Business Plans

Class 3
August 26, 2009

In this section we look back at earlier discussions and

complete workshopping our understanding of the concept
of value-price pairing to develop a value proposition

QUICK RECAP

Stages to Market
Validate Business
Idea

Offerings Concept
Development

Create Business
Proposition

Business Proposition
Document

Create Business
Model

Business Model
Document

Develop Business
Plan

Business Plan

Start Business
Enter Market

The Business Concept

Three basic elements of your Business
Concept
1.The Offering/s: the product or service you
intend to deliver
2.Market Segments: the specific groups of
customers to whom you will deliver these
3.The Channel: the means by which the
offering/s the customers and how they will
pay for it

Complements and
Substitutes
For your business concept to succeed it must
establish its position wrt other offerings in the
market. These fall into two main categories:
1.Complements: these increase the value of
your product to the customer e.g. lighting or AV
will enhance your retail space design. You must
include their impact in your concept and plans
2.Substitutes: these will decrease the value of
your product to the customer they are your
competitors offering products similar to yours.
You must prepare responses and understand
how to increase your value to your customers in
comparison

Testing a Business
Proposition
Business

Business
Concept

Development
Process

Business Concept
Testing

Ready?

Market Testing and

Judgment

Advantage
d?

Legal and
Strategic Analysis
and Judgment

Protectable
?
Business Concept
Document

Next Stage

Value Proposition
The answers to these two fundamental
financial questions will help determine
whether your business can earn enough
to cover expenses and return a profit:
What value will be delivered to the customer?
Why, specifically, will customers buy your
offering? What will its worth be to them?
What price will the customer pay for it? What
will your business have to charge for its
offerings to return a profit that will justify the
investment? If the required price is higher
than the worth of the offering then the
business is not viable and must be redefined

Value Offerings vs Market Needs

Designer Photoshoot
Publication Design Print Ads
Web Retail Space
Film maker Set Design Print
Magazine Publication Design Photography
Govt./Pvt. Signage Branding
Graphics Promotion Animation
Styling
Product Development AVs
Retail Space Graphics.. .web Space Design
Advertising
Signage Photography

Direct

Branding Publication
Space-Design Signage
Fashion

Channels

Offerings

Indirect

Packaging Advertising
Animation/ Web

Summarise Business
Proposition
Then your Business Proposition should
comprise 3 sections:
1. Business Concept
1.
2.
3.
4.

Offering/s
Market Segments
Channels
Value net including substitutes and
complements

2. Value Proposition
1. Value
2. Price

3. Conclusions and Critical Assumptions

The Value Chain

Management and Administration

Marketing
Product
Development

Sales
Operations

This value chain represents all the activities generally to be

performed in bringing a product or service to market. Your
business model may determine if any of these functions
should be outsourced. Normally, Management obviously is
not outsourced.

Bringing your business idea to life

BUSINESS PLAN
Sources:
Kelly MD

1. Stanford class notes instructor Douglas

2. Taking Technology to Market Roger E.

Levien

Why a Business Plan

Its more for you than anybody else

It allows you to organize your thoughts
It allows you to see what you are missing
It shows others that you have a rational
organized process
It becomes a historical document to let you
see what you were thinking at the time
It is a recruiting tool

Why a Business Plan

It keeps you honest
It is a starting point for a tactical operating plan
It is a document that justifies the existence of a
company
It is a critical document that assesses pros and
cons
It is a roadmap for strategic focus
It is a money-raising document that represents
what kind of founder you are
It outlines financial & operational milestones
and specifies capital requirements for each

What do You Need for the Business

Plan?

Research, research, research

Honesty, honesty, honesty
Guts
Determination that if it does not hold together,
change the model or kill the plan
Recognition that it is cheaper to kill a marginal idea
than to try to make it work
Do your financial homework
Talk to your customers
Talk to your competitors
Realize you can never do enough work on your plan
Remember that it is a living document

Parts of a Business Plan

Executive summary/use of funds

The problem/the market
The solution (your business proposition)
Market and trends
Sales strategy and distribution
Intellectual property (patents, trade secrets, unfair
competitive advantage)
Government regulation
Exit/liquidity
People (key employees, advisors)
Financials (Capitalization chart, 5 years of income
statements, balance sheets, cash flows)
Appendix

Executive summary
1 or 2 pages
Summary of business plan with all
sections
Your one chance to grab the reader
Avoid hyperbole
The more quantitative you are, the better
Cite your sources
How much you want to raise

The problem
Describe what the customers itch is
Current solutions
Current costs/size of market
opportunity
Who cares?

The solution

What can you do?

How much does it cost?
Who says it is important?
Discusses specific attributes
Describes the logic behind this solution
Establishes the credibility of your due
diligence
Is it a marginal improvement or
revolutionary?

The solution

Will competitors get to it if you dont?

What makes your solution unique?
Is it a must have or a nice to have?
Does it allow my customer to do it
better/faster/cheaper?
How do you keep from getting pulverized?
What makes you so smart?
Developmental milestones, timelines and
costs, uses of cash
Strategy & tactics

The Market

How big?
How is it divided?
Who owns what?
Who are your customers?
How are they organized?
What are the politics of their
organization?
Who are your early adopters?

The Market
What are their motivations?
Why should they buy from a new
supplier and not a trusted brand?
What influences their buying decision?
Where is your niche?
Total vs. Addressable vs. other
Growth
Changes due to technology or other
reasons

Sales Strategy &

Distribution
How am I going to sell, direct or
through distributors?
How am I going to price?
Can I support my own sales staff?
Can I access my customers? How
much will it cost? Alternatives?
How much profit will I have to give to
the channel?

Sales Strategy &

Distribution
How much will each salesman have
to sell?
What prevents my distributor from
competing with me?
What are their incentives?
What prevents them from selling
competitive products?

Intellectual property

Patents
Trade secrets
Know-how
Contract/agreements
Unfair competitive advantage

Government Regulation
Taxes and levies
Import and other duties
Statutory compliances
filing monthly, quarterly, annual returns
Labour laws
Book keeping

Exit/Liquidity
Going public
Selling your
company/merging/getting acquired
Participating in an ongoing revenue
stream

People
Key employees (CEO, CFO, VPs, Sr.
technical people, inventors)
Board members/investors
Scientific Advisory Board
Business Advisory Board
Lawyers
Accountants

Financials
Should tell you how much money you
need to reach your milestones
Should justify why this is a good
business/investment
Should allow you to do sensitivity
analysis and ask what if I am a quarter
ahead or behind?
Capitalization chart, 5 years of income
statements, balance sheets, cash flows
Should be able to show why each round
of financing is a good investment

Appendix
Technical documents
Certificate of incorporation
Other documents referred to in the plan

The class will form 8 to 10 small groups. Each group will be represented by a leader. The
groups will each prepare a Business Plan on a business of their choice e.g. graphic-design
studio, specialised photography studio, multi-design-service practice (must define each
service), product design studio, fashion-design house, apparels boutique - anything that strikes
you as doable. Each week the groups will briefly (max 3 minutes each) present progress on
their plan, led by their group leaders. The final plans will be presented by all groups,
professionally formatted and printed, by November 18, 2009. Appraisal of these plans will
comprise marks added to overall individual appraisals for performance in Design Management.

PROJECT: MAKE A
BUSINESS PLAN OF YOUR
PROPOSED BUSINESS