Strategic Business Planning Part 4

STRATEGIC BUSINESS PLANNING
Welcome!
Session 4 – July 27, 2004
Instructor - Kevin Hawley

Kevin.Hawley.wg01@wharton.upenn.edu
Copyright © March 2004

Wharton Small Business Development Center
The Wharton SBDC is part of Wharton Entrepreneurial Programs and

the Sol C. Snider Entrepreneurial Research Center. The Wharton
Small Business Development Center is in part financed by a grant from
the Commonwealth of Pennsylvania, Department of Community and
Economic Development. The Wharton SBDC is funded under
Cooperative Agreement No. 4-603001-2-0040-24 by the U.S. Small
Business Administration. The support given by the U.S. Small
Business Administration through such funding does not an expressed
or implied endorsement of any of the co-sponsors’ or participants’
opinions, findings, conclusions, recommendations, products, or
services.
All SBDC programs are non-discriminatory and open to the public.

Reasonable arrangements for persons with disabilities will be made if
requested at least two (2) weeks in advance. Please contact Dr. M.
Therese Flaherty, Director, Wharton Small Business Development
Center, University of Pennsylvania, 433 Vance Hall, Philadelphia, PA
19104, (215) 898-8635.

Agenda – Session 4
 Homework Review from Session 3
 Bringing It All Together – Writing the Business Plan
 Attachments and Supporting Documents
 Milestone Driven Planning
 Finding and Using an Expert Advisory Board
 Finishing your Business Plan
 Accessing Additional SBDC Resources
 Group Q & A

Session 3 Homework Review

 Develop Your Financial Plan
 Income Statement, Balance Sheet, Cash Flow
 5 Year EBITDA Projections?
 Startup funding requirements?
 Pre-money valuation?
 Revise Your Operating Plan
 Cost estimates per sales unit and operating expenses that
correspond to values in the financial plan
 Revise Your Marketing Plan
 Pricing per unit and sales volumes that correspond to
revenue estimates and cash flow projections
Analyzing Your Numbers…

Total amount of money needed/raised $_______ - Cash Flow Projections
Angel investor’s expected 5-year ROI $__________ (30X) – Roughly 100%
ROI per year
Pro forma 5-year EBITDA estimate $_______ - Income Statement

Valuation (comparable) multiple ___ times earnings - Industry research
Projected 5-year value of company $__________ - multiply
Ownership percentage required by __% - Projected 5-year value of the company

Angel Investors at 5-year exit horizon divided by the AI’s expected
5-year return amount
Current (pre-money) valuation of $____________ - Amount of money

company raised divided by the AI’s required
ownership percentage

Finding Angel Investors…

Starting points for finding Angel Investors and other resources…
 Wharton SBDC Website

http://whartonsbdc.wharton.upenn.edu
 Innovation Philadelphia
http://www.IPphila.com
 Inc.com (“Inc. Magazine”) Website

http://www.inc.com/guides/finance/20797.html
 Google Search Engine

Enter these terms - “angel investors” Philadelphia

Reviewing the Business Plan Model

Opportunity Product/Service
Why this business? Why Industry, What are you going to provide
now? Why you? Buyer & Competitor and who wants to buy it?
Analyses
Operating Plan Marketing Plan

Cost Projections Sales Projections
What will it cost to produce What will it cost to sell any given
your product or service? amount of your product or service?
Financial Plan
Pro Forma Financial Statements
How will your business make money?
How much? For how long? Risks?

Writing the Business Plan

Executive Summary
 Statement of Purpose – Why are you writing a business plan?
 Mission Statement – Who do you serve? How? What’s special?
 The Opportunity – Why now? Why here? Why you?
 The Strategy – How are you going to capitalize on The Opportunity?
 Economics – How does the business make money?
 Exit/Harvest Strategy – How do investors get paid at the end?
 The Offering – How much of the company is available? For how much?


Product / Service Description
 Description of Business – What exactly is it that you plan to do?
 Industry Analysis – What is the general business environment like?
 Buyer Analysis – How much do you know about prospective buyers?
 Competitor Analysis – How much do you know about other providers?
 Geographic Analysis – What makes you think this is a good location?


Operating, Marketing, and Financial Plans
 Operating Plan – How will the business be run on a day-to-day basis?
 Unit Cost Analysis – What are the variable costs associated with one sale?
 Marketing Plan – How will you drive demand for your product/service?
 Pricing Analysis – How much are people willing to pay you?
 Sales Projections – How many units will you be able to sell?
 Income Statement and Balance Sheet – Do the numbers agree?
 Cash Flow, Sensitivity, and Break Even – How much do you need?

Business Planning is an Iterative Process…
Run the numbers…

(Develop your Financial Plan)
Tell the story… Verify the story…

(Draft your narrative sections) (Examine the narrative sections)

Attachments and Supporting Documents

 Executive team résumés, C.V.’s, professional
certifications/licenses, and letters of recommendation
 Patents, trademarks, plans, drawings, and other documentation
of intellectual capital related to the business model
 Flow charts (explaining business processes)
 Lease agreements and real estate appraisals
 Agreements (or letters of intent) with customers, suppliers, and
business partners.
 Brochures and marketing collateral examples, web page
printout
 Market research reports, analyst reports, and news articles
 Glossary of terms specific to your business model
 List of current investors/owners (capitalization schedule)
 Your Milestone Plan (next slide)
Milestone Driven Planning (MDP)

 Identify the big milestones between “right now” and your objective.
 Develop a process map describing the important steps you must take
and the achievements you expect along the way.
 Relate your map to time – put milestones on the calendar.
 Product/Service Development Milestones
 Operating Plan Milestones
 Marketing and Sales Milestones
 Funding and Revenue Milestones
 What questions do you need to answer along the way?
 What are the go/no-go decision points?
 HINT - Use your financial plan to work backward from a key business goal
 HINT - Bracket regular intervals (3, 6, 12, and 24 months)
 HINT - List what must happen in each period to move the business forward
 Use MDP as a Report Card to yourself and financing sources

Milestone Driven Planning (MDP)
NewCo Inc.
Product/Service Milestones By January 1, 2005 By March 31, 2005 By June 30, 2005 By September 30, 2005 By December 31, 2005
1 Develop initial prototype X
2 Begin first stage customer tests X
3 Revise prototype X
4 Begin production (limited run) X
Operating Plan Milestones
5 Lease 600 sq/ft facility X
6 Expand facility to 1400 sq/ft X
7 Hire machine operator X
8 Hire assembler X
Marketing and Sale Milestones
9 Hire sales & marketing coordinator X
10 Begin customer presentations X
11 Finalize list of customers for first stage testing X
12 Hire outside sales professional X
13 Begin initial marketing campaign X
Funding Milestones ($500K total funding)
14 Initial (seed) funding $25,000
15 April 1 - June 30 additional funding $32,000
16 July 1 - September 30 additional funding $90,000
17 October 1 - December 31 additional funding $120,000
18 January 1, 2006 - June 30, 2006 funding $233,000
Revenue Milestones
19 October 1 - December 31 revenue $50,000
Projected January 1, 2006 - March 31, 2006
20
revenue $160,000
21 Projected April 1, 2006 - June 30, 2006 revenue $240,000
- 10 Minute Break -

Types of Expert Advisory Boards

Customer Advisory Board Business Advisory Board Industry Advisory Board
•Form a group of your most •Select people who are •Influencers in the industry
strategic customers.
Types Of Advisory Boards qualified to evaluate your assemble to discuss the
specific business model. critical issues facing the
•Invite them to offer perspective industry, including lobbying
concerning your products, •The Business Advisory efforts.
competitors, or industry trends. Board can provide direction
and provide much needed •This group can be
•Unlike a User Group, this type “reality checks” as you plan instrumental in bringing an
of Advisory Board is intended to your strategy. outside understanding of the
build relationships with the industry to develop thought
customers or segments that will •These outside experts leadership and define industry
most directly impact the future should be drawn from standards
of your company. various business disciplines
(finance, marketing and •May include key suppliers,
•Best for companies whose sales, legal, operations, functional specialists,
customers' success depends technology, etc.) journalists, analysts, and
upon the company's product or academicians.
service delivery. •Ideal for entrepreneurs who
need an outside, highly
knowledgeable viewpoint. Source: Geehan Advisory Boards
www.geehanadvisoryboards.com
Finding and Using Expert Advisory Boards

 Networking, Networking, Networking
 People you come into contact with everyday
 People your current contacts can introduce you to
 People featured in local newspapers, professional
journals, convention keynote speakers, etc.
 Academic faculty, faculty recommendations
 Use every opportunity to find people to talk to about your
business – follow up on all expressions of interest!
 Appropriate Roles for Advisory Boards
 Boards help you learn and to stay informed
 Boards help you evaluate options and understand risks
 Boards can help you meet prospective customers
 Boards can provide context for your decisions, but don’t
let advisory boards make your decisions!
Finishing Your Business Plan

 How much progress have you made during this class?
 Which sections have been the easiest to write? The most
difficult?
 What do you have left to do?
 What needs to be done first?
 What can you do now?
 What requires additional research/assistance?
 When will your first draft (all sections) be completed?
 What would have helped you prepare for this class?
 How could this class itself have helped you move forward
more?

Accessing Additional SBDC Resources

From this point forward, you’ll get the most out of
your contact with the Small Business Development
Center if you:
 Have completed a first draft of your business plan
 Have specific questions about sections of your business
plan
 Need to improve your skills in a specific area
 Have completed a list of specific objectives or goals to
accomplish over the next three months (Milestones)

Accessing Additional SBDC Resources

 The Wharton Small Business Development Center website
 http://whartonsbdc.wharton.upenn.edu/Index.htm
 Wharton SBDC Answer Desk
 We maintain an answer desk to aid with your business questions.
Our answer desk is just a phone call away.
 Wharton SBDC Resource Center
 There are many great resources on the web. We have compiled a
list of the web resources for small businesses we find the most
useful.
 Entrepreneur’s Guides
 Local Business Assistance Organizations
 Wharton SBDC Consultants
 Additional Wharton SBDC courses
 Events for entrepreneurs
Group Questions and Answers
Q&
Homework Assignments
 Finish your Business Plans!
 Complete your Milestone Plans!
 Stay motivated, stay optimistic, and stay focused.
 “Discuss – Write – Review – Repeat”
 Setbacks are to be expected – persistence counts!
 Try to keep an objective view of your progress.
 Your are your own first employee.
 Your are also your own boss.
 How effective are you at leading that first employee?!
Good luck in your new ventures!


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STRATEGIC BUSINESS PLANNING

Instructor - Kevin Hawley

Copyright © March 2004

The Wharton SBDC is part of Wharton Entrepreneurial Programs and

All SBDC programs are non-discriminatory and open to the public.

Copyright © March 2004

Copyright © March 2004

Session 3 Homework Review

Analyzing Your Numbers…

Pro forma 5-year EBITDA estimate $_______ - Income Statement

Ownership percentage required by __% - Projected 5-year value of the company

Current (pre-money) valuation of $____________ - Amount of money

Copyright © March 2004

Finding Angel Investors…

 Wharton SBDC Website

 Inc.com (“Inc. Magazine”) Website

 Google Search Engine

Copyright © March 2004

Reviewing the Business Plan Model

Operating Plan Marketing Plan

Copyright © March 2004

Writing the Business Plan

 Statement of Purpose – Why are you writing a business plan?

 Mission Statement – Who do you serve? How? What’s special?

 The Opportunity – Why now? Why here? Why you?

 The Strategy – How are you going to capitalize on The Opportunity?

 Economics – How does the business make money?

 Exit/Harvest Strategy – How do investors get paid at the end?

Copyright © March 2004

Writing the Business Plan

 Description of Business – What exactly is it that you plan to do?

 Industry Analysis – What is the general business environment like?

 Buyer Analysis – How much do you know about prospective buyers?

 Competitor Analysis – How much do you know about other providers?

 Geographic Analysis – What makes you think this is a good location?

Copyright © March 2004

Writing the Business Plan

 Operating Plan – How will the business be run on a day-to-day basis?

 Pricing Analysis – How much are people willing to pay you?

 Sales Projections – How many units will you be able to sell?

 Income Statement and Balance Sheet – Do the numbers agree?

Copyright © March 2004

Business Planning is an Iterative Process…

Run the numbers…

Tell the story… Verify the story…

Copyright © March 2004

Attachments and Supporting Documents

Milestone Driven Planning (MDP)

Copyright © March 2004

Copyright © March 2004

Types of Expert Advisory Boards

Finding and Using Expert Advisory Boards

Finishing Your Business Plan

Copyright © March 2004

Accessing Additional SBDC Resources

Copyright © March 2004

Accessing Additional SBDC Resources

Group Questions and Answers

Good luck in your new ventures!

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