Lecture 31 : Writing Business Plan

Welcome back . The topic of this session is
writing a business plan . We are going to discuss the various elements
of the business plan and information that are contained. So, that you can project your business as
a winning proposition before whosoever we are going to present .
First off, let us make a distinction between business model and business plan. They are not the same thing . Although, they
refer to the same thing, they are distinctly different . Business model is the business
that someone does or some teama group of co founders doto solve a problem through a superior
value proposition compared to competitors. So, that they can acquire and retain customers
and finally, they can serve the customer through a profitable proposition. On the contrary, business plan is the description
of the business model. Meaning, how you are going to execute the
business model is a detailed elaboration of that, how you create competitive advantage? What are your unique selling proposition? How you are going to compete with competitors? How you are going to remain ahead of competition
? What is you, what are the strategies that you are going to adopt to overcome the various
challenges or the risks that you foresee that are likely to come. So, this is what is business plan. So, business plan is a written document that
you present before an audience. Or maybe it may remain with you as a ready
reckoner as to what are your milestone and what you are going to achieve etcetera etcetera. So, that is the difference between business
plan and business model. Now, if one has to define the business plan,
the simplest form is that, it is a guide, a road map for you. For your business, that outlines the goals
and how you plan to achieve those goals . Goals or maybe perhaps it is better to say how you
are going to achieve the may be mission vision . Ideally, the plan explains why you think
you will be successful. So, you have to prove before your audience
that there are compelling reasons. You are going to give that reasons while explaining
the challenges ahead. That, these are the challenges and this is
how we are going to overcome the challenges and become winner .
You know the purpose of business plan. Before we enter into the elements of business
plan the purpose, most important purpose is it is an entrepreneur’s ready reckoner it
remains with you and you follow that or you revise that continuously depending on changing
circumstances. Even more important than that is raising fund. Whenever you are raising fund whether from
an Angel or VC or, or maybe you are pitching before anda kind of a committee where you
will be incubated or accelerated. Even sometimes you invite some customers in
a room and then you pitch before them about your objectives. And how we are going to satisfy their, how
their aspiration and your aspiration kind of converse at one point so that that everybody
feels win win . You can also pitch before your mentor or maybe potential buyer of your
company at some point of time. So, these are the reasons why you write a
business plan . Before we dive into the business plan per se, here are some of the points that
are critical for any business to be successful. So obviously, these should form integral part
of your business plan. What are this? The people, number 1, most VC say we invest
in the people not really in the product or service. So, people are most important. Who are the founders? What do they bring to the enterprise? Employees, means what are their skills and
commitment, mentors directors. The opportunity, opportunities about everything,
opportunity involve the risk and or the challenges and the opportunity that you identify in the
challenge. Because, if there is an opportunity, without
the challenge opportunity does not exist is evaporates within no time. So, definitely there are challenges. And you are overcoming the challenges to create
an opportunity in that. So, you kind of identify the, pinpoint the
the competing solutions available. So, you come up with a superior value proposition
etcetera. The context, means what is the industry scenario
now, it is the big picture and you want to say why this is relevant at this point of
time, why we think that this is the right time to for this business to be successful. The risk and reward, the whole presentation
will be about around risk and reward. Because, you are in front of investors or
people that matters and there for every business, a business is around a risk and reward. Meaning, you are trying to alleviate some
pain and that comes with lot of risk because there are competitors, there are other people
who are waiting to grab this opportunity. And you have a superior proposition or superior
executionstrategies that you are going to convert that you are going to convert the
challenges into rewards. And your audience will be interested to understand
that reward. Means how the investors are going to reap
the benefit or how you are going to create value for you, for the nation, for all the
employees, for all other stakeholders. So, whatever is the motive, the final objective
is that you want to project or you want to show how you think that there are compelling
reasons for you to be successful. Meaning, how you are going to navigate through
challenges to emerge and become successful. Your focus must be to bring that story before
the audience ok. Now, coming to the main topic of the day,
major components of business plan. There are many templates available. I will show you some of them. But, we are going to adopt this for further
discussion. And I have the reference for this particular
template in the next next slide. So, it starts with the cover page. You are ok, before even going to that know
that there are two formats of business plan. One is a written document that you sent across
to the either funding agencies or investors or maybe in a competition. That is a text document. Whereas, there is another format that you
present before the audience in person, that is a PowerPoint document mostly. So, there are two formats. Today we are discussing the written document. What are the items that have to be there in
the document? Written doc written format and for that cover
page is a very important thing. Remember that first impression is the lasting
impression. And cover page is is the page what is visible
when your business plan is a stacked with many other business plans. So, when somebody is flipping through the
plans , your plan the cover page itself should catch their eyes, their attention. So, immediately they should think that ok
this looks so professional. So, they will immediately pick that up and
then flip the pages. So, cover page actually should be such that
your business plan stands out of the crowd. Contents: content is again very important. Why so, because people do not have time to
go through the entire business plan to understand what all you have covered
Contents in single page tells your audience hot wall to expect in the report. It tells that you have been detailed in presenting
the business plan. Meaning, you have covered almost everything
that your audience will be looking forward to. If the content is not there it becomes very
boring because they have to flip through the pages. It is very difficult to find the right items
that somebody will be liking to look for. Executive summary, it gives, you should give
your best shot because know that it is the executive summary which is going to be read
by everybody and many of them. Maybe 90 percent of them will not have the
time to really go beyond the executive summary pages. Because, there is a short of time and and
they have to sift through so many business plans. So they will always try to read the executive
summary and if somebody has the time maybe they will read the conclusion, concluding
paragraph or something. And if reading the executive summary somebody
find compelling reason to flip through the pages and know more about certain things. They will only then go through. But, if executive summary itself is not so
attractive, it is not covering the core idea, core competing competitive advantages, core
philosophies through which you are actually going to be successful, the reason, if it
does not emerge out of the executive summary, people will not read them forward. Then the business, business is everything,
it is the background of the business and the business mix, market mix, product mix. What is the pain and how, where? Means it will tell your audience where do
you come from and where you are now. Competitive advantages including value proposition. A strategies for operating management means
how you think that your operation is going to be the most efficient operation . Then,
how you plan for a lean system supply and bias management. So, that your input cost also is kind of optimally
reduced, minimum. Then the resources, resources is very wide,
it it includes your input resources, it includes your management resources, marketing resources,
operation resources. Your technology, access to technology, maybe
financial resources as well. So, we are going to discuss that moving forward. Then comes financial outlay and financial
performance meaning the projected financials. Number 8 is risk, opportunities, rewards and
sensitivities. So, what are the risk that you foresaw, the
biggest risk that you foresee that may actually have huge impact on your business then, how
you are going to work around or or overcome those risks and create a unique opportunity
around that. And how your execution of this whole plan
is going to create rewards for you as well as for your investors so, that your investors
would be interested to fund. Then the sensitivities meaning there are parameters
on which your business performance will depend. And for changing a little bit of any of this
parameter say, your selling price goes down by 5 percent. How your bottom line or profit is going to
change? That shows how sensitive is your business
performance on selling price or input cost or labor cost, interest rate etcetera etcetera. So, how sensitive is your business on all
these parameters that are potential killer of your business maybe to exaggerate. Then conclusion, conclusion is not all that
essential, but then in conclusion you can actually drive home the point. Or in a very concise manner you can actually
kind of mold the decision process of your audience. Meaning, whatever they want to decide about
your your business plan, you can actually help them to make that decision. You can mold their their opinion their kind
of philosophies or whatever they are thinking in a you can channelize that into something
by pointing out or focusing on your key advantages or key strengths. So, they will revisit at the end ok, so, these
are the points, right so, this is a good business. More importantly, people say that first impression
and the last impression should be wonderful . Even if your, if the whole body of the presentation
is not so well, but if the conclusion is wonderful, it is going to be a winning proposition. Because, even in a lecture if your last sentence
is wonderful, perhaps people will give you a standing ovation. But, throughout you talk so exciting things,
interesting things, but you end in a very naive manner, not so attractive manner, perhaps
you do not win them, win the audience heart. So, conclusion gives you an opportunity to
say something wonderful. Then the appendix, it contains all elaborate
calculations like detailed profit loss account. Then balance sheet etcetera etcetera, you
can give your market research, glimpses of the market research that you have done and
many other things that will overload the body. You do not want to unnecessarily load that
so you can come there means it can come there .
As I said, there are many templates. Hobart business review has this template. Then, Sequoia Capital who are conspicuous
investors in India. Majority of the startup that you think they
are making noise and they are becoming successful. Chances are very high, Sequoia has been the
first investor in those companies. They also continued to invest as the companies
companies grow. So, when somebody has been kind of evaluating
thousands of business plans and they are funding, they are seeing that people becoming successful
. Whatever template they suggest, we have every reason to think that it is kind of getting
something from the horse’s mouth . I actually like this one. It is by Forbes and written by Dave Lavinsky
. This is also wonderful. Every every one of them is is wonderful, but
you will notice that they kind of talk about the sameelements, but in a slightly different
manner. Not really significantly different, some there
are some nuances and that aside they have the major same elements .
So, I have given the references also at some point and you can visit them. And if you are really writing a business plan,
you can follow any one of them. But, I am going to follow the one that I have
referred at the beginning . First chapter after your cover page and contents. 1st chapter is executive summary. What should contain there? Executive summary should contain everything
about your business because you should remain alert, mindful, that this is the only portion
that people are going to read. So, in a couple of pages maybe 2 pages, you
have the opportunity to to bring everything and show people that there are compelling
reason to believe that your business is going to be successful. So, that should be your motivation, your driving
force while writing executive summary . So, it starts with business, meaning what business
it is. Then the team, then the proposal, meaning
what the proposition, what proposal means. What the pain point that your solving and
how you are solving? Why now? What is the relevance? The big picture. What is the technology domain? Means how the technology is progressing and
why this is the right time, for this entire marketplace to depend on. Likes a 5G, if 5G is just coming as we know. So, there will be many many related businesses
which are particularly important of 5G. So, you can always say that 5G is just coming
and this business the right time for this. If I do not do it, tomorrow somebody else
will do and become successful . Why it will succeed? So, we give all compelling reasons for it
to be success. What is a reward? Meaning particularly your reward refers to
the rewards that you are going to give to the investors. Meaning, how they are going to exit, with
what, how many times, multiple their investment is going to be multiplied . Major risks and
how you can minimize them. Obviously, this is the topic .
Executive summary, for most readers it will be the only few pages that they will read. Look at what Vaughan Evans say, Vaughan Evans
wrote the book and I have given the reference at the bottom or maybe some other places also
and I find this book is wonderful . So, this is just a line copied from there. I have been means this entire presentation
is inspired by his book . A spend time on executive summary, nurture it, hone it and
edit it remorselessly, even give it to professional to edit. It may be the best investment you make. Nothing is exaggerated. It is so true because these 2 pages are going
toeither make or break your business . Make the first impression as I said. When you meet somebody, you create an impression
in first 15 seconds, that there is the same. Similarly, when you read the summary, you
create impression about the whole business plan. Whatever is there, is very difficult to modify
that. You create something not so impressive, you
will not be able to impress writing so much in the body. So, give your best shot, but then do not keep
a single word in the summary which you can remove without making significantvalue reduction. Meaning, that if a word can be eliminated,
just eliminate. Remain as precise as possible .
Chapter 2 is the business, meaning your business that has 2 subsection, 1 is background another
is business mix by segment . Means you have to show or present it there. 1st part is the background, background has
many part, your brief, your audience on the bare essentials. See, background contains your business meaning
where you come from and for whom means what pain? And who has the pain and why now? And where these people reside? Meaning, the customer segment. Then, how you are going to solve where do
you, where are you now? Meaning, up to what extent you have done the
progress. Highlight the traction, traction means if
you have made any progress whatsoever. Suppose, you have, you are incubated by some
organization. So, that is a traction. Suppose, you have talked to some big persons,
he has become your mentor is a traction . You got your first customer is a traction. Got a product validated is traction. So, highlight the traction that you have achieved. We will briefly set out why business. For us to enjoy a substantial competitive
advantage. Introduce more details. You have given something in this executive
summary. No, bring them in more detail here. This is where the reader is introduced; the
business where you set out clearly and concisely what makes your business stick, why your business
is going to be successful. In background there are 5 major items. There may be many. So, opener goals and objectives, strategies,
resources and basic financials. Just give a summary of the financials, nothing
beyond the summary . So, first is the opener. Opener again is the opener of the background
. The opener should be just one paragraph containing the following. Opener should not, means nothing should be
too too muchmost voluminous or wordy or anything . So, here in the opener you say who you are,
meaning your team and your business . So, you try to focus that ok. These are the people who have teamed together
to solve this this pain etcetera. What product or services it focuses on? Which main customer groups of here comes the
customer segment also business going to serve. Where it is based? So, location where is it has operation maybe
have a branch somewhere or collaboration with some company. Maybe in India, maybe outside . Without success
means, have you validated your product, have you been able to acquire 1 customer, 2 customer
or maybe many customers. By which year going to achieve certain goals
that you have set etcetera . Goals and objectives; so goals and objectives
particularly, objectives are very important goals mission vision this is slightly kind
of subjective. Whereas, objectives are really objective meaning
that, you have a defined kind of goal to achieve, becomes an objective. So, your goals is to become customer centric
meaning that you have studied your customer through market research. You have realize the pain that they have clearly
defined clearly defined the solutions that are there in the marketplace. And then you you understand what kind of a
solution is going to give a better, more effective solution to this audience etcetera. And then you defined how you are going to
means what is the metrics that you used to understand that your customer focus. Like for example, it may be that 40 percent
of your customer is rating you as excellent or they are fully satisfied. And then you have a target that by 2020 perhaps,
we are going to achieve this. Because, whatever you do, initial product
will have some troubles or the other. So, you have to continue to do the troubleshooting
and then come up with a model that customer will fall in love with . You may set the goal
in terms of market share also like 10 percent market share by 2020 20 whatever . So, some
goal, there should be some goal. Goals are kind of directional, meaning that
it is kind of subjective. Objectives are a specific, kind of objective
. So, you may have come across the useful acronym called SMART. This is how objectives are defined not really
goals . And SMART stands for specific, meaning you have a specific target. And they are measurable, meaning if you achieve
that, you know that ok, this is the metric, we have achieved that. Or you can tell your team that these are our
objectives and they know where we stand, 30 percent, 90 percent or 100 percent. And attainable, you can easily attainable,
it is not something that unsurmountable or something. And then, it is relevant, it is not something
which is kind of crazy. And then time-limited, you set a goal of time
on a temporal scale that by this time we are going to achieve this . Mission, vision and
goals, these are kind of, mission is how you differentiate yourselves from the competitors. Vision is, where do you want to see yourself
moving forward in the long run. Values are, what is your standard, your ethical
standard or your standard in response to the safety, maybe health, maybe moral behavior
etcetera etcetera . Your audience is more in not so much interested
about mission, vision, goals. They are more interested about your objective. What metric, clear metric you would like to
achieve at what time, they are more interested. So, mission, vision and goals, they may go
slightlyforward, meaning that you can actually put them into appendix as well. So, let us remain on the objectives then strategy. You defined your problem, that you are going
to solve. What strategy you are going to adopt to solve
that in a competitive manner, meaning how you are going to beat the competitors? How we are going to, more importantly, there
are challenges. How we are going to overcome the challenges? These are the strategies. So, you tell the audience that these are the
strategies that we are going to adopt to overcome, alleviate all, whatever comes on our way. Then comes resources; resources is very wide. It it includes the natural resources, the
human capital, the managerial skill, the marketing skill, the operation operation management
skill, everything togethersubsumes into resources. So, you have to really, this is an opportunity
to to really bring to light your most important positives. You can showcase that our team has this skill,
we have the early staffs who have who possess this. Some some from marketing, some from finance,
some has maybe may have operational skill . And the like, and there may be other like
say, you have access to technology etcetera .
List of resources, so, it just means explaining them in tabular manner is these are the things
that comes under resources. And then you give very glimpse of your financials. You, how much money you need and how you are
going to spend that money and if you have made some cells. So, show your profitability statement. If you have not made then show some projected
profitability that over a 5 year period , these are our maybe gross profit, operating profit
and net profit and then maybe cash flow. Business mix, means so long we were under
background. Now, it is business mix under the business. Business mix clearly defines what are the
products that you are selling and which segment this products are being catered to. So, you know different segments. Out of them, which is your flagship product,
meaning which is giving you the maximum revenue, maximum profit . So, you tell your audience
that this this is our flagship product and this is segment. So that, they also have a clear understanding
of your business . Customer segment we have discussed many a times. So, let me just flip through . Identify, you
may actually identify niche market meaning you make your product so different with a
very important feature that the customer love. And for the presence of it, customer will
not buy your competing product, but they will love your product .
Chapter 3, market demand. So, you do some market research and understand
the demand supply and you show your audience that there is sufficient space for us as well
as for the competitors. Do not down play the competitors, you have
to always talk about the competitors. Otherwise, your audience will think that you
do not have much idea about competitors. So, you are not you will remain unprepared,
that is the most important part. If you talk loudly about your competitors
that, there are so much of competition in the market, at the same time you say we have
these strategies to beat the competitors. Your audience or your backers or your investors
are going to think ok, so you know the competitors and you are prepared to beat the competitors. That is the best case scenario. If you fail to bring or say, just gloss over
the issue of competition as if there is no competition. Your investors or your audience is going to
think that perhaps, you have no idea about the competition or the market. And you will be caught napping by them, your
competitors because you are not prepared to fight the competition .
Market demand again continuing; so, here there are risk and opportunities. And know for sure, if you are thinking of
any opportunities, there are tremendous amount of risk. Otherwise, this opportunity all will not remain
there. So, you have to talk about the risk. What are your great big big risk, the biggest
risk? Maybe 1, 2, 3 and what are their impact on
your performance. More importantly, what is the likelihood of
them manifesting. There may be many risk, but then you can actually
prove that many of them have very low likelihood, less likelihood of happening. So, people will, you can come play down on
them and if there are opportunities also. So, you have to show that these opportunities
can actually be exploited because of this this reason. And how the market share is changing? So, how the leading players are capturing
market place, if they are growing very fast, capturing market place. This is to be worried about. The market must be sufficient as I said . Your
market must buy your product, meaning that there should be demand for your product .
There will be demand if the product is well differentiated and and it has efficacy, it
has value for your customer. You have a well conceived plan for creating
a brand that is going to connect people emotionally. And then you can acquire and retain loyal
customer, increase customer base moving forward. So, we will close that session, this session
here and then we will restart back soon. Thank you very much.

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