how to write a great business plan berkeley
DESCRIPTION
TRANSCRIPT
© Copyright 2008 Tennant Consulting
How to Write a Great Business PlanSteve TennantTennant Consultingwww.tennantconsulting.com
© 2008 Tennant Consultingwww.tennantconsulting.com
About the SpeakerSteve Tennant, Managing Director, Tennant Consulting
2
■ After PeopleSoft, Steve was VP Business Development at Ninth House Network, a broadband Internet e-learning company; then VP Marketing at Planitax, a startup software-as-a-service application financial software provider, a Tennant Consulting client which he helped to secure venture financing in 2003.
■ Past roles include advising over 20 high-tech firms at Technology Ventures Corporation and as a member of the Keiretsu Forum, an angel investor group.
■ Steve founded the 2,000-member PeopleSoft Alumni Network and co-chairs the East Bay Innovation Groups' Startups and Venture Capital SIG, a monthly networking and educational forum for high-tech entrepreneurs.
■ Mr. Tennant graduated with a BBA with high distinction from the University of Michigan Business School in Ann Arbor, Michigan and lives with his family in Orinda, California.
■ Steve publishes a free monthly newsletter with tips and tools for entrepreneurs. To subscribe, visit www.tennantconsulting.com
■ Steve Tennant is a marketing consultant to software and technology firms looking to attract more customers and venture capital.
■ Since 2001, Steve Tennant has been managing director of Tennant Consulting, helping software and Internet executives accelerate growth of their businesses through strategy, marketing, alliance, and product management consulting services.
■ Steve has over 20 years of software and technology industry experience. He is a former VP of Business Development and director of Product Strategy at PeopleSoft. Prior to that, he was a senior manager at Andersen Consulting (now Accenture).
© Copyright 2008 Tennant Consulting
How to Write a Great Business PlanSteve TennantTennant Consultingwww.tennantconsulting.com
© 2008 Tennant Consultingwww.tennantconsulting.com
Representative Clients
■ Employer tax collection system – State of Michigan■ Project management system■ Professional service billing system■ Government accounting system – Puerto Rico■ Receiving, inventory, shipping system■ Utility billing system■ Member information system■ Disaster recovery system■ AI-based mortgage loan origination system■ Retail banking system■ Bank of the Future solution center■ Portfolio accounting system■ Investment management customer reporting
4
First Nationwide Bank
© 2008 Tennant Consultingwww.tennantconsulting.com
Experience – As an employee
■ Global accounting enterprise packaged software■ Activity-based accounting software■ Knowledge management software
■ Broadband e-learning / management training
5
© 2008 Tennant Consultingwww.tennantconsulting.com
Representative Clients■ Hosted corporate tax software■ Accounting & audit software■ Enterprise pricing software■ RFID supply chain application software solution■ Hosted medical billing software■ Expandable USB hard drive ■ IT asset management software■ Building energy analysis software■ Networking skills e-learning■ Data storage security■ Wireless power products for consumer electronics■ Corporate training materials printing software■ Credit and collections software■ Grid computing solutions■ Hosted bio-computing software■ Offshore product management services■ Collaborative software solution■ Global capital markets trading software
6
Rolling Thunder
© 2008 Tennant Consultingwww.tennantconsulting.com
7
You Might Be Thinking…■ How do I write a business plan?
■ What do I include?
■ How does this process work in the real world?
■ What separates “good” from “great”?
■ How do I get started?
■ Is there any more pepperoni?
© 2008 Tennant Consultingwww.tennantconsulting.com
8
An idea to make your plan great
© 2008 Tennant Consultingwww.tennantconsulting.com
9
The “Business Concept”
Customers’ReallyBig
Problem
Valuable,Differentiated
Solution
What are Their Needs and Wants?How Do They Solve It Today?
How Do They Buy?What Do They Value/Pay?
How “Really Big” Is The Problem?How Are We Different?
How Do We Deliver Value?What Do We Build/Buy/Partner?
How to Balance Speed & Quality?
What’s Our Solution?
© 2008 Tennant Consultingwww.tennantconsulting.com
10
Your “Investor Toolkit”
1. Executive Summary (of the Business Plan)■ 1-3 page standalone Word or PDF
document2. Investor Pitch
■ 10-16 Slide PowerPoint3. Business Plan
■ 15-40 Page Word or PDF document4. Financial Plan
■ 5-20 Page Spreadsheet■ 2-3 pages in Business Plan ■ 1 Slide in Investor Pitch
© 2008 Tennant Consultingwww.tennantconsulting.com
11
How This Works
Sum
You
AdvisorsSum
Sum
Sum
Investors
Sum
InvestorPitch
InvestorPresentations
PPT
BP Fi
n
Due Diligence
BPFin
Terms
Negotiations
Funding
$
Great, send me your business plan & financials
I’d like to
meet
InvestorPitch
All PartnersMeeting
PPT
© 2008 Tennant Consultingwww.tennantconsulting.com
12
Now on to the nuts and bolts…
© 2008 Tennant Consultingwww.tennantconsulting.com
13
What’s in a business plan?
Business PlanSample Table of Contents
1. Executive Summary2. Problem/Market Opportunity3. Business Concept & Vision4. Solution5. Competitive Landscape6. Intellectual Property7. Customer Value Proposition8. Revenue Model9. Sales, Marketing & Alliances10. Manufacturing/Operations11. Financials12. Investment/Uses of Funds13. Team
No “right or wrong” – just “complete”
and “incomplete”
Adjust sequence to tell your story
• Team• Customers• Solution• IP
Lead with your strength
© 2008 Tennant Consultingwww.tennantconsulting.com
14
Executive Summary■ Used to get investor
meetings■ 1-3 pages■ Industry, category, stage■ May be required to
complete an application■ Include short answers to
each of the other sections■ No NDA: Keep jewels close■ Lead with your strength■ Show compelling vision■ Make the story interesting
■ Tips Draft first, finalize after long
business plan is completed Use to provide “routing
information” for VC firms Leave investors wanting to
learn more Used twice: stand-alone
email doc and as intro in your longer business plan
Have other laypeople review & provide feedback
© 2008 Tennant Consultingwww.tennantconsulting.com
15
This section speaks volumes…
about your thought process
© 2008 Tennant Consultingwww.tennantconsulting.com
16
Problem/Market Opportunity
■ What’s the REALLY BIG PROBLEM you’re solving?
■ What’s the market size? How much is spent ON THIS PROBLEM today?
■ How fast is the market growing? Compound Annual Growth Rate (CAGR)
■ Hubcaps vs. cars■ What are the market trends? ■ Why invest now?
© 2008 Tennant Consultingwww.tennantconsulting.com
17
Market: Tips for Success■ Think Big
$1-1.5B market size hurdle for many VC’s – or their economics don’t work
Include global, not just domestic markets Have customer purchase knowledge before meeting investors
■ Bottoms Up Start with the economics of one customer Then build it up to a customer base: “Bottoms Up” analysis
means this many customers, spending this much = market size Do “bottoms-up” math:
• (# of customers) x (% who buy each year) x (average amount spent annually) = market size
■ Top Down Compare to “tops-down”
• “Gartner says this will be a $50B market by 2011 – we just need “__%”. This doesn’t work – but it can be used to reconcile your bottoms up analysis.
© 2008 Tennant Consultingwww.tennantconsulting.com
Terminology■ “Available Market”
Everyone who has this problem, that could someday buy your solution
■ “Addressable Market”Everyone you plan to address with this
version of your solution■ “Demand side” vs. “Supply side”
Demand = measure of customer spending
Supply = measure of supplier revenuesBoth are valid
18
© 2008 Tennant Consultingwww.tennantconsulting.com
19
Now the stage is set…
© 2008 Tennant Consultingwww.tennantconsulting.com
20
Business Concept
■ Introduce your company - what’s your idea?■ What kind of company are you?
“We sell software”, “We license IP to pharmaceuticals”
■ Who will you sell to? Specific titles, demographics, examples
■ What are their biggest problems?■ How being addressed today?■ What are people willing
to pay for your solution?
© 2008 Tennant Consultingwww.tennantconsulting.com
Examples■ “We replace redundant local accounting systems
with a single global system…” ■ “We use a specialized, customized, online survey
tool to replace in-person tax interviews by expensive tax accountants…”
■ “75% of computer users have pictures, music, or other valuable data that is not backed up...”
■ “Most data security has focused on the corporate perimeter, yet most breaches are internal. We stop internal users from accessing stored data they should not be accessing.”
21
© 2008 Tennant Consultingwww.tennantconsulting.com
22
Typically the longest section
(and unnecessarily so)
© 2008 Tennant Consultingwww.tennantconsulting.com
23
Solution■ What is your solution to the problem?■ What is your technology? ■ Underlying technology?
Platform decisions?Development tools?
■ How does it work? ■ How is it better?■ Functions? Features? ■ What are you actually selling?■ Answer, “So what?” Describe benefits.
© 2008 Tennant Consultingwww.tennantconsulting.com
24
Solution: Tips
■ Include 1-2 pictures, diagrams, graphs, flowcharts, screenshots.
■ What’s your vision? Roadmap?■ What is your role in the value chain? What
other components to the “Whole Product”?■ Layperson language for angel investors and
BP competition – assume VCs have experience■ Save technical details and secret recipes for
due diligence■ Show some restraint!
© 2008 Tennant Consultingwww.tennantconsulting.com
25
Show Them The Money…If You Want Them to Show
You The Money
© 2008 Tennant Consultingwww.tennantconsulting.com
26
Customer Use & Value Proposition
■ Include your protagonist, the customer, in the story. How is their life better after
using your solution?
■ How do economics work for one customer?How does that customer
justify purchase? Include “Whole Product” cost
© 2008 Tennant Consultingwww.tennantconsulting.com
27
Just don’t ever, ever say, “We have none”
© 2008 Tennant Consultingwww.tennantconsulting.com
28
Competition
■ From the buyer’s perspectiveWho else do buyers consider as substitutes?
■ From the investor’s perspective If you prove there’s a profitable market, who else
would enter? Then how will you beat them?What’s your strategy to win long term?
© 2008 Tennant Consultingwww.tennantconsulting.com
29
Barriers to Entry/ Intellectual Property
■ Brief (1-2 sentence) patent description & number
■ Patent approval status■ Status of key regulatory approvals (e.g., FDA
approval, NSA certification, Gorilla vendor certification)
■ Also different business model, limited distributors or partners, few global players, financials required to be successful, etc.
© 2008 Tennant Consultingwww.tennantconsulting.com
30
“So, how do you make money?”
© 2008 Tennant Consultingwww.tennantconsulting.com
31
Revenue Model / Business Model
■ Describe revenue streams & pricing, e.g.:License fees, subscription revenues, service contracts,
consulting fees, gain share, etc.Distinguish 1-time vs. ongoingDistinguish by product and market
■ What is pricing based on?How does price compare to customer value?What PROOF do you have that customers will actually
pay this for your solution?
© 2008 Tennant Consultingwww.tennantconsulting.com
32
What happens when you actually go try to sell this?
© 2008 Tennant Consultingwww.tennantconsulting.com
33
Sales, Marketing & Alliances
■ A.K.A. “Go to Market” strategy■ How will your reach your customers? ■ How much website traffic? ■ Type of sales model (direct, keywords,
telesales, through partners, etc.)■ What will it cost to sell the product?■ What are the risks?■ How long before the sales model is proven?■ What will it take to prove the cost of sales?
© 2008 Tennant Consultingwww.tennantconsulting.com
34
Sales, Marketing, Alliances Tips■ Your product is unlikely to “sell itself”■ Examine sales models and financials from similar
companies to see what works; estimate costs■ Compare (total expenses spent selling to date) /
(number of customers) = sales & marketing costs■ Compare sales & marketing to product cost■ Factor in:
Sales ramp up time Customer education time Customer budget cycles Sales compensation requirements Not all reps make quota Typical # accounts/representative # contacts per account
© 2008 Tennant Consultingwww.tennantconsulting.com
35
How will you build it?
© 2008 Tennant Consultingwww.tennantconsulting.com
36
Operations/Manufacturing
■ For product companies■ How will product be built?■ Who on the team is managing?■ Are costs known? Contracted for?■ Offshoring? Outsourcing? Your team’s
experience with this?
© 2008 Tennant Consultingwww.tennantconsulting.com
37
Probably requires the most effort after
“customers”
© 2008 Tennant Consultingwww.tennantconsulting.com
38
Financials■ Quarterly for two years, 5 years total
IncomeExpensesMarginCash Requirements
■ Summarize financials in a table■ Include hockey-stick graph■ Include key assumptions■ Reference your financial model (the spreadsheet in
your investor kit)
© 2008 Tennant Consultingwww.tennantconsulting.com
39
The Ask
© 2008 Tennant Consultingwww.tennantconsulting.com
40
Financing/Uses of Funds■ How much capital are you raising?■ Debt/equity?■ How will the money be used?
Complete prototype Customer acquisition Management team Product development Etc.
■ If this is such a good deal, who are the previous investors, and where are they now?
■ Be prepared for exit strategy w/ angels; exclude for meetings with VCs
■ Do not include a valuation
© 2008 Tennant Consultingwww.tennantconsulting.com
41
This Section Speaks Volumes About
You As A Leader
© 2008 Tennant Consultingwww.tennantconsulting.com
42
Team■ Describe the team members and advisors
Their role & responsibility relative to the plan, and Their relevant experience achieving similar results
■ CEOPrior relevant experience?Who is accountable for the investment?Avoid “Three musketeers”
© 2008 Tennant Consultingwww.tennantconsulting.com
43
Cover
■ Company name■ Industry■ Date■ Contact information
Name of primary contactEmailOffice phoneMobile phoneCompany website
© 2008 Tennant Consultingwww.tennantconsulting.com
Tool: Business Concept Questionnaire
44
Writer’s block? Make this your first stop – 12 page questionnaire
© 2008 Tennant Consultingwww.tennantconsulting.com
Steve, your business concept questionnaire is AWESOME. It really helped to expand how to describe our business and structure our investor presentation.
We had our first VC meeting today, and it went very well – the questionnaire helped us crystallize our business concept and anticipate the vast majority of their questions…. Thank you!
- Phil Cullen President, Acqua Consulting
45
“ “
© 2008 Tennant Consultingwww.tennantconsulting.com
46
Questions?
■ Why a business plan
■ What is your concept
■ What to include
■ How to get started
■ Q&A
© Copyright 2008 Tennant Consulting
How to Write a Great Business PlanSteve TennantTennant Consultingwww.tennantconsulting.com