1.Introductio, the five W:

1.What:

-> DEF: document that describes in detail how a new business is going to achieve its goals.

• Lay out a written plan from a marketing, financial and operational viewpoint.
• Tool to understand the present, make hypothesis about the future, plan the activities, coordinate people, and control costs and cash flows.

-> OBJ:

• Reach a Break Even;

2.When:

-> Business plan is not just to plan new activities, but to control the ongoing business:

• Must be kept updated, to verify how things have gone, and how far from forecast.
• Is both a program of future activities, and a forecast of the future itself, about variables that no one can control (the market, the customer’ preferences, future technology developments, etc.)

CUSTOMER ACQUISITION COST: how much to the company cost bring the customer in the market.

3.How:

-> BP is an established tools to guide the activities of a company.

• Is the best tools in a stable environment (while the startups aren’t in a stable environment).

=> Lean Startup or Lean LaunchPad is a method that guide the decisions, approach and activities of a startup during its first phase (the one unstable).

• Startups need new tools which consider it as a temporary organization till in search of a viable & suitable business model that don’t have a clear idea of what are the products, the clients and the processes for the future.

Tools to Plan Activities:

-> Not all the New Venture are Startup.

4.Who (targets):

-> DEF: Everyone who is responsible of an organization should know the structure, the function and how to create/evaluate a business plan.

5.Why (objectives):

-> Planning

• Evaluate an investment opportunity
• Evaluate feasibility / profitability
• Find resources and funds
• Assess Risks and Opportunities
• Control

-> Communication

• Internal: executives, management team, workforce.
• External: shareholders and other stakeholders (e.g. government, institutions) etc.

12 Steps for a Successful Business Plan:

Define your value proposition and the core business activity Define the current status of the business Identify your competitors, and define your market positioning Define your objectives for the period of the plan Develop a strategy to achieve the objectives Identify risks and opportunities

Develop a strategy to reduce risks and exploit opportunities Redefine the strategies into working plans Project costs and revenues and develop a financial plan Document it concisely Get it approved Use it

Practical Tips:

Tell a story! Be concise (no more than 20-40 pages) Document and support with references your affirmation

People (team) is as important as numbers! Use a nice and ordered layout (nr. of pages, formatting, etc.) Use a solid structure (permises,  body, conclusion)

Types & Sources of Data:

-> When you add data, be sure to indicate what is the source of information.

-> Basically, you have three types of data:

1. Your historical data → if you have historical data, that’s the best!
2. Market data → cite the source
3. Your assumptions → if you don’t have data, make and motivate your assumptions (don’t be shy, it is reasonable)
4. Results of Lean Startup test (validated learning) → the business plan follows and leverages the lean startup approaches

If you are not sure, use journalistic ways of saying, like: “Commentators say that, …” ; “Industry sources indicates …”, etc.

2.Business Plan Sections:

Main Sections of a BP:

Executive Summary Product / Service Strategic Plan Marketing Plan

Operating Plan Economic and Financial Plan: bottom line (Cost structurte, distintion CAPEX/OPEX, fix/variable costs, revenue stream); Risk Analysis

-> All the sections are linked together.

• Every sections has an impact on others;
• E.g.: if you establish that your strategy to enter a new market is to offer a niche product, this choice impacts production, positioning, communication, distribution, pricing, etc.

-> Every section has…

• …its own characteristics and …
• …also a set of managerial tools that may support the business planner.

-> These tools are basically frameworks to organize data and information and to clarify – first to our self then for the reader- the plan in each section.

Business Objectives & Local Goals:

-> DEF: they form the red line keeping together the whole plan.

• Are introduced & explained in strategy section.
• Every section has a local objective/goals, consistent with the overall ones, while answering to specific questions or choices, regarding, for examples decisions about manufacturing, organization, communication, funding, etc.

⚠️ The process is not linear:

-> Business Planning is an iterative process rather than linear: every section can impact the following ones and the previous ones.

E.g.: while building the financial plan, you realize that your business can’t be sustainable. Thus, you might have to reconsider the product itself, the strategic plan, or marketing plan, manufacturing and operational plan, etc.

-> The business planner has understand peculiarities and problems at different levels of a business: from strategy to operation, from marketing to organization, from financial projections to risk analysis.

• Should be also able to engage/attract the audience.

The relations among sections

1. Executive Summary: Synopsis of the whole plan;
2. Products & Services (Value Proposition): presentation of main features and characteristics;
3. Strategic Plan: set strategic objectives; design of the competitive environment;
4. Marketing Plan: translate strategic Objectives into Marketing Objectives and Plan;
5. Operating Plan: translate strategic objectives into a series of actions and activities;
6. Financial Plan: measure sales, costs, cash flow related with the activities performed;
7. Risk Analysis: assess the risk of the venture.

📌It’s a iterative process.

Cover:

-> An example:

1.The Executive Summary:

-> DEF:  synopsis of the whole business plan: it contains fundamental information discussed deeper in each section. It’s a way to give in few pages (2-3 maximum) an overview of the venture. Interested readers will go deeper reading following sections.

• Is a plan in miniature, it is not an introduction.
• It should capture in no more than one or two pages most important points of the whole plan.
• You have to encourage your audience to go ahead and read the whole document. At the same time, it has to present honestly the business.

-> Main TOPICS:

• Company Introduction: present the company, date of foundation, state of art, stage in the history of the company, seats, plants, type of ownership, governance, etc;
• Business idea: shortly, describe the value proposition, how you intend to deliver this value, why and to whom;
• Market Opportunity: describe what are the opportunities and the characteristics of the market in term of attractiveness.
• Expected Results: describe what are the main objectives / results and relative timing.
• Resources, competences: describe main resources, competences, skills the company can rely on.
• Main activities: describe the core activities to reach the objectives.
• Economics: introduce main economic and financial data
• Objective of the business plan: introduce the following sections of the business plan, clarifying what is the objective of the whole document
• Goals: Introducing the reader to the business, offering first elements to assess whether the venture is interesting or not.
• Premises: All the other sections of the business plan. This is the last section developed (but the first read by the target)
• Following: None (it is the opening section in the business plan)
• Tools: None (it is just a synopsis of all the other sections)

-> INFORMATION to include:

Start with the objective Management Team (key people to make the business to succeed) Products or services (why are they special?) Market (what’s your niche? What are your unique factors?)

Assets, strengths, advantages, and competences Strategy to succeed Key Financial Data Funding required and its use

-> TIPS: State clearly & concisely

Your Value Proposition What’s the Business Opportunity and the KSF of the Market What’s your solution and why it’s different from others

What’s your target and your positioning What’s your price What are your revenue streams Key Activities

Key Partners Channels Customer Relationships Structure of costs

2.Products & Services:

-> DEF:  the reader is introduced to the products and/or services offered by the company. The description not only from a physical or technical point of view, but in term of the value for the client.

Physical / Technical Description (Features, Values for clients) Types of usage

Features Values Service

Image Product lifecycle stage Product Positioning Map

Cost Quality

-> Main TOPICS:

• GOALS: Presen ting products/services main features, characteristics, physical and technical description, advantages for users, plus, etc.
• PREMISES: Market & Product Fit; market opportunity, business opportunity, disruptive technology, untapped need, etc.
• FOLLOWING: Go-to-market strategy; operating marketing; operation (production,localization, channels, delivery, etc.)
• TOOLS: Photos, drawings, models, technical description, product lifecycle and product positioning maps, etc.

-> Practical TIPS:

• Be very detailed if you are a startup or if your product is totally new, or it is a complex portfolio of products
• Start with one-paragraph summary, then repeat in more detail
• List all your products and services
• Highlight the importance of each of them
• Add pictures, sketches, diagrams, and any type of documents that can substitute the physical contact
• If it is something that people must use, describe how does it work (without getting too technical)

3.Strategic Plan:

-> DEF: is the core of the whole business plan.

• Starting point to assess the competitive environment and to weight opportunities and risk.
• Companies can define the value proposition and the unique positioning, with the objective to set a competitive advantage.

-> In order to reach this competitive advantage, a strategy is defined, or the unique interconnection of choices and activities (what to do and what not to do) that make a company different from the other.

-> The strategy has a direct consequences on the activities and organization, and thus on the operating plan, and on the financial plan. The strategy is not defined once for all. It is common that something in the operating or financial plans is considered as not feasible, and thus there is the need to refine and update the strategy, then operations, etc.

-> MAIN SECTIONS:

• Values, Vision, Mission, Objectives;
• Strategic Analysis (Internal vs External);
• Strategy;

-> DEFINITIONS:

• VALUES: in what you believe;
• VISION: where your target market or industry will evolve long term;
• MISSION: how to reach the ideal stated in the vision;
• OBJECTIVES: results aligned with Values-Vision-Mission; S.M.A.R.T. objectives: Specific – Measurable – Attainable – Realistic – Time-related
• GOALS: Presenting the culture and the long term goals of the company;
• PREMISES: None
• FOLLOWING: Strategy, Organization, Role of innovation & R&D, HRM, Recruiting Style, Markets, Products, etc.
• TOOLS: Corporate culture

• 10 Common Central Objectives:

-> Are different for every company;

-> The more common are:

Maximizing shareholders value Maximizing profitability Maximizing dividends pay-out Maximizing market share Maximizing total assets

Minimizing risks Positioning the company as a takeover target Building an empire (nr. of employees, seats, markets, etc.) Stability and growth Maximizing some altruistic vision (CSR)

The objective of Strategic Analysis:

-> List contains a series of questions the strategic analysis should answer.

Identify opportunities in the market and in the society; Identify threats in the market and in the society; Identify the type of competition in the industry; Assess company’s competences, skills, resources;

Assess Key Success Factor (KSF) in the market; Verify whether KSF matches company’s competences, skills, resources; Identify the possible sources of competitive advantage

Sources of competitive advantage

Economies of Scale → reduce average cost introducing a new unit of output Economies of Scope → reduce average cost introducing a new product Economies of Learning → becoming a true specialist

Production Capacity Saturation Localization Distribution Channel Access Other Factors (regulations: depressed area incentives, etc.

7 Criteria to Evaluate a Strategy

ROI – Return on investment Risk of loosing the investment Ownership and control Potential for growth

Stability of employment and earnings Prestige Social Responsibility

4.Marketing Plan:

-> OBJ: analyze in detail the market and the competition, and to define a unique positioning of the company or its products in each of targeted segments.

• Defined Positioning and Targets, the marketing plan has the role to enact this program and to define the tangible elements (products, price, channels, points of sale, people, communication, and all the other aspects related with the go to market and the relationship with clients, partners, and competitors).

5.Operating Plan:

-> DEF: translation of the strategic plan into a set of activities.

• The operating plan introduces the second part of the document.

-> STEPS:

Break the project into the smallest possible components and activities Identify linkages and critical paths (critical path is the longest path) Order the activities with the critical and higher risk and schedule them as early as possible Set measurable targets for each activity Assign responsibilities

Set up a mechanism for tracking the reporting on each target Establish a culture that encourages problem reporting Execute the plan Act immediately if a target is missed or a problem report is generated

6.Financial Statements

-> DEF: section in which figures are put on paper and you can discover whether the strategy is executable, and if the activities are correctly organized.

• Quantitative section of the business plan.

-> The fundamental GOALS of the financial statement sections are:

Forecast sales (profitability of the business) Forecast and control costs (profitability of the business)

Forecast cash flows (assess the financial needs) Valuate the return of the investment (assess whether the investments make sense or not)

• Financial Planning:

1.Sales Forecast:

Describe the logic underlying the forecast Show historical proofs of your method Introduce the assumptions made Develop your forecast Explain how you changed it taking into account trends

Show sales forecast Show costs forecast and thus the gross profit Include a summary Explain the key risks and possible alternative scenarios Keep it simple

2.Costs & Investments:

1. Define your capital investment (spending on assets with a life of more than 1 year)
2. Define current consumption (current spending divided into functional areas, like R&D, marketing, sales, etc.).
3. Put everything in the Profit & Loss Account

2.1)Cost

-> CLASSIFICATION:

Variable vs. Fixed Costs Committed Costs (fixed) vs. Discretionary Costs (fixed)

Semi-variable Costs Mixed Costs

2.2)COGS:

-> Defined  the sales => measure COGS

1. Measure COGS;
2. Define Gross Profit: GP = Sales – COGS

-> It define the efficienty of the company.

2.3)Types of Cost of Sales:

-> Direct cost of what you sell in an accounting period.

1. For a re-seller: the price paid to acquire the goods to be resold
2. For a manufacturer: the cost of raw materials and other supplies to produce the goods, plus wages of workers directly employed in building up the product, and the factory overheads, such as factory light and energy, etc.
3. For a software company: one-hundredth of the original R&D cost for each unit sold

2.4)Operating Costs & Depreciation:

Draw up a list of capital spending Determine the period and the method of depreciation Draw up a depreciation method Develop a detailed capital spending forecast Divide current spending into functional areas

Divide functional areas into employees and other costs Divide employees and other costs into expenditure headings Work through expenditure headings forecasting Bring depreciation into appropriate expenditure headings Combine figures to arrive to net profit

2.5)Depreciation, Amortization, Depletion

• Depreciation: physical assets
• Amortization: intangible assets
• Depletion: natural resources

3)Profit & Loss:

1. Put revenues, costs & investments in the Profit & Loss account;
2. Do it and compare past, current & future P&L;
3. Check whether the business is profitable.

7.Risk Analysis:

Methodologies:

• Financial Ratios (Liquidity, Debt Burden, etc.)
• Break-even analysis
• What-if analysis
• Worst-case analysis
• NPV
• Distribution of observations (mean, standard deviation, skewness)