Writing a winning business plan
What are we looking for and what you will be judged against?
1) Team 2) Customer Need 3) Market Size 4) Competition 5) Sources of Sustainable Competitive Advantage
Technology Channel Business Model
Key guiding questions
1)
Before starting your business plan you need to answer two key questions
• • What is the pain your customer is experiencing? What is the solution, and why is this better than any other solutions in the marketplace?
What your business plan should address
1) 2) 3)
4) 5) 6) 7) 8) 9)
Brief business description Team What is the issue / pain point that your product / solution will address What is the size of the market opportunity Product / Technology Overview What is the value proposition Business model / financial model Competitive landscape Risk factors to execution
Brief business description
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One paragraph, no more that articulately conveys the business opportunity Starts with a one sentence tag line – grab reader’s interest! Think of this as an ‘elevator pitch’ where if you only had one minute to capture the interest of a Venture Capitalist, what would you say? Venture Capitalists are interested in big problems, and bold and innovative solutions If you cannot distill the core of the business down to one paragraph, go back to the drawing boards. The simpler the message, the quicker you will draw in the reader Sell, Sell, Sell
Team
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2) 3)
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The most important asset that a company has is its team, not its technology, or its business model Key question to frame this section. Why is this team the best team to capture the business opportunity Demonstrate that the members of the team have either relevant industry experience or core competencies that will facilitate their effort Be succinct, and keep it tight. VCs are interested in work experience and educational background
Problem you intend on solving
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2)
This is your time to utilize the brainstorming that you and your team conducted before writing this business plan. Just as in the executive summary, the key here is to be succinct and clear What is the pain in the market?
• • Is it an inefficiency? Is it a need?
3)
What exactly is the solution. Why this, right now?
• Why has no one else come up with this solution yet? Has technology only recently made this possible?
Market size
1)
2) 3) 4)
Key question - who is going to be the customer for your product and how much will they spend? Big ideas have big markets. Think back to the initial exercise and the question of pain. Think now ‘how much does this pain cost?’ How much does the customer currently spend on solutions that you will replace How much are customers willing to spend on a product like your own
• Depending on the amount of pain, there is a degree of cost associated with that pain. Your product should be less expensive than that pain, and should represent the obvious choice for the customer to make if the solution is provided to him or her
5) 6)
Build the model from the bottom. Who will buy this, how much will they spend, and how much revenue does that mean for you Then think of it top down to cross-check. What portion of the market do you have to capture to get to this revenue number. Is that realistic?
Product / technology overview
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2) 3) 4)
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Make this simple and do not assume that the reader necessarily is an expert in your domain Focus on the question – why is this technology or its application unique? What are its main benefits? Just as in the business summary, be succinct. Diagrams are helpful as are pictures / descriptions if necessary to show us what you do Demonstrate that the technology is scalable, and how you intend on building or improving this to address the market you are going after Is the technology patent protected? What other applications could the technology potentially be used for. Show the VC that this is even bigger than what you are initially addressing
Value proposition
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What is the value proposition of this product / technology How does the customer perceive ‘value’ in their purchase of the product (why will they buy it)
Business model / Financial Model
1) 2)
How do you make money from this opportunity? How will you reach your customers?
• Advertising? Direct sales? Channels? Partners?
3)
4)
Focus on how it is sustainable, if it is proven in other industries or areas, and why the team you have in place is the best to execute on it What are your revenues, gross margin, EBITDA, EBT, and Net Income for the next five years
• Be sure this foots to the market opportunity. It is unlikely that you will capture an entire market – be reasonable about your solution
Competitive landscape
1)
Who are your competitors?
• Your competitors are anyone who is addressing the same pain point as you
2)
Why are you better than them?
• Technology? Team? Customers?
3)
How are you the dominant player?
Risk factors
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What are the biggest risks to your business?
• • • • • Market risks? Financial risks? Competitive risks? Business model risks? Execution risks?
Summary
This is a guideline, not an outline
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Be sure that your business plan includes all of these aspects, but make sure it is laid out a manner appropriate to your business
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As you write the plan, try to write it in a language that anyone could understand / value. You want this business and the opportunity to be obvious to anyone who reads the plan Ask questions. Reach out to peers, professors, CEOs, and entrepreneurs for advice This is not something you write overnight. Do not underestimate the challenge of writing an effective business plan