BUS2 131D

10/11 Lecture – The Business Plan in detail

 Agenda for Tonight
1. Business Plan contents and work plan
− Review
− Working session
2. Housekeeping
− Next class meeting present Product Service Brief
− 10/18 email me transcripts for customer interviews (review writing requirements
from the syllabus)
3. Review Exam #1
 References for Tonight

• Outline for a Business Plan, Ernst and Young LLP 1997

• New Venture Creation, Revised 4th edition, Jeffery A Timmons, 1994
• The Four Steps to the Epiphany, Steven Gary Blank
• Previous class lectures
 The Purpose of our Business Plans

• Develop a plan to build a profitable business to deliver our new

product or service idea
 7 Steps

• Step 1: Set Goals and Objectives

• Step 2: Outline your plan (details will break the work up)
• Step 3: Review your outline (do they address what I want to see?)
• Step 4: Write your plan (Research? Financial Statements)
• Step 5: Write your plan (Tell the story, Exec summary)
• Step 6: Have your plan reviewed (classmates?)
• Step 7: Update your plan (based on the feedback, fill the holes)
 6 Sections

• Section 1: Executive Summary

• Section 2: Market Analysis
• Section 3: Company Description
• Section 4: Marketing and Sales Activities (The Marketing Plan)
• Section 5: Operations Plan
• Section 6: Financial Data
 Step 1: Goals and Objectives
• Who will read the plan? me
• What do they (me) already know about your company?
– Product Concept – and what a well prepared plan looks like
• What do you want them (me) to know?
– You understand your target customers, their problems as they relate to your product
concept (Section 2)
– You understand the competitive environment in which your product and company is
engaged (Section 2)
– You have developed a coherent marketing strategy (Section 4)
– You have developed and you understand profitability thresholds for your sales
channel (Sections 4, 6)
– You have developed a reasonable 3 year sales forecast (Section 6)
– You can tell a compelling story about why your new venture will satisfy customer
demands and deliver shareholder returns (Sections 1, 3)
 Section 1. Executive Summary

a) Purpose of the plan

b) Market Analysis
c) The company
d) Marketing and Sales Activities
e) Product or Service Research and Development
f) Financial Data

NO MORE THAN 3 PAGES (Write this last)

 Section 2. Market Analysis

a) Industry description and outlook

− What business are you in?
b) Industry characteristics and trends
− How fast is the industry growing? What trends are driving growth?
c) Target Markets (Customer Discovery)
− How will targets be identified?
d) Competition, Market Penetration
− Strengths Weaknesses
− Importance of your target market to your competition
e) Pricing, Gross Margin Targets
f) Regulatory Restrictions
 Target Customers
• Discuss who the customers for the product(s) or service(s) are or
will be. Note: Potential customers need to be classified by
relatively homogenous groups having common, identifiable
characteristics.
– Example: Dog owners who spend on average $XX per month on feeding their
dog. They seek nutritious, well-balanced dog food that provides their pet with
high energy and a healthy coat
• Indicate whether customers are easily reached and receptive, how
customers buy (channel), and how buying decisions are made
and how long they take.
– Example: Casino managers can be located among the finite number of gaming
parlors in operation. At the end of 2005 there were XXXX casino parlors in the
US. Casino operators are fiercely competitive and will invest in ancillary services
providing they get an adequate return on their investment in the form of longer
gaming sessions or greater expenditures.
 Target Customers
• Describe the purchasing process, including the basis for decision
making (price, quality, timing, delivery, training, service, personal
contacts, political pressure, …) and why they might be willing to
change to your product or service
 Competitive Environment
• Make a realistic assessment of the strengths and the weaknesses of the top 3-4
competitors (if you are new, then talk about the behavior shift or the existing
work around to the problem you’ll be solving)
• For each competitor estimate market share, quality, price, performance,
delivery, timing, service, warranties, …whatever is pertinent. Also, include the
leader in each of the pertinent categories
• Discuss the advantages and the disadvantages that each of these competitors
have relative to the offer you’re developing.
– Sales, distribution, financial position, other capabilities
• Indicate any knowledge you have about the competitors strategic intent
(where are they headed with their business and why?)

• The Punch line: Explain why you think each of these competitors are
vulnerable and why you can capture a share of their business. Discuss
what will make it easy or difficult to compete with them
 Section 3. Company Description

a) Nature of your business (Company Positioning)

− Check out worksheet 3b on page 266 of the text for some helpful hints
b) Your distinctive competencies
− What will lead you to success, profitability
 Section 4. Marketing and Sales Activities
The Marketing Plan
a) Overall Marketing Strategy
b) Marketing Penetration Strategy
− What will lead you to success, profitability
c) Distributions Channels
d) Communications
e) Sales Strategies
f) Marketing Budget
 Marketing Strategy
• How will you exploit the opportunity that you’ve defined using your
competitive advantages? Include a discussion of sales and service policies,
pricing, distribution, promotion, and advertising strategies
• What is your specific marketing philosophy and strategy for the company
(high quality, low price, …)?
• How will your target customers be contacted?
• What features of your product will be featured to win sales from your
competition?
• Do you have any innovative ways to market this product that your
competitors haven’t tried or thought of?
• Indicate whether the product will be introduced nationally, locally, or
regionally. Why?
 Section 5. Operations
a) Production and Service Delivery Procedures
− How will you produce your goods or service
− Discuss labor, how and who will be hired, are there any seasonality issues that you will have
to plan around to avoid spikes in labor demand?
− Discuss how the costs of your product or service will scale at differing volume levels (In
other words, does the production and service delivery model fit the sales forecast?)
b) Production and Service Delivery Capability
− Describe how and when the necessary facilities to start production will be acquired
− Are there legal or regulatory requirements unique to your product or service?
c) Operating Competitive advantages
− Are there gaps in your competitors production strategies?
d) Suppliers
− Are you or will you be dependent on any suppliers to meet your sales forecast?
 Section 6. Financial Data

a) Prospective Financial Data next 3 years (2007, 2008, 2009)

b) Summary of significant assumptions
− Heads-up now I will be asking questions about this on the final oral presentations
c) Analysis
− How doe the business models of your competitors look and are there
opportunities to for faster, better?
d) Pro Forma Income Statement (2007, 2008, 2009)
 Financial Data – Pro Forma Income Statement
2007 2008 2009

Sales Forecast Revenue

What it costs to produce? COGS
Revenues - COGS Gross Margin
Gross Margin / Revenue % Revenue
Your Choice A) Expense Sales and Marketing
Your Choice / Revenue % Revenues
Your Choice B) Research and Development
Your Choice / Revenue % Revenues
Your Choice C) General and Admin and Other
Your Choice / Revenue % Revenues
A+B+C+D D) Total Operating Expense
A + B + C + D/ Revenue % Revenue
Operating Income
% Revenue
 Sales Forecast Example

2006 2007 2008 2009

Units (Market Volume) 100 120 144 172.8
Average Selling Price (ASP) $20 $19 $18.05 17.15
$2,000 $2,280 $2,599 $2,963

My Product 0 12 17.28 24.192

My ASP $0 $22.5 $22.5 $22.5
$0 $270 $389 $544
My Share ($) 0 11.8% 15% 18.4%

Assumptions:
1) The market is growing at 20% per year (Source?)
2) The market price will decline by 5% per year …based on ???
3) My product will capture 10% share the first year and increase to 12% in 2007, and 14% in 2008 because…
4) We will continue to be able to charge a premium in the marketplace because….?
 Step 2: Outline your plan

Section Priority Person Date to begin 1st Draft Final Draft

Responsible Due Date Due Date

Exec Summary 4
Market 1
Analysis
Company 3
Description

Marketing and 2
Sales Activities
Operations 2
Financial Data 1
 Next Class Meeting Presentations “Elevator
Pitch, Product/Service Brief”
• Format 3 slides
– Elevator Pitch (Modified)
– Product/Service Brief (product features, benefits, and release dates)
– One summary slide: Concisely tell us what the customer interviews revealed to
you about your product and customer hypotheses
– How you’re changing course now that you have that input
 What have we accomplished tonight?

• Business Plan details

• Elevator Pitch/Product-Service Brief
• Review First Mid Term exam