Enterprise Club

Business Plan Competition

Analysis by

Prof Anthony Fretwell-Downing

7th December 2004

Introduction

• Ingredients!

• Essential foundations

• Business proposition

• Proof of concept

• Funding the foundations

• Business plan executive overview

• Summary

Ingredients!

• Positive attitude and fascination for discovery

– In any area of knowledge

• Think outside ones subject area

– Serendipity (unexpected happenings)

• Combine different perspectives

– Innovation essential for progress

• Education instincts

– Often no materials

– Learn from others and teacher colleagues

Essential Foundations

• Team of like minded individuals with contrasting experiences– Leader– Co-ordination– Self-discipline & self-confidence

Access to chosen market networks – Acknowledged expertise– Personal credibility

• Combined advantage– Innovative solutions – Quality enhancements– Competitive pricing

• Window of opportunity – stay ahead of the pack!

Business Proposition

• Define the market (segment/s) for your initiative

• Who really needs your product/services?– Types of organisations– Potential clients

• Where does the purchasing power reside?– Individuals– Business (Corporates, SMEs)– Public sector (Universities, NHS, government, education)

• Political, Economic, Sociological, ‘Technological’ barriers to entry?– Comprehending ‘PEST’ interactions – Show linkages in the business plan and the financial model

Proof of Concept

• Convincing competitive advantages:– Lower operating costs

– Greater business integration

– Global services proposition

– e.g. http://www.wiredworkplace.net/

– e.g. http://www.breakbeat.co.uk

• Innovative proposition– Lower production costs

– More reliable components

– Greater system integration e.g. virtual groupings

– e.g. http://www.researchtogether.com/?refsite=sheffield

Funding the Foundations

• Banks don’t take risks so avoid start-ups

– Lend against securities (mortgage your assets e.g. house)

• Venture Capital and Business Angel investors expect to share

risks

– Tough conditions

– High equity stake (from 25% to 50%)

– Monitor through non-executive directorships

• Use of prize money

– Seed corn only

– Additional funds essential (£100,000 upwards)

– Pseudo capital provision– lots of free labour!!!

Business Plan – Executive Summary Part 1

• Proposition

– Encapsulate the idea in a sentence or two

• Business Model - outline the basic essentials:

– The leader, roles and team positions (Financial management?)

– Describe the product/service

– Map competitive advantage against the competition

– Use published data to estimate market size and structure

– Communications: website, telemarketing, partnerships, etc

Business Plan – Executive Summary Part 2

• Sales & Marketing

– Prospects, sales forecasts, closing contracts

– Evidence that sales margins will cover direct costs and fixed overheads

– Publicity mechanisms to support market launches - logo

– Product/service collateral for marketing campaigns (literature)

• Financial Model

– Initial and second stage funding requirement (working capital)

– Cost of setting up initial business infrastructure & ‘production/services’

– Capital equipment, premises etc.

– Breakeven point: gross margin to date = all costs

Sample budget by type

  Products Services Admin Totals Revenue 100,000 50,000 - 150,000

Direct Costs 40,000 5,000 - 45,000

Gross Margin 60,000 45,000

-

105,000

Fixed overheads 10,000 5,000 15,000

Marketing 8,000 4,000 12,000

Staffing 30,000 20,000 15,000 65,000

Total operating costs 48,000 29,000 15000 92,000

Depreciation 2,000 3,000 5,000

Interest 1,000  500  1,500

Net Profit 9,000 12,500 -15,000 6,500

Sample 3 year budget

  Year 2006 2007 2008

Products 100,000 150,000 300,000

Services 50,000 70,000 100,000

Total Revenue 150,000 220,000 400,000

Direct Costs 45,000 70,000 135,000

Fixed overheads 15,000 20,000 30,000

Marketing 12,000 15,000 20,000

Staff 65,000 80,000 110,000

Total Costs 137,000 185,000 295,000

Depreciation 5,000 6,000 8,000

Interest 1,500 2,000 4,000

Net Profit 6500 27,000 93,000

Summary

• Purpose of business investment– Create profits – Increase shareholder value

• Don’t believe your own propaganda– Remain focused– Growth inevitably leads to ‘chasms’ that have to be crossed

• Everything joins up to create a coherent proposition– At the ballot box your ‘picture’ must be in the mind of the

judges• Option one Yes • Option two No!

Insight

“No magic recipe exists for creating a successful business,

just opportunities that require fearless exploitation,

AD INFINITUM!!!”.

FD Business ventures

• FD Informatics – www.fdisolutions.com

• FD Hospitality – www.fdhospitality.com

• FD Tek – www.fdtek.com

• W2 Networking – www.wiredworkplace.net

• AEI – www.breakbeat.co.uk

• Researchers Ltd - www.researchtogether.com

• FD Maynard – www.maynardarms.co.uk

• FD Whirlowbrook Hall – no website

• FD Learning – sold, now at - www.tribalgroup.co.uk