writing_a_bplan

writing_a_bplan - 2.96 - Management in Engineering, Fall...

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Unformatted text preview: 2.96 - Management in Engineering, Fall 2004 Massachusetts Institute of Technology Department of Mechanical Engineering Instructors: Professor Jung-Hoon Chun and Professor Alexander d'Arbeloff Company logo(s) removed due to copyright considerations. Writing A Winning Business Plan MIT: September 13, 2004 Jack Derby Derby Management Why create a Business Plan? Company logo(s) removed due to copyright considerations. • For a company manager… – – – – – – Communicates strategic direction Communicates tactical agreements Communicates company objectives Communicates department objectives Communicates budget requirements Provides for common agreement & buy-in Company logo(s) removed due to copyright considerations. Strategy ? Tactics ? Objectives? • Strategy = Direction • Tactics = Operating Plans • Objectives = Metrics 1-36 months 1-12 months 1-12 months Business Planning Architecture Business Company logo(s) removed due to copyright considerations. Vision Strategy Tactics 24-36 months 12-24 months 1-12 months Senior Managers Senior Managers All Key Managers The Day-to-Day Operations Actions Why create a Business Plan? Company logo(s) removed due to copyright considerations. • For a company manager… – – – – – – Communicates strategic direction Communicates tactical agreements Communicates company objectives Communicates department objectives Communicates budget requirements Provides for common agreement & buy-in Why create a Business Plan? Company logo(s) removed due to copyright considerations. • For an entrepreneur… • Provides the same as a company manager • Also, – …provides a framework for investors & bankers Why create a Business Plan? Company logo(s) removed due to copyright considerations. • Most importantly, for you & your team – The actual process of planning is the key. • It consolidates management direction. • It provides debate & finally consensus. – It is a guide when speed bumps happen. – It is your company & personal scorecard. Let’s take an example… • Company logo(s) removed due to copyright considerations. • • • • • • Ideas…mid 1999 Talk & Strategize First Generation Business Plans, summer, 1999 Raised $100,000 First customer, early 2000 Second Generation Business Plans, mid 2000 Raised $ 4 million on Series A Writing a plan is tough work ! • It requires disciplined balance Company logo(s) removed due to copyright considerations. – – – – – It’s visionary, but logical. It’s financially perfect, but flexible. It’s for today, but also for 3 years out It’s a formal Plan, but it’s easy to read. It’s creative, but it follows The Rules. How do you start? Pay attention to The Do’s & Don’ts. Company logo(s) removed due to copyright considerations. – Be compelling – Be brief, focused, & deliberate – Focus on customers • How will you sell them? – Focus on cash breakeven – Provide market research & hard data – Be innovative & describe barriers – Create an experienced management team Do… Company logo(s) removed due to copyright considerations. • Be brief & direct & detailed. – Get to the bottom line quickly. • Identify what the business is immediately • Identify the business model immediately. • Focus on your customers. – Who ? How big ? Where ? • Identify the sales model immediately – Define metrics of Sales productivity Company logo(s) removed due to copyright considerations. Do… • • • • • • Define what’s compelling & unique. Be realistic with yourself. Remember, you're investing your career. Define long term objectives for 3 to 5 years. Describe the 3 to 4 primary strategies. Focus on cash breakeven – Make realistic, but exciting projections Company logo(s) removed due to copyright considerations. Don’t Don’t just start writing • Preparation…The Key to Success. – What’s my Vision? – Can I explain it to others ? – What business are we in today? • What about in 3 years? – Are we really innovative? Don’t just start writing Company logo(s) removed due to copyright considerations. • Preparation…The Key to Success. – What do we really know about… • Our market & customer targets • Who our customers will be in 2005 • Our future product roadmap • Market data, trends, & forecasts. • Competition • New technologies in development Company logo(s) removed due to copyright considerations. One One more preparation task… • Define your starting assumptions… – Internally, what do we expect for… • Sales revenue growth rates • Sales acquisition costs • Technology investment rates • Product costs & expected margins • G&A expense percentages • Receivables, payables, financing Get a Part Time CFO Company logo(s) removed due to copyright considerations. Now, you can start writing. What you need… – – – – – – A quiet place and time. All of your data easily available. Start working by yourself. Get the content down quickly. Send a first rough draft to others quickly. Write draft after draft after draft after….. The Traditional Business Plan Company logo(s) removed due to copyright considerations. • An Executive Summary • 7-9 sections • 20-30 pages with financials • • • • Provides clear details Brings out the richness of the business idea. Details the market opportunity & complexity Details the business and sales models What’s included? Company logo(s) removed due to copyright considerations. • 7-9 Sections… 1. Executive Summary 2. Introduction to the business 3. Definition of products & services 4. Overview of markets 5. Overview of sales & marketing plans 6. Overview of product roadmap 7. Summary of manufacturing & operations 8. Management team bios 9. Four pages of financials Section Section 1: The Executive Summary Company logo(s) removed due to copyright considerations. 3-4 compelling pages… • • • • • • Clear definition of the business Markets The business & the sales models Competitive advantages Management team Financials & use of funds Section 2. What’s the Business? Company logo(s) removed due to copyright considerations. • This section is focused on… – The Business Opportunity – The Markets – The Technology & The Products • It must define… – A clear vision & clear strategies – A well defined business & economic model – A strong sense of management experience Company logo(s) removed due to copyright considerations. Section Section 3: Sales & Marketing What’s the Market ? .... The most important section – – – – Customer analysis: pain & needs Worldwide market size & trends Competitive strengths & weaknesses What’s the value creation? Section 3: Sales Company logo(s) removed due to copyright considerations. 3.1 The Sales Plan • What’s your Sales strategy? – What channels will you use? – Is there an innovative channel? – What are your penetration tactics? • What’s your sales model? • What are your metrics? • What’s your hiring & training plan? Section 3: Sales & Marketing Company logo(s) removed due to copyright considerations. 3.2 The Marketing Plan • What are your marketing strategies? – What are the data points to measure success? – What is your price positioning & why? – What are your primary tactics in years 1 & 2 ? – Company logo(s) removed due to copyright considerations. Section 3: Sales & Marketing 3.3 The Customer Support Plan • Primary objectives – Delivery & Response metrics • Primary policies & tactics • Outsource or not? • Future services ? Section 4: Engineering Company logo(s) removed due to copyright considerations. The Development Plan • What are your core technologies? – Provide sufficient, not numbing detail. • What is your development status? – Describe your primary milestones. – Be conservative. Development will be late. • What is the product roadmap ? • Detail the technical team’s background. Section 5: Operations & Manufacturing Company logo(s) removed due to copyright considerations. The Manufacturing Plan • Customer focus is the key • Outsource or not? Why & why not? • Primary metrics? – Quality, costs, delivery • What is core in Manufacturing? • What are unique capabilities & processes? Section 6: Senior Management Company logo(s) removed due to copyright considerations. Management – – – – – #1 reason business plans fall apart #1 reason that investors do not invest. Experience is first. Dedication is second. Ability to rapidly learn is third Too strong an ego is a negative. Section 7: The Financials • The Rule: Everything Must Sync • • • • • • Your vision & strategies in text must tie in. Your market growth objectives must tie in. Your business & sales models must tie in. Your margin percentages must tie in. Your cost of goods must tie in. Your expenses must reflect standard %’s. Company logo(s) removed due to copyright considerations. Section 7: The Financials Company logo(s) removed due to copyright considerations. You need… • P&L’s – 1st year by month – 2nd year by quarter – 3rd year by year • Balance Sheets for each year • Cash Flows for each year • 3-4 pieces of paper only Section 7: The Financials Company logo(s) removed due to copyright considerations. You need to list your… • Primary assumptions • Primary categories for use of funds • Primary risks – Other than the normal – If nothing specific, do not list any. • What’s your exit strategy Company logo(s) removed due to copyright considerations. Section 8: The appendices • Provide only the compelling things… – – – – Product data sheets for primary products Any critical publication. Do not provide resumes. Do not include patents. Let’s take an example… Company logo(s) removed due to copyright considerations. • • • • • • • Ideas…mid 1999 Talk & Strategize First Generation Business Plans, summer, 1999 Raised $100,000 First customer, early 2000 Second Generation Business Plans, mid 2000 Raised $ 4 million on Series A ...
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