Business plan creation presentation final 112013

Business Plan Creation: A Unified Process for Businesses with a

Government and Commercial Focus November 20, 2013

Sponsored by DARPA Small Business Programs Office (SBPO)

Presented by The Foundation for Enterprise Development

(FED)

The views expressed are those of the author and do not reflect the official policy or position of the Department of Defense or the U.S. Government.

Business Plan Creation Webinar 11/20/13 www.fed.org

Distribution Statement "A“ (Approved for Public Release, Distribution Unlimited) 1

Goal of this Presentation

Provide a method of vetting your proposed business/business model before diving into a full business plan

Provide a process for building a business plan through a critical evaluation of each key business area

Provide a framework for considering business planning for both government and commercial markets



Many Models of Technology Commercialization Are Feasible for SBIR/STTR Companies

Licensing models Early-stage sponsorship (rather than early-stage

licensing) Cross-licensing Patent licensing

New Venture/Spin-off New Business Unit

(with/without venture funding)

What’s Your Business Plan? Business Plan Creation Webinar 11/20/13 www.fed.org


Key Elements of a Good Business Plan

Business Plan Executive Summary Market and Competitive Analysis Company Description Organization & Management Marketing, Sales, & Distribution Management Whole Product Offerings: Service or Product Line Funding Request Financial Plans

Business Plan



Why is a Business Plan Important?

Investors require one Employee, suppliers, and collaborators expect

to see one A good business plan requires a close

examination of your proposed business and serves as a playbook for successful execution Start early, test assumptions, and iterate on all plan

elements A key step to creating your business plan is an open

evaluation of the proposed business concept.



Key to a Successful Business Plan

Technology Market

Business Your Company

Sweet Spot

A successful business plan combines a defensible product and/or service that fills a market need with a profitable business model

that meets the desires of the stakeholders. Business Plan Creation Webinar 11/20/13 www.fed.org


Step One: Simply Define Your Business

What – What does the product do? Is it a stand-alone product or component? What services are needed? How – How is it different from other products or services? Who – Who will buy it? How do you make money (revenue model)? How will it be promoted and sold? Why – Why will they buy it? Price? Convenience? Safety, security, well-being? Better performance? More pleasurable experience?

Where – How will they buy it? Where will it be sold? Geographic location of business and customers? Business Plan Creation Webinar 11/20/13

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Example: Company Z (not a real company)

Company Z has a DARPA SBIR/STTR Phase II SBIR for the fabrication of deep UV semiconductor lasers. The ultimate goal of the government program is to use this type of laser to be able to create smaller features in the semiconductor manufacturing process with the goal of migrating chip features from 20nm to 10nm over the next 10-15 years.



Identify a customer, a means of reaching that customer, and the benefit to be delivered.

Customer Benefit

Delivery

NEED/DESIRE

Business Concept or Description


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Business Descriptions for Company Z (not a real company)

1. Company Z licenses its process for creating deep UV lasers for use in semiconductor fabrication. Company Z receives an upfront license fee plus a royalty on all semiconductor fabrication systems that use Company Z’s technology.

2. Company Z produces deep UV lasers and integrates the lasers into a sensor for non-invasive blood glucose measurement. Company Z partners with major diagnostic companies to sell the sensors through drug stores. Company Z derives high margins due to product quality and ease of use.



Key Features of Description

Clearly defines your product Clearly defines who is your customer (not

necessarily the end customer) Clearly defines how you make money (e.g.,

business model) Clearly defines how you are differentiated from

the competition



First Deliverable

Create one or more business descriptions for your business

Does the business sound compelling? Keep the business concepts that are the

strongest (remember that licensing technology is a possible business concept)

These will be the basis for your business plan



Build a Business Plan Around One or More Successful Business Descriptions

Market The foundation for every successful business is an

addressable market need Product need, market size, market segmentation, marketing

plan

Business The second key is a profitable business model Type of business, partnering, time to market, financials



Market Need

First step in vetting any business concept is to determine if there really is a need and, if so, how large is the need and is anyone else filling the need

Ultimate goal is the same regardless of whether this is a government application or commercial application

Tactics can be somewhat different



Market Analysis: Targeting

Defense/Government Commercial/Private

Goal Define the optimal market/customer for your technology/product/service

Tactic Map your technology/product/service to DoD component(s) or other Federal Agency’s operational mission area(s) and program(s). Identify urgent operational needs, user requirements, and capability gaps your technology could meet or fill.

Identify an unmet need in a commercial market that your technology/product/service can address. Identify what has been tried before and why it did not satisfy the need.



Market Analysis: Segmentation


Goal Define market size and segmentation. Where does your technology/product/service fit?

Tactic Define how your technology/product/service fits within the overall program. Understand primes and other key players. Define your specific contribution. What will you make/sell/license and to whom.

Define how your technology/service/product can address the identified need. Are you providing a full solution to a broad market or a necessary component for a niche market? Or starting with niche and expanding? What will you make/sell/license and who is your customer? How many units could be sold?



Market Analysis: Competition


Goal Define your initial competitive advantage and how you will maintain your advantage over time.

Tactic Is there legislation or policy that impacts your market? Does your technology provide a unique solution relative to requirements (e.g. performance, price, etc.). Who else can provide a solution? How does their solution compare? How will you maintain an advantage over time?

What is unique about your product offering: performance, cost, time to market, etc.? Who are the primary competitors and what products do they offer? What differentiates your offering and how will you maintain this differentiation over time?



SWOT Analysis

Favorable Unfavorable Internal STRENGTHS

What are your strengths? What do you do better than others? What unique capabilities and resources do you possess? What do others perceive as your strengths?

WEAKNESSES What are your weaknesses? What do your competitors do better than you? What can you improve on? What do others perceive as your weakness?

External OPPORTUNITIES What trends or conditions may positively impact you? What opportunities are available to you?

THREATS What trends or conditions may negatively impact you? What are competitors doing that may impact you? Do you face financial threats (e.g., inadequate funding?) How do your weaknesses impact the threats you face?


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“Go to Market” Analysis


Goal Define your “go to market” strategy.

Tactic Define your federal acquisition and procurement model. Do you need another government contract prior to acquisition? Will you be part of someone else’s prime contract? Do you have the appropriate relationships with government stakeholders making contract award decisions or do you need to do more business development?

Will you market your product directly or will you use distributors? Will you partner with some other company to sell and market on your behalf? Will you focus on a single beachhead? How do “special” pricing and discounts play a role? What level of customization is required?



Defining Your Market Strategy and Critical Success Factors

Take the Same to Others

Build a Base

New

Cus

tom

er

Existing New

Product & Service Offerings

Catch a New Trend

Diversify the Portfolio Existing



Summary of Market Analysis

Define your product or service and the market it serves Actual product, level of customization, market segment,

competition, etc.

Define your customer Prime, end user, license partner…

Define your market strategy Distributors, internal sales force, strategic partners, pricing, entry

and growth success factors…

Define your product differentiation and how you will sustain your competitive advantage IP position, technology superiority, etc.



Test Assumptions

Define Customer and Challenge Assumptions How will you access your customer, how much can

you afford to spend to acquire customers, etc. What don’t you know?

Define Distribution Channel Should you build your own distribution?

Challenge Benefits Define benefits derived from key features. Create a

brochure. Identify early customers/adopters. Business Plan Creation Webinar 11/20/13

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This is Not a Good Business

You are better off realizing that your business concept is not sound early in the process rather than spending too much effort on a bad idea

Throughout the process, think whether there is a better concept to explore and go back through the process

Know when to modify and when to stop



Just the Beginning

So the market seems real and you think you have access to the customer, this is just the first step

The next step is to make sure the business model is sound

A good product in a real market that loses money is still not a good business



Business Analysis: Business Model


Goal Define the business model.

Tactic What do you sell: technology via a license, a component, a full product? How much do you charge? What are the costs associated with producing the product? Have you factored in cost of testing? Are there government restrictions on profit, reimbursable expenses?

What do you sell: technology via a license, a component, a product? How much do you charge? What are the costs associated with producing the product? How is your pricing model constrained by existing products/competition?



Business Analysis: Readiness

Defense/Government Commercial/Private Goal Define what needs to be done to get to a product? Tactic What is your current technology

readiness level (TRL) and how much more investment is required to get to product? What is your manufacturing readiness level (MRL) and what investment is required? Do you have a resource loaded timeline to get to product? What government funding opportunities are there to advance the technology to product?

What is your current technology readiness level (TRL) and how much more investment is required to get to product? What is your manufacturing readiness level (MRL) and what investment is required? Do you have a resource loaded timeline to get to product? How do you plan to fund the development to product and how much money is required? Are there visionary customers who could accept lower readiness?



Business Analysis: Human Capital

Defense/Government Commercial/Private Goal Define the team that will get you to the next level. Tactic What are the key human

resources required to get to the next level? Do you have appropriate knowledge of government acquisition, business development, manufacturing? Do you have the right team to get you into the next demonstration? What will your role be as the company grows?

What are the key human resources required to get to the next level? Do you have appropriate knowledge of the market segment you are targeting? Do you need more help with business development, manufacturing, finance (e.g., raising money)? How will you segment the government and commercial business? What will your role be as the company grows?




Goal Define the financial resources required to get you to the next level.

Tactic What financial resources are required to get the technology, product, and team to the next level? Is there a government program that can help advance the company in one or more of these areas? Are there strategic partners that may be interested in helping advance the technology? Does it make sense to raise funds?

What financial resources are required to get the technology, product, and team to the next level? Are there strategic partners that may be interested in funding development? Does it make sense to raise angel or VC financing? Who would be interested in financing the company given where it is currently?

Business Analysis: Finances



Product Timeline

Must identify a lead customer Must define personnel needs and costs to profitability Easy to underestimate time/cost

Initial Production

Beta Customer

Scale Up

Product Improvement

Marketing Commercial

Launch Profitable Marketing

Cost Reduction

People $

TRL MRL

People $

TRL MRL People

$



Whole Product Model

What else is needed by the customer to ensure complete satisfaction?

Complementary services, e.g., Pre-sales services Training, consulting and implementation Legacy interfaces and conversions Post-sales services and support

Complementary products, e.g., Hardware Software Peripherals Connectivity



Build a Financial Plan



Product Description Competitor UsAvg. Sales Price xxx aaaCost of sales & delivery yyy bbb

Price minus sales zzz cccSales cost as % of price 26% 31%Distribution cost as a % of sale 4% 3%

A financial plan should: Consider revenue, cost of goods (production costs), sales and

administrative expense, marketing, R&D, etc. Accurately reflect fully loaded employee costs Be easy to test different scenarios (optimistic vs. pessimistic

assumptions/outcomes) Include internal rate of return (IRR) or other financial metric that summarizes

financial attractiveness of business Address differences required for commercial versus government accounting

Business Drives Investment

The business will dictate the investment required Build reasonable and accurate timeline Understand competitive advantage Building out manufacturing may be costly but if that is a source of

competitive advantage, the investment may be warranted Understand customer acquisition and selling Business may have long sales cycles or require unique sales force

Know your financing needs How long before you make money? How long before you need to raise more money? What type of investor would find this business attractive?

Understand the different sources of capital What do you give up?



Government vs. Private Funding

A follow on government grant is non-dilutive (i.e., you do not have to give up part of your ownership)

Make sure the government research grant advances the goals of your company (e.g., aligns with commercialization)

Private financing can be dilutive (equity) and non-dilutive (debt) and each investor will bring different interests in over-sight, ability to provide connections, and provide other support (e.g., legal advice)



Summary of Business Analysis

Define your business model and revenue stream(s)

Create a detailed time-line Define key personnel required and when you will

need them Identify costs during development phase and after

product launch Define the required capital, type of capital

desired, and when it is needed Measure the overall profitability of the business Compare scenarios, especially pessimistic ones



Test Your Business Model

Does it make sense - even under your most pessimistic scenarios? (things don’t always go as planned!)

Do your staffing needs match the current capabilities of your team? (or near term capabilities)

Is it a model you want to execute and can execute?



Business Plan

You Should Have all the Elements of a Good Business Plan

Business Plan Executive Summary Market and Competitive Analysis Company Description Organization & Management Marketing, Sales, & Distribution Management Whole Product Offerings: Service or Product Line Funding Request Financial Plan Business Plan Creation Webinar 11/20/13 www.fed.org


Summary

Ask the questions that are key for building business case and creating a business plan

Compare opportunities before diving too deep into any one concept

Make sure the business opportunity fits with what you want to do



Additional Resources

Business Plan Templates http://www.sba.gov/business-plan/1 http://office.microsoft.com/en-us/templates/business-

plan-for-startup-business-TC001017520.aspx DARPA Small Business Planning Tool

http://dtsn.darpa.mil/sbpt/#



http://www.sba.gov/business-plan/1

http://office.microsoft.com/en-us/templates/business-plan-for-startup-business-TC001017520.aspx

http://office.microsoft.com/en-us/templates/business-plan-for-startup-business-TC001017520.aspx

http://dtsn.darpa.mil/sbpt/



Q & A

Business plan creation presentation final 112013

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