商业计划书英文版.pdf

1、1Table of Contents1.The Route from Concept to Company.21.1.Success factors.21.2.Stages of development.32.The Business Idea.62.1.Developing a business idea.62.2.Elements of a promising business idea.72.3.Protecting your business idea.102.4.Presenting your idea to investors.113.The Business Plan.133.1

2、.Advantages of a business plan.133.2.Characteristics of a successful business plan.133.3.The investors point of view.153.4.Tips on preparing a professional business plan.174.Structure and Key Elements of a Business Plan.194.1.Executive summary.194.2.Product or service.214.3.Management team.224.4.Mar

3、ket and competition.244.5.Marketing and sales.274.6.Business system and organization.324.7.Implementation schedule.364.8.Opportunities and risks.384.9.Financial planning and financing.382Exhibit 2KEY FACTORS FOR SUCCESS OF INNOVATIVE START-UPSIdeas Degree ofinnovation Scope PatentCapital Availabilit

4、y/amount Needs/responsibilities Exits for investorsPeople Inventors Entrepreneurs TeammembersTraditional serviceproviders Attorneys Patent lawyers Tax consultants/accountants MarketresearchersNetwork and exchange Coaching Networking Team building Innovative service providerVenture capitalistsHeadhun

5、tersAngel investorsHigh-tech start-upconsultants1.THE ROUTE FROM CONCEPT TOCOMPANYNew,innovative companies generally try to grow from start-ups into established companieswithin 5 years.But they can seldom finance their activities alone along the way.Rather,theyare dependent on professional investors

6、 with considerable financial clout.For entrepreneurs,financing is a critical question the business plan must thus be considered from the point ofview of potential investors right from the outset.1.1.Success factorsSuccessful companies arise from a combination of five elements(Exhibit 2).1.No busines

7、s concept,no businessHaving an idea is just the beginning of the creative process.Many entrepreneurs are initiallyinfatuated with their inspiration,losing sight of the fact that their idea is the point of departurefor a long process of development which must face and withstand tough challenges befor

8、e itcan enjoy financing and market success as a mature business concept.2.Money mattersWithout somebody who invests money into the idea to grow it into a viable business,thisbusiness will never become a reality.From early on,therefore,much attention must be paid toconvincing investors to provide the

9、 necessary funding.3Exhibit 3STAGES OF START-UP DEVELOPMENTBusiness ideagenerationBusiness planpreparationStart-upand growthEstablishedcompanyInterest ofinvestorsFinancingdecisionsExit ofinitialinvestors3.No entrepreneurs,no enterpriseGrowing new firms is not a one-person job.It can only succeed wit

10、h a team of,usually,three tofive entrepreneurs whose talents are complementary.Putting together well-functioning teamsis a difficult process one that takes time,energy,and an understanding of human nature.Donot lose any time in putting your team together and work on perfecting it throughout the enti

11、restart-up process.The characteristics of a high-performance management team are discussed inmore detail in section 6.3 of this Guide.4.Traditional service providers will help you clear the first hurdlesYou will often need the advice of professional service providers,such as patent lawyers,taxadviso

12、rs,and market researchers-especially at the beginning.Getting the right informationearly(e.g.,for registering a patent)can have consequences for later success or failure.5.Strong networks are a shot in the arm for every new companyProfessional guidance for potential entrepreneurs through a network o

13、f sponsors,entrepreneurs,venture capitalists,and service providers is decisive in transforming viable ideas into realcompanies.Prime examples for such regional networks can be found in Silicon Valley and theBoston area.1.2.Stages of developmentThe typical progression of the start-up and development

14、of growing companies into establishedfirms can be subdivided into three stages.The end of each stage serves as a milestone forventure capitalists by which to gauge the status of their investment.Being familiar with eachstage and the challenges it poses may spare you wasted energy and disappointment.

15、Pleasenote,however,that the three stages in the development of a functioning start-up do not matchthe three phases in the development of a business plan within the framework of thiscompetition(see Exhibit 3).If you intend to be successful,this start-up process should influence both your activities a

16、s theinitiator of a business concept and your path toward forming your own company.To a largeextent,it is the demands of investors that will determine how you must approach the individualstages of the start-up.4Stage 1:Business idea generationThe beginning is the inspiration your solution to a probl

17、em.It must be evaluated todetermine if it delivers an actual customer value,whether the market is big enough,and justhow big it will be.The idea itself has no intrinsic economic value.It acquires economic valueonly after it has been successfully transformed into a concept with a plan and implemented

18、.You will need to start putting together your team as soon as possible,finding partners who candevelop your product or service until it is ready for market(or at least until shortly before).Inthe case of products,this stage usually involves a functioning prototype.You will most likelyhave to do with

19、out venture capital during this stage.You will still be financing your plan withyour own money,help from friends,perhaps state research subsidies,contributions fromfoundations,or other grants.Investors refer to this as seed money,as your idea is still aseedling,not yet exposed to the harsh climate o

20、f competition.Your objective at this stage is to present your business concept and market which forms thefoundation of your new company so clearly and concisely as to pique the interest of potentialinvestors in helping you cultivate your idea further.Stage 2:Business plan preparationAt this stage,it

21、 is most important to focus on the big picture:Dont lose sight of the forest for thetrees!The business plan itself will help you to focus as you must consider and weigh the risksinvolved,prepare for any contingency,and learn to anticipate a variety of possible situations orscenarios.You will need to

22、 lay down plans and create a budget for the key activities of thebusiness for development,production,marketing,distribution,and finance.Naturally,youwill need to make many decisions,such as which customers or segments will you target?Whatprice will you ask for your product or service?What is the bes

23、t location for your business?Willyou handle production yourself or outsource it to third parties?And so on.In preparing the business plan,you will come in contact with many people outside your start-up team.In addition to investors,you will talk to many specialists,including attorneys,taxadvisors,ex

24、perienced entrepreneurs,and experts.The business plan competition organizerswill help you get in touch with just the right people.You will also have to begin reaching out toyour potential customers(i.e.,by means of consumer surveys)to make initial assessments ofyour market.Always keep in mind that c

25、ustomer acceptance is an essential prerequisite to thesuccess of your company!Scout about for possible suppliers and perhaps close your firstagreements.You will also want to become aware of who your competitors are.This whole process will not come cheap.The team must continue to earn a living while

26、runninga rudimentary operation and perfecting a prototype.Yet at this stage,you should also be ableto estimate your expenses.Financing will generally still be provided from the same sources yourelied on during stage one,although some investors may be willing to make the occasionaladvance.This stage

27、concludes successfully for you as a new entrepreneur when an investorexpresses a willingness to finance your undertaking.Stage 3:Start-up and growth5Now that the conceptual work is largely complete,it is time to start implementing yourbusiness plan.Your role now changes from that of architect to tha

28、t of builder.Business successmust now be sought and achieved in the market.The day of reckoning has come when you willlearn whether your business concept was a good and,ultimately,profitable one.Investor exit en route to becoming an established companyThe pullout of your initial investors is a compl

29、etely normal step in the development of a start-up.For if everything has gone well,your risky venture will have gradually become a stableenterprise(see Exhibit 4).In the course of its short life,you have created a number of jobs andwooed many customers with your innovative solution to their problem.

30、Your commitment ispaying off as the value of your business increases.A profitable exit has been the objective for the venture capitalist from the outset.Capitalrecovery can happen in very different ways.Normally,the business is sold to a competitor,supplier,or customer.Or it is listed on the stock e

31、xchange(the initial public offering or IPO).It is also possible for investors who want out to be paid off by the other partners.62.THE BUSINESS IDEAThere is nothing in the world aspowerful as an idea whose time has come.Victor HugoThe above statement undoubtedly applies to ideas for starting a new b

32、usiness.But how do youcome up with such an idea?And how can you know if the idea for the business will have apromising future?Studies show that the lions share of original and successful business ideas were generated bypeople who had already had several years of relevant experience.Gordon Moore and

33、RobertNoyce,for example,had a number of years at Fairchild Semiconductors behind them beforeteaming up with Andy Grove to form Intel.But there are also examples of revolutionary ideasbrought to life by mere novices as Steve Jobs and Steve Wozniak demonstrated when theydropped out of college to start

34、 Apple Computer.2.1.Developing a business ideaIn economic terms,a spark of genius is worthless,no matter how brilliant it may be.For an ideato grow into a mature business concept,it must be developed and refined,usually by manydifferent people.The initial idea must first pass a quick plausibility ch

35、eckBefore you follow up on an idea,you should evaluate it in light of its(1)customer value,(2)market chances,and(3)degree of innovation,as well as considering whether it will beboth(4)feasible and profitable.Talk your idea over with friends,professors,experts,and potential customers.The broader the

36、support you find for your idea,the better you will be able todescribe its benefits and market opportunities.You will then be wellprepared when the time comes to discuss your project with professionalinvestors.Is your idea really novel?Has someone else already developed it or evenapplied to patent it

37、?Will it be possible to develop your idea in a reasonable period of time andwith a justifiable level of resources?It takes at least four weeks to develop a business ideaConsidering the multiple stages of development,it is improbable and fairly unrealistic thatyou will spend fewer than four weeks dev

38、eloping your concept.Generally,a business idea isnot worthy of being financed until it is so concrete that it can be launched in the market in theforeseeable future at reasonable risk.Investors talk of the seed phase of a business concept,75ELEMENTS OF A PROMISING BUSINESS IDEAExhibit 5Clearcustomer

39、valueMarket ofadequate sizeFeasibilityandprofitabilitySufficientdegree ofinnovation1243which usually has to be financed with soft money(i.e.,from sources that as yet place no hardand fast demands on the success of the idea).The seed phase can take longer,in particular if the idea is ahead of its tim

40、e.Although theperfect product has been found,it cannot yet be marketed because the development ofcomplementary technologies or systems is still in the works.One example is the Internet.Theideas for marketing products and services came early,but a lack of security in the availablepayment systems hamp

41、ered and delayed its commercial exploitation for some time.2.2.Elements of a promising business ideaA business idea can be considered promising if it has the following four elements(Exhibit 5):1.Clear customer valueThe key to success in the marketplace is satisfied customers,not great products.Custo

42、mersspend their hard-earned money to meet a need or solve a problem.The first principle fordeveloping a successful business idea is that it clearly shows which need it will fulfill and howit will do so.Initially,many entrepreneurs have the product and the technical details of designand manufacture i

43、n mind when they speak of their solution.Not so for the investor theinvestor first looks at the idea from the perspective of the market.For investors,customer valuetakes top priority,and everything else is secondary.Whats the difference?If innovators say,our new device can perform 200 operations per

44、 minute,or our new device has 25%fewerparts,they are focusing on the product.By contrast,saying,our new device will save thecustomer a quarter of the time and,therefore,20%of the costs,or our new solution can boostproductivity by up to 25%,adopts the customers point of view.The product is merely ame

45、ans of delivering value to customers.The customer value of a product or service expresses what is novel or better about the itemwhen compared to competitive offers or alternative solutions.As such,it plays a key role in8setting your product apart from others a core issue in marketing,as we will lear

46、n and isessential to the market success of your business concept.Try,whenever possible,to alsoexpress the customer value in figures.Marketing theory states that the customer value must be formulated into a unique sellingproposition,or USP.This means two things:First of all,your business concept must

47、 bepresented in a way that makes sense(selling proposition)to the customer.Many start-ups failbecause the customer does not understand the advantage of using the product or service and,asa result,does not buy it.Secondly,your product must be unique.Customers shouldnt choosejust any solution that hit

48、s the market they should choose yours.You must,therefore,persuade them that your product offers a greater benefit or added value.Only then will your customers give you an edge.In describing your business concept,you neednot present a fully formulated USP,but it should be more or less obvious to pote

49、ntial investors.2.Market of adequate sizeA business idea will have economic value only when it succeeds in the market.This secondprinciple of a successful idea demonstrates how big the market is for the product offered,whichtarget group(s)it is designed for,and to what degree it will differ from the

50、 competition.A detailed analysis of the market is not yet necessary at this point.Estimates,derived fromverifiable basic data,will suffice.Sources could include official statistics,information fromassociations,articles in trade journals,the trade press,and the Internet.It should be possible todraw a

51、 reasonable conclusion about the size of the target market from this basic data.It issufficient for you to summarize the results of this investigation in your presentation of thebusiness idea.The same is true for your target customers;you will only need a loose definition of who theywill be.Describe

52、 why your business idea will provide a special value to this group in particular,and why this group is financially the most interesting to you.You will always face competition both direct,from companies that offer a similar product,andindirect,from substitute products that can also fulfill the custo

53、mers need.A pastamanufacturer competes not only with other pasta manufacturers,but also with manufacturersof rice and potato products and bakeries and,more generally,with manufacturers of all otherfood stuffs.Your business idea will need to demonstrate that you have understood who yourcompetitors ar

54、e.Name them and describe why and how you can take the lead with yourbusiness idea.3.Sufficient degree of innovationBusiness ideas can be classified along two dimensions-products/services and business systems.In each of these categories,you can develop something new or capitalize on something thatalr

55、eady exists.Simplified,a business system is a way of understanding how a product orservice is developed,manufactured,and marketed(Exhibit 6).The term innovation is generally used in the context of new products,which are made withconventional production methods and delivered to the customer through e

56、xisting distribution9channels.Microsoft,for instance,developed DOS,making use of the IBM sales organization tobring it to the market.Innovations in business systems are less obvious,but just as important.The success of Dell isattributed to significant cost savings thanks to a new form of direct dist

57、ribution and a novelproduction process in which a computer is produced only after it is ordered,and in the shortestpossible time frame.In developing new products,improvement of the multi-layered dimension customer value isat the forefront.Innovations in the business system are targeted at lower cost

58、s and fasterprocesses,savings which can then be passed on to the customer in the form of lower prices.It is rare that both types of innovation in product and business system can be combined tocreate a completely new industry.Netscape contributed significantly to the success of theWorld Wide Web by d

59、istributing its new browser over the Internet free of charge.In doing so,Netscape passed up initial sales revenues but,through the increased number of visitors to itsWeb site,succeeded in raising advertising revenues.4.Feasibility and profitabilityFinally,to arrive at an actual start-up,the feasibil

60、ity of the business idea must be assessed.Inaddition to specific factors that could make the project not feasible(e.g.,legal considerations,standards),the assessment may include the time and resources needed to carry out the project.The construction of hotels on the moon may be technically feasible,

61、for example,but their cost-benefit ratio is unreasonable.Interwoven with the feasibility criterion is profitability.A company must be able to generatelong-term profit.This fourth element of a successful business idea should thus indicate howmuch money can be made and how.Traditionally,profit calcula

62、tions for a business are made as follows:A company buys materialor services,thereby incurring costs.It also sells products or services to customers,thereby10earning revenues.If your business follows this pattern,it is not necessary to provide anygreater detail in the description of your idea.Do,howe

63、ver,make rough estimates of anticipatedexpenses and profits.One rule of thumb for growing companies is that the start-up phaseshould generate gross profits(revenues minus direct product costs)of 40%to 50%.But many businesses do not function according to this traditional model.McDonalds,forexample,ea

64、rns its money from the licensing fees it charges franchisers.The restaurant ownerpays McDonalds for the name and the way the restaurant is run.If your business idea is basedon this kind of innovation in profit generation,you should detail it in your business idea.KEY QUESTIONS:Business idea!Who will

65、 buy your product?!Why should customers buy the product?What need does it fulfill?!How will the product be distributed to the customer?!What,exactly,is innovative about your business concept?!How is the business concept unique?Is it protected by patent?!How is the product better than comparable alte

66、rnatives?!What competitive advantages will the new company have,and why cant acompetitor simply copy them?!Can money be made with the product?What costs will be incurred,whatprice will be asked?2.3.Protecting your business ideaOnly a few ideas are genuinely ingenious.True breakthroughs are the resul

67、t of hard work and,therefore,cannot be easily replicated.A compromise must be found to protect the idea,whiledisclosing sufficient information to test its viability.PatentingEarly patenting is recommended,especially in the case of new products or processes.Get theadvice of experienced patent lawyers

68、:The future success of your business can depend on apatent,and,in every industry,there are powerful competitors with the means to keep anunfavorable patent from being granted.But some degree of caution is advised as a patent canalso miss the mark when it comes to protecting your idea by making the i

69、dea public.Be sure tokeep in mind if the patent can be improved upon easily and thus thwarted.The recipe forCoca-Cola,for example,is still secret and has never been patented because the patent can becircumvented with a very few,neutral-tasting changes.Confidentiality agreement11Lawyers,trustees,and

70、bank employees are all required by law to maintain confidentiality vis-vis their clients businesses.Venture capitalists also have an interest in keeping things underwraps,as someone with a reputation for poaching ideas will not be made privy to new ideasany time again soon.The same is true for profe

71、ssional consultants.A confidentiality agreementcan be effective in some cases.The coaches and organizers involved in EnterPrize are requiredto sign a confidentiality agreement;judges are encouraged to do so.But,like every legaldocument,it has its limits,and there are gray areas that could make it di

72、fficult to prove aviolation of the agreement in court.Quick implementationYour best protection against intellectual property theft is probably to implement your plan asquickly as possible.A great deal of work must be done between dreaming up an idea andopening for business.This effort can keep poten

73、tial copycats at bay,because in the end,itscrossing the finish line first that makes you the winner,not having the fastest shoes!2.4.Presenting your idea to investorsHow you present your business idea to an investor will put all your previous efforts to the test.It is critical to attract attention a

74、nd pique interest through content and professional appearance.Good venture capitalists are presented with up to 40 business ideas per week,and their time islimited.In submitting the business idea,neither fanfare nor a wealth of details is as importantas a clear and thoughtful presentation.Example 1:

75、The hard sellI have a great idea for a new,customer-friendly method of payment with a big future.This issomething everybody has always wanted.You could earn a lot of money from this Theinvestor thinks,That sounds like a lot of hot air.Ive heard of a hundred such miracle solutionsbefore Next!Example

76、2:The technical approachI have an idea for a computerized machinery control system.The key is the fully-integratedSSP chip with 12 GByte RAM and the asymmetrical XXP-based direct control unit.It took me 5years to develop this.”The investor thinks,Techie.In love with technology.Shes her ownmarket Nex

77、t!Example 3:The entrepreneurI have an idea that will enable companies with up to 100 employees to save 3%to 5%of theircosts.Initial cost-price analyses have convinced me that a spread of 40%to 60%should bepossible.I have found a focused advertising channel through the Association of Small andMedium-

78、sized Businesses and the ABC Magazine.The product will be distributed by directsale.The investor thinks,Aha!She has identified the customer value,and even worked outthe figures!Shes thought about the market and the profit potential and knows how she will getthe product to her customers.Now Id like t

79、o get a look at the productThese examples demonstrate why clarity should be your foremost goal.It is best to assume thatinvestors are not familiar with the technology of your product or the industry jargon.They arealso not likely to take the time to look up an unknown term or idea.Describing your co

80、ncept12clearly and incisively is your next goal.You must be able to convey the basic mechanics of yourbusiness idea to an investor with credibility.There will be plenty of time at a later point fordetailed descriptions and exhaustive financial calculations.Formal requirements of a business concept p

81、resentationTitle pageName of the product or serviceName of the person(s)submittingConfidentiality noticeIllustration,where appropriate,of the product or service in actionBody4 to 7 pages(including a one-page executive summary)Clear structure with headings and indentations as visual organizersCharts,

82、illustrations,tablesMaximum of 4 illustrations,placed in the appendixUse only if necessary for comprehensionMake reference to the illustrations in the textSimple,clear presentationUniform formatThis page intentionally blank133.THE BUSINESS PLANWriting a business plan forces you into disciplined thin

83、king,if you do an intellectually honest job.An idea may sound great,butwhen you put down all the details and numbers,it may fall apart.Eugene Kleiner,Venture CapitalistThe modest term business plan does not really do justice to this very important business tool.The business plan was first used in th

84、e U.S.as means of acquiring funds from private investorsand venture capitalists who then participate in the company as co-owners and provide thecapital.The presentation of this type of start-up strategy has become a mandatory courtesywhen seeking to do business with any partners,including customers,

85、suppliers,and distributors,to say nothing of venture capitalists and banks.But business plans are not only used by start-ups;even major corporations rely increasingly on project-specific business plans to help themmake internal investment decisions.3.1.Advantages of a business planThe great importan

86、ce attached to the business plan is well justified.With it,entrepreneurs canprove that they are in a position to articulate and handle the diverse aspects of start-ups andtheir management.Properly conceived and executed,the business plan becomes a keydocument for evaluating and managing an operation

87、.A business plan details the overall entrepreneurial concept behind a planned business.It givesan exact summary of the economic circumstances,the targets set,and the resources necessary.The business plan forces entrepreneurs to think through their ideas systematically:It identifiesgaps in knowledge,

88、demands decisions,and promotes the formulation of a well-structured andfocused strategy.During its preparation,one after the other,alternative approaches come tolight and are evaluated,and pitfalls are identified.With its clear analysis of the situation,thebusiness plan becomes an invaluable tool fo

89、r overcoming problems and contributessubstantially to boosting efficiency and effectiveness.3.2.Characteristics of a successful business planHow a business plan is designed depends on what kind of venture is envisioned and what theplan should accomplish.If a plan is being written for a start-up,for

90、example,it will necessarilyhave a different structure than one that aims to launch an existing company into a new segment.Despite such differences,business plans have a number of things in common.They are toprovide a clear and comprehensive evaluation of the opportunities and risks posed by theopera

91、tion.This is no small task,and completing it will require careful attention to certainstandards of design and content.The following suggestions and guidelines should help you make your plan successful.14A good business plan impresses with its clarityReaders should be able to find suitable answers to

92、 their questions.It should be easy for readersto find the topics in which they are particularly interested.This means the business plan musthave a clear structure to enable readers to maneuver and choose what they would like to read.It is not the volume of analysis and data,but rather the organizati

93、on of the statements and aconcentration on the essential arguments that will persuade your readers.Any topic that couldbe of interest to the reader should,therefore,be discussed fully,but concisely.A total length ofabout 30 pages,give or take 5or so,is generally appropriate.A business plan is not re

94、ad in the presence of the author,who could answer questions andprovide explanations.For this reason,the text must be unambiguous and speak for itself.Eachplan should be presented to a test audience,if at all possible,before it is finally submitted.Competition coaches,for example,can help weed out co

95、nfusing passages or indicate areas stillin need of editing.A good business plan convinces with its objectivitySome people get carried away when they are describing what they feel is a good idea.Whilethere is something to be said for enthusiasm,you should try to keep your tone objective andgive the r

96、eader a chance to carefully weigh your arguments.A plan written like glowingadvertising copy is more likely to irritate than appeal to your readers,making them suspicious,skeptical,or otherwise unreceptive.Equally dangerous is being too critical of your own project in response to various pastmiscalc

97、ulations or mistakes.This approach will raise questions about your ability andmotivation.To the best of your knowledge,the data presented should be accurate.Weaknessesshould never be mentioned without introducing methods to correct them or plans to do so.This does not mean that fundamental weaknesse

98、s should be hidden,just that in preparing yourplan,you should develop approaches to remedy them and present with clarity.A good business plan can be understood by the technical laymanSome entrepreneurs believe that they can impress their readers with profuse technical detail,elaborate blueprints,and

99、 the small print of an analysis.They are mistaken.Only rarely aretechnical experts called to evaluate this data carefully.In most cases,a simplified explanation,sketch,or photograph is appreciated.If technical details on the product or manufacturingprocess must be included,you should put them in the

100、 appendix.A good business plan is written in one consistent styleSeveral people usually work together to produce the business plan.In the end,this work mustbe integrated to avoid creating a patchwork quilt of varying styles and analytical depth.Forthis reason,it is best to have one person edit the f

101、inal version.A good business plan is your calling cardFinally,your business plan should have a uniform visual layout.The fonts,for example,shouldbe consistent with the structure and contents,effective graphics neatly integrated and,perhaps,a header with the(future)company logo used.15Exhibit 7SeedBe

102、forestart-upMainly todevelopbusinessconceptfurtherGrowthstageAt first orsecondgrowth spurt,IPO still faroffTo financegrowthEarly phaseGrowth phaseExitAs a rule,5-8years after start-upRecovery ofinvested venturecapital forreinvestment inmore start-upsTransition toestablishedcompanyVENTURE CAPITAL PAR

103、TICIPATION IN THE VARIOUS START-UP PHASESStart-upAt or shortlyafter start-upE.g.,forproductdevelopment,initialmarketingactivitiesBridge stage6-12 monthsbefore IPOTo coverfinancialneeds untilsale of stockto publicWhen?Whatfor?3.3.The investors point of viewThe entire start-up process must focus on su

104、ccessful capital acquisition.Professional investorsare the first real acid test of the chances your business concept will have.Address yourcommunication entirely to them,and learn to think like they do.They will not be satisfied witha mere description of your business concept,even if it is brilliant

105、.What is venture capital?Venture capital is the money that is made available by venture capital companies or individualsto finance new businesses.Typically,such projects have a high chance of being profitable,while facing an equal risk of incurring loss.Experience shows that of 10 businesses finance

106、dwith venture capital,only one will triumph,three will manage to eke out an existence,three willwaste away,and three will be a total loss.It is only natural for venture capitalists to doeverything in their power to generate profits in line with the risk ventured.Accordingly,theyback up a project ver

107、y intensely in order to harness as much potential as possible(Exhibit 7).What do venture capitalists look for?Venture capitalists look for a number of important pieces of information in a business plan:Management experience and competence.All investors pay particularattention to who will be managing

108、 the enterprise.When all is said and done,the ability of management to implement the concept is a major determinantof whether a business survives or fails.Particularly in industries whereinnovation is critical,the focus is on the proper mix of all necessarymanagement skills that one person alone wil

109、l rarely have.Entrepreneurial16experience is more highly valued than academic degrees.Another test of aworthwhile investment is the ability of management to work as a team.A well-defined and,where possible,quantifiable customer value.In itssimplest form,this means lowering the cost of delivering an

110、existing value orcreating a new value,if this can be achieved at reasonable cost.Innovative product or service range.The product,service,and/or businesssystem must possess a high degree of innovation.The possibility to protect/sustain the innovation.An important competitiveadvantage to your company

111、could be a patented idea.A growing and/or large market.Venture capitalists prefer start-ups thatdemonstrate a potential to achieve significant sales of approximately$30million within 5 years.An effective concept for capturing a clearly defined target customersegment.Potential investors want to see t

112、hat you have a clear understandingof your market and how you intend to reach your customers.Your forecastsand estimates should be based on well-founded,persuasive assumptions andfacts.A far-sighted analysis of the competition.Investors arent naive so donteven try to claim that your product has no co

113、mpetition.A complete andobjective description of existing and potential future competitors,however,shows that you are aware of the risks you are taking which,in turn,willinspire confidence in you.Here again,having an idea that can be protectedby law(patented,trademarked)is an advantage.A careful wei

114、ghing of the risks and opportunities.Investors hate surprises,especially negative ones.A realistic description of the risks you face and howyou plan to overcome them is far more credible than looking at the futurethrough rose-colored glasses.Detail possible exit routes.Investors want to know from th

115、e outset whentheir commitment will end and how they will recover their investment.Generating a profit is always the object and the purpose of investorparticipation.The more productive options you can show them for how todo this,the better.The main possibilities include going public or sellingshares

116、to the other partners or to other companies.What do venture capitalists do for the new company?Venture capitalists play a number of roles(see Exhibit 8).But they will also take over the reinsif the business does not achieve its targets.How should you choose a venture capitalist?Venture capitalists g

117、enerally expect to have a high stake in the new company.In return,theyprovide support that goes far beyond a financial commitment and often shoulder a great deal of1723POSSIBLE ROLES OF VENTURE CAPITAL COMPANIESCoaches andmotivators of thestart-up teamAdvisors inachieving success(sale of thecompany,

118、IPO)Specialists informing newcompaniesGateways to anetwork ofexperiencedentrepreneursPossible roles ofventurecapitalistsExhibit 8responsibility for the success of the venture.But potential investors do differ,and the companyteam should know its investors well.If you would rather own 20%of a$100 mill

119、ion companythan 80%of a$5 million operation,you will have to choose your investor according to morecriteria than just who will provide the most money at the best rate.3.4.Tips on preparing a professional business planInvestors are interested in the finished plan,not the process you went through to p

120、roduce it.They prefer to see a well-prepared document from which they can gain a good sense of the risksand opportunities involved on the first read-through.When preparing your plan,the themes ofcustomer value and potential return should run through the descriptions of your businessobjectives.The th

121、ree phases of the competition provide a general structure for preparing your plan.Thethree phases build upon one another such that the contribution for a previous phase willbecome a major portion of the following phase,supplemented with additional elements.Howyou carry out the work within each phase

122、 is up to you.The following tips are designed to helpyou.Plan your approachDrawing up a business plan is a very complex undertaking.Many variables must beconsidered and analyzed systematically,in a logical order.A detailed outline should be madeas soon as the first ideas are laid down.It is smart to

123、 do your planning along the lines of abusiness plan,or according to your business system(e.g.,R&D,production,marketing,sales,delivery,and administration).You should also number your topics and note any references.Using a word processing program with a spreadsheet is helpful.All reference material sh

124、ouldbe sorted by topic.Do the same with notes from discussions.18Tailor key questions to your specific projectUsing a set of questions is helpful in preparing your business plan.Which questions should beasked and which answers included in the plan is determined by the type of value created,theproduc

125、t,service,or degree of technological sophistication,and what the readers need to know.You can use the sample questions provided in this Guide to write your own series of questions.These questions are only examples designed to get you thinking;they should not be taken as anexhaustive list of possible

126、 questions.In other words,you are neither required to answer each question,nor must you reply to allquestions in equal depth.It is up to you to decide which questions are relevant to yourundertaking and necessary to understand it.You must also consider whether there are otherquestions to be answered

127、 beyond those that have been provided.Focus on the final productIn projects of this kind,there is always a danger of getting lost in the details of each analysis.Step back from time to time and ask yourself whether the data provided is not already sufficientand whether further analysis will really b

128、e beneficial.We also recommend that you limit the length of the results for each of the three competitionphases.You will save a lot of time and energy if you stick to the recommended lengths fromthe beginning of your planning.Seek support earlyGathering support from many different parties will be im

129、portant in this competition.Teamingup early is one such form of support.Teams with complementary technical and entrepreneurialexperience can delegate assignments according to the talents of the individual team members.This will help ensure that the work will be performed efficiently.Do not hesitate

130、to seek help from outside sources as soon as you need it.Contact experts andexperienced entrepreneurs whom you meet at competition events or call the EnterPrize officefor assistance.Keep testing your planA winning entry will be easy to understand and follow.Therefore,it is important to presentyour i

131、dea to a test audience along the way.People outside the competition who critique yourplan before you submit it can identify weaknesses and even give your work fresh impetus.19Exhibit 9ELEMENTS OF A BUSINESS PLANFocus of this phasePart of this phasePhase 1Phase 2Phase 31 Executive summary2 Product or

132、 service3 Management team4 Market and competition5 Marketing and sales6 Business system and organization7 Implementation schedule8 Opportunities and risks9 Financial planning and financing4.STRUCTURE AND KEY ELEMENTS OF ABUSINESS PLANDespite their many differences,all business plans have certain ele

133、ments in common that allpotential investors expect to find(Exhibit 9).Additionally,an appendix is often included thatcontains detailed information,often presented in the form of tables or graphs.Within this moreor less required structure,the business plan is free to grow in its own direction.At theb

134、eginning,you will only work on a few key elements and individual topics.New elements areadded with each additional phase,while the topics from the previous phases are expanded,and,gradually,the plan fills with content.At the end of the third phase,the individual analysesform a whole whose individual

135、 parts correspond to one another.4.1.Executive summaryA good executive summary gives me a sense ofwhy this is an interesting venture.I look for a veryclear statement of the long-term mission,an overviewof the people,the technology,and the fit to market.Ann Winblad,Venture CapitalistThe executive sum

136、mary is designed to pique the interest of decision makers.It should contain abrief overview of the most important aspects of the business plan.In particular,it shouldhighlight the product or service,the value to the customer,the relevant markets,managementexpertise,financing requirements,and possibl

137、e return on investment.20Venture capitalists look at the executive summary first,though they usually just skim it.Thequality of the summary itself is not likely to make them invest in your project,yet it canconvince them not to.A clear,objective,and concise description of your intended start-up,whic

138、h must be easy to comprehend,especially by the technical layperson,will show them thatyou know your business.Therefore prepare your summary with the utmost care;it may welldecide whether the rest of your business plan is read.The executive summary is an independent element of the business plan:Do no

139、t confuse it withthe introduction of your business concept on the title page.Look at your executive summarywith a critical eye repeatedly especially after all other aspects of your business plan havebeen completed.Ask yourself if you have described your business idea as clearly,compellingly,and conc

140、isely as you can.Your readers should be able to read and comprehend the summary in five to 10 minutes.Test it.Give your executive summary to someone who has no previous knowledge of your businessconcept or its technical or scientific basis.KEY QUESTIONS:Executive summaryPhase 1!What is your business

141、 idea?In what way does it fulfill the criterion ofuniqueness?!Who are your target customers?!What is the value for those customers?!What market volume and growth rates do you forecast?!What competitive environment do you face?!What additional stages of development are needed?!How much investment is

142、necessary(estimated)?!What long-term goals have you set?Phase 2!How high do you estimate your financing needs?!What are the sales,cost,and profit situations?!What are the most important milestones along the way to your goal?!What test customers have you approached/could you approach?!What distributi

143、on channels will you use?!What partnerships would you like to enter into?!What opportunities and risks do you face?!What is the picture on patents?Phase 3!Summarize the results of your detailed business planning and state your exactfinancing needs!How will you delegate management tasks?!How much pro

144、duction capacity is necessary?!How will the implementation of your business idea be organized?!List your next,concrete steps!214.2.Product or serviceIf you dont know what the customer value is,the whole things a waste of time.Bruno Weiss,EntrepreneurYour business plan derives from an innovative prod

145、uct or service and its value to the endconsumer.It is important to indicate how your product differs from those that are now or willbe on the market.A short description of how far development has progressed and what stillneeds to be done is also essential.Customer valueIt doesnt make any sense to st

146、art up a new business unless the product or service is superior tocurrent market offerings.Be sure to discuss in detail the function the product or service fulfillsand the value the customer will gain from it.If comparable products and services are already available from your competitors,you mustcon

147、vincingly substantiate the added value your customers will receive from your start-up.Todo so,put yourself in the place of the customer and weigh the advantages and disadvantages ofyour product over the others very carefully,applying the same criteria to all.If you are offering a range of innovative

148、 products or services,categorize them into logicalbusiness areas according to product or customer.Define the business areas in detail so there isno overlap.Development status of the product/serviceIn explaining this issue,imagine you are the venture capitalist who wants to minimize the riskinvolved

149、in participating.Try to refrain from including technical details and describeeverything as simply as possible.A finished prototype will show your potential investor thatyou are up to meeting the technical challenge.If it enhances the understanding of your product,include a photo or sketch in your bu

150、siness plan.It is even better to have a pilot customer whoalready uses your product or service.You should also explain the nature of the innovation itself and the edge you have overcompetitors.This is the point at which you should address the subject of patents for protectionfrom duplication or imit

151、ation,or the protection of a model through registration.If there are stillproblems or issues to cover regarding development,be sure to mention them and how youintend to overcome these difficulties.Regulatory requirements on products and services pose another set of risks.Note any permitsyou have obt

152、ained,have applied for,or will apply for,such as those of technical controlassociations,the postal service,or the department of health.22KEY QUESTIONS:Product or servicePhase 1!What end customers will you address?!What are the customers needs?!What customer value does your product/service provide?!W

153、hat is the nature of your innovation?What is the current status of technicaldevelopment?!What partnerships are necessary to achieve full customer value?!What competitor products already exist or are under development?!Is your product/service permitted by law?!What are the prerequisites for developme

154、nt and manufacturing?!What stage of development has your product or service reached?!Do you have patents or licenses?!What further development steps do you plan to take?What milestones mustbe reached?Phase 2!What versions of your products/services are designed for what customergroups and application

155、s?!What patents/licenses do the competitors have?!Do you need to obtain licenses and,if so,from whom and at what cost?!What kind of service/maintenance will you offer?!What product or service guarantees will you grant?!Compare the strengths and weaknesses of comparable products/serviceswith yours in

156、 an overview!Phase 3!What resources(time,personnel,materials)do you require for eachsubsequent development?!What share of sales do you expect from your various products/services(ifapplicable)?Why?!What income from royalties/sales do you estimate from possibly marketingthe property rights?Who would b

157、e your licensees/buyers?4.3.Management teamI invest in people,not ideas.Eugene Kleiner,Venture CapitalistThe management section is often the first part of the plan that venture capitalists turn to afterreading the executive summary.They want to know whether the management team is capableof running a

158、 promising business.Entrepreneurs frequently underestimate the significance ofthis question and make the mistake of skimping on content and making do with meaninglessphrases.23Take the time to describe your management team well.When discussing managementsqualifications,be sure to emphasize those tha

159、t are particularly important for implementing yourspecific plans.Professional experience and past success carry more weight than academicdegrees.If key positions are to be given to inexperienced staff members,explain this decision indetail.CHARACTERISTICS OF A POWERFUL MANAGEMENT TEAM!Common vision:

160、Everybody wants to succeed!Complementary attributes and strengths!At least three,but usually no more than six,people!Sticks together through thick and thin!Staying power,even when there are setbacks-regroups and makes asecond or even third attempt to clear the hurdleAlso explain how the responsibili

161、ties in the company are to be delegated and indicate whichpositions still require reinforcements.It is particularly helpful to compare the assignments to befilled with the skill profiles of current team members.Do not hesitate to name your mostinfluential advisors.No one will have all the qualificat

162、ions and experience necessary to found acompany.Considerable involvement on the part of advisors such as experienced entrepreneurs,accountants,PR firms,or management consultants is a sign of professionalism and will reassurethe venture capitalist that you have all the contacts you may need.WHAT PROF

163、ESSIONAL INVESTORS LOOK FOR!Has the team already worked together?!Do team members have relevant experience?!Do the founders know their weaknesses and are they willing to make up forthem?!Have the founders agreed on their future roles?Are ownership issues settled?!Has the management team agreed on a

164、common goal,or are thereunderlying differences of opinion?!Do the individual team members fully back the project?Finally,although the management team will not be evaluated until the third phase of thebusiness plan competition,it is advisable to begin looking for suitable partners as soon aspossible.

165、Bringing together just the right people to form a dream team,so to speak,isimmensely important for later business success and,therefore,requires a great deal of time andcare.24KEY QUESTIONS:Management teamPhase 3!Who are the members of your management team and what distinguishesthem:education,profes

166、sional experience,success,standing in the businessworld?!What experience or abilities does the team possess that will be useful forimplementing your concept and setting up your company?!What experience or abilities are lacking?How will the gaps be closed?Bywhom?!What goals do the team members pursue

167、 by starting up the business?!How high is the motivation of each individual team member?4.4.Market and competitionIf there is no competition,there is probably no market.Brian WoodThorough understanding of your customers and their needs is the foundation of everysuccessful business.For it is the cust

168、omers who give your company a reason for being.And inthe end,by buying or not buying your product,or service,they will decide if and howsuccessful your company will be.Only those customers who are convinced they are getting agreater value than they would from a competing product,or by not buying a p

169、roduct at all,willbuy your product.Knowing your market and competition well is thus critical to the success ofyour undertaking.Market size and growthA dramatic increase in the value of the company can be expected only if the market holds greatpotential.The market size should be presented in figures

170、representing the number of customers,unit sales,and total dollars in sales.Your expectations for market growth are critical.Youshould also indicate what main factors are now influencing or may influence the given industrysegment.Show what factors will affect developments(technology,legislative initi

171、atives,etc.)and what relevance these factors have for your business.Work with a focus in order to saveyourself some energy:Work with hypotheses,make a list of questions you want answered,what information you will need,and where you might find it.The external data necessary for an analysis are often

172、easier to obtain than you might think.Becreative and determined;make use of all possible sources including trade literature(journals,market studies,scholarly essays),industry directories,associations and government agencies(statistics offices,chambers of commerce,patent offices),banks for industry s

173、urveys,databases,the Internet(keep your searches focused),and,of course,interviews.It often helps to callaround.Using a short discussion outline will increase your efficiency and productivity,as wellas the willingness of your party to disclose information.25This collection of individual pieces of da

174、ta seldom provides a direct answer to your questions you will have to draw well-founded conclusions or make sound estimates.When making anestimate,observe the following:Build on a solid foundation.There may be many unknowns,but if you relyon easily verifiable figures,your estimate will be harder to

175、topple.Think logically.An estimate should be a logical conclusion(i.e.,it shouldnot have any leaps in logic or depend on unspecified assumptions).Compare your sources.Check your facts,such as statements made in aninterview,with a number of different sources if at all possible.Be creative.The shortes

176、t distance to your goal is not always a straight line.For example,when a variable is unknown,look for a substitute variable thatrelates to the one you need.Check for plausibility.For each estimate,ask yourself,Does this resultreally make sense?Market segmentationFollow up your general explanations w

177、ith your choice of target customer and your plannedmarket success(sales volumes,sales revenues,market share,and profit).To do this,you mustsegment your market.The choice of segmentation criteria is up to you,as long as you arecertain that the number of customers in each segment-as well as their beha

178、vior-can bedetermined,and that the customers within each segment can be reached by means of the samemarketing strategy.Possible customer segmentation criteria for the consumer goods markets:!Location:country,urban/rural(population density)!Demographics:age,sex,income,profession,company size!Lifestyl

179、e:techies,counterculture,active seniors!Behavior:frequency of product use,product application!Buying habits:brand preferences,price consciousnessPossible customer segmentation criteria for industrial goods markets:!Demographics:company size,industry,location!Operations:technology employed(e.g.,digit

180、al,analog)!Buying habits:centralized or decentralized purchasing,purchasing criteria,supplier agreements!Situational factors:urgency of need,order size26Define the potential sales revenues for a given period per segment.Take your sales strategyand the behavior of the competition into consideration.D

181、epending on the industry,you mayalso want to allow for price erosion.CompetitionDefine the strengths and weaknesses of your competitors.To do this,evaluate your majorpotential competitors using the same criteria,such as sales volume and revenues(pricing),growth,market share,cost positioning,product

182、lines,customer support,target groups,anddistribution channels.In the interest of brevity,forgo the use of a great deal of detail.Evaluateyour own company according to these same criteria and make a comparison as to howsustainable your competitive advantage will be.Positioning vis-vis the competition

183、Why should a potential customer buy your product and not that of your competitor?Because itoffers greater value(in some aspect that is important to the customer)than competing products;because it is objectively or emotionally better;or,as marketing experts would say,you havedeveloped a value proposi

184、tion or unique selling proposition for your business idea.Formulating this value proposition and anchoring it firmly in the mind of the customer is themain task of marketing communication.Marketing experts talk about the positioning of aproduct,brand,or business.Well-positioned products leave consum

185、ers with a particularimpression.The most important guideline for positioning is,therefore,to look at the productfrom the customers point of view.The point is to meet a need better,not to present newproduct attributes.The advantage to the customer must be immediately clear,memorable,andimportant.At t

186、he same time,your positioning must be distinctive from that of competitors.Only then can customers connect the value proposition that you offer with the name of yourproduct or business and buy your product.The following guidelines may help:Identify relevant customer needs or problems Define clear cu

187、stomer segments of sufficient size Design an attractive range of products and services Make yourself unique through differentiation from the competition Address the subjective perception of the customer Ensure customer satisfaction even after purchaseBecause positioning is so critical to the market

188、success and,therefore,to the long-term successof your business,you should pay particular attention to it.Persuasive positioning will not comeabout immediately,it will be a result of intense effort and will need frequent revision to achievethe maximum effect.The point of departure for positioning is

189、the product itself.Additionalinsight will be found as you refine and modify your product during development and respondto new revelations as a result of customer surveys.27KEY QUESTIONS:Market and competitionPhase 1!How is the industry developing?!What factors are decisive for success in your indust

190、ry?!What role do innovation and technological advances play?!How will you segment the market?!What market volumes do the individual market segments have,now and inthe future(rough estimates)?!Who are your target customer groups?!What customer examples can you give?!What major competitors offer simil

191、ar products/services?!What new developments can be expected from competitors?!How sustainable will your competitive edge be?Phase 2!What market volume(value and amount)do you estimate for your individualmarket segments over the next 5 years?!What will influence growth in the market segments?!What is

192、 your estimate of current and future profitability of the individualmarket segments?!What market shares do you hold in each market segment?!What segments are you targeting?!Who are your reference customers?How do you plan to get referencecustomers?!What role do service,consulting,maintenance,and ret

193、ail sales play?!How much do you depend on large customers?!What are the key buying factors for customers?!How does the competition operate?What strategies are pursued?!What are the barriers to market entry and how can they be overcome?!What market share does your competition have in the various mark

194、etsegments?!What target groups do your competitors address?!How profitable are your competitors?!What are your competitors marketing strategies?!What distribution channels do your competitors use?!How sustainable will your competitive edge be?Why?!How will competitors react to your market launch?How

195、 will you respond tothis reaction?!Compare the strengths and weaknesses of your major competitors with yourown in the form of an overview!4.5.Marketing and salesMarketing is far too importantto be left to the marketing department.David Packard,Entrepreneur28Key elements of a well-conceived business

196、concept are well-planned marketing and salesactivities.They require a persuasive description of your strategies for market launch,marketing,and the measures planned for sales promotion.A skeleton framework to follow is that of thefour Ps:product,price,place,and promotion.1.ProductYour original produ

197、ct idea has already given you some sense of the characteristics of yourproduct.After a closer analysis of the needs of various customer segments,you now mustevaluate whether your product actually meets them or to what extent it may require adaptation.This raises the question of whether you should ma

198、nufacture one single product for all segmentsor whether you want to adjust the product to meet the needs of individual segments.2.PriceThe basis for an attainable price is the willingness of customers to pay the price asked of them.This contradicts the conventional wisdom that price is derived from

199、costs.Of course,cost is aconsiderable factor,but the cost-price ratio only becomes critical when the price asked will notcover costs within the foreseeable future.In this case,it is advisable to get out of the business asquickly as possible or,better yet,never to go into the business in the first pl

200、ace.The price you can ask depends entirely on how much the value of your product is worth to thecustomer.You have defined,and perhaps quantified,the customer value in the businessconcept or product description.Now define a price bracket based on the quantified customervalue of your product.You can v

201、erify and refine your assumptions through discussions withpotential customers.The pricing strategy you choose depends on your goal:Do you want to penetrate the marketquickly by going with a low price(penetration strategy)?Or,do you want to generate thehighest possible return from the out-set(skimmin

202、g strategy)?New companies generally pursue the skimming strategy for good reason:A new product is positioned as better than previous options,so a higherprice can be justified.Higher prices generally lead to higher profit margins and allow the newcompany to finance its own growth.New investments can

203、be financed out ofprofits and outside investors are no longer needed.Unlike the skimming strategy,the penetration strategy generally requireshigh initial investment in order for supply to meet the high demand.Thisheightened investment risk is something investors usually prefer to avoid.Certain situa

204、tions make following a penetration strategy the better choice:Setting a new standard.Netscape distributed its Internet browser free ofcharge,thus setting a standard.With the Macintosh,however,Apple29followed a skimming strategy and missed the chance to establish the Mac asthe new standard.High fixed

205、 costs.Businesses with high fixed costs are forced to find a wideaudience as quickly as possible to make those costs worthwhile.Fixed costsat Federal Express,for example,for air transport and sorting facilities,are thesame whether they deliver thousands or many millions of letters.Competition.If the

206、 entry barriers are low and tough competition is likely,apenetration strategy is the best way to be faster than the competition incapturing a large market share.Such cases naturally also raise the questionas to whether this type of business is appropriate for a start-up.3.PlaceYour product or servic

207、e will somehow have to reach the customer physically.Although thismay sound simple,it involves another monumental marketing decision:In what way,via whichdistribution channel,do you want to deliver your product?The choice of distribution channel is influenced by various factors,such as how many pote

208、ntialcustomers will you have?Are they companies or individuals?How do they prefer to shop?Does the product require explanation?Is it in an upper or lower price bracket?Basically,youwill have to consider whether your company will handle distribution itself,or whether aspecialized operation will handl

209、e it for you.This sort of make-or-buy decision will have asignificant impact on both the organization and the business system of your enterprise.Thechoice of distribution channel is thus closely related to other marketing decisions and will,inturn,affect other measures.Distribution can be roughly ca

210、tegorized into two forms:direct or multi-channel.Technologicaldevelopments,particularly in information technology,have greatly expanded the spectrum ofdistribution channels over the past few years.Here is a selection:Third-party retailers.Products are sold via retailers who have easy access topotent

211、ial customers.Here,it is important to acquire a good shelf position,which is obviously also sought by the competition and is accordinglyexpensive.The product must also offer retailers an attractive profit if theyare to include it in their range at all.Outside agents.Specialized companies act as agen

212、ts for the distribution ofproducts from various manufacturers.They take over the function of the in-house sales person.Outside agents are relatively expensive,although onlyfor the sales they conclude successfully.They make no commission if they donot sell the product,making them an attractive channe

213、l for new companiessince risk is limited.Good agents,however,are not always easy to find.Franchising.A business concept is put into practice independently by afranchisee who pays a licensing fee,whereby the franchiser maintains controlof the business policies(McDonalds is an example).Franchising ena

214、bles30rapid geographic growth,while ensuring control of the sales concept withouthuge personal investment.Wholesalers.It can be difficult for a small company to maintain contact witha large number of retailers.A wholesaler who has good contacts to the retailtrade can take over this activity,helping

215、to improve market penetration whilelowering distribution costs.On the other hand,wholesalers often demand acut for their efforts.Stores.Selling in your own store is a good choice when the design of thepurchasing experience is central to the product,and only a small number ofstores is necessary to co

216、ver the market.Independent shops will requireinvestment,but will also allow the greatest control over distribution.Own sales staff.Sales agents are above all deployed when the product iscomplex(e.g.,capital goods),requiring extensive knowledge of the product.Face-to-face customer visits are expensiv

217、e;the number of customers must befairly small.Having your own sales staff as the distribution channel isrelatively expensive and only worthwhile for involved products.Direct mail.Select customers receive a mailing through the postal service.Addresses can be purchased from database companies and sort

218、ed accordingto desired criteria.The success of the direct mailing depends on whether thereader feels an immediate appeal otherwise,it lands in the wastebasket.Call center.Through advertising,customers are invited to order a productby telephone.Simple products can be distributed to many customers in

219、thisway,with no need to set up stores throughout the entire sales region.Youcan also hire the services of specialized call center operators.Internet.The Internet is a relatively new marketing channel,through whicha global market can be reached at minimal cost.4.PromotionBefore potential customers ca

220、n appreciate your product,they have to hear about it.And toachieve this,you must advertise to attract attention,inform,persuade,and inspire confidence.Those are the objectives of communication.Communication must explain the value of yourproduct or service to your customers,as well as convince custom

221、ers that your product meetstheir needs better than competing or alternative solutions.There are various ways of gettingthe customers attention:Classic advertising:newspapers,magazines,trade journals,radio,TV,movietheaters Direct marketing:direct mail to select customers,telephone marketing,Internet

222、Public relations:articles in print media about your product,business or you,written by you or a journalist31 Exhibitions,trade fairs Customer visitsCommunication is expensive,so make the most of it.Calculate exactly how much advertisingyou can afford per sale and choose your communication messages a

223、nd media accordingly.Focused communication yields the best results.When you address your customers,focus onthe people who make the purchasing decision or have the greatest influence on the purchasingdecision.KEY QUESTIONS:Marketing and salesPhase 1!What final sale price do you want to charge(estimat

224、ed)?What criteria didyou use to arrive at this final sale price?How high is the profit margin(estimated)?!What sales volumes and sales revenues are you aiming for(estimated)?Phase 2!In which partial market segments will you make your market entry?How doyou plan to turn this“toehold”into a high-volum

225、e business?!What sales volumes are you targeting(detailed data by market segment)?!Describe the typical process of selling your product/service.Who,amongyour buyers,ultimately makes the purchasing decision?!What target groups will you reach by what means of distribution?!Do you want to penetrate the

226、 market quickly with a low price,or bring in thehighest return from the start?Explain your decision!How will you draw the attention of your target groups to your product orservice?!How will you woo reference customers?!How much,in time and resources,will it cost to acquire a customer?!What advertisi

227、ng materials will you use to do so?!What part do service,maintenance,and hotlines play?!How difficult will it be and/or what will it cost to create long-lasting customerloyalty?!What other planning steps are necessary in the run-up to launching yourproduct/service?Draw up a schedule with the most im

228、portant milestones!Phase 3!What demands(employee number,qualifications,and outfitting)must theoperation meet in order to effectively implement its marketing strategy?Whatis your estimated expenditure for this area?!How will sales volume and operating results be spread out among the variousdistributi

229、on channels(estimated)?!Which market share per distribution channel do you plan to capture?!What are your expenses?At launch and later.!What price will you charge for your product/service per target group anddistribution channel?!What payment policies will you lay down?32Exhibit 10Research anddevelo

230、pmentProductionMarketingSalesServiceGENERIC BUSINESS SYSTEM4.6.Business system and organizationOrganizations exist to enable ordinarypeople to do extraordinary things.Ted Levitt,Editor,Harvard Business ReviewBusiness systemEvery entrepreneurial assignment is comprised of the interplay of a number of

231、 individualactivities.When they are presented systematically in relation to one another,a business systemresults.The business system model maps out the activities necessary to prepare and deliver afinal product to a customer.For claritys sake,they are grouped into functional blocks.Devising a busine

232、ss system is a good way to understand the business activities of a company,think them through systematically,and display them with transparency.A generic businesssystem common to nearly all industries and enterprises is shown in Exhibit 10.Use the above model as the starting point for designing your

233、 own business system.You willneed to adapt it to your own situation and make it concrete in order to put it into practice.For amanufacturer,for example,it may be useful to subdivide the production category into separatestages,such as purchasing,raw materials processing,component manufacture,and asse

234、mbly.You may also need to separate sales into logistics,wholesale distribution,and retail sales,forexample.An individual plan will be appropriate to each case,depending on the industry in which youoperate and,of course,the business itself.The business system of a computer manufacturerwill be very di

235、fferent from that of a fast food chain.And the business system of a departmentstore may look quite different from that of a direct merchandising company although both willsell many of the same products.There are no general rules or standards for a business system.Your own system should be logical,co

236、mplete,and useful for planning just dont let it get toocomplicated.Concentrate on the major activities in your business system.A team of three to five will not beable to cover all tasks themselves,either because they do not have the abilities or because theycould not do so with the necessary efficie

237、ncy.Together with your management team,thinkcarefully about what activities really create something new and how you and your staff can bestmake use of your time to create the highest value for your customer and get ahead of thecompetition.The buzzword here is focus.Once you have determined which act

238、ivities make up33Exhibit 11SAMPLE START-UP ORGANIZATIONManaging DirectorMr.DuxResearch andDevelopmentMr.InventProductionMr.FacitMarketingMs.OratoriaFinanceMr.PecuniaHuman Resources andAdministrationMr.Duxyour business system,choose those which you can execute better than anyone else.A trendtoward sp

239、ecialization can be observed in many industries.Specialization is particularly important for start-ups.They should concentrate all their energyon just a few select activities in the business system.At the beginning,even software giantMicrosoft concentrated solely on the development of the DOS,leavin

240、g all other activities in thebusiness system up to IBM.OrganizationIn addition to a business system,you will need to consider several other organizational issues.It is essential that tasks and responsibilities be clearly delegated and that you design a simpleorganization with few levels.The rest wil

241、l follow as needed during operation.Yourorganization must be flexible and always adaptable to new circumstances.Be prepared toreorganize your company repeatedly during the first few years.Decide who is responsible forwhat in each business area(delegation of tasks and responsibilities).As soon as you

242、 have setup the interdisciplinary functions-such as a management,human resources,finance,andadministration-youll be up and running.If you keep your organization simple,each staffmember will know which assignments he or she must complete and can carry them outindependently.On the other hand,everyone

243、should be in a position to fill in for another teammember for a short time if necessary.(See Exhibit 11)Business locationDescribe briefly the choice of location for your business.Do not enter into a long-term rentalagreement,as your business may have to move in response to the growth you anticipate.

244、Youmay have to make this move fairly quickly.Make or buy and partnership decisionsOnce you have determined the core of your business and have drawn up the necessary businesssystem,you will have to think about who will best carry out the individual activities.Activitiesoutside your chosen focus shoul

245、d be handled by third parties.But supporting activities withinthe new company do not necessarily have to be carried out by you.These may include34bookkeeping or human resources.For each activity,the question to ask is:Do we do itourselves,or have someone else do it-to make or to buy?Make-or-buy deci

246、sions need to be conscious decisions taken after weighing the advantages anddisadvantages.Supplier partnerships,for example,cannot be dissolved from one day to thenext,and some partners cannot easily be replaced if,for some reason,they are no longeravailable.When considering make-or-buy decisions,re

247、ly on the following criteria:Strategic significance.Those aspects of performance that make a majorcontribution to your competitive advantage are of strategic importance toyour business.They must remain under your control.A technologycompany could hardly relinquish research and development,and a cons

248、umergoods manufacturer would never give away its marketing activities.Suitability.Every business activity demands specific abilities that may notbe available within the management team.Your team must,therefore,consider whether in specific instances it is best to carry out a particular task,acquiring

249、 the necessary abilities,or whether it would be better to hand overthe task to a specialized company.Specialists may not only be able to carryout the assignment better,they may also be able to offer a cost advantagethanks to higher production volumes.Availability.Before you make a decision to buy,yo

250、u need to find outwhether the product or service is available in the form or with thespecifications you require.Negotiate,whenever possible,with severalsuppliers.You will usually find the best terms in this way and will learnmore about the service you are buying.Often,you can help a supplierimprove

251、its performance.If you cannot find someone to supply what youneed,you may find a business partner who is willing to acquire the necessaryskills to do so.The question for a start-up is how you want to cooperate with other companies.Everypartnership has its advantages and disadvantages.Informal,non-bi

252、nding partnerships represent no great obligation for eitherside.Both parties can end the partnership quickly and easily.But they mustalso live with the knowledge that supply or demand could dry up just asquickly.Furthermore,suppliers will not be able to meet all the special needsof a customer since

253、they can not sell tailored products to all their customers.Casual partnerships are typical for mass products,every-day services,andstandardized components for which replacement buyers and sellers are easilyfound.Close partnerships are sometimes characterized by a high degree ofinterdependence.They a

254、re typical of highly specialized products andservices or high trade volumes.In these situations,it is usually difficult forboth sides to change partners or to buy or sell large quantities of special parts35within a short time period.The advantage for both sides is the security of abinding relationsh

255、ip and the possibility of concentrating on ones ownstrengths,while benefiting from the strengths of partners.In order for a partnership to develop into a successful business relationship,a number of factorsmust be considered:Win-win situation.Both sides must be able to gain a fair advantage from the

256、relationship.Without an incentive for both sides,a partnership cannot besustained.Risks and investments.Partnerships involve risks that are usually brushedaside when business is going well.A supplier with an exclusivity agreementcan,for example,end up in a difficult situation if the buyer suddenly c

257、utsback production and purchases fewer components.This is especially true ifthe supplier has acquired specialized production tooling that cannotimmediately be used for other orders and buyers.Conversely,a buyer canface difficulties if a major supplier ceases to deliver(bankruptcy,fire,strike,etc.).S

258、uch risks and possible financial consequences must be thoughtthrough from the outset and perhaps regulated by contract.Dissolution.As in interpersonal relationships,business relations can alsosuffer tension and result in irreconcilable differences.Make sure to lay downin detail under which condition

259、s a partner can withdraw from a partnership.When working on your business plan,it is not too early to begin thinking about whom you maywant to cooperate with and what form this may take.Partnerships will allow a young companyto benefit from the strengths of established companies and focus on develop

260、ing their ownstrengths.Through partnerships,you can usually grow faster than you could on your own.KEY QUESTIONS:Business system and organizationPhase 2!What does the business system for your product/service look like?!What activities do you want to handle yourself?!Where will the focus of your own

261、activities lie?!What business functions make up your organization,and how is it structured?!What resources do you need(quantitative and qualitative)to create yourproduct/service?!How high is your need for technical input(raw materials,materials to createyour service)?!What will you make,what will yo

262、u buy?!Which partners will you work with?What are the advantages of workingtogether for you and your partners?Phase 3!Where will you locate your business?36!What capacity for product manufacture and service production do you plan(number of units)?!How much will production and delivery of your produc

263、t/service cost?!How,and at what cost,can you adjust your capacity in the short term?!What measures are planned for quality assurance?!If you need a warehouse,how will you organize your inventory?!How much of your product has to be put in storage?!How are your costs structured(fixed,variable)?4.7.Imp

264、lementation scheduleBusiness is like chess:To be successful,you must anticipate several moves in advance.William A.Sahlmann,ProfessorInvestors want to know how you envision the development of your business.A realistic 5-yearplan will inspire credibility among investors and business partners.Moreover

265、,it will help youthink through your various activities and interdependencies.You will endanger your businessif you attempt to reach your targets with faulty and,above all,overly optimistic planning.Drawing up your implementation scheduleConcentrate on the most major milestones and the most important

266、 interdependent events.Thefollowing three elements will usually suffice:Gantt implementation schedule(for a sample Gantt timeline,see CityScapecase study)Major milestones Important connections and interdependencies between the work assignmentgroupingsHuman resources planningAs your new business take

267、s off,systematic personnel planning will become more and moreindispensable.Growth will require you to recruit new employees who will have to be trainedand integrated into the business.Maintaining a simply structured working environment willhelp you draw up clear job descriptions and seek just the ri

268、ght employees.Keep in mind that aqualified,specialized workforce may be difficult to find even in times of high unemployment.You will often not be able to avoid stealing good employees from competitors.Include costs in your personnel planning in order to arrive at the total cost of human resources(w

269、ages and indirect labor costs)for the income statement in your business plan.The cost ofpersonnel depends on a number of factors,such as the industry itself,employee qualifications,and age.Additionally,indirect labor costs can amount to over 50%of the wage.37Investment and depreciation planningInves

270、tment and depreciation planning includes all investments that may be capitalized and thecorresponding write-offs.The amount of depreciation depends on the service life planned forthe property.Usually,property is written off in full over 4 to 10 years in equal annual amounts(straight-line method).Inv

271、estments are to be included in the liquidity calculation,and the totalamount of annual write-offs listed in the planned income statement.KEY QUESTIONS:Implementation schedulePhase 3!What are the most important milestones for the development of your business,and when must they be reached?!How do you

272、plan to structure the work to reach these targets?!Which tasks and milestones are interdependent?!For which tasks/milestones do you anticipate bottlenecks?!How many new employees will you need in the individual business areasover the next 5 years?What will this cost?!How much real capital is necessa

273、ry to achieve initial sales?!List your planned short-term investments!List your planned longer-term(3 to 5 years)investments!What investments will be required when which milestones are reached?!How high is the annual depreciation for each investment?384.8.Opportunities and risksOne of the greatest m

274、yths about entrepreneurs is thatthey are all risk seekers.All sane people want to avoid risk William A.Sahlmann,ProfessorThe object of this exercise is to identify a margin of error for departures from your assumptions.If possible with reasonable effort,it is advisable to draw up best-case and worst

275、-case scenariosinvolving key parameters to identify the opportunities and risks.These calculations will allowventure capitalists to judge how realistic your plans are,and to better assess the risk of theirinvestment.Change various parameters in the scenarios(such as price or sales volumes)to simulat

276、e how achange in conditions might affect your key figures(sensitivity analysis).KEY QUESTIONS:Opportunities and risksPhase 2!What basic risks(market,competition,technology)does your business ventureface?!What measures will you take to counter these risks?!What extraordinary opportunities/business po

277、ssibilities do you see for yourcompany?!How could an expansion of your capital base help?Phase 3!What will your planning look like for the next 5 financial years under both a bestand worst case scenario?!What effect will this have on your need for capital and your return?!In your view,how realistic

278、are these scenarios?!What consequences do they have on your business planning?4.9.Financial planning and financingPlanning substituteschaos for mistakes.UnknownFinancial planning assists you in evaluating whether your business concept will be profitableand can be financed.To this end,the results of

279、all preceding chapters must be compiled andconsolidated.Projected growth in value results from the planned cash flows from youroperative business.These are revealed through liquidity planning,which also provides39information on your various financing needs.In addition,the profit situation of your bu

280、sinesscan be seen in the income statement.This statement is also necessary according to commercialand tax law.There are many ways to present the figures.The appendix contains sample tablesof how to perform liquidity planning and make up an income statement,as well as a balancesheet.Minimum required

281、of financial planning in your business plan:!A cash flow calculation(liquidity planning),income statement,balance sheet!Forecasts over 3 to 5 years,at least 1 year beyond the point of breaking even,that is,beyond the generation of positive cash flow!Detailed financial planning for the first 2 years(

282、monthly or quarterly),thereafter annually!All figures must be based on reasonable assumptions(only the mainassumptions need to be described in the plan)Planned income statementWhether a companys assets grow or diminish depends on the bottom line at the end of a year.The income statement can help you

283、 forecast this.In contrast to liquidity planning(=plannedcash flow),an income statement focuses on the issue of whether transactions lead to an increase(=revenue)or a decrease(=expense)in the net worth of your business(defined as the sum ofall assets minus debt).Go through your entire business plan

284、and decide whether your assumptions will lead torevenues or expenses and,if so,how high they will be.If you are in doubt about the exactamount of costs your business will incur,gather quotes and estimates.Do not forget to coverthe cost of your personal living expenses.In the case of a limited liabil

285、ity company,this wouldbe the salary of your general manager.List write-offs in your investment and depreciation planning.The cost of investmentsthemselves(i.e.,the purchase price of the investment)is not included in the income statement,because the amount paid out does not lead to a change in the ne

286、t worth of the business.Material costs comprise all expenses for raw materials,auxiliaries,expendable supplies,andpurchased goods and services.Your planned human resources expenditure includes wages andsalaries plus social security contributions and taxes and is listed under personnel costs.For thep

287、urpose of simplification,the category other costs is treated as a collective item,includingamong other things,rent,insurance,office supplies,postage,advertising,and legal counsel.When assigning individual revenues and expenses strictly observe legal regulations.Finally,calculate the difference betwe

288、en all revenue and expenses in a financial year,by which you willarrive at an annual net profit/loss.This will give you an overview of the operating result,but itwill not give you a reliable assessment of your level of liquid funds.For this,you will needliquidity planning.40Sales of your product or

289、service may be booked in the current financial year,even thoughpayment does not occur until the next;you will need to list the sales revenue even though themoney has not yet been deposited into your accounts.The same is true for expenses.Theincome statement is generally planned in annual intervals.T

290、o enhance the accuracy of yourplanning for the first year,you should make monthly forecasts,and quarterly forecasts for thesecond year.For the third,fourth,and fifth years,continue to make annual projections.Youcan make use of the tables contained in the appendix of this Guide to list the figures.Li

291、quidity planningYour company must have a certain amount of cash on hand at any given time in order to avoidbecoming insolvent,which leads to bankruptcy that will mean the financial ruin of yourbusiness.Detailed liquidity planning should help ensure a positive cash flow.The principle issimple:Receipt

292、s are compared directly to disbursements.Please note that writing or receivingan invoice does not mean that the money is already in your account or that you have paid thebill.Liquidity planning is concerned with the date of payment when the money actually comesin or goes out.Thus,liquidity planning

293、involves only those transactions that cause a change inyour cash reserves.Depreciation,liabilities,and non-market output are not included.Lay out the amount and timing of all the payments you expect.Your company is solvent whenthe sum of its receipts is greater than the sum of its disbursements at a

294、ny given time.You willhave to draw on capital for those times when this planning does not cover all expenses.Thesum of all these individual payments will equal the total capital required for that planninginterval.The farther you look into the future,the more uncertain your planning will be.Liquidity

295、planning should thus be carried out every month for the first year,quarterly for the second yearand only annually for the third,fourth and fifth years.The appendix of this Guide containstables you can use for an exact compilation of the figures.Projected balance sheetVenture capitalists are interest

296、ed in seeing how your assets are expected to grow as representedon a projected balance sheet.Here,the type and value of the assets are placed on the asset sideof the balance sheet across from the source of the capital on the liabilities side.As with theincome statement,there is a standard accounting

297、 format,required by law,for balance sheets.They are prepared at annual intervals.Again,the appendix of this Guide contains tables youcan use for an exact compilation of the figures.Financing needsLiquidity planning enables you to determine the amount of capital you will need and when youwill need it

298、,but it does not indicate how these needs will be met.We basically distinguishbetween equity(investors have a stake in the business)and loan capital(which is borrowedfrom outside sources).Select the right mix for your business from the myriad sources offinancing available to you(Exhibit 12).You cant

299、 get something for nothing,the saying goes-and the same is true of money.Yourfamily may ask little in return for financial assistance;professional lenders are more demanding.41Exhibit 12SOURCES OF CAPITAL AT VARIOUS STAGES OF DEVELOPMENTSeed phaseStart-upGrowthEstablishmentPersonal savingsFamily loa

300、nsGovernment grantsIndividuals(usiness angelsVenture capitalMortgagesLeasesBank loansStock exchangeAll the management team can offer investors for their cash is a promise not exactly a goodposition from which to negotiate.Nevertheless,you have a good chance of beingfinancially successful if business

301、 goes well,because professional investors also have an interestin top performance from the team.Be clear about your needs and expectations and those ofyour investors.If you are seeking a long-term commitment and are satisfied with a small company,you areprobably well advised to make use of family fu

302、nds and loans from friends and banks.You willretain a majority shareholding,but you are significantly restricting your chances for growth.If,however,you desire rapid expansion,you will want to procure venture capital.Venturecapitalists will generally expect to obtain a large share of the company.You

303、 may,in fact,haveto relinquish the majority of the equity.Professional investors,however,are not interested inmanaging the business as long as you meet your targets,even if they have the majorityshareholding.They have,after all,invested in the management team in order to lead it tosuccess.They will

304、support you actively with their management skills and contribute specialtyknowledge,such as legal or marketing expertise,ties,and contacts.A deal can be very complicated.It is always advisable to contact experienced entrepreneursand get the expert advice of trustees,tax advisors,and lawyers.You may

305、also want to gather anumber of bids from various investors.Do not be put off by complicated arrangements.Thereare usually legitimate reasons for them,such as tax breaks,control of the funds invested,etc.Beabsolutely certain,however,that you understand all the details of the deal.Calculating the inve

306、stors return42Exhibit 13-0.90-0.53-1.06Year 0CALCULATING THE RETURN$MillionsYear 1Year 2Year 3Year 4Year 50025.00Series of cash flowsDiscount factorDiscounted value ofcash flows at IRR of72%1.00-0.900.58-0.620.34-0.180.2000.1100.071.70Total 0-1.06Investors evaluate the success of an investment by th

307、e return they get on the capital invested.As a result,anticipated return should be apparent at a glance in the business plan.In the CityScape case study,for example,investors put a total of$2.5 million into the enterpriseduring its first 3 years($0.9,$1.1,and$0.5 million,respectively).After 5 years,

308、and listing onthe stock exchange,realistic proceeds of approximately$25 million are expected.How high isthe return in this case?(Exhibit 13)From the point of view of the investor,all funds contributed to a new company result first innegative cash flows.After a business breaks even,positive cash flow

309、s will not immediately bepaid out in the shape of dividends,but will be first used to strengthen the balance sheet.Cashwill be returned to the investors at realization.Because cash flows will occur over several years,they must be discounted,that is,calculated back to the present(interest and compoun

310、d interestcalculation).The discount factors for the various years can be arrived at using the followingformuladiscount factor=1(1+r)Twhereby r=the discount rate in percent and T=the year in which the cash flow takes place.Tocalculate the return,the internal rate of return(IRR)method is used.The IRR

311、is the discountrate at which the sum of all positive and negative cash flows,discounted at present,results inzero.The IRR for the CityScape project example is 72%.That means that the investors get anannual return of 72%on their capital.This is a reasonable return considering the risk involved.Most c

312、alculators and spreadsheets have a special IRR function with which to calculate the IRR(in Excel this is the IRR()function).It can also be calculated by hand.43Valuation of a company(i.e.,working out how much a market is prepared to pay for shareswhen a business goes public)is an art in itself.A sim

313、ple rule of thumb is that the value is six toeight times the cash flow or net profit(after taxes)of the business in the year of initial publicoffering.In the case of CityScape,a factor of six multiplied by the net profit in the fifth year($4.2 million)was used,which results in a valuation of$25.2 mi

314、llion.If you have no experience in financial planning,consulting with coaches or experts(e.g.,taxconsultants or accountants)is highly recommended.In particular,discuss the issues of turnoversales and income taxes,which have been simplified here,with a tax advisor at one of thecompetition events list

315、ed at the front of this Guide.Note that most business ventures fail due tolack of financial planning.If you dont have someone with the necessary skills on your teamalready,start looking!KEY QUESTIONS:Financial planning and financingPhase 3!How will your revenues,expenses,and income develop?!How will

316、 your cash flow develop?When will you expect to break even(=sumof all revenues greater than the sum of all expenses)?!How high is your need for financing based on your liquidity planning?!How much cash is needed in the worst case scenario?!What assumptions underlie your financial planning?!Which sources of capital are available to you to cover your financing needs?!What deal are you offering potential investors?!What return can investors expect?!How will they realize a profit(exit options)?This page intentionally blank