Business Plan

Anjana Vivek; [email protected]

Business Planning; Business Plans

VentureBean Consulting Private Limited

At the start

Kinds of Investors

Project Requirement

Building the BPlan

Summary

Agenda

2 2


BEFORE YOU START

Do take time out to think/reflect…

• WHAT are the strengths – that you bring to this

business

• WHAT are the constraints that you have to

either

– Address or

– Accept (and work keeping this in mind)

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AT THE START

• What do you believe you can achieve, for example in terms of– Revenue

– Number of offices

– Lines of business/products/service

– Kinds of customers / categories

– etc..

– .. Over a period of time

• Are you confident that you can achieve.. i.e do you have faith in yourself and the power of your dreams?

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At the start

Kinds of Investors

Project Requirement

Building the BPlan

Summary

Agenda

5 5


‘to trigger thinking’

Do take time out to think/reflect…

• What are the kinds of Funding options available

today for business?

• What are the alternate equity investment

options? VC/ PE/ Incubation?

This session focusses on equity linked funding

options and strategies

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Investors: Equity (Linked): One Slide Checklist

• HNIs, informal and formal angel groups

• Seed Funds

• Venture Capital

• Private Equity

• Banks exploring innovative ways to fund SMEs

• Strategic Investors

• Corporate Funds; (Family) Business Groups, Indian & Global

– Directly and/or through a special division or subsidiary

– For employees alone or open to public

– As intellectual and/or financial capital with other facilities

• Government supported funds

• Impact Investors

• Incubators

• Accelerators

• Crowd funding

• Online funding platforms

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WhichOne is the …

RightFitfor

You?


Contributors

• Corporates

• Banks and FIs

• FIIs

• Family Business Groups

• HNIs

• Combination / others

• 3Fs ?

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Caselet: You are an investee

• Zyco Fund has a life Cycle of 10 years, this is a fund with overseas investors

• In year 7 of the fund, Zyco has offered 1 million USD for a 15% stake in Amaze Co., in Bangalore

• The promoters of Amaze also have another offer from Indo, a Rupee Fund; they are offering Rs.6 crores for 20 % stake in the company.

• What are the key deal aspects the Amaze founders should consider

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Caselet – Debrief - Illustrative

• Promoters should make an effort to understand the mandates of potential investors and their reasons for investing

• Some contributors want money back in a finite time period, some are not particular

• The value add and brand accretion or depletion due to an potential investor need to be factored, it is not only about money and equity stake percentage

• The clauses in the contract need to be checked with care

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• Founders of an investee company should think through possible scenarios over the next 3-5 years, assuming the company does as well as projected and also assuming a scenario where projections are not met

• Valuation today and valuation expected tomorrow, both have a role to play in decision making

• Valuations expected in 3-5 years, depend on assumptions for projections. These need to be thought through carefully from multiple angles, operations, finance, team, competitive landscape and more

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Caselet: You are an investor

• GR Fund is a fund of alumni of GR Institution

• The Fund invests directly and sometimes the alumni may also invest in individual capacity

• Blyitz, a for profit company, which is working on a BOP (Bottom of the Pyramid) model has got a commitment from an Angel Fund (AF)

• AF tells Blyitz that they will put in money along with another co-investor, so Blyitz approaches GR Fund

• Another HNI Fund managed by a professional also hears of this deal and asks for information

• How will you evaluate the investment proposal from Blyitz if you are a Fund Manager for GR Fund? What if you are the HNI Fund Manager, will your approach be different?

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• Each Investor and Fund Manager will approach it from his or her fund mandate and how the investment and disinvestment from this company will fit into this

• Internal aspects, such as stage in the Fund Life Cycle, current portfolio on hand, etc. will also play a key role in evaluation

• If multiple fund managers are involved, the differences and similarities in the mandates of the funds will need to be assessed

• There needs to be collective discussion as to who will lead the deal, do the due diligence and play an active role post the funding. One or more of the Funds may be involved in these aspects and more

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Stages of investment

• Idea / Seed

• R&D / Pilot / Proof of Concept

• Commercialization / Scale up

• Early Stage

• Growth / Later Stage / Expansion

• Turnaround

• Acquisition, Inorganic expansion

• … etc.


Trends: ‘to trigger thinking’“The Indian startup ecosystem has reached an inflection point, with

800 new tech startups sprouting in a year. This, taken in conjunction

with rising investment flows, makes it the world’s fastest growing

startup ecosystem, NASSCOM”

• https://www.techinasia.com/india-is-fastest-growing-startup-

ecosystem-in-world/

• http://www.nasscom.in/india-fastest-growing-and-3rd-largest-

startup-ecosystem-globally-nasscom-startup-report-2014

• Too much money chasing limited deals, i.e. demand is clearly

greater than supply, despite India currently being rated country with

3rd largest number of startups as per the NASSCOM report

• Technology based companies, ecommerce linked business, product

ventures, businesses leveraging on smart phone user bases,

solutions attempting to fix problems or providing solutions that

address large populations and customer segments… and more are

the flavors of this season.

https://www.techinasia.com/india-is-fastest-growing-startup-ecosystem-in-world/

http://www.nasscom.in/india-fastest-growing-and-3rd-largest-startup-ecosystem-globally-nasscom-startup-report-2014


Trends: ‘to trigger thinking’• Anywhere you turn, anywhere you look, investors are

seeking startups to fund

• Start ups are also attracting the interest of investors

from the traditional businesses and business houses

from the so-called ‘old-economy’

• New categories of investors are emerging, with their own

investment philosophy, due diligence process; rules of

the game are being re written, depending on the

potential investors and business models

• Consortium funding is finding many takers, with safety

being seen in a large set of co-investors.

– This comes with its own set of challenges – for both the investors

and the investee.

– Consortium investors can also be a mix of individuals, funds and

corporate groups


At the start

Kinds of Investors

Project Requirement

Building the BPlan

Summary

Agenda

17 17


What a project must have

• High upside potential

• Potential for extraordinary returns to investor

• Exit route plan

• This implies – Rapid Growth, i.e.– Total addressable market is really high

– Company has potential to address this market

– Company has ambition to address this market

– Company has the capability to Execute to achieve high growth

– Risks are articulated

– .. Etc

MUST Have Key Requirements:

• TEAM with Execution Capability and

• Huge Addressable Market


4 Points: Investors look for

• Team – leadership, multidisciplinary, integrity, competence, capability to execute, domain knowledge

• Idea/Service/Product potential to attract large numbers of paying customers

• Market, opportunity, growth expected, barriers to competition

• Exit avenue

What else do you think investors may seek?


Business Plan

• An output based on business model and strategy, expected to evolve over time

• To be forward looking, based on past knowledge of promoters and their work experience in the existing or new venture

• Assumptions to be tested to see if they will be valid for execution, i.e. to demonstrate this is not a business plan on paper alone

• Risks to be factored in plan

• Multiple scenarios are looked at, revenues expected are discounted, expected costs and expected cash flows factored, sensitivity to key parameters checked


Due diligence reviews (DDR)Investment decision is based on DDR, some

illustrative reviews are below. Some of these or

aspects of these may be done in-house by the

investor, others may be out-sourced to experts and

professionals:

• Business

• Market

• Accounting

• Tax and Legal

• Technical

• HR


An Illustrative Sales Quality Review..

• Illustrative indicative parameters, for DDR

– Sales Quantity

– Quality of revenue - in terms of

product/service/vertical/location etc.

– Average revenue per employee

– Number of customers, number of high value

customers

– New customers added

– Customers lost

– Pipeline customers

– Customer acquisition strategy

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Value Creation Review

• Investment should have potential for value creation not value depletion; i.e. beyond– Top line (revenues)

– Bottom line (profits) and

– Cash flow

• To understand financial and non-financial aspects of business and investment into business and impact on growth and sustainability

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At the start

Kinds of Investors

Project Requirement

Building the BPlan

Summary

Agenda

24 24


A BUSINESS PLAN COMMUNICATES…

• Many times, a reader’s perception of your business/idea will be based on the business plan you prepare

• Different persons will look for different things, a banker will check if a loan can be repaid, the VC will look for value multiples on exit

• Substance and form matter, more so, when hundreds of plans are reviewed

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AT THE STARTING POINT

Before starting on preparing the business plan, think through the following:

PUT YOURSELF IN THE READER’S PLACE

• What is the reader looking for in a business plan?

• What is the message you are trying to convey through the business plan?

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• Different persons may view the business plan

differently

• Try to understand background and experience of

individual/group to whom plan is shown

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Before starting on preparing the business plan, think through the following:

What are you looking for?

PUT YOURSELF IN THE READER’S PLACE

• What is the reader looking for in the business plan?

• What is the message you are trying to convey?

• Is there some common ground between the two? Or is there a disconnect?

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• Just because someone rejects or scoffs at your

idea, does not mean it is bad

• Try to take some learnings from rejections

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BUSINESS PLAN SET … Illustrative

• Word document (15 – 25 pages)

• Presentation deck (15 – 20 slides)

• Spreadsheet with financials (Balance Sheet,

Profit and Loss Account, Cash Flow; 3-5 years)

• You may like to keep in hand a separate

executive summary or summary business plan

as an initial teaser document (3-10 pages)

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THE PLAN DOCUMENT

• You may prepare a detailed plan in sections,

which you may be stand alone and kept for

different purposes, ie sections for internal use,

for investor and for banker

• Keep a track on versions to minimise confusion

and possible errors

• Keep control of access to the document

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BUSINESS PLAN

• The set should be self speaking: ie with limited clarification required (including with regard to abbreviations & technical terms)

• Reader friendly: Key information that you want to convey should not be hidden amongst too much details

Do not think only of what you want to share, rather think about what your potential reader may want to know

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BUSINESS PLAN

• Plan on format of report and how data,

information, analysis, comments etc. are to be

presented

– Move what is not essential to flow of document to

main report

– Think of content required to capture attention of

reader; avoiding excessive information overload

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BUSINESS PLAN

• Avoid using graphs for the sake of using graphs;

tables for the sake of using tables etc. without

substance in the document

• Avoid information overload, i.e. temptation to

disclose all you know and demonstrate your

knowledge and experience about the business

• Make attempts to protect your intellectual

property if any

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CONTENTS : Illustrative

• Table of contents

• Executive summary

• Sections/chapters/paras

• Summary/conclusion

• Appendix of abbreviations, references, other

annexures

• Graphs, tables, figures - numbered and labeled

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CHAPTERS - Illustrative

• Company and background information

• Management team, organisation structure

• Business idea, strategy and implementation plan

• Marketing strategy; sales plan

• Financial details; funding strategy

• Other information such as implementation

schedule, statutory environment applicable etc.

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– Background history if existing company; current

status

– Rationale for existing business or new start up, value

proposition etc.

– General industrial environment of business;

competitive landscape in brief, brief background of

promoters

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– Vision and mission statement

– Key business drivers and key constraints; SWOT and

business strategy

– Plan in terms of short term/immediate, medium-term

and long term goals

– Other key information to make initial background

information complete

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• Management team, organisation structure

– Experience and qualification of promoters and key

team

– Roles and responsibilities

– Organisation structure

– Any key organisation/HR policies

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• Business idea, strategy and implementation

plan, including inter-alia:

– Vision, mission

– Product/service offered

– Operational details

– USP(unique selling point); barriers to competition

– Differentiator

– Brand building plan

– Social media plan

– Strategy to handle competition

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• Business idea, strategy and implementation

plan, including inter-alia:

– Details of any in-house techonology/process or idea;

or source of technology, ie technology transfer

through collaboration

– Details of alliance partners, current as well as

proposed

– Details of any intellectual property associated with the

business

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• Marketing plan

– Target market size; TAM (total addressable market)

– Market research details

– Customer profiles; existing, potential/pipeline

– Marketing strategy

– Pricing strategy

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• Financial details

– Past financials: Balance sheet, P&L account and cash

flow summary for five year period if available

– Future forecast – five years in summary (detailed

schedules may be in appendix)

– Details of how funds will be raised and utilised

– Details of contribution from promoters (cash/kind)

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• Financial details

– Sensitivity analysis for key parameters, eg sales

variations of + / - 10%

– Scenario analysis:

– optimistic, normal and pessimistic (budget)

– Key ratios, break even, project IRR

– Other information such as quality of key parameters,

ie revenue based on geography

– Cash burn, i.e. monthly requirement of cash and

requirement for capital investment in phases

– Funding plan and strategy

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• Other information

– Time lines, implementation schedule, expected date

of commercialisation

– Regulatory environment if applicable, ie

environmental laws for pharma company

– Other information which may be relevant to the

business

– Include any required references, contact information,

data and statistics

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PREPARING THE BUSINESS PLAN

• PRESENTATION IS THE KEY

• CAPTURE THE READER’S INTEREST

• Think through the format of report and how data,

information, analysis, comments etc. are to be

presented

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BUSINESS PLAN

• Points to consider

– You must believe in the idea to sell it

– Homework to be done before hand, adequate

knowledge required to be demonstrated

– Credibility is important, ie if caught with one

falsehood, nothing said would be believed

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UPDATES/CHANGES IN BUSINESS PLAN

• Points to consider

– If there has been substantial change, update the plan

– The difficulty is when there are too many versions

which are floating around

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At the start

Kinds of Investors

Project Requirement

Building the BPlan

Summary

Agenda

49 49


IN SUMMARY: At the starting point

As an entrepreneur

• What are your strengths/weaknesses?

• What do you like to do or think you like to do?

• What do you think you are good in?

• How would you bring this into your business?

As a business

• Have you thought about the business model?

• Have you thought about the soft issues such as team dynamics, roles and responsibilities, leadership plan?

• Have you thought about your business plan structure?

• Have you thought about who will read/review your plan?

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Some more points on the TO-DO list

• Plan for the business

• Plan for advisors / accountants / lawyers

• Educate oneself about the law and regulations to be followed

• Educate oneself on basics of managing a business and

finance

• Plan for long term impact of decisions taken with regard to

hiring employees, renting space etc.

Additional information/articles/resources at:

• www.slideshare.net/anjanavivek : Content in TOP 4% of

Viewed in 2013

• http://www.linkedin.com/company/venturebean-

consulting-private-limited

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http://www.slideshare.net/anjanavivek

http://www.linkedin.com/company/venturebean-consulting-private-limited


Thank You!

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Business Plan

Business

Transcript of Business Plan