Workshop:

How to Write an Effective Business Plan in Just 3 Hours

Getting all the key issues, problems, interconnections, unknowns, resource

requirements, and timing issues out in the open where you can see them and figure out

how to move forward.

Terry Collison, BLUE ROCK CAPITAL© Terry Collison All rights reserved.

May be freely reproduced or quoted with proper attribution.

Timetable• Step 1: A dose of reality about business plans

The truth makes the business planning process easier ... and also tougher. Result: far more useful plans.

• Step 2: Let’s make an actual Business Plan

(Yep, right here, right now)

Actually, we’re going to make 2 !

Clock time

“Traditional” business plan

• Many companies make a critical mistake by assuming that the primary audience is their intended funding source.

• While this assumption is understandable, it often leads to a misdirected analytical and strategic approach.

Why do most Business Plansget written?

Why do Plans get written?

Right.

To raise money.

Consequences

• A plan that is mostly oriented to potential funding sources is mostly useful just for raising money.

• But if the effort proves ineffective – or if it simply takes longer than planned – then on a current basis, the company may be caught without its required funding and without a clear way to guide its current operations.

• Moreover, if the money comes, what specifically is the company supposed to do? And how?

The most effective type ofBusiness Plan is the document that

a company writes to itself.

• Included in this document would be the standard issues such as the company's funding requirements, the intended use of funds, and the results that the company expects. These are important in any Business Plan.

• Logically, this material is directed to all readers of the plan – insiders and outsiders alike.

The internally oriented Business Plan – a critical difference

A Business Plan which is internally oriented is, at root, an operating plan.– It provides a step-by-step description of the specific

actions that the company will use to fulfill opportunities it has identified in the marketplace.

– It also identifies human resources as requirements that must be met to achieve the desired growth.

– Often, it can reveal segments of the business that are extraordinarily profitable or unexpectedly unprofitable.

A happy paradox

• Internally-oriented Business Plans usually prove to be ….– more realistic in concept

– more executable by the company, and

– more convincing in terms of raising money

• A second benefit: It actually takes less time to do.– Fewer (precious) company resources

– Fewer support resources (less wheel-spinning)

You must cover all the usual issues …But you should consume much less TIME

• Key elements in an effective Plan

• A radically accelerated planning process

Creating the Business Plan and using it to raise money can be synergistic with a company's on-going operations and not a critical drain on those finite resources.

The standard elements

• Overall venture concept

• Market opportunity (and competitive alternatives)

• Our technology and our protection strategy

• Development program

• Manufacturing

• Marketing

• Selling Function

• Distribution

• Management and Key Team Members

• Timeline

• Required Resources

• Expected Results

• Supporting Materials

What’s actually critical?• On the previous slide, which elements are most

important to the Company? Why?• For prospective Investors, which are the most

important issues? Why?• Should these priorities have any bearing on the way

the material gets presented? How?• Yes, but honestly how does it usually happen?• Forget traditional business plans. How would you

like to see it done?If you were CEO ? . . . If you were an Investor ?

3 “reminders” before you start

• Planning vs. problem-solving

• The 7 kinds of Business Plans

• The 3 distinct steps in the Planning process

Planning vs. Problem-Solving

• “Problem-solving” is not “planning.”

• “Planning” is not the same as “problem-solving.”

• Effective planning cannot be done without addressing the problems that are critical.

• Not all problems deserve attention. Some just go away.

Not every Plan is the same

• The technology roll-out Business Plan• The market positioning Business Plan• The grow-sales Business Plan• The manufacturing-based Business Plan• The acquisition oriented Business Plan• The “issue” and “problem-solving” Business Plan• The financial Business Plan

Don’t short-circuit the Process

There are 3 steps.Do them one at a time . . . in sequence.

• Step 1: Description– State clearly what is

• Step 2: Analysis– Interpret the situation for its significance

• Step 3: Prescription– State what the company ought to do to achieve its

business objectives. And how it will measure progress.

Business Plan V.1: Make a single... simple... grammatically correct... descriptive sentence... which completely describes the opportunity the company has identified,... the basis for the company’s belief that it can successfully “go after” this opportunity,... the approach that the company intends to use (including a listing of the basic operations that are planned),... the resources, both cash and non-financial resources (such as specific “skill-sets”) that are required to carry out these operations,... an indication of which resources the company already has and which ones it needs to attract,... a description of what the successful achievement of the company’s objectives would look like, and... some indication (qualitative if not quantitative) of what the backers of such an undertaking might expect as a result of their participation.

Your Turn• Organize into Teams (yes, everybody from your

school can work together if you wish).• No, you don’t have to work that way. Feel free to

mix it up with other attendees.• Team size? Anything that’s workable is OK.• Pick any venture situation you’d like.

The next slide provides several examples. Or you can use your own – either real, hypothetical or a combination. The second slide shows a real case.

Example Venture Concepts• Technology for reprocessing post-consumer newsprint into a

manufactured wallboard (4’ x 8’ sheets for the construction industry).

• Proprietary chemistry to de-ink true post-consumer office waste paper so that “identical-to-virgin” paper fiber can be recovered for use in making new high-quality printing and writing grades of paper.

• Non-invasive infrared radiometric analysis (a service business) to detect pre-failure conditions at industrial, commercial, and manufacturing facilities and electrical installations.

• Inexpensive ($20 or less MSRP) chip-based plug-in timer for controlling 110 v. household devices (to replace old-style “clock-motor” timers such as those marketed under the Intermatic Brand).

• Automated electronic brake bleeder and adjustment device which halves labor time and increases reliability of adjustment even on cars with advanced braking systems (i.e., newer models that absolutely cannot be adjusted with the old manual methods).

The tale of a real start-upUsing knowledge and contacts from a decade working together to pioneer the original musical performance synthesizers, the company founders are commercializing fully digital discrete personal monitor mixers that allow professional performers to mix all signals in real time fully independently of both “front-of-house” sound as well as other players via low-cost proprietary components that run over standard Cat-5 cabling backed by the founders’ investment plus $2 million in Series A equity for supporting staff-up, product line completion (in time for holiday merchandising in Year 1), manufacturing (using a proven contract manufacturer), and roll-out (using a network of regional managers and reps) first through music equipment channels (three major dealers confirmed through due diligence) and secondarily to recording studios (some contacts) and pro sound (as well as possibly other segments) in order to achieve operating break-even within 24 months (without additional funding) and then build the company forward using the proprietary technology as a platform for related products with the prospect for several different exit scenarios within 5-7 years.

PresentationsBusiness Plan V.1

• Team 1• Team 2• Team 3

• How to listen – Identify the key factors• What to evaluate – S-O-F-T Analysis• Based on what you hear, how would you now

upgrade your own team’s 1-sentenceBusiness Plan?

Business Plan V.2Based on what you’ve heard, each team is now challenged to write a complete Business Plan ….which conveys all key information … using no more than a single page for each of the 8 or 9 “traditional” sections!

Getting started: View the company as having already achieved at least one major Milestone. Describe what it did to achieve it. Why is this Milestone significant? Now list all the major phases from Milestone #3 to cash-flow break-even ….

Don’t short-circuit the Process

There are 3 steps.Do them one at a time . . . in sequence.

• Step 1: Description– State clearly what is

• Step 2: Analysis– Interpret the situation for its significance

• Step 3: Prescription– State what the company ought to do to achieve its

business objectives. And how it will measure progress.

How to Write an Effective Business Plan in Just 3 Hours

Getting all the key issues, problems, interconnections, unknowns, resource

requirements, and timing issues out in the open where you can see them and figure out

how to move forward.

Terry Collisonwww.bluerockcapital.com / resources

© Terry Collison All rights reserved.May be freely reproduced or quoted with proper attribution.