Transcript Business Plan Presentation by Eliot Ingram

Swat Tank Talk:
Writing a Business Plan
January 15, 2013
Eliot Ingram ’93
Agenda
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Goals
Marketing mix
Reverse income statement
Feasibility study
Business plan
Conclusion
Eliot Ingram - Background
• Swarthmore College, Econ/PoliSci double major (1993)
• MCS, education start-up (1993 – 97)
• Wharton MBA, Entrepreneurial Mgmt major (1997 – 99)
• Vcall, VC-backed internet start-up (1999 – 00)
• Clear Admit, education consulting/publishing firm (2001 –
present)
What Is Your Goal for Your Business?
• What is your exit strategy?
• How long do you want to run the business?
• How long do you want your business to run independently?
• Who is the natural acquirer of your business?
• Do you want to grow a:
• Small/niche/lifestyle business?
• Large, scalable business?
What Is Your Goal for Your B-Plan?
• Internal/personal goals
• Help you test assumptions
• Think through strategic alternatives
• External goals (funding considerations)
• Use plan to raise money from outside investors
Steps to Take Before Writing Your Plan
• Marketing mix exercise (3 Cs & 4 Ps)
• Reverse income statement exercise
• Feasibility plan
Marketing Mix: 3 Cs
• Customers
• Who are they?
• How many are there? (market size)
• What are their needs?
• Competitors
• What firms are trying to meet the needs of the customers?
• Company (you)
• How will you deliver a service that better meets customer
needs?
Marketing Mix: 4 Ps
• Product
• How will you tweak your product or service to better meet the
needs of customers?
• Price
• How will you set prices?
• How does your pricing compare to similar services?
• Promotion
• How will you get the word out that you have a great product at
a great price?
• Placement (distribution)
• How will you deliver your product or service to the customer?
Reverse Income Statement
• What it is/why use it?
• A quick way to check financial assumptions
• Start with your profit goal and work backwards
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Profit goal
Cost assumptions
Revenue goal given profit goal & cost assumptions
Different Combination of Revenue – Cost = Profit
Different Combination of fixed and variable costs = Costs
Different Combination of Price * Quantity = Revenue
Reverse Income Statement Example
(Part 1)
• Assume profit goal is $100,000 per year
• What revenue – cost of good sold combination is realistic
for your proposed business?
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$200,000 - $100,000 = $100,000 (50% gross profit margin)
$300,000 - $200,000 = $100,000 (33% gross profit margin)
$400,000 - $300,000 = $100,000 (25% gross profit margin)
$1,000,000 - $900,000 = $100,00 (10% gross profit margin)
Reverse Income Statement Example
(Part 2)
• What Price*Quantity options make sense in order for your
business idea to generate $1 million in revenue?
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100 customers paying $10,000 each?
1000 customers paying $1000 each?
10,000 customers paying $100 each?
50,000 customers paying $20 each?
• Market size
• What is the size of your target market?
• $50 million market?
• $100 million market?
• $500 million market?
• What % of market size is needed to achieve # customers?
• Ideally you serve a large market ($100 million+)
Reverse Income Statement Example
(Part 3)
• Costs
• What are the estimated fixed costs?
• What are the estimated variable costs/unit?
• Breakeven Volume = Fixed Cost/(Price/Unit – VC/Unit)
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Assume $3000 fixed costs
Assume $1/unit of variable costs
Price point of $4/unit
BEV = $3000/(4-1) = 1000 units sold to achieve BEV
• A key milestone is to become cash flow positive from
operations (when incoming cash from operations exceeds
outflowing cash from operations)
• Breakeven Volume is a key way to determine when you will
achieve positive cash flow
Feasibility Study
• What it is?
• 1-2 page written plan
• 1-page description of market size/financials
• Why use it?
• A quick way to assess a new business idea
• Might do this for 4-5 ideas before determining which business
idea to write up into a 30+ page business plan
Feasibility Study: Questions to Answer
• Succinctly describe your idea.
• Who and how big is the potential market for your product
or service?
• What are the advantages/disadvantages over your
competitors? How do you differentiate yourself?
• What research did you rely on?
• Itemize your start-up costs and your source funds.
• What can you do to improve the business sales volume?
• Discuss your risks and strategies for managing these risks.
• Discuss the feasibility for you to implement this idea.
See AlumNet Feasibility Study Example
Summary of Pre-Business Plan Steps
• Marketing mix
• Help with marketing and strategy sections of business plan
• Reverse income statement
• Help with strategy and financials sections of business plan
• Feasibility study
• Provides overview for business plan
Business Plan Outline
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Summary/vision
Market analysis
Competitive analysis
Strategy
Products/services
Marketing and sales
Operations/key personnel
Financials
Summary/Vision
• Summary of business idea
• Vision for your company
Market Analysis
• Market size/market growth rate
• Market customer segments/target customer profile
• Customer needs
(Use marketing mix 3 Cs in this section)
Competitive Analysis
• Key competitors
• Who are they?
• Competitive landscape
• Fragmentation: Few large players vs lots of small players?
• Changes in industry
• Any consolidation happening?
• How well are they meeting the customer needs?
(Use marketing mix 3 Cs in this section)
Strategy
• Complete a SWOT Analysis
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Strengths
Weaknesses
Opportunity
Threats
• What is your strategy for serving the customers better than
existing competitors?
• How is your product faster/better/cheaper?
(Use marketing mix 3 Cs in this section)
Products/Services
• Describe your product/service
• How do you position it relative to competing products?
• Do you have a product roadmap for developing a suite of
products?
• Are you creating a product or a company with products?
(Use marketing mix 4 Ps in this section)
Marketing/Sales
• Price
• What prices will you charge? Will you offer any discounts
based on volume, time of purchase, etc?
• Promotion
• How will you get the word out that you have a great product at
the right price?
• Placement/distribution
• How will you deliver your service to your customers?
(Use marketing mix 4 Ps for this section)
Operations/Key Personnel
• Key personnel/qualifications
• Include bios on founders/key advisors
• Organizational structure
• How will you organize your firm to market, produce and
deliver services to customers?
Financials
• Assumptions
• Income statement (P&L) projection
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Revenue - Cost of Goods Sold = Gross Profit
Gross Profit –Overhead = Pre Tax Operating Profit
Operating Profit – Capex = Pre Tax Profit
Pre Tax Profit – Taxes = Net Profit
• Cash flow statement
• Cash from operations (similar to P&L)
• Cash from investments (buying/selling equipment = Capex)
• Cash from financing (raising debt/equity)
• Balance Sheet = Assets – Liabilities = Shareholder Equity
(Use reverse income statement for this section)
Partners
• Advisory board
• Beta customers
• Distributors
• Marketing channel partners
• Legal/Accounting
Financing Your Venture
• Bootstrapping/self fund
• Prepayments from customers
• Debt (secured vs. unsecured)
• Equity
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Friends/family
Angel investors
Venture capitalists
Strategics
Conclusion
• Think carefully about your business goals
• Business plan is a snapshot in time
• Always out of date
• More about the process of creating the plan, not the plan
itself
Reference Materials
• Marketing mix document
• Business plan outline
• Developing a discovery-driven plan
• See document
• See link:
http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/Disc
overy_Driven_Planning_-_Annotated.pdf
• Feasibility study example (AlumNet)
Contact Info
• Feel free to contact me if you have questions
• Eliot Ingram
Clear Admit, LLC
[email protected]
215.568.2590