Business Plan

Anjana Vivek; anjana@venturebean.com
Business Planning; Business Plans

VentureBean Consulting Private Limited
At the start
Kinds of Investors
Project Requirement
Building the BPlan
Summary
Agenda
2 2

BEFORE YOU START
Do take time out to think/reflect…
• WHAT are the strengths – that you bring to this
business
• WHAT are the constraints that you have to
either
– Address or
– Accept (and work keeping this in mind)
3

AT THE START
• What do you believe you can achieve, for example
in terms of
– Revenue
– Number of offices
– Lines of business/products/service
– Kinds of customers / categories
– etc..
– .. Over a period of time
• Are you confident that you can achieve.. i.e do you
have faith in yourself and the power of your
dreams?
4

At the start
Kinds of Investors
Project Requirement
Building the BPlan
Summary
Agenda
5 5

‘to trigger thinking’
Do take time out to think/reflect…
• What are the kinds of Funding options available
today for business?
• What are the alternate equity investment
options? VC/ PE/ Incubation?
This session focusses on equity linked funding
options and strategies
6

Investors: Equity (Linked): One Slide Checklist
• HNIs, informal and formal angel groups
• Seed Funds
• Venture Capital
• Private Equity
• Banks exploring innovative ways to fund SMEs
• Strategic Investors
• Corporate Funds; (Family) Business Groups, Indian & Global
– Directly and/or through a special division or subsidiary
– For employees alone or open to public
– As intellectual and/or financial capital with other facilities
• Government supported funds
• Impact Investors
• Incubators
• Accelerators
• Crowd funding
• Online funding platforms
7
Which
One
is the
…
Right
Fit
for
You?

Contributors
• Corporates
• Banks and FIs
• FIIs
• Family Business Groups
• HNIs
• Combination / others
• 3Fs ?
8

Caselet: You are an investee
• Zyco Fund has a life Cycle of 10 years, this is a
fund with overseas investors
• In year 7 of the fund, Zyco has offered 1 million
USD for a 15% stake in Amaze Co., in
Bangalore
• The promoters of Amaze also have another offer
from Indo, a Rupee Fund; they are offering Rs.6
crores for 20 % stake in the company.
• What are the key deal aspects the Amaze
founders should consider
9

Caselet – Debrief - Illustrative
• Promoters should make an effort to understand the
mandates of potential investors and their reasons
for investing
• Some contributors want money back in a finite time
period, some are not particular
• The value add and brand accretion or depletion due
to an potential investor need to be factored, it is not
only about money and equity stake percentage
• The clauses in the contract need to be checked with
care
10

• Founders of an investee company should think
through possible scenarios over the next 3-5 years,
assuming the company does as well as projected
and also assuming a scenario where projections are
not met
• Valuation today and valuation expected tomorrow,
both have a role to play in decision making
• Valuations expected in 3-5 years, depend on
assumptions for projections. These need to be
thought through carefully from multiple angles,
operations, finance, team, competitive landscape
and more
11

Caselet: You are an investor
• GR Fund is a fund of alumni of GR Institution
• The Fund invests directly and sometimes the alumni may also
invest in individual capacity
• Blyitz, a for profit company, which is working on a BOP
(Bottom of the Pyramid) model has got a commitment from an
Angel Fund (AF)
• AF tells Blyitz that they will put in money along with another
co-investor, so Blyitz approaches GR Fund
• Another HNI Fund managed by a professional also hears of
this deal and asks for information
• How will you evaluate the investment proposal from Blyitz if
you are a Fund Manager for GR Fund? What if you are the
HNI Fund Manager, will your approach be different?
12

• Each Investor and Fund Manager will approach it
from his or her fund mandate and how the
investment and disinvestment from this company will
fit into this
• Internal aspects, such as stage in the Fund Life
Cycle, current portfolio on hand, etc. will also play a
key role in evaluation
• If multiple fund managers are involved, the
differences and similarities in the mandates of the
funds will need to be assessed
• There needs to be collective discussion as to who
will lead the deal, do the due diligence and play an
active role post the funding. One or more of the
Funds may be involved in these aspects and more
13

Stages of investment
• Idea / Seed
• R&D / Pilot / Proof of Concept
• Commercialization / Scale up
• Early Stage
• Growth / Later Stage / Expansion
• Turnaround
• Acquisition, Inorganic expansion
• … etc.

Trends: ‘to trigger thinking’
“The Indian startup ecosystem has reached an inflection point, with
800 new tech startups sprouting in a year. This, taken in conjunction
with rising investment flows, makes it the world’s fastest growing
startup ecosystem, NASSCOM”
• https://www.techinasia.com/india-is-fastest-growing-startup-
ecosystem-in-world/
• http://www.nasscom.in/india-fastest-growing-and-3rd-largest-
startup-ecosystem-globally-nasscom-startup-report-2014
• Too much money chasing limited deals, i.e. demand is clearly
greater than supply, despite India currently being rated country with
3rd largest number of startups as per the NASSCOM report
• Technology based companies, ecommerce linked business, product
ventures, businesses leveraging on smart phone user bases,
solutions attempting to fix problems or providing solutions that
address large populations and customer segments… and more are
the flavors of this season.

Trends: ‘to trigger thinking’
• Anywhere you turn, anywhere you look, investors are
seeking startups to fund
• Start ups are also attracting the interest of investors
from the traditional businesses and business houses
from the so-called ‘old-economy’
• New categories of investors are emerging, with their own
investment philosophy, due diligence process; rules of
the game are being re written, depending on the
potential investors and business models
• Consortium funding is finding many takers, with safety
being seen in a large set of co-investors.
– This comes with its own set of challenges – for both the investors
and the investee.
– Consortium investors can also be a mix of individuals, funds and
corporate groups

At the start
Kinds of Investors
Project Requirement
Building the BPlan
Summary
Agenda
17 17

What a project must have
• High upside potential
• Potential for extraordinary returns to investor
• Exit route plan
• This implies – Rapid Growth, i.e.
– Total addressable market is really high
– Company has potential to address this market
– Company has ambition to address this market
– Company has the capability to Execute to achieve high growth
– Risks are articulated
– .. Etc
MUST Have Key Requirements:
• TEAM with Execution Capability and
• Huge Addressable Market

4 Points: Investors look for
• Team – leadership, multidisciplinary, integrity,
competence, capability to execute, domain
knowledge
• Idea/Service/Product potential to attract large
numbers of paying customers
• Market, opportunity, growth expected, barriers
to competition
• Exit avenue
What else do you think investors may seek?

Business Plan
• An output based on business model and
strategy, expected to evolve over time
• To be forward looking, based on past knowledge
of promoters and their work experience in the
existing or new venture
• Assumptions to be tested to see if they will be
valid for execution, i.e. to demonstrate this is not
a business plan on paper alone
• Risks to be factored in plan
• Multiple scenarios are looked at, revenues
expected are discounted, expected costs and
expected cash flows factored, sensitivity to key
parameters checked

Due diligence reviews (DDR)
Investment decision is based on DDR, some
illustrative reviews are below. Some of these or
aspects of these may be done in-house by the
investor, others may be out-sourced to experts and
professionals:
• Business
• Market
• Accounting
• Tax and Legal
• Technical
• HR

An Illustrative Sales Quality Review..
• Illustrative indicative parameters, for DDR
– Sales Quantity
– Quality of revenue - in terms of
product/service/vertical/location etc.
– Average revenue per employee
– Number of customers, number of high value
customers
– New customers added
– Customers lost
– Pipeline customers
– Customer acquisition strategy
22

Value Creation Review
• Investment should have potential for value
creation not value depletion; i.e. beyond
– Top line (revenues)
– Bottom line (profits) and
– Cash flow
• To understand financial and non-financial
aspects of business and investment into
business and impact on growth and
sustainability
23

At the start
Kinds of Investors
Project Requirement
Building the BPlan
Summary
Agenda
24 24

A BUSINESS PLAN COMMUNICATES…
• Many times, a reader’s perception of your
business/idea will be based on the business
plan you prepare
• Different persons will look for different things, a
banker will check if a loan can be repaid, the
VC will look for value multiples on exit
• Substance and form matter, more so, when
hundreds of plans are reviewed
25

AT THE STARTING POINT
Before starting on preparing the business plan,
think through the following:
PUT YOURSELF IN THE READER’S PLACE
• What is the reader looking for in a business
plan?
• What is the message you are trying to convey
through the business plan?
26

• Different persons may view the business plan
differently
• Try to understand background and experience of
individual/group to whom plan is shown
27

Before starting on preparing the business plan,
think through the following:
What are you looking for?
PUT YOURSELF IN THE READER’S PLACE
• What is the reader looking for in the business
plan?
• What is the message you are trying to convey?
• Is there some common ground between the
two? Or is there a disconnect?
28

• Just because someone rejects or scoffs at your
idea, does not mean it is bad
• Try to take some learnings from rejections
29

BUSINESS PLAN SET … Illustrative
• Word document (15 – 25 pages)
• Presentation deck (15 – 20 slides)
• Spreadsheet with financials (Balance Sheet,
Profit and Loss Account, Cash Flow; 3-5 years)
• You may like to keep in hand a separate
executive summary or summary business plan
as an initial teaser document (3-10 pages)
30

THE PLAN DOCUMENT
• You may prepare a detailed plan in sections,
which you may be stand alone and kept for
different purposes, ie sections for internal use,
for investor and for banker
• Keep a track on versions to minimise confusion
and possible errors
• Keep control of access to the document
31

BUSINESS PLAN
• The set should be self speaking: ie with limited
clarification required (including with regard to
abbreviations & technical terms)
• Reader friendly: Key information that you want
to convey should not be hidden amongst too
much details
Do not think only of what you want to share,
rather think about what your potential reader
may want to know
32

BUSINESS PLAN
• Plan on format of report and how data,
information, analysis, comments etc. are to be
presented
– Move what is not essential to flow of document to
main report
– Think of content required to capture attention of
reader; avoiding excessive information overload
33

BUSINESS PLAN
• Avoid using graphs for the sake of using graphs;
tables for the sake of using tables etc. without
substance in the document
• Avoid information overload, i.e. temptation to
disclose all you know and demonstrate your
knowledge and experience about the business
• Make attempts to protect your intellectual
property if any
34

CONTENTS : Illustrative
• Table of contents
• Executive summary
• Sections/chapters/paras
• Summary/conclusion
• Appendix of abbreviations, references, other
annexures
• Graphs, tables, figures - numbered and labeled
35

CHAPTERS - Illustrative
• Company and background information
• Management team, organisation structure
• Business idea, strategy and implementation plan
• Marketing strategy; sales plan
• Financial details; funding strategy
• Other information such as implementation
schedule, statutory environment applicable etc.
36

– Background history if existing company; current
status
– Rationale for existing business or new start up, value
proposition etc.
– General industrial environment of business;
competitive landscape in brief, brief background of
promoters
37

– Vision and mission statement
– Key business drivers and key constraints; SWOT and
business strategy
– Plan in terms of short term/immediate, medium-term
and long term goals
– Other key information to make initial background
information complete
38

• Management team, organisation structure
– Experience and qualification of promoters and key
team
– Roles and responsibilities
– Organisation structure
– Any key organisation/HR policies
39

• Business idea, strategy and implementation
plan, including inter-alia:
– Vision, mission
– Product/service offered
– Operational details
– USP(unique selling point); barriers to competition
– Differentiator
– Brand building plan
– Social media plan
– Strategy to handle competition
40

• Business idea, strategy and implementation
plan, including inter-alia:
– Details of any in-house techonology/process or idea;
or source of technology, ie technology transfer
through collaboration
– Details of alliance partners, current as well as
proposed
– Details of any intellectual property associated with the
business
41

• Marketing plan
– Target market size; TAM (total addressable market)
– Market research details
– Customer profiles; existing, potential/pipeline
– Marketing strategy
– Pricing strategy
42

• Financial details
– Past financials: Balance sheet, P&L account and cash
flow summary for five year period if available
– Future forecast – five years in summary (detailed
schedules may be in appendix)
– Details of how funds will be raised and utilised
– Details of contribution from promoters (cash/kind)
43

• Financial details
– Sensitivity analysis for key parameters, eg sales
variations of + / - 10%
– Scenario analysis:
– optimistic, normal and pessimistic (budget)
– Key ratios, break even, project IRR
– Other information such as quality of key parameters,
ie revenue based on geography
– Cash burn, i.e. monthly requirement of cash and
requirement for capital investment in phases
– Funding plan and strategy
44

• Other information
– Time lines, implementation schedule, expected date
of commercialisation
– Regulatory environment if applicable, ie
environmental laws for pharma company
– Other information which may be relevant to the
business
– Include any required references, contact information,
data and statistics
45

PREPARING THE BUSINESS PLAN
• PRESENTATION IS THE KEY
• CAPTURE THE READER’S INTEREST
• Think through the format of report and how data,
information, analysis, comments etc. are to be
presented
46

BUSINESS PLAN
• Points to consider
– You must believe in the idea to sell it
– Homework to be done before hand, adequate
knowledge required to be demonstrated
– Credibility is important, ie if caught with one
falsehood, nothing said would be believed
47

UPDATES/CHANGES IN BUSINESS PLAN
• Points to consider
– If there has been substantial change, update the plan
– The difficulty is when there are too many versions
which are floating around
48

At the start
Kinds of Investors
Project Requirement
Building the BPlan
Summary
Agenda
49 49

IN SUMMARY: At the starting point
As an entrepreneur
• What are your strengths/weaknesses?
• What do you like to do or think you like to do?
• What do you think you are good in?
• How would you bring this into your business?
As a business
• Have you thought about the business model?
• Have you thought about the soft issues such as team
dynamics, roles and responsibilities, leadership plan?
• Have you thought about your business plan structure?
• Have you thought about who will read/review your plan?
50

Some more points on the TO-DO list
• Plan for the business
• Plan for advisors / accountants / lawyers
• Educate oneself about the law and regulations to be followed
• Educate oneself on basics of managing a business and
finance
• Plan for long term impact of decisions taken with regard to
hiring employees, renting space etc.
Additional information/articles/resources at:
• www.slideshare.net/anjanavivek : Content in TOP 4% of
Viewed in 2013
• http://www.linkedin.com/company/venturebean-
consulting-private-limited
51

Thank You!
52

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