Contrarian views on business planning

Chapter 16

Developing a sustainable business plan

Objectives1. To define a sustainable business plan and demonstrate its value2. To describe the benefits of a business plan3. To set forth the viewpoints of those who read a business plan4. To understand the mind-set of your five-minute reader5. To see a complete outline of an effective business plan6. To present some helpful hints for writing an effective business plan7. To highlight points to remember in the presentation of a business plan8. To underline some of the contrarian viewpoints on the importance of a

business plan

A business plan is a work of art• You can’t raise money without a business

plan… a business plan is a work of art in its own right. It’s the document that personifies and expresses your company. Each plan, like every snowflake, must be different. Each is a separate piece of art. Each must be reflective of the individuality of the entrepreneur. – Joseph R. Mancuso, How to Write a Winning Business

Plan 

BP for Involution Studios “Magical Software for Personalized Medicine”

But first

Why can’t you just start a business on the back of a napkin?Who reads a business plan anyway?What would a ‘sustainable’ business plan include?

?

• Traditional definition – surviving or maintaining a business’ viability

against its competitors.

• New definition– real commitment to the environment and climate

change mitigation/adaptation as well as a revamping of the entire business model to its core.

– providing products and services without jeopardizing the environment

Why do we say'sustainable' BP?

Review slides from Chapter 3

8

The need for a sustainable business plan• Remember this slide from Chapter 1?

– Famous roller coaster entrepreneur Carl Miler’s brilliant innovation swept away by global warming.

• Usually it’s about finance, marketing and personnel . . .

• But today more and more investors are demanding that BPs focus on People, Profits, and Planet.

• You must write for both definitions of sustainability.• BPs have to take into account . . .

– Volatile weather, economic instability, interruptions to transport, energy and water, availability of raw materials, food supply glitches, and regulatory changes

•What do you expect people to do with your product when they have finished using it?

•Take electronic waste as an example

•The entire life cycle of the product must be considered

The need for a sustainable business plan

Ecology of entrepreneurial business planning

• A business is not separate from the biosphere.

• Industrial ecology sees business as a series of interlocking ecosystems

• The biosphere surrounds the socioeconomic and regulatory systems in which the firm operates.

• The goal is to pick the least burdensome environmental and social outputs when designing products and services.

Contrarian views on business planning

• ‘Business plans are the equivalent of “intellectual push-ups”. Nice exercise, but not necessarily relevant to anything in the real world’.

Lean canvasbusiness planning

• Instead of writing a long and in-depth business plan, Lean Canvas Planners advocate a simpler approach, essentially on a single sheet of paper.

• Osterwalder’s Business Model Canvas puts all the complicated strategies of your business in one simple diagram.

• Each box details your company’s strategy.

Lean canvasbusiness planning

• Lean canvas may be useful for high-growth, technology gazelles

• But some entrepreneurs must first thoroughly research the customer.

• Lean Canvas doesn’t help entrepreneurs determine if their company is truly financially viable without rigorous financial planning.

• You are going to get nowhere with banks and private investors without a plan.

A short ‘pitch deck’ may be enough• What is the opportunity?• What gives you special advantages in

solving the problem?• What makes you think that your people are

especially qualified to grow this business?• What is the business model?• What makes it scalable?• How do you know you’ll have customers?

• How do you connect to customers?• What is the secret of your expected sales

success?• What have you learned from the

competition?• What are the risk factors?• How will you make money?• How will you use the funds you raise?

Original pitch deck for Josef Schumpeter Entrepreneurship University

Business model competitions

Accelerator competitions

Start-up weekends and hackathons

Demo days and pitch events

Prize challenges

Reasons for competition

Foster student success and ultimately to demonstrate credibility..

Evaluating the best ideas to enter ‘acceleration’ for eventual investment.

Entrepreneurs encouraging collaboration among themselves.

Showcasing entrepreneurs and viable ventures to VCs and angel investors.

Solving big problems or addressing specific markets.

JudgingFaculty, local mentors, entrepreneurs, some investors

Seed-stage angel investors, successful entrepreneurs

Local entrepreneurs, local business leaders

Seed angel investors, VCs, successful entrepreneurs.

Professional full time or volunteer committee.Sometimes judged by ‘the crowd’.

StructureBusiness plans submitted and reviewed. Live evaluation of finalists.

Submit basic application. Live pitch/demo at an event.

Collaborate with peers over long weekend. Demo and pitch in front of judges.

Successive rapid pitches in front of judges and audience.

Varies. Often successive judging/pitch competitions.

Entrance criteria Business plan. Application, team,

pitch/demo.Hands-on development skills.

Pitch, basic product demo.

Innovative prototype/product.

Ideal outcomes

Cash prize, recognition.

Seed-capital, participation in a program. Startup development.

Team formation. Prototype. Idea validation. Cash prize/services.

VC/angel investment. Visibility and traction.

Cash prize. Customer validation /adoption. Visibility.

In business planning, never forget your ‘north star goal’

• Achieved in a reasonable timeframe • Can be acted on by your team • Connects to the core of the business • Drives excitement and passion • Serves a higher purpose than business

profitability• Solves a great human challenge and • Leverages your organisation’s strengths.

Benefits of the business plan• Stakeholders get a lot out of a business plan.• Provides the financial details • Helps identify risks

• Provides a useful guide for assessing the entrepreneur’s planning and managerial ability.

• May help you avoid a project doomed to failure!

Benefits for the entrepreneur

• Forced to view the venture objectively.• Scrutinises your assumptions • Lets you develop operating strategies • Quantifies your objectives, providing

measurable benchmarks • Gives you communication tool for outside

financial sources

Benefits for the funder

• Gives them the details of the market potential • Show the venture’s ability to service debt or

provide an adequate return on equity.• Identifies critical risks, crucial events and

contingency plans • Gives them a thorough business and financial

evaluation.• Give them a guide to assess you planning

and managerial ability.

Who reads the plan?

• Obviously venture capitalists, bankers, angel investors, potential large customers, lawyers, consultants and suppliers

• You need to understand three main viewpoints when preparing the plan

• ‘Five-minute reading’ 1. Characteristics of the industry.2. Financial structure 3. Balance sheet 4. Quality of entrepreneurs 5. Establish the unique feature 6. Read over the entire plan lightly

How to structure a business plan

• Eight to 12 sections (depending on the idea, the industry and the technical details)

• Length of a plan is 25 pages• See complete outline in book

Table 16.2.

?Yahoo’s original BP

How to structure a business plan

See complete BP outline in book Table 16.2.

?Yahoo’s original BP

Business plan segments• Write this after the rest of the business plan• A clever snapshot of the complete plan

Executive summary

• Business name and industry background• Thoroughly describe the venture

Business description

• Define sustainability relevant to the businessSustainability

• Includes marketing vision, market trends, competitor analysis, remarkable differenceMarketing

• Prototypes, lab tests, blueprints, sketches, developmental budget.R&D

•Location, labour availability, wage rate, suppliers, customers, taxes and zoning, plant and equipment OperationsH

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Business plan segments• Key personnel, advisers, consultants, board• Structure of payment and ownership Management

• Demonstrate the viability of the undertaking• Pro forma reportingFinancial

• Unfavourable trends, difficulties• Cover the what-ifsCritical risks

• Orderly transition• Management succession and exit strategiesHarvest strategy

• Provide a timetable for the various activities• Timeframes

Milestone schedule

• Additional documentation Appendix

bibliography

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Use the business plan assessment tool in the book.

Updating the business plan

• Update in the event:– of financial changes– of additional financing– of changes in the market– of launch of a new product or service– of new management team– to reflect the new reality.

A practical example

See Appendix 1 for an example business plan – ‘Cocoa Samoa Ltd’

The pitch

• Now it is written, how can you (verbally) present your plan to an audience??

The pitch

• Presenting the plan to stakeholders – especially funding providers– Either individually or in groups

• Also known as ‘the elevator pitch’• Be organised, well-prepared, interesting

and flexible

The pitch

• Know the outline thoroughly• Use keywords that help recall examples,

visual aids or other details• Rehearse the presentation • Be familiar with any equipment • The day before, practice it in full

The pitch

• Focus on the consumer pain• Demonstrate a reachable market• Explain the business model• Tout the management team• Explain your metrics • Motivate the audience• Answer: ‘Why you?’ and ‘why now?’

The pitch

• Focus on the consumer pain• Demonstrate a reachable market• Explain the business model• Tout the management team• Explain your metrics • Motivate the audience• Answer: ‘Why you?’ and ‘why now?’

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Key concepts

(close your books)1. What is a business plan and

what does it describe?2. What are the main segments in

a business plan??

Key concepts

A business plan is a written document that describes:

– current status– expected needs – projected results of the new business.