USING THE ICP EXERCISE TO
BETTER UNDERSTAND THE
BUSINESS PLAN
July 8, 2014
Kelley A. Packalen, PhD
Associate Professor of Entrepreneurship, Queen’s School of Business
Shad Valley Alum (Carleton 1992)
kpackalen@business.queensu.ca
PURPOSE OF BUSINESS PLAN
 Reality Check—What’s it going to take?
 Living guide to the business
 Statement of intent for third parties
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Investors
Bankers/lenders
Potential management
Strategic partners
Suppliers
PURPOSE OF BUSINESS PLAN
 Statement of intent for third parties
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
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Investors
Bankers/lenders
Potential management
Strategic partners
Suppliers
FOR THE AUDIENCE FOR THE
PLAN…
 A simple statement of what’s being offered to prospective
investors… customers… suppliers… key employees…
 This is what we need
 Here is what is in it for you
TYPES OF BUSINESS PLANS
 Business plans come in a variety of different types
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Summary business plan – “The 10 to 12 pager”
The manageable plan – “The 18 to 20 pager”
Full business plan – “The 40 to 50 pager”
Operational (business) plan – “The Hernia Document”
THE BUSINESS ITSELF: KEY AREAS
TO ADDRESS
 Positioning
 Marketing & sales
 Problem
 Competition
 Solution
 Management team
 Business model
 Financial projections & key
metrics
 Underlying magic (your
competitive advantage)
 Current status,
accomplishments to date,
timeline & use of funds
POSITIONING TEAM EXERCISE:
STEP 1
Ability to provide a unique
product or service
 Plot the main competitors that you identified in the following
framework.
Stupid
companies
Dotcom
companies
X
Price
competition
Value to customer of the product or service
Best place
to be
THE PROBLEM (AKA THE
OPPORTUNITY)
 What is the customer’s pain that you are alleviating?
 Bring in market research as appropriate to demonstrate that this is
the IDEAL time for this venture
 Need to demonstrate that a trend is in fact a trend
 Hit the high points in the text, put back up material in an appendix
 This is not a list making exercise – be clear about answering ‘the
so what’ question for every point to you make
THE SOLUTION
 Explain how you alleviate this pain
 Second of three places that you talk about your idea. More detail
here than the executive summary and positioning statement, but
less detail than the underlying magic
 What do you sell? What is your value proposition?
 If you already have customers mention them
 Stories are great to demonstrate impact
BUSINESS MODEL
 How do you make money?
 Who pays you?
 How do you distribute your product?
 What are your gross margins?
UNDERLYING MAGIC
(COMPETITIVE ADVANTAGE)
 Describe the technology, secret sauce, or magic behind your
product or service
 Use pictures and diagrams in lieu of text if appropriate
EXAMPLE: PICTURES SIMPLIFY
TEXT
 Deregulation has also significantly
changed the structure of the
industry, whereas in the past before
deregulation the market structure
was fairly simple as well head
producers sold directly to pipeline
companies, who in turn sold to
distributors, and then to end users
(Figure 4). After deregulation prices
are no longer regulated at the well
head, with the exception of pipeline
transporters, who are still under
federal regulation. In the
unregulated natural gas market, the
role of marketers has emerged as
middle men who facilitate sales and
transactions between the various
parties (Figure 4). Today there are a
large number of possible pathways
for natural gas to proceed from
producer to end user.
MARKETING AND SALES
 Demonstrate you know your market(s)
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Who are your customers?
How will you get to them?
What will it cost you to get to them?
Why will they buy?
 Convince the reader you have an effective go-to-market
strategy
COMPETITION
 Provide a complete view of the competitive landscape
 Remember to include substitutes
 Focus on why you are good versus why the competitors are bad
THE TEAM
 The ‘team’ can & should consist of:
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The founders
The management
The employees
The advisors
 Together, need to demonstrate that you are the BEST team to
capitalize on the opportunity
 At the same time, don’t need to have everyone in place. Be
honest about what you know & don’t know
FINANCIAL PROJECTIONS AND
KEY METRICS
 How much money will you need? When? From where?
 Cash flow statements are critical
 Will need the other financial statements as well, based on several
scenarios
 Scenarios must be tied to your business’ critical success and key risk
factors (see next slide)
 Key differentiating points:
 Demonstrate frugality and creativity
 Tie these plans explicitly back to your ‘context’ discussion
DUE DILIGENCE AND VALUATION
CRITERIA
Technology Risk
• Stage of Development
• Impact & Application
• Sustainable Advantage
Market Risk
IP Risk
•
•
•
•
•
•
Nature and Scope
IP Form
Ownership
Enforceability
IP Building
Freedom to Operate
•
•
•
•
•
Execution Risk
•
•
•
•
Reputation / Leadership
Commitment
Market Knowledge
Experience
Size and Growth
Dynamics
Competition
Customers
Distribution Channels
CURRENT STATUS,
ACCOMPLISHMENTS TO DATE,
TIMELINE & USE OF FUNDS
 What is the current status of your product or service?
 What does the near future look like?
 How will you use the money you are trying to raise?
PUTTING ALL THE PIECES TOGETHER:
COMMON RED FLAGS FOR
INVESTORS
 We have no risks
 Scale up will be straightforward – it will take very little time and money
 Hockey stick revenue projections
 We have no competitors
 We only need .05 percent of our target market to meet our sales
targets
 No explanation of how financial numbers were generated
 My brother-in-law, the real estate agent, is the ideal director of
marketing for our Web 2.0 company
 No indication you have talked to your potential customers