How to Write a Business Plan

SEDAN KURESHISEDAN KURESHI
HOW TO WRITE A
BUSINESS PLAN
SEDAN KURESHI
www.sedankureshi.com

How will we
proceed?
2
A Understanding of
Business Management
& Analysis
Case Study Analysis
Business Plan Writing
& Presentation

GOALS & OBJECTIVES
Why are you starting a business? What problem are you trying to solve?

What are you
trying to do?
>To make new products or
services
>To develop new production
processes
>To organize in new ways
>To open up new markets
>To use new raw materials
4

MAIN CONCEPTS
FOR BUSINESS
PLANNING

WHAT ARE YOU SELLING?
The assumptions you need to figure out about your product/service/software.

What is
that you
are
selling?
7
Description
Illustrations Lifecycle
Comparisons Differentiation
End Goals

BUSINESS STRATEGY
The things you need to figure out about your strategy.

9
What is it?
What I need to do to
win in the market?
Mapping out all possible
routes and selecting the
best path.

Place your screenshot here
10
What is it? Business Strategy
provides overall direction
to your venture and
involves specifying the
organization's objectives,
developing policies and
plans designed to achieve
these objectives, and then
allocating resources to
implement the plans.

11
What are
the levels?
OverallStrategy
Corporate
Strategy
Business Unit
Strategy
Team Strategy

12
What are
the
questions
that a
Business
Strategy
answers?
>What is the organization's business?
>Who is the target customer for the organization's
products and services?
>Where are the customers and how do they buy? What is
considered "value" to the customer?
>Which businesses, products and services should be
included or excluded from the portfolio of offerings?
>What is the geographic scope of the business?
>What are the important opportunities and risks for the
organization?
>How can the firm grow, through both its base business
and new business?
> How can the firm generate more value for investors?

Corporate
Strategy
13
It determines how your business as a whole
supports and enhances the value of the business
units within it
"How do we structure the overall business, so that all of
its parts create more value together than they would
individually?"
You can do this by building strong internal
competences, by sharing technologies and
resources between business units, by raising
capital cost-effectively, by developing and
nurturing a strong corporate brand, and so on.

14
What is
Porters
Generic
Strategy?

15
What is
Porters
Generic
Strategy?
The Cost Leadership strategy is exactly
that – it involves being the leader in terms
of cost in your industry or market.
> Increasing profits by reducing costs, while charging
industry-average prices.
> Increasing market share through charging lower prices,
while still making a reasonable profit on each sale
because you've reduced costs.
> Access to the capital
> Very efficient logistics.
> A low-cost base

16
What is
Porters
Generic
Strategy?
Differentiation involves making your
products or services different from and
more attractive than those of your
competitors.
> Good research, development and
innovation.
>The ability to deliver high-quality
products or services.
> Effective sales and marketing

17
What is
Porters
Generic
Strategy?
Companies that use Focus
strategies concentrate on
particular niche markets
By understanding the dynamics of
that market and the unique needs of
customers within it, develop
uniquely low-cost or well-specified
products for the market.

18
What is the
Boston
Matrix?

Business
Unit
Strategy
19
Is concerned with competing successfully in
individual markets, and it addresses the question,
"How do we win in this market?"
However, this strategy needs to be linked to the
objectives identified in the corporate level
strategy.
Competitive analysis, including gathering
competitive intelligence is a great starting point for
developing a business unit strategy. As part of this,
it's important to think about your core
competencies.

Generic All
Purpose
Franeworks
20
SWOT
Structured Planning and Analysis

What is
SWOT
Analysis?
21

5 Forces
22
FIVE
FORCES
Determine the
“Attractiveness
/ Profitability”
of your
Business.

What is
Porters 5
Forces
Framework?
23

Where can I use
this?
24
Determine the
“Attractiveness/
Profitability” of
your industry.
How your business
should position
itself given
Industry/sector
forces.

Team
Strategy
25
Team strategy must lead directly to the
achievement of business unit and corporate
strategies, meaning that all levels of strategy
support and enhance each other to ensure that the
organization is successful.
This is where it's useful to define the team's
purpose and boundaries using, for example, a team
charter and to manage it using techniques such as
Management by Objectives and use of key
performance indicators Add to My Personal
Learning Plan.

Specific
Strategy
Franeworks
26
STRATEGY
DIAMOND
MODEL
PESTLE
Defines the
components of
your Business
Strategy
Outlines the
way to evaluate
the external
business
environment

What is
PESTLE
Analysis?
27

Where can I use
this?
28
To Proactively
Evaluate Your
Environment

What is the
Strategy
Diamond
Model?
29

Where can I use
this?
30
Determine the
components of
your Business
Strategy

31
What are
the
questions
that a
Strategy
answers?

What are the
questions
that a
Strategy
answers?
32
Consonance Consistency
FeasibilityAdvantage

MARKETING
The things you need to figure out about your marketing.

CUSTOMER VALUE
PROPOSITION (CVP)
34

What is your
Customer Value
Proposition ?
▫ Your customer value
proposition (CVP) consists of the
sum total of benefits which you will
be providing your users for their
associated payment.
35
▫ A value proposition summarizes
why a consumer should buy a
product or use a service. The CVP is
ideally supposed to convince a
potential consumer to buy your
product or service over others.

How do you
figure out your
Value
Proposition ?
▫ The simplest way to know your CVP
is to build a profile of your key targeted
users.
36
▫ Key target user profiles will help
you understand who are the key target
users, where can they be found, what
issues do they face, and how would
they use the product.

How do you
figure out your
Value
Proposition ?
▫ The simplest way to know your CVP
is to build a profile of your key targeted
users.
37
▫ Key target user profiles will help
you understand who are the key target
users, where can they be found, what
issues do they face, and how would
they use the product.

How will I
Quantify my
Value
Proposition ?
▫ Now quantifying your CVP in
measureable terms is crucial. This is
because it allows you to compare your
product or service with the entities you
are competing against.
38
▫ Take meaningful units of
measurements.
▫ Quantify and compare the unit
benefits for your competitors.

An Example of
Quantifying your
VP
▫ So let’s take the barber shop example
again. What are the potential benefits a
barber shop can give a user?
➢ Timings- how long will you be open?
➢ Quality of Service/Haircut
➢ Location – i.e. Accessibility
➢ Ambience –i.e. Atmosphere
➢ Method of Payment – i.e. Cash, Credit
➢ Speed of Haircut
39

An Example of
Quantifying your
VP
▫ Now you have to rank all these things
in importance to your customers.
Then give your potential barber shop a
score and then compare the weighted
average.
▫ At the end of this exercise, you will
know where the opportunity to
develop your VP lies.
40

Unique Selling Point
41

What is a USP
and why is it
important for
my business
plan?
A unique selling
proposition (USP,
also seen as
unique selling
point) is a factor
that differentiates
a product from its
competitors, such
as the lowest
cost, the highest
quality or the
first-ever product
of its kind.
A USP could be
thought of as
“what you have
that competitors
don’t.”
A successful USP
promises a
clearly articulated
benefit to
consumers, offers
them something
that competitive
products can’t or
don’t offer, and is
compelling
enough to attract
new customers.
42

Lesson #1
You are
looking for a
gap in the
market.
How do I figure
out my USP?
Lesson #2
You don’t have to
be the best but
have to be
different in some
way or the other.
43

How do I figure
out my USP?
1. Figure out the
value
propositions that
your targeted
consumers really
want.
2. Screen them
against the trends
and competitions
and eliminate all
USPs that are
already being
addressed.(
unless the market
is huge and the
same USP
providers can
exist
simultaneously)
3. Compare and
contrast the
remaining USP’s
with the core
strengths of your
business
structure and
decide as to what
you think you will
be able to
address.
44
VALIDATE WITH RESEARCH

Best Practices
while
Developing USP
1. Keep it Personal.
2. Target Ideal Customers.
3. Don’t go after Shock
value.
4. Leverage Unique Industry
Shortcomings.
45

46
COMPETITIVE ADVANTAGE
Figure out where your strengths lie

What is a
Competitive
Advatnage?
Competitive advantage is an
advantage that a firm has over
its competitors, allowing it to
generate greater sales or
margins and/or retain more
customers than its
competition. There can be
many types of competitive
advantages including the
firm's cost structure,
product offerings, distribution
network and customer
support.
Just because a company is the
market leader now, doesn't
mean it has a sustainable
competitive advantage. A
company can temporarily cut
its prices to gain market share,
but its competitive lead will
disappear when it restores
those prices to a profitable
level. A company must create
clear goals, strategies, and
operations to sustain its
competitive advantage over
time
47

How can I find a
competitive
advatnage for
my business?
Become a Cost Leader
With this strategy, the
objective is to become
the lowest-cost
producer in the
industry. The traditional
method to achieve this
objective is to produce
on a large scale which
enables the business to
exploit economies of
scale.
> High levels of productivity
> High capacity utilisation
> Use of bargaining power
to negotiate the lowest
prices for production inputs
> Lean production methods
(e.g. JIT)
> Effective use of
technology in the
production process
> Access to the most
effective distribution
channels
48

How can I find a
competitive
advatnage for
my business?
Targeted Segments
In this strategy, a business
aims to differentiate
within just one or a small
number of target market
segments. The special
customer needs of the
segment mean that there
are opportunities to provide
products that are clearly
different from competitors
who may be targeting a
broader group of
customers. Its also called
niche marketing strategy.
Differential Leadership
With differentiation leadership,
the business targets much
larger markets and aims to
achieve competitive advantage
across the whole of an industry.
➢ Branding
➢ Industry
➢ Consistent Promotions
➢ Superior product
49

What Resources
would I normally
need to create
an advatnage?
➢Patents & TradeMarks
➢Propreity Know How
➢A Large Existing
Customer Base
➢Reputation of Firm or
Employees
➢Brand Equity
50

Minimum Viable
Product(MVP)
51

Why is it
important?
Building a Minimum
Viable Product (MVP) is
a strategy for avoiding
the development of
products that customers
do not want. The idea is
to rapidly build a
minimum set of features
that is enough to deploy
the product and test key
assumptions about
customers’ interactions
with the product.
It differs from the
conventional strategy of
investing time and money to
implement whole product
before verifying whether
customers want the product
or not. MVP tests the actual
usage scenario in contrast
to conventional market
research that relies on
surveys or focus groups,
which often provide
misleading results.
52

What is the
Purpose?
▫Be able to test a product
hypothesis with minimal resources
▫Accelerate learning
▫Reduce wasted engineering hours
▫Get the product to early customers
as soon as possible
▫Base for other products
▫To establish a builders abilities in
crafting the product required
53

Examples of
MVP
> Ice Cream Stall instead
of Store
➢Online Listing instead
of Online Store ( e.g.
Suits , Shoes)
➢Basic Program instead
of Software Suite
54

Quick Ways to
build a MVP
THIRD PARTY
SERVICES
FRIENDS &
FAMILY
CROWDSOURCE
55

Customer Segmentation
56

Why should I
segment my
customers?
Because your
individual customers
have differing needs, it
will be easier to give
them what they want if
you divide them into
groups sharing similar
needs, and treat each
group differently.
You can then:
> Customise your
products and services
for each segment
> Aim your marketing at
each particular group,
saving you time and
money
> Focus on your most
profitable customers
57

How should I
segment?
> Businesses or
organisations - business-
to-business or B2B
> Individual consumers or
households - business-to-
consumer or B2C
58

How can I
segment?
B2B
> What they do - industry
sector, public or private,
size and location
> How they operate -
technology, use of your
products
> Buying patterns - how
they place orders, their
size and frequency
> Behavior- loyalty and
attitude to risk
59
B2C
> Location - towns,
regions and countries
> Profiles - such as age,
gender, income,
occupation, education,
social class
> Attitudes and lifestyles
> Buying behaviour -
including product usage,
brand loyalty and the
benefits they seek from
the product or service

What are the
methods to
segment?
Primary
Research
60
Secondary
Research
Qualitative
Research
Quantitative
Research
> Face-to-face
interviewing
> Telephone
> Mail
> Email or web
surveys
> Focus groups
METHODS

CLV and Customer Acquisition
Cost (CAC)
61

What is a
CLV?
62
CLV is a prediction of the net
profit attributed to the entire future
relationship with a customer
CLV (customer lifetime value) calculation process
consists of four steps:
1. Forecasting of remaining customer lifetime (most often
in years)
2. Forecasting of future revenues (most often year-by-
year), based on estimation about future products
purchased and price paid
3. Estimation of costs for delivering those products
4. Calculation of the net present value of these future
amounts

What is a
CAC?
63
Customer Acquisition Cost is the cost associated in
convincing a customer to buy a product/service.
This cost is incurred by the organization to convince
a potential customer. This cost is inclusive of the
product cost as well as the cost involved in
research, marketing, and accessibility costs.
Customer Acquisition Cost will typically
increase as a business matures. It is also
typical to see a diminishing return on CAC as a
business grows in size and possibly
geographical distribution.

When to Stop
Acquiring New
Customers?
When CLV > Cost of
Acquisition
64
1. Either Increase CLV
2. Either Decrease Cost
of Acquisition

Distribution Channels
65

Why are
distrIbution
channels
important?
A product with better
distribution will always win
over a superior product
with poor distribution. Once
your start-up is ready to
commercialize its product,
you must determine how
the product will reach your
target consumer.
Distribution is about finding
a suitable distribution
channel that makes it
convenient for the buyer to
purchase and consume
your product.
➢Online/Digital
➢Joint Ventures
➢Referral &
Affiliate
Programs
➢Tradeshows
➢Direct /Indirect
➢Organic
66

Componenets of
the Distrbution
Channels
Product distribution relies on combining three
different channels (which can be independent or
joined):
> Sales channel
> Delivery channel
> Service channel
67
For each channel, you can choose either a
direct (in-house) channel or a third-party indirect
(outside) channel, or a combination of both.
Many high-tech companies have an inside sales
force and employ other distribution channels to
reach different customer groups.

How to choose
the right
channel for my
business?
> Size of the market—includes the variety of customer
profiles
> Cost of the distribution channel—absolute value
cost, cost per customer, profitability of different
channel options, fixed versus variable costs
> Type of product—standard (well-defined
characteristics, sold in large quantities, ideal for
external distributors) vs. non-standardized (involves
customization, requires personal contact with users)
> Degree of control over distribution channel—open
sharing with distribution channels vs. closed
relationship, possibility of competition from distributor
> Flexibility of distribution channel—length of
contract, time required to develop relationship
68

Pricing
69

Why is Pricing
Important?
.
70
➢ Price is important to you because it represents
your assessment of the value customers see in
the product or service and are willing to pay for
your product or service.
➢ Adjusting the price has a profound impact on
the marketing strategy, and depending on
the price elasticity of the product, it will often
affect the demand and sales as well.
➢ Pricing contributes to how customers perceive
your product or a service.

Which Pricing
Model should I
Use?
.
71
➢ Cost Based Pricing
➢ Value Based Pricing
➢ Freemium Model
➢ Razor & Blade Model
➢ Premium Pricing/Loss Leader
➢ Feature Pricing
➢ Volume Pricing
➢ Market Pricing
➢ Free + Advertising
➢ Free + Paid Services
➢ Dynamic Pricing
➢ Skimming

What is the one
thing I should
remember about
pricing?
> Pricing low makes future growth less
sustainable.
> Pricing low devalues your product
offerings.
> Pricing low is hard to recover from.
72
Don't under price Your
Product or Service

How should I set
my price?
73
➢ Calculate Your Material Costs
➢ Calculate Your Labor Costs
➢ Calculate Your Overhead Costs
➢ Respect Industry Averages
➢ Calculate Your Break Even Targets
➢ Research Potential Markups and Work
Backwards
Estimates
Base Cost = Materials Cost + Labor Cost
Wholesale Cost = (Materials Cost + Labor Cost) *
Wholesale Markup
Retail Cost = Wholesale Cost * Retail Markup
Profit = (Retail Markup * Items Sold) – Overhead Cost

Critical Mass
74

What is it?
.
75
The amount of users/sales after which traction
occurs and you will be all right.

76
When will
I pass it?

Why is it
important?
.
77
➢ Normally the point after which you know the
idea will work and you can quit your day job.
➢ 99% of businesses make it if they are able to
achieve their critical mass.( if calculated
correctly)
➢ Once you have a “critical mass” of users, then
there’s enough activity to keep everyone
coming back i.e. Sustainable Growth

Hypothesis Testing
78

79
How can I
test my
hypothesis?

The 7P’s
80

Why is it
important?
.
81
The marketing mix enables a company to review and
define the key issues that effect
marketing of its products and services.
> Ensure each aspect of the business has been
considered.
> Build objectives.
➢ Compare your business to competitors.
➢ Write the Marketing Plan

What is it?
.
82

What is it?
.
83

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STP Model
85

Why is it
important?
.
86
STP is core to marketing strategy linking
and prioritizing audiences with
propositions.
STP is a model for expanding sales by dividing your
market into segments.
This is achieved by identifying the segments, evaluating
the commercial attractiveness
of those segments, developing a marketing mix and
product positioning strategy for each
segment, as shown below:

What is it?
.
87

How do I
position?
88

OPERATIONS
Implementation Schedule & TimeLine

What do I
need to
Take into
Account?
90
Management Team
Can Execute the Plan
The Plan to Deliver
on Your Promises

What do I
need to
Take into
Account?
91
MILESTONES
( Pre & Post
Operations)
KPI’s
EXPENSES

What are
the three
stages?
92
PRE-LAUNCH(
E.G Prototyping)
LAUNCH
POST LAUNCH(
e.g. Account ,
Service
Delivery)

What do I
need to
Take into
Account?
93
PRODUCTION LOCATION
LEGAL STAFFING
INVENTORY TIMELINES

PRODUCTION
94
PRODUCTION
TECHNIQUES
& COSTS
QUALITY
CONTROL
INVENTORY
CONTROL
CUSTOMER
SERVICE
PRODUCT
DEVELOPMENT

LOCATION
95
AMOUNT
OF SPACE
ENERGY &
UTILITIES
AMBIENCEZONING
ACCESS

LEGAL
96
PERMITS
LICENSING
REGULATIONSINSURANCE
TRADEMARKS
/PATENTS

STAFFING
97
TYPE OF
LABOR
ACCESS TO
LABOR
PAY
STRUCTURES
JD’S
/DOCUMENTATIO
N
TRAINING
METHODS

INVENTORY
98
TYEPE OF
INVENTORY
WAREHOUSING
CREDIT
POLICIES
TURNOVER
/LEAD TIMES
SEASONAL
BUILDUPS

Requirements
– WBS & Gantt
Chart
99
>A work breakdown structure (WBS) is a deliverable-
oriented decomposition of a project into smaller
components.
> A WBS also provides the necessary framework for
detailed cost estimating and control along with providing
guidance for schedule development and control.
> A hierarchical decomposition of the total scope of work
to be carried out by the project team to accomplish the
project objectives and create the required deliverables.

WBS
100

GANTT
CHART
101

VENTURE TEAM
The things you need to figure out about your management potential.

SEDAN KURESHI
“
SEDAN KURESHI
WHAT IS THE #1 MOST
IMPORTANT
VARIABLE IN THE SUCCESS
OF A NEW VENTURE?
103

SEDAN KURESHI
“
SEDAN KURESHI
“I prefer a grade A entrepreneur (and team) with a
grade B idea to a grade B team with a grade A
idea” (~George Doriot)
“If you can find good people, they can always change
the product. Nearly every mistake I’ve made had
been when I picked the wrong people, not the wrong
idea.” (~Arthur Root)
104

Individual Issues
>Overconfidence
(hubris)
> Psychological
ownership (and
territoriality)
> Escalation of
commitment
Why do I need to
address the
Venture Team?
Collective Issues
➢ Relationships
➢ Roles
➢ Rewards
105

FIGURE OUT
YOUR
EXTERNAL
MANAGEMENT
TEAM
BOARD OF
ADVISORS
PROFESSIONAL
SERVICES
NETWORKING
BODIES & JOINT
VENTURES
106
INDIVIDUAL
CONTRIBUTERS

FIGURE OUT
YOUR INTERNAL
MANAGEMENT
TEAM
CORE
STRENGTHS
OF TEAM
TECHNICAL
SKILLS &
EXPERTISE
MANAGEMENT
SKILLS &
EXPERTISE
107
GAPS IN
COMPOSITION
& EXPERTISE

OWNERSHIP
STRUCTURE
SOLE
PROPRIETORSHIP
108
A business registered in
the name of an
individual is called Sole
Proprietorship. A single
person is completely
responsible for the
entire business with the
business and the owner
not being separate from
each other. The owner
funds the business,
takes any profits and
bears any losses.

OWNERSHIP
STRUCTURE
SOLE
PROPRIETORSHIP
109
ADVANTAGES
> Easiest and least expensive form of ownership to organize.
> Sole proprietors are in complete control, and within the
parameters of the law, may make decisions as they see fit.
> Sole proprietors receive all income generated by the business
to keep or reinvest.
> Profits from the business flow-through directly to the owner’s
personal tax return.
> The business is easy to dissolve, if desired.

OWNERSHIP
STRUCTURE
SOLE
PROPRIETORSHIP
110
DISADVANTAGES
> Disadvantage in raising funds and are often limited to using
funds from personal savings or consumer loans.
> May have a hard time attracting high-caliber employees, or
those that are motivated by the opportunity to own a part of the
business.
> Some employee benefits such as owner’s medical insurance
premiums are not directly deductible from business income.

OWNERSHIP
STRUCTURE
PARTNERSHIP
111
The basic difference
between partnership
and sole proprietorship
is that more than one
individual is involved in
a partnership. The roles,
responsibilities and the
share of each partner
are specifically defined
in a legal partnership
agreement.

OWNERSHIP
STRUCTURE
LIMITED LIABILITY
PARTNERSHIP
112
It is a separate legal
entity from the
partnership entity and
business assets are
separate from the
personal assets of the
partners. In case the
business incurs losses,
the personal assets of
partners are not put at
risk as the maximum
liability of every partner
is defined by his share
capital in the entity.

OWNERSHIP
STRUCTURE
PARTNERSHIPS
113
ADVANTAGES
> Partnerships are relatively easy to establish; however time
should be invested in developing the partnership agreement.
> With more than one owner, the ability to raise funds may be
increased.
> The profits from the business flow directly through to the
partners’ personal tax returns.
> Prospective employees may be attracted to the business if
given the incentive to become a partner.
> The business usually will benefit from partners who have
complementary skills.

OWNERSHIP
STRUCTURE
PARTNERSHIPS
114
DISADVANTAGES
> Partners are jointly and individually liable for the actions of the
other partners.
> Profits must be shared with others.
> Since decisions are shared, disagreements can occur.
> Some employee benefits are not deductible from business
income on tax returns.
> The partnership may have a limited life; it may end upon the
withdrawal or death of a partner.

OWNERSHIP
STRUCTURE
CORPORATIONS
115
A corporation, chartered
by the state in which it is
headquartered, is
considered by law to be
a unique entity, separate
and apart from those
who own it. A
corporation can be
taxed; it can be sued; it
can enter into
contractual agreements.

OWNERSHIP
STRUCTURE
CORPORATIONS
116
The owners of a
corporation are its
shareholders. The
shareholders elect a
board of directors to
oversee the major
policies and decisions.
The corporation has a
life of its own and does
not dissolve when
ownership changes.

OWNERSHIP
STRUCTURE
CORPORATIONS
117
The total capital of the
entity is made up of
shares. These shares
can be sold/transferred
to another individual
who then also becomes
one of the owners of the
company.

OWNERSHIP
STRUCTURE
CORPORATIONS
118
ADVANTAGES
> Shareholders have limited liability for the corporation’s debts or
judgments against the corporations.
➢ Generally, shareholders can only be held accountable for
their investment in stock of the company.
➢ Corporations can raise additional funds through the sale of
stock.
> A corporation may deduct the cost of benefits it provides to
officers and employees.

OWNERSHIP
STRUCTURE
CORPORATIONS
119
DISADVANTAGES
>The process of incorporation requires more time and money
than other forms of organization.
> Corporations are monitored by federal, state and some local
agencies, and as a result may have more paperwork to comply
with regulations.
➢ Incorporating may result in higher overall taxes.
➢ Dividends paid to shareholders are not deductible form
business income, thus this income can be taxed twice.

FINIALIZE YOUR
AGREEMENTS
COMPENSATION DECISION
MAKING
120
OWNERSHIP
STRUCTURE
VOTING RIGHTS
SHAREHOLDER’S AGREEMENT

Biggest
Mistakes
121
Hiring friends who don’t add
the skills that the venture
needs at each stage of its
development.
Assuming the start-up’s
culture will take care of itself.
NOT
CREATING
CULTURE

FINANCIALS
The things you need to figure out about your investment potential.

TYPES OF FINANCING
123

How can I
fund my
business?
124
SELF FINANCING
i.e.
BOOTSTRAPPING
DEBT FUNDING GRANTS
EQUITY FUNDING
➢ Loss of Ownership
➢ Crowdfunding
➢ Issuing Shares
➢ Seed Financing
➢ Competitions
➢ Impact Based Options
➢ Total Control
➢ Slow Growth
➢ No Loss of Ownership
➢ High Rates of Interest
➢ Crowdfunding
➢ Venture Debt, Asset Loans

IMPORTANT CONCEPTS
125

Financial
Must Know
126
Gross
Margin %
Net Margin
%
Operating
Margins
Total sales
revenue minus its
cost of goods sold,
divided by the
total sales
revenue,
expressed as a
percentage
The percentage of
revenue remaining
after all operating
expenses, interest,
taxes have been
deducted from a
company's total
revenue.
Can be calculated by
dividing a company’s
operating income (also
known as "operating
profit") during a given
period by its net sales
during the same
period.

Financial
Must Know
127

Financial
Must Know
128
NPV
Break Even
Point
Contribution
Margins
Compares the
amount invested
today to the
present value of
the future cash
receipts from
the investment
The point at
which cost or
expenses and
revenue are
equal
Difference
between a
company's sales
and variable
expenses

Financial
Must Know
129

Financial
Must Know
130
Return on
Investment
Return on
Assets
Return on
Equity
Return on
investment =
(gain from
investment –
cost of
investment) /
cost of
investment
Net Income /
Total Assets –
Measures
Efficiency and
Profitability
Net
Income/Share
holder’s Equity

Venture Valuation
131

Why is it
important?
.
132
➢ Investors use it to estimate the value of your
business. They want a high rate of return for the
risk they will take investing in your business.
➢ It gives you a timeframe to plan your exit
strategy.
➢ You can use it to merge or acquire an existing
business into your platform.
➢ Gives you a tool to figure out your risks and
expenses and see how much of the company to
offer for the investment.

How does the
evaluation take
place?
.
133
➢ There are many different ways of valuing your
business. The type of business will
really determine the approach you should take.
➢ A risky business that makes $100 is usually worth
less in present day dollars than a non-risky
business that makes $100.
➢ The discount rate is used a marker for the risk
the investor will take.
➢ The stage of the company determines the
discount rate.

Place your screenshot here
134
TYPICAL
VALUATION
APPROACHES
➢ DCF (Discounted cash flows)
➢ Venture capital method
(discounting a future exit
value) using multiples
➢ Times Revenue
➢ Times EBITDA
➢ Angel rule of thumb method

Company
Stages for
Funding
Pre-Seed
Status. This is the wild-eyed, perhaps incurable, inventor
stage. There is an idea, a concept, no management team, no
prototype, and patentability has not been determined. No
business plan, timetable, or market research has been
assembled. Founder(s) may be technicians.
Tasks. To begin development of a prototype, assemble
some key management, develop a business plan, assess
market potential, structure the company, and assess
patentability or proprietary standing.
Financing. Personal savings or friend and family money
usually funds this stage. It ends with the completion of a
seed stage business plan and the formation of the company.135

Company
Stages for
Funding
Seed
Status. At least one principal person of the company is pursuing
the project on a full-time basis. The prototype is being developed,
the business plan is being refined, A management team is being
identified, market analysis is being undertaking, and beta tests are
being set up or initial customers are
identified.
Tasks. Complete and test the prototype and obtain evidence of
commercial interest. Assemble and identify an initial management
team, finish the business and marketing plans, establish
manufacturing and initiate sales.
Financing. Fund raising is a major effort at this stage and
usually comes from Friends & Family, Government Programs, Angel
and Angel Groups. Some professional venture capital Seed Funds
may also get involved.136

Company
Stages for
Funding
Start-Up
Status. The company is now a going concern. The product can
be manufactured and is selling. If it's a service company, some
customers have tried the service. The management team is in
place, the company has experienced some setbacks, customers
can confirm product usage, marketing is being refined, adjustments
are being made in the business plan and the money raising efforts
continue.
Tasks. Achieve market penetration and initial sales goals, reach
close to break even, increase productivity, reduce unit costs, build
the sales organization and distribution system.
Financing. At this stage, company is financed through further
injections of investment from Angels and Angel Groups, certain
Government Programs are available. This is the first stage when
institutional equity funds (VC) come into play.137

Company
Stages for
Funding
Expansion
Status. Significant sales are developing. Second-level
management is being identified and hired. Export marketing
is being explored and more sophisticated management
systems are being put into place.
Tasks. Obtain consistent profitability, add significant sales
and back orders, expand sales from regional to national,
identify international marketing plans, and obtain working
capital to expand marketing, accounts receivable,
and inventory.
Financing. More sophisticated and second-round
venture capital financing comes into play at this stage. This
is the most preferred stage for most of the
traditional venture capital firms.138

Company
Stages for
Funding
Mezzanine
Status. All systems are optimized – snags are being worked out
in all areas from design and development of second-generation
products; to marketing and distribution; to management and all its
applied systems. The venture is
nearing the liquidity event (IPO or acquisition).
Tasks. Begin to "dress up" the company for harvest. There is a
great amount of pressure to prove second- and third-generation
products, increase profitability records, improve the balance sheet,
and firmly establish market share and penetration.
.Financing.. At this stage, the company may need to obtain
"bridge" or "mezzanine" financing to carry increased accounts
receivable and inventory prior to harvest. The financing comes from
special Institutional Equity (Mezzanine Funds), Bank Loans and
Bonds.139

What is
Discount
Rate?
140
Discount rate or
expected annual
return is simply a
quantitative value
on the risk that the
investor
takes by investing
in a venture.
The higher the risk,
the higher is the
discount rate (or
expected
annual return) that
we use in our
venture valuation
calculations

What are
typical
Discount
Rates?
141

Factors
Influencing
Discount
Rates
142
Significant or lack of
experience/education
of the entrepreneurial
team
Proven or unproven
market
Stable or volatile
business environment
(i.e.. Switzerland Vs.
Somalia)
Presence or absence
of an isolating
mechanism (patent,
copyright
Trademarks etc.)
Proven or unproven
Product

DISCOUNTED
CASH FLOW
143
Year 1 -
$40,000
Year 2 -
$50,000
Year 3 -
$60,000
CASH FLOWS >>>>
The discounted cash flow (DCF) approach is applied to high-risk situations
such as your start-up in order to define the "present value" of all future benefits. Its
value is determined by the combination of current assets and future financial
performance.
Year 4 -
$90,000

THE 3 STEP
PROCESS
➢Determine the future cash flows
for 5 Years for your business.
➢Calculate the Net Present Value
(NPV) of cash flows using the
related discount rates.
➢Subtract amount of initial cash
outlay, present long term &
short term borrowings.144

What is the
value of my
business?
145

USE
EXCEL
146
=NPV()
Rate
Value 1,2,3

What is the
value of my
business?
147

Making the
Deal
148

Examples
149
Business unit 1 Business unit 2 Business unit 3
Revenue
(annual)
$3M current;
$5M readily
achievable
$700k current;
$1M readily
achievable
$7M
EBITDA $240k - $400k $35k - $150k $420k
NPV $3M $215k currently;
$600k possible
$3M
Times revenue $3M - $10M
1-2x
$350k - $1M
0.5-1x
$3.5M - $7M
0.5-1x
Times EBITDA $2.4M - $4M
10x
$105k - $750k
3-5x
$1.3M - $2.1M
3-5x
Venture
capitalist
Estimates
$5M $500k $3M

Financial Forecasting
150

What has to be
included in
Financial
Forecasting?
151
➢Detailed Base Assumptions
➢Income Statement
➢Cash Flow Statement
➢Balance Sheet
➢Break Even Analysis
➢5 Year Statements
➢Industry Averages & Ratios

BUSINESS CANVAS
The things you need to put down in writing.

Components of Your Business Plan
The questions you need to answer regardless
of the way you write the plan
154
➢Is the Business Idea worth
anything?
➢Is the Team Capable of Executing
this Idea?
➢Is it a worthy investment?

WRITNG THE BUSINESS PLAN
How to write the Business Plan & Presentation

The 3
Ways
156
Presentation/Lean
1. Introduction
2. Value Proposition
3. Customer Segments
4. Customer Relationships
5. Channels
6. Key Resources
7. Key Partnerships
8. Key Activities
9. Revenue Streams
10. Cost Structure
11. Cash Flow
12. Appendix

The 3
Ways
157
Business Case
1.Executive Summary
2.Company Details
3.Products and Services
4.Marketing Plan
5.Operational Plan
6.Management and Organization
7.Personal Financials
8.Start-up Expenses
9.Financial Plan
10.Appendices

The 3
Ways
158
Govt. Method
1. Executive Summary
2. Business Vision
3. Marketing strategy
4. Operational Plan
5. Strategic Analysis
6. HR plan
7. CSR strategy
8. Digital Strategy
9. Financial forecasts
10.Business Exit strategy
11.Additional Resources

BUSINESS CASE BREAKDOWN
The components to include in the business centric business plan

LEAN CASE- CASE STUDY
The business plan and presentation of a lean business plan.

161
CAVEATS ➢ Don’t fall in love with
your own idea.
➢ Take an objective view
& not an emotional one.
➢ Fail Often, Fail Fast, Fail
Cheap.

162
THANKS SEDAN KURESHI
sedankureshi@gmail.com
www.sedankureshi.com

How to Write a Business Plan

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