Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

A business plan is a document describing a venture’s opportunity, its product or service, context, strategy, team, required resources, and potential financial returns. It is guided by three basic questions:

• Where are we now?

• Where do we want to be?

• How are we going to get there? There is ample material available on how to structure and write a successful business plan. We could even go so far as to say that the art of writing business plans has been commoditized over the years. Therefore, the mechanism behind the document should not present the entrepreneur with insurmountable challenges. What makes successful business planning so difficult is the time and thinking necessary for the entire process. It requires – usually for the first time – sitting down and carving out and putting in writing every single detail about the what, whys, and how-tos of the business.

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

Key Elements of the Business Plan

New Venture Team

Many factors need to come together to start and grow a successful new venture. However, first comes a great idea and directly after that the people who can realize it. It is generally believed that startups thrive and prosper when standing on the shoulders of more than one person – especially science-based and high-tech startups. A single entrepreneur typically can make a living out of the business, butstartups that are led by teams create substantial value. The advantage of having a team is mostly in the greater network, the more diverse knowledge and skills, and the possibility to divide and specialize tasks, which eventually enables faster growth. However, forming a successful team is sometimes compared with the process of courtship and marriage. And like some marriages, there are divorces. So choose your partners wisely. This handful of individuals is likely to stick around for a while and will have to fight some battles. The way team members find one another varies significantly, and it is hard to say which way – if any – is best. Some teams form by accidents of geography, others through common interest, still others by working together or simply through past friendships [9]. However, only two distinct patterns can be identified for team formation as such: Either there is an individual entrepreneur who will be joined over the first few years by three or four partners, or the team was already formed at the outset. Both can be successful.

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

Market Analysis and Sizing

Following the evaluation of the opportunity, this part of the business plan should be quite quick to do. But a business plan does need to give credible statements on the venture’s market and size, beyond the back-of-the-envelope exercise done in the BCP. Often entrepreneurs do not have a clear understanding of what a market actually is and sometimes confuse it with an industry. However, the attractiveness of each can differ. So, to clarify: A market consists of a group of current and/or potential customers with the willingness and ability to buy products – goods or services – to satisfy a particular class of wants or needs. These potential customers may be consistent in their geographical location, purchasing power, or buying attitude. An industry, by contrast, consists of sellers, i.e., you and your competitors. Analyzing a market can and should be done on two different levels: The macro and the micro environment. The macrolevel analysis typically asks questions about things such as the number of customers, aggregate money spent, and number of units and usage occasions. Answers to these questions are often to be found in secondary data sources such as trade publications, the business press, and so on.

Also, these sources might give answers to how fast the market has been growing and the expected growth rate in the future. The analysis should also cover macroeconomic trends in terms of possible political, technological, and socio cultural developments. The micro level analysis is somewhat more intricate. It is about segmenting the market and putting a name to potential customers. At the end of the day, a successful business needs to find customers who are willing to pay for that business’s product or service. Successfully entering and competing in a market is frequently accomplished by solving a customer need, which does not necessarily mean selling a particular feature of a technology. It is more about delivering benefits. Convincing customers that you have the best solution to their problems, or even teaching them that they have a need you can fulfill, is actually the challenging task.

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

Industry and Competitor Analysis

No serious investor will believe a startup that claims there is no competition. If there really were no competition, there would be no market. Furthermore, even if it were possible that there was no competition, as soon as the startup began making money, many players would enter the market seeking to gain a share of the trail that the entrepreneur had blazed. Therefore, any serious business plan needs to contain a careful analysis of the industry, its outlook, and the competitive forces inside. At a bare minimum, the plan should lay out what percentage of the market the venture could realistically achieve, both at the beginning and five years on once the big players and other startups enter the fray.

The typical approach here is to perform some textbook strategy analysis such as Porter’s five forces or SWOT analyses, but this often reads like boilerplate material in a business plan. Instead, we would recommend tailoring the analysis to the opportunity. In no-nonsense language, explain what the market is, how quickly it is growing (backed up with references to credible market research), and who the main players are. Find a startup that was in a similar situation in a similar market and explain what its market share was and why yours would deviate (or not) from that of the other startup. Then, assuming there will be some competitive reaction, discuss how your company would respond and what your long-term market share would be. Make a table with the competitive advantages and disadvantages of all the players in the market.

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

Intellectual Property

Intellectual property (IP) is one of the most important and, at the same time, one of the most delicate assets to handle of the new technology-based venture. IP can be any product of the human intellect that has value in the marketplace, i.e., products, technologies, methods, processes, new services, and new designs. Recognizing the value of the knowledge contained in these assets and identifying and legally protecting the parts that are the original property of the entrepreneur can become the heart of any commercialization strategy. Four main instruments of IP protection exist: patents, copyrights, trademarks, and trade secrets.

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

The Business Model

A business model essentially defines how a firm competes in the marketplace and how it earns profits from this activity. This includes, in particular, how the firm structures its relationships with customers and suppliers. All else being equal, the profit that can be made from a technology depends on choosing the right business model. The trade off is to find a balance between quick market access and, at the same time, maximizing the returns from the investment made. It also relates to decisions on whether to make or buy, whether to sell or license products or components, and whether to sell a product or a service or a combination of both.

Internal factors that influence the choice within this continuum are the founder’s long-term ambition vs. the immediate economic and promotional needs of the technology at the particular moment. Externally, it depends on the ability to mobilize particular market partners to deliver the technology effectively and quickly. The latter, above all, can serve as a strategic asset, preventing other companies from entering a particular market. The best product is no good if you cannot get the resources to build it or deliver it to your customer. Bearing this in mind, it is particularly important to understand that a business model goes well beyond the boundaries of the firm. It needs to be defined in relation to other market actors: Partners to deliver the product/service, customers, and competitors. As it is naturally difficult for small and unknown ventures to enter into these types of partnerships, it is advisable to seek out collateral benefits that could convince potential partners.

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university

The Marketing Plan

There are two distinct ways in which products emerge – either as a result of a research-and-development project (technology push) or by first listening to a customer need and developing a product accordingly (market pull). Most products in the real world are the outcome of a mix of both models. It is unlikely that any successful technology company will either exclusively develop to customer needs or exclusively try to find markets for its greatly engineered products. The first rarely succeed long term because they frequently miss out on the highly innovative and high-margin products that customers did not know they would like until they had them. The second group of ventures spends too much money developing products that mostly fail to find a customer at all. Science-based startups tend to be among the second group. They often struggle to strike a balance between engineering and marketing.

Financing the Venture

Talking About Risk

Unit VI Business Plan Preparation for New Ventures for New Venture Planning Bcom sem 1 Delhi university