The Business Development Plan (BDP)

BUSINESS DEVELOPMENT PLAN (BPD)

Why should a BDP be prepared? What is a BDP? What should be included in a BDP? How does one develop a BDP? How does one prepare and present a BDP?

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WHY PREPARE A BDP?

On average, it takes twice as long as predicted to reach half the revenues Actual costs are double the forecast Investment is generally far greater than forecast Failure rate is greater than 50% A BDP is complicated, expensive, and time-consuming A BDP becomes almost obsolete as soon as it is written

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WHY PREPARE A BDP?

To provide a framework for a systematic and comprehensive evaluation of the venture idea. It enables the venture team to take an objective and critical view of the entire new business. To decide whether to proceed with the venture To communicate the business idea and raise financial backing for the venture To deal with uncertainties, evaluate risks, and prepare contingencies that enable the venture team to anticipate events rather than react to them To help manage and control the venture during the developmental and operational stages
Lay out estimated resource requirements Provide framework for action schedules Use as a yardstick for measuring progress Provide critical event milestones

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The BDP has to reflect the needs of: The strengths and weaknesses of:

CUSTOMERS COMPETITORS

The skills, knowledge and experience of: ENTREPRENEUR(S) The criteria of:

INVESTORS

And, in the case of corporate ventures, the fit with the:

CORPORATION

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WHAT IS A BUSINESS PLAN?

The Business Plan is a carefully prepared, cohesive and concise 25-30 page description, analysis, and evaluation of the venture. The document, loaded with facts and figures, provides critical information about the entrepreneurs, the market (customers, competitors, etc.), the product, the strategy, the financial prospects, and the risks involved. It is presented in a credible, authoritative, and an ingenious manner which facilitates clear communication of the venture idea; the reasons for its success; the skills of the entrepreneurs; the implementation strategies; and a financial evaluation of its potential attractiveness. Yet humble; Keeps the right assumption to knowledge ratio
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THE BUSINESS DEVELOPMENT PLAN ANSWERS KEY QUESTIONS

Is the market real?
Market Identification Customer Analysis Competitor Analysis Industry Analysis Environmental Analysis

Is the product real?

Product/Service Definition Physical and Functional Description Distinctive Characteristics (Features and Benefits)

Can we win?
Competitive Analysis The Business Strategy of the Venture Functional Plans (e.g., Marketing, Sales)

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THE BUSINESS DEVELOPMENT PLAN

(Continued)

Is it worth it?
Financial plan Proforma capital budget Proforma income statement Proforma balance sheet Proforma sources and uses statement Financing plan Type and amount of capital Timing and source of capital Intended use of proceeds Financial evaluation Pricing, breakeven, sensitivities, etc.

What are the risks?

Identification and evaluation Contingency plans

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THE ORDER OF COMPLETION OF A BDP

IDEA
Is the Market Real?

NEED
Is the Product Real?

PRODUCT
Can We Win?

OVERALL STRATEGY

Is It Worth It?

Risk Evaluation

Functional & Financial Plans

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DEVELOPING A BUSINESS PLAN

Don't start with a detailed plan !
Step 1: A Concept Statement Description of the market need to be filled Description of the product(s)/service(s) Description of resources needed to create the product/service Specification of available resources "Bottom-up" financials Step 2: A Feasibility Analysis Exposition of market acceptance Exposition of early insulation Exposition of product/service feasibility Exposition of investment required Clear specification of all assumptions Discussion of corporate fit (when applicable) Step 3: A detailed Business Plan

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ISSUES IN PREPARING THE BUSINESS PLAN Who should prepare the business plan? What should be the role of the external team members (e.g., accountant and lawyer) in preparing the business plan? How and where can you obtain the needed market research information?

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ISSUES IN BUSINESS PLANNING FOR NEW VENTURES

Managers are often assessed on their ability to meet a plan (or budget) IS THIS APPROPRIATE FOR NEW VENTURES? What are the fundamental differences between planning for new versus established businesses? No history or experience base Knowledge/assumption ratio High uncertainty about validity of key assumptions including sales forecasts, costs, competitive response, resource requirements, etc. Different risk/return profile

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Guidelines for Writing

BUSINESS PLAN

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BUSINESS DEVELOPMENT PLAN

Suggested Structure
Executive Summary Describe your company, its scope, and its product(s)/service(s)
Describe your offerings in terms of customer functions and segments, and technologies utilized. Provide physical and functional descriptions of your products/service. Focus on the uniqueness of your offerings: state features and benefits; proprietary position; future upgrade potential; state franchise, royalty and licensing potential.

Market Analysis
Articulate the market opportunity (including size and growth potential of your market) Describe customer groups served, customer functions fulfilled and technologies utilized

Present facts along with implications.

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BUSINESS DEVELOPMENT PLAN

(CONTINUED)

Suggested Structure (continued)

Market Analysis (continued)
For each served segment, provide brief answers to the five Ws: What? When? Where? Why? Who? Find desired positioning in view of industry structure (balance of power among the five forces) Justify desired scope of your business

Strategy
Derive the required set of Strategic Assets in your chosen market segments, and identify the ones you will exploit in your competitive strategy State your overall business strategy - the specific action plan that will:
Create isolating mechanisms to prevent imitation Lead to establishing the venture's sustainable competitive advantage

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BUSINESS DEVELOPMENT PLAN

(CONTINUED)

Marketing Plan
Target market segments and selected distribution channels Present sales forecast (include volume, market share, assumptions and exhibits) Describe how you will achieve your plan, present pricing, discounting, advertising, promotion and service policies

Operations Plan
Discuss your production technology and manufacturing processes. Included are:
Equipment requirements Facility requirements Component make/buy decisions Raw material, labor and supply requirements Present a cost analysis Raw material and finished goods inventory policies Quality control policies

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BUSINESS DEVELOPMENT PLAN

(CONTINUED)

Financial Section Integrates all of the BDP data in a cohesive manner to produce:
The Financial Plan--a five-year:
Proforma Capital Budget Proforma Profit and Loss Sheet Proforma Balance Sheet Proforma Cash Flow Report
(Quarterly data for the first two years; annual thereafter)

The Financing Plan:

State the amount, timing and type of capital over the five-year planning horizon.

The Financial Evaluation:

Present and discuss financial performance measures (e.g., NPV, IRR, breakeven, ratios, sensitivities) Present your proposed pricing and deal structure

NOTE: All exhibits should explicitly state the assumptions that were made.

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BUSINESS DEVELOPMENT PLAN

(Continued)

Milestone Events
Present a realistic schedule of events, their anticipated timing, and the interrelationship between the major events necessary to launch and grow the venture.

Organization and People

Identify type of business (corporation, partnership, etc.) Describe who is accountable to whom for what (enclose organizational chart) Summarize staffing requirements by function Enclose summary resums of key management personnel

Key Risks
Identify and discuss critical environmental risks, customer-response issues and alternate competitor- reaction scenarios Evaluate their impact on your base-case plan Outline your contingency plan

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IS THE MARKET REAL ?

1. 2. 3. 4. 5. Defining the business Customer analysis Competitor analysis Industry analysis Environmental analysis

The Challenge:
To integrate these elements into the ventures

Business Strategy

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DEFINING THE BUSINESS1

Scope: The organizations domain - the extent of the organizations planned interaction with the environment. The definition should allow for:
Differentiation of the companys offerings, one from another across segments Differentiation of the companys offerings from those of competitors

A business can be defined in three dimensions:

Customer groups served Customer function served Technologies utilized
1

Source: Derek F. Abell, Defining the Business: The Starting Point Of Strategic Planning, Prentice-Hall, 1980

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