The Business Plan
Why write a business plan?
• Always when a new venture needs outside
funding
• Early in the planning process when you are
looking at a large-scale project
• Later or not at all when you are bootstrapping
Dollinger, 2008
Costs and benefits of planning
• Writing a plan takes considerable time,
money, and energy
• Every plan deals with economic uncertainty
and risks posed to new venture – founders
may be uncomfortable confronting risks and
uncertainties and avoid writing a plan
• Writing the plan helps founders confront risks
and conflicts before they become serious
problems
Dollinger, 2008
The plan demonstrates how you
1. Create or add significant value to a customer or
end user
2. Solve a significant problem or meet a significant
need for which someone is willing to pay a
premium
3. Have robust market, margin, and money-making
characteristics
4. Have a good fit with the founders, management
team at time of market entry, and the
risk/reward balance
Timmons, 1999
After you write the plan
• It becomes a point of departure for due diligence
for potential investors and to determine risks of
venture (technology, market, management,
competitive, financial risks)
• This homework is crucial even if you don’t try to
raise outside capital
• The most valuable investors will see weaknesses,
even flaws, and will propose tactics and people to
fix them
Timmons, 1999
Tips for business planning and raising
outside funds
RE: Venture capitalists
• There are a lot of them; don’t talk to all of
them
• Getting a “no” is as difficult as getting a “yes;”
qualify your targets and force others to say no
• Be vague about which other VCs you are
talking to
• Do not meet with an associate or junior
member twice without a partner
Timmons, 1999
Tips for business planning and raising
outside funds
RE: The plan
• Stress your business concept in the executive
summary
• The numbers matter less than the economics
(value proposition and business model)
• Make the business plan look and feel good w/o
using “filler”
• Be prepared to provide copies of published
articles, contracts, market studies, purchase
orders, resumes, etc.
Timmons, 1999
Tips for business planning and raising
outside funds
RE: The Deal
• Make sure investors want you as bad as you
want them
• Create a market for your venture
• Never say no to an offer price
• Use a lawyer with venture deal experience
• Don’t stop selling until the money is in the
bank
Timmons, 1999
Tips for business planning and raising
outside funds
RE: The fund raising process
• It is much harder than you ever thought it
would be
• You can last much longer than you ever
thought you would
• The venture capitalists have to do this the rest
of their careers
Timmons, 1999
Critiquing the plan – General criteria
• Comprehensiveness – use a template to help
• Analysis – resource, industry, competitor and
product analysis; financial projections with
percentages, returns, and comparisons with
analogs
• Reasonableness – assumptions are
comparable to benchmarks and facts
• Writing and presentation – well written and
organized
Dollinger, 2008
Critiquing the plan – Specific criteria
• Management – experience, honesty, integrity
• Resources – rare, valuable, hard to copy,
unique
• Projections and returns – all data must have
solid foundation in reality, yet optimistic
enough to attract investors
• Exit – how and when will investors recoup
money?
Dollinger, 2008
P
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Level 4
Product/ svc fully
developed
Many users, established
mkt
4/1
4/2
4/3
4/4
Level 3
Product / svc fully
developed
Few users, mkt assumed
3/1
3/2
3/3
3/4
Level 2
Product / svc pilot
operable, not developed
for production, mkt
assumed
2/1
2/2
2/3
2/4
Level 1
Product / svc idea but not
operable, mkt assumed
1/1
1/2
1/3
1/4
Evaluation
System
Level 1
Level 2
Single would- 2 founders,
be entrep
Level 3
Level 4
Partly staffed Fully staffed,
mgt team,
experienced
mgt team
Management status and experience levels
Writing and editing the plan
• Steps: Prewriting, writing and rewriting/editing,
editing – despite importance of good writing:
Research on 20 business plans in a competition:
• 30% didn’t include specific strategy
• 40% of teams had no marketing experience
• 55% failed to discuss technical idea protection
• 75% failed to identify details of competitor
• 10% had no financial projections; 15% omitted
balance sheets; 80% failed to provide adequate
details of the financial projections
Dollinger, 2008
Exercises
1. Draft an outline of your business plan
– What information do you already have?
– What information is still required? How will you get it?
2. Prepare as much of the executive summary as
you can. Be concise and informative
3. Critique a business plan
– How well does the plan address key issues?
– What changes and improvements would you make to
the plan?
– How well done is the presentation and writing?
– Would you invest in this business? Why or why not?
Dollinger, 2008