs from the competitioncompetition

SUFFICIENT SUFFICIENT DEGREE OF DEGREE OF INNOVATIONINNOVATION

Create a new product or Create a new product or a new way of delivering a new way of delivering an existing product – an existing product – do both and create a do both and create a new industrynew industry

Ideas should be Ideas should be feasible with realistic feasible with realistic time and resource planstime and resource plans

The key to success is The key to success is satisfied customers, not satisfied customers, not a great producta great product

““There is nothing in the world as There is nothing in the world as powerful than an idea whose time has powerful than an idea whose time has

come”come”Victor HugoVictor Hugo

7

Innovation classification schemeInnovation classification scheme

New product

• Microsoft

New industry

• Netscape

Existing industry

• Skilled trades

• Engineering offices

New business system

• Dell

ConventionConvention InnovationInnovation

Business systemBusiness system

Co

nve

nti

on

Co

nve

nti

on

Inn

ova

tio

nIn

no

vati

on

Pro

du

ct/s

ervi

ceP

rod

uct

/ser

vice

8

Role of traditional service providersRole of traditional service providers

Patent Patent lawyerslawyers

Tax Tax consultantsconsultants

Market Market researchersresearchers

PATENTSPATENTS

TAXTAX

MARKET MARKET RESEARCHRESEARCH

Professional advisors can help to Professional advisors can help to clear hurdlesclear hurdles

Long term

success

9

Role of a venture-capital companyRole of a venture-capital company

££££££

• IPO (Initial Public IPO (Initial Public Offering)Offering)

• Sale of stake to Sale of stake to third partiesthird parties

• Seed capital (pre Seed capital (pre start-up)start-up)

• Start-up capital (at Start-up capital (at or shortly before or shortly before start-up)start-up)

• Expansion capitalExpansion capital

• Young, growing Young, growing companiescompanies

CapitalCapitalrecoveryrecovery

InvestmentsInvestments

5–8 years post5–8 years postStart-upStart-up

10

Collective team strengthCollective team strength

Well constructed teams Well constructed teams provide a strong basis for provide a strong basis for

successsuccess

TeamTeammembersmembers

InventorsInventors

EntrepreneursEntrepreneurs

TeamTeammembersmembers

FinanceFinance

SUCCESS

11

Network supportNetwork support

START-UP

Venturecapitalists

Friends

SponsorsOther

start-ups

Serviceproviders

Peers

EntrepreneursAcademics

Use all Use all connectionsconnections

12

ContentsContents




13

““Writing a Business Plan forces you Writing a Business Plan forces you into disciplined thinking, if you do an into disciplined thinking, if you do an intellectually honest job. An idea may intellectually honest job. An idea may sound great, but when you put down sound great, but when you put down all the details and numbers, it may fall all the details and numbers, it may fall apart”apart”

Eugene Kleiner, Venture CapitalistEugene Kleiner, Venture Capitalist

14

Characteristics of a successful Business PlanCharacteristics of a successful Business Plan

Your calling card

The document the reader will remember you by

Objective

• Accurate

• Positive and critical

Clear

• Well structured

• Standalone

Simple

• Plain English

• Non-technical terms

Consistent

• Style

• Analytical depth

15

Elements of a Business PlanElements of a Business Plan

5. Marketing and sales5. Marketing and sales

6. Business system and organisation6. Business system and organisation

7. Implementation schedule7. Implementation schedule

Businessconcept

Draftbusiness

plan

‘Final’business

plan

Focus of this phase

Part of this phaseIm

po

rtan

ceIm

po

rtan

ce

1. Executive summary1. Executive summary

2. Product or service2. Product or service

3. Management team3. Management team

4. Market and competition4. Market and competition

8. Opportunities and risks8. Opportunities and risks

9. Financial planning and financing9. Financial planning and financing

16

Key questions – 1. Executive SummaryKey questions – 1. Executive Summary

• What is your business What is your business idea? In what way does it idea? In what way does it fulfil the criterion of fulfil the criterion of uniqueness?uniqueness?

• Who are your target Who are your target customers?customers?

• What is the value for those What is the value for those customers?customers?

• What market volume What market volume and growth rates do and growth rates do you forecast?you forecast?

• What competitive What competitive environment do you face?environment do you face?

• What additional stages of What additional stages of development are needed?development are needed?

• How much investment is How much investment is necessary (high level necessary (high level estimation)?estimation)?

• What long term goals have What long term goals have you set? you set?

• What are the results of What are the results of your detailed business your detailed business planning? planning?

• What are your exact What are your exact financing needs?financing needs?

• How will you delegate How will you delegate management tasks?management tasks?

• How much production How much production capacity is necessary? capacity is necessary?

• How will the How will the implementation of your implementation of your business idea be business idea be organised?organised?

• What are your next What are your next concrete steps? concrete steps?

• What do you estimate What do you estimate your financing needs to your financing needs to be?be?

• What are the sales, cost What are the sales, cost and profit situations?and profit situations?

• What are the most What are the most important milestones important milestones along the way to your along the way to your goal?goal?

• What test customers have What test customers have you approached/could you approached/could you approach?you approach?

• What distribution What distribution channels will you use?channels will you use?

• What partnerships would What partnerships would you like to enter into?you like to enter into?

• What opportunities and What opportunities and risks do you face? risks do you face?

• What is the picture on What is the picture on patents? patents?

Business concept Draft business plan ‘Final’ business plan

17

Key questions – 2. Product or serviceKey questions – 2. Product or service

Executive Summary

Product or service

Management team

Market & competition

Marketing& sales

Business system & organisation

Implementation schedule

Opportunities & risks

Financial planning

• What are the features or functions of the product/service?What are the features or functions of the product/service?

• Who are the target customers?Who are the target customers?

• What value propositions does the product/service provide to What value propositions does the product/service provide to the customers? (e.g., tabulate customers’ unfulfilled needs the customers? (e.g., tabulate customers’ unfulfilled needs and ways the product/service addresses those needs)and ways the product/service addresses those needs)

• What is the revenue model? (i.e., description of revenue What is the revenue model? (i.e., description of revenue sources – advertising revenue, transaction revenue, sources – advertising revenue, transaction revenue, subscription revenue, flat-fee vs. percentage-based)subscription revenue, flat-fee vs. percentage-based)

• What is the development status of the product? What remains What is the development status of the product? What remains to be done to convert the business idea into a tangible to be done to convert the business idea into a tangible product or service?product or service?

• Has this business model been proven elsewhere? What are Has this business model been proven elsewhere? What are some successful examples?some successful examples?

• What is the plan to maintain the loyalty of customers?What is the plan to maintain the loyalty of customers?

18

Key questions – 3. Management teamKey questions – 3. Management team

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• Who are the founders/founder groups and what are their Who are the founders/founder groups and what are their qualifications, experience and past achievementsqualifications, experience and past achievements

• How critical is the idea originator to the future success of the How critical is the idea originator to the future success of the venture?venture?

• How are the management responsibilities shared among the How are the management responsibilities shared among the team? (e.g., a table of team members with their position and team? (e.g., a table of team members with their position and key activities/responsibilities)key activities/responsibilities)

• What is the plan to reinforce management team in the future? What is the plan to reinforce management team in the future? (e.g., schedule of future management hiring and skills (e.g., schedule of future management hiring and skills required)required)

19

Key questions – 4. Market & competitionKey questions – 4. Market & competition

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• What is the potential market size for the product/service? What is the potential market size for the product/service? (e.g., calculation derived from number of target customers, (e.g., calculation derived from number of target customers, units sold, value of sales)units sold, value of sales)

• What is the expected market growth and which major factors What is the expected market growth and which major factors influence that growth?influence that growth?

• Who are the likely competitors? What do they offer?Who are the likely competitors? What do they offer?

• What are the strengths and weaknesses of competitors? What are the strengths and weaknesses of competitors? What is your competitive positioning vis-à-vis competitors? What is your competitive positioning vis-à-vis competitors? (i.e, a table of competitors and their ratings across key criteria (i.e, a table of competitors and their ratings across key criteria – e.g., time to launch, technological capability, access to – e.g., time to launch, technological capability, access to proprietary technology, privileged relationship with suppliers proprietary technology, privileged relationship with suppliers and customers)and customers)

20

Key questions – 5. Marketing & salesKey questions – 5. Marketing & sales

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• What are the specific plans to promote the product/service?What are the specific plans to promote the product/service?

• How will the product/service be distributed? Which partners How will the product/service be distributed? Which partners will be needed in the distribution channel?will be needed in the distribution channel?

• What will be the pricing strategy? (e.g., how much will you What will be the pricing strategy? (e.g., how much will you charge for different customer segments, quantities)charge for different customer segments, quantities)

21

Key questions – 6. Business systems & organisationKey questions – 6. Business systems & organisation

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• What is the proposed organisational structure of the What is the proposed organisational structure of the company?company?

• How will this organisational structure help achieve business How will this organisational structure help achieve business goals?goals?

• What skills will be required and what is the hiring plan? What skills will be required and what is the hiring plan? (e.g., a table that shows total number of positions and the (e.g., a table that shows total number of positions and the functional description of positions, skills required for top 3 functional description of positions, skills required for top 3 positions in each department)positions in each department)

• What is the scope of the business? (i.e. what will be What is the scope of the business? (i.e. what will be performed internally and what will be outsourced?)performed internally and what will be outsourced?)

• Have strategic partnerships been identified? If yes, how will Have strategic partnerships been identified? If yes, how will these partners be secured? If no, what is the plan to get these partners be secured? If no, what is the plan to get partners?partners?

• Have key vendors been identified? If yes, how will these Have key vendors been identified? If yes, how will these vendors be secured? If no, what is the plan to get vendors?vendors be secured? If no, what is the plan to get vendors?

22

Key questions – 7. Implementation scheduleKey questions – 7. Implementation schedule

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• What is the detailed short term implementation plan? (e.g., What is the detailed short term implementation plan? (e.g., Gantt chart showing detailed activities by month)Gantt chart showing detailed activities by month)– Who is responsible for each of the tasks?Who is responsible for each of the tasks?– What are major milestones?What are major milestones?– What are interdependencies between tasks?What are interdependencies between tasks?

• What is the 5-year implementation plan? (e.g., Gantt chart What is the 5-year implementation plan? (e.g., Gantt chart showing activities by quarter)showing activities by quarter)– Who is responsible for each of the tasks?Who is responsible for each of the tasks?– What are major milestones?What are major milestones?

• What are possible long term options for the business?What are possible long term options for the business?

23

Key questions – 8. Opportunities & riskKey questions – 8. Opportunities & risk

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• What are the best case and worst case scenarios for the 5-What are the best case and worst case scenarios for the 5-year financial projections? What are the key assumptions on year financial projections? What are the key assumptions on the key parameters? (e.g., market shares, profit margin) – the key parameters? (e.g., market shares, profit margin) – refer to Appendix for examplerefer to Appendix for example

• What does the sensitivity analysis show? (i.e., by varying key What does the sensitivity analysis show? (i.e., by varying key assumptions in isolation)assumptions in isolation)

• What mitigating steps are planned in order to minimise risks?What mitigating steps are planned in order to minimise risks?

24

Key questions – 9. Financial planning & financingKey questions – 9. Financial planning & financing

Executive Summary

Product or service

Management team


Marketing& sales




Financial planning

• For the next 5 years (and at least 1 year beyond breakeven For the next 5 years (and at least 1 year beyond breakeven point), what are the projections forpoint), what are the projections for– Income statement (includes detailed revenue source as Income statement (includes detailed revenue source as

described in the business model)described in the business model)– Cash flow statementCash flow statement– Company valuation, utilisingCompany valuation, utilising· Discounted cash flow analysis Discounted cash flow analysis · Revenue multiples Revenue multiples

– Balance sheetBalance sheet

• What are the key assumption used in the financial proforma? What are the key assumption used in the financial proforma? (e.g., cost of capital, market share, margin)(e.g., cost of capital, market share, margin)

• What are the financial requirements for the business and what What are the financial requirements for the business and what sources of financing have been identified? (e.g., financial sources of financing have been identified? (e.g., financial schedule with amount needed and possible financing sources)schedule with amount needed and possible financing sources)

25

ContentsContents




26

““Invest in people, not ideas”Invest in people, not ideas”Eugene Kleiner, Venture CapitalistEugene Kleiner, Venture Capitalist

27

Characteristics of a powerful management teamCharacteristics of a powerful management team

• Common vision – everybody wants to succeedCommon vision – everybody wants to succeed

• Complementary attitudes and strengthsComplementary attitudes and strengths

• At least 3, but usually no more than 6 peopleAt least 3, but usually no more than 6 people

• Sticks together through thick and thinSticks together through thick and thin

• Staying power, even when there are setbacksStaying power, even when there are setbacks

28

Criteria applied by investorsCriteria applied by investors

• Has the team already worked together?Has the team already worked together?

• Do team members have relevant experience?Do team members have relevant experience?

• Do the founders know their weaknesses and are Do the founders know their weaknesses and are they willing to make up for them?they willing to make up for them?

• Have the founders agreed on their future roles Have the founders agreed on their future roles and are ownership issues settled?and are ownership issues settled?

• Has the management team agreed on a common Has the management team agreed on a common goal, or are there underlying differences of goal, or are there underlying differences of opinion?opinion?

• Do the team members fully back the project?Do the team members fully back the project?

29

GOOD GOOD LUCKLUCK