Transcript Business Plan Preparation Frank Moyes Leeds College of Business

Business Plan
Preparation
Frank Moyes
Leeds College of Business
University of Colorado
Boulder, Colorado
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Tonight
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Financial Plan
Customer acquisition costs
In the Fire – preliminary Customer
Survey results
Team meetings
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November 10 & 11
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Financial Projection Model Workshop
Room 302
6:00 to 7:00pm
Download model v6.8.9 & play with
example
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November 12
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In the Fire - Marketing plan
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Prepare 6 to 10 slides (this is not a DECK)
10 minutes
2 marketing experts
Hand-in:
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Marketing Plan - draft
Customer surveys & summary of results
Customer acquisition costs
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Title Slide
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Name of venture
Team member names
Date
Introduce team
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Introduction
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Grab investor’s attention
Describe the venture
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Elevator speech (not on slide)
Value proposition (not on slide)
3 key points want investors to remember
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Presenting the Marketing Plan
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Show that you really understand the target
customer
Make it real - tell a story
Show prototypes, exhibits, short videos
Focus on the key strategies that you want
the investor to remember
Less is better - use graphs & charts
Put content in bullets, not a marker
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Attractive Market (Example)
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Low barriers to entry
Large market and growing
Favorable trends
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Attractive Market
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Fragmented, no brand loyalty
Addressable market $100 million, 10%
growth
Trends aging baby boomers, social
networking, cost of oil
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Marketing Plan
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Customer Research
Target Customer Strategy
Channel Strategy
Positioning
Product/Service Strategy
Pricing Strategy
Internet Strategy
Communications Strategy
Sales Strategy
Revenue Model
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Business Plan Elements
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Executive Summary
Company Overview
Product or Service Description
Industry and Marketplace Analysis
Marketing Plan
Operations Plan
Development Plan
Management
 Financial
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Plan
Offering, Funding Requirements, Valuation
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Financial Plan
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Financial Projections
Key Assumptions
Business Risks
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Business Plan Perspective
“People write-up their business plan with a
top-down mentality. They invariably talk about
a particular vertical market that has X billions
of dollars in sales each year. They’ll tell us that
they can get 10% of that market. But when we
ask them for the average sale or the cost of
customer acquisition, the answer almost
always is “I’ll get back to you.”
Dan Beldy, Hummer Winblad Venture Partners
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Financial Projections
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Income Statement
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Balance Sheet by years for 5 years
Cash Flow
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By years for 5 years
By months for years 1-2 & by quarters for years 3-5
By years for 5 years
By months for years 1-2 and by quarters for years 3-5
Break-even Analysis
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Focus Your Attention
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Profitability
Assets (resources)
Cash Flow
Funding
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Focus Your Attention
Revenue
Margins – prices vs. costs
Major operating expenses
Cap Ex - Property & Equipment
Working capital
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Profitability
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Assets (resources)
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Cash Flow
Increase/(Decrease) in Cash
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Funding
Equity & Debt
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Common Weaknesses
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Gross margins are too high
Operating expenses are too low
Working Capital (must be based on industry)
Fixed Assets & Capital Expenditures not
addressed
Seasonality
Growth not anticipated
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Financial Drivers (2-3 Key)
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Revenue model – roll out, market share, new
products, customers/day
Margins (price/labor+materials) – cost goal
Operating Expenses – hire 10 sales persons,
prototype cost, legal expenses, etc.
Capital Expenditures – major
Working Capital – A/R days, Inventory days
(turns) & A/P days
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Risks I
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What major risks does the venture face?
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What can go wrong?
What must go right
How mitigate?
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Risks II
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Market
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Size of market
Competitor’s response
Sales cycle
Closing window (12 VC funded companies)
Strategic - establishing partnerships or
agreements
Operational - large number of interrelated
components
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Risks III
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Technology
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Financial
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Will it work
Time and cost to development
Scalability
Risk/return
Dilution
Macro-economic
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Volatile industry
Government approval
Exchange rates
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Financial Plan Sections
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Financial Projections
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Assumptions
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Summary goes in Plan
All Financial Statements go in Appendix
2-3 key assumptions go in Plan
Detailed assumptions go in Appendix
Business Risks
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Summary of Financial Projections
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Break-even
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Customer Acquisition Costs
Costs to Get a Customer
Number of Customers
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Costs to get a customer
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Sales salaries & commissions
Advertising & promotion
Customer & tech support
Website
Travel & entertainment
Number of customers
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Business Plan Perspective
“Entrepreneurs have got to display a clearly articulated vision
for what they want to do. And they must tell their story from the
bottom up. A bottom-up approach means that they know with
absolute certainty whom they’ll sell to, how much it will cost,
and what the sales per week will be next March. Sure, a lot of
assumptions are involved, but entrepreneurs need to break
their business down to the molecular level. That information
leads logically to the next step which is saying to an investor, ‘I
am going to take this money and do X, Y, and Z with it and
here’s what will happen in the end.’ Your survival depends on
knowing that stuff cold.”
Dan Beldy, Hummer Winblad Venture Partners
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Critical Mistakes I
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“Let’s go smoke something”
“These trees sure are pretty”
“We can get orders in a month”
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“We
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Sales cycle
No one knows you
can whip this puppy out in 6 months”
Development time-line longer
More expensive
“Look at how much they spend on marketing!
We won’t have to spend that much”
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Critical Mistakes II
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“Sure, operating expenses are high at the
beginning, but then they will go down.”
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Operating expenses don’t decline
Salaries must be realistic
Growth requires spending money
“We’ll lean on our suppliers and not pay
them for 90 days.”
“Our customer will pay us in 30 days.”
“
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Financial Dynamics
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Who does the financial projections?
Should my projections be optimistic or
pessimistic?
What kind of questions do investors ask &
why?
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