The Ideal Business Plan Fiona ReadBusiness School, U. of Oxfordhttp://deimos3.apple.com/WebObjects/Core.woa/Browse/ox-ac-uk-public.1908817890.01908817892.2333045145?i=1862825358

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Do you need a business plan?

You may think you’ll never need a business plan – but you will A business plan is used to communicates with your audience – selling your

business to investors or bank manger or for grant proposal First you must understanding investors and how you should talk to them

2 reasons- Internal = your team agrees on plan / it’s your map. It will change all the time- External = it’s a sales document, used to persuade someone to invest in you.

Cautionary note: using templates (software) = dangerous because don’t want your plan to look like everyone else’s/ more effective if it comes in your words. If you use a canned approach, your business will come across as canned.

http://youtu.be/kpywdu1afas

Deliver what your investors want to know

Most investors don’t read the plan. They’ll look at the summary at the front, financials at the back and about the management team. These parts must therefore sing. You’ve got 1 min 20 seconds to make your point and get them interested.

Sell a compelling story –define your customer. More importantly show how you get customers.

Be explicit about people or organizations that pay you money. Define problem and state clearly WHY someone will pay Crux of business

plan. Be ultra clear on what the market places needs. Be concise about the pain that exists in the market.

Successful business is based around changing behavior – show evidence and make valid statements demonstrating that you will create this change. Don’t just assume a change will happen.

Truth equals creditability

Be direct and realistic and credible. Avoid untruths – if you are a one woman business then say it: “I am a one woman band with a brilliant idea. My plan is to raise X amount of money and I know I need a CEO, finance and logistics managers and I will gather these people as I go along “. This is a much more credible plan than pretending what you’re not.

6.30 Supply chain:Which part of supply chain will you add value. Sports manufacturer sells to distributor who sells to sports club who sells to consumer. Where will you add value?Understand fully where you fit and where value of your company is.

8.00 What your plan should look like{INSERT HERE}15 page max. Only a couple of pages on each. Risk – what if it goes horribly wrong. What are limitations. Build creditability.

10.55 who are investorsVenture = >$1m (rarely less)Business angels – High net worth people, Accessible through networks ($50k). Investment comes with knowledge. Hard to reach. Friends and family – test idea and build credibility. Government awards – non dilutive. SBA grants.

16.10 What do investors look for?Experience of management team/ track record.Problem of you don’t have experience.

If light on experience, express potential. Passion and drive. Be careful here.Gather experience people around to enhance creditability

Profile of VC:Male, normally high ego. They are all the same in essence, even though they say they are different. They are looking for big run. Not interested in life style business. If you cant spin big picture don’t bother.Process – get junior person interested and use to push up chain. Quick, easy coherent pitch is essential. Aim low with technicality.

19.56 Use the right formalitiesDon’t make it complicated (applies for VC, angel, bank manager).Avoid acronyms – assume minimum knowledgeDescribe product in terms of story and how customer would use it.Make plan easy to read- short paragraphs, no small font. It will be skim read. Think of it as the spoken word – not written word.Repeat core message.Avoid ‘perfect’ language – make it easy to ready. Avoid passive tense. “The team WILL” (use active tense)Start with and end with important point in each paragraph.Avoid clichés – ‘paradigm shift’, ‘state of the art’, ‘unique’ and ‘world beating’. You can’t validate them so it makes you look amateur. Be specific – say ‘rain and fog’, not ‘bad weather’. Substantial share. What does that mean – don’t use it if you can’t qualify. Remember goal is to establish credibility.

28.00 Executive summaryWrite the plan first then write the summary last. It’s so important. Spend x5 on summary that on the rest of the plan.Frame it as how your product benefits customers. Make it customer centric and not product centric (spend minimal time describing product). Must say how much looking for and when you’re pay it back and achieve revenues.Be clear about business model you will use i.e. how you will generate money.Key drivers of market and your teams’ ability to deliver.Tell the brief history of your business. Tell a story where idea came from. It shows how thinking generated your business idea. Who have you talked to – customers – how have you qualified your opportunity. Say why customers will CONTINUE to buy your product – future development of your business.Avoid lots of detail about market research. Focus on customers.

35.30 Talking about your marketWhen quantifying size of market – avoid big macro statements. State you market in meaningful terms. Keep it small and quantifiable. How does your market operate; who are big companies and how do they service market. Know the dynamics.

Unrealistic assessment of market, serves as red flag to investors and makes call into doubt all the other claims you make about your plan.

37.37 CompetitorsFind out what your competitors are doing. There are always competitors. Don’t say you have none.How do the competitors compete e.g. cut price airlines compete on price. State your business in terms of how you will competeIt’s often dangerous to say that a start up can compete on price. Find your axis of competition.Ask your customers how they view competitors and what they are offered in the market.Example: you created a high-end wonder washing machine. Amateur plan would say ‘we are going to attack the global washing machine market which is worth $3bn and we will achieve 5% of market by year 5”; the good plan says – “we don’t want to service the whole of the US at this stage, we are going to target households who buy high end appliances first, because they have the propensity to buy the Wonder Machine. Because we will have limited service capability to start we are just going to focus on the 3 big South East cities and target household with above $100k income, who we know spend $10 million on high-end appliances. We will secure $1 million of this market and then expand to additional 50 cities through a distributor network and create revenues of $50 million”.

42.30 MilestonesState your milestones and how you will get there.

43.00 Pricing, promoting and selling.How are you going to set price? Is it based on margin or market price? DO NOT under price your product it will signal your death knell. High price not necessarily wrong – think Starbuck’s, Apple computers. Based on getting branding right. Promotion – watch that you don’t spend too much time and money at the beginning. The entrepreneur needs to drive this him / herself first. You can’t hide from this. Make modest assumptions in your plan. You need to get close to your customer and know them – don’t rely on judgment, rely on specific interaction. Where will you geographically sell first? Don’t have to sell big first. Be intelligent and make it manageable. Don’t include massive amounts of detail in your plan.How you will sell your product is a huge part of your story – why will you be able to get your product out. Do you have any advantages here – relationships or big contracts – that give you an ‘unfair’ competitive advantage. Show you have anticipated where the major costs will arrive and how you are planning to deal with them. Show that you are looking down the road.

51.45 Management

If your have an incomplete team, then say so and say where you need to plug the gaps e.g. we’re going to hire someone to run the company by X date.Recruit advisors to plug gaps. Names should have big credibility in your space. Demonstrate any press your have had – it’s good third part validation. What is your sense of ambition? Let it be known where you want this go.

55.15 FinancialTake third party advice and use other resources to create the plans and story.Be clear about how much money your need, how you will use it and what the return will be (or payback plan).Show how you will measure your progress. Talk about key performance indicators and your main metrics e.g. the cost to acquire a customer is $1,000 and the life-time value of customer is $9,000.DO NOT use hundreds of spreadsheets.Investors want to know how they will make money. Their return on investment is the crux of your entire plan. They want their money back with interest.

Be realistic; be interesting; stay away from the boring; your job is to tell investors what they want to know and why they should invest. Be hyper informed about your customer.