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Business Plan
Preparation
College of Business Administration
University of Central Florida
Business Models
2
Determinants of Performance
What Creates a Successful
Business Model?
Customer value
Scope
Pricing
Sources of revenue
Connected activities
Capabilities
Implementation
Sustainability
4
Critical Business Model
Questions
Component of Business Model
Question for all Business Models
Customer Value
Is the firm offering its customers
something distinctive or lower cost than
its competitors?
Scope
To which customers (demographic and
geographic) is the firm offering this value?
What is the range of products/services
offered that embody this value?
Pricing
How does the firm price the value?
Revenue Source
Where do the dollars come from?
Who pays for what value and when?
What are the margins in each market and
what drives them?
What drives value in each source?
5
Critical Questions for a
Business Model
Connected
Activities
Which set of activities does the firm have to perform to offer this
value and when?
How connected (in cross section and time) are these activities?
Implementation
What organizational structure, systems, people and environment does
the firm need to carry out these activities?
What is the fit between them?
Capabilities
What are the firm’s capabilities and capability gaps that need to be
filled?
How does a firm fill these capabilities gaps?
Is there something distinctive about these capabilities that allows the
firm to offer the value better than other firms and makes them more
difficult to imitate?
What are the sources of these capabilities?
Sustainability
What is it about the firm that makes it difficult for other firms to
imitate it?
How does the firm sustain its competitive advantage?
6
Business Model Dynamics
7
Generic Strategies and
Complementary Assets
Who Profits from Innovation?
Appraising a Business Model
Appraising a Business Model
11
Appraising a Business Model
12
Elements of a Successful
Business Plan
Agenda
Elements of a Successful Business Plan
Twelve Steps to a Successful Plan
Twelve Components
Step One – Assess Feasibility
Elements of a Successful
Business Plan
Executive Summary
Company Overview
Product Plan
Industry/Marketplace
Analysis
Marketing Plan
Operations Plan
Development Plan
Management
Financial Summary
Offering
Appendices
5-yr P&L
5-yr Balance Sheet
5-yr Cash Flow
1-yr monthly CF
Other support docs
How to Write a Plan?
Iterative Approach
Step One – Assess Feasibility
Quick Concept Analysis
Bring all members of team up to
speed
Review critical plan components
Identify missing information /
research
Industry and Marketplace
Analysis
Agenda
Industry and marketplace analysis
Industry analysis
Marketplace analysis
Customer analysis
Competitor analysis
Product/service description
Industry and Marketplace
Analysis
Overview of industry and marketplace
Trends, dynamics, problems, opportunities
Demonstrate need or hole in marketplace
Show how trends lead inevitably to your concept
Tone of dispassionate analysis
Arms-length viewpoint, outsider looking in
Not the place to describe your concept or firm
This is not where you present your market strategy
Conceptual Picture
Save for
Marketing Plan
Your Industry
Your Marketplace
X
Buyers
You Sellers
Industry analysis
Overview of industry
organization
Pure competition, oligopoly,..
Focus on major and
important trends
Identify disruptive
technologies (if any)
Porter analysis is a good
exercise
May or may not include in
plan
Industry Questions
How do we define our industry?
How is the industry segmented?
What are current trends and important
developments?
Who are the largest and most important players?
What problems is the industry experiencing?
What national and int’l events influence our
industry?
What are growth forecasts?
Marketplace Analysis
Define and describe your marketplace
Niche, geographic area, subset of larger industry
What’s happening in your market?
Network! – talk with the marketplace
Customers, competitors, vendors,
suppliers, salespeople, …
Chambers of commerce
Industry trade groups
Marketplace Questions
How do we define our marketplace?
How large is it and how fast is it growing?
How is our marketplace segmented?
What companies currently service this market?
What trends are important in our marketplace?
Customer Analysis
Identify current buyers in your
marketplace
Segment these customers
What “problems” are not being
solved?
What needs are not being met?
Which customer segments are
currently ignored?
Talk with current buyers!
Customer Questions
Who are the traditional customers in
this market?
How is the market segmented?
What motivates buying decisions?
What channels of distribution are
used? What channels are ignored?
In what ways are customers dissatisfied
with current offerings in the
marketplace?
What customer needs are currently
unmet by the market?
What emerging customer groups are
being ignored?
Competitor Analysis
Identify current sellers in your marketplace
 Niche and focus
 Target customers
 Strengths and weaknesses
Talk with current marketplace
sellers!
 Sellers themselves
 Vendors
 Customers
Competitive Matrix Comparison
Competitive Matrix
Competitive Matrix Chart
Product or
Service
Competitor A
Competitor B
Competitor C
Competitor D
Competitor E
Competitor F
Production
/ Quality
Unique
Features
Distribution Marketing / Geographic Strengths &
System
Advertising Location Weaknesse
Market
Share
Competitor Questions
Who are current sellers in the marketplace?
What are the attributes and characteristics of these sellers
and their products/services?
What is their size, location, target market, and other
important characteristics?
For their products or services, identify price, quality, features,
distribution, and other important attributes.
What problems and concerns to customers have with these
sellers?
Product/Service Description
Introduction
Description
What is your product or service?
Describe carefully.
Market comparison
Why is our product or service unique or
better?
What problems does it solve for
customers?
Proprietary rights (if any)
Stage of development (brief)
Use this section to sell your concept
Product/Service Description
35
Product/Service Summary
Introduction
Write an evocative paragraph that
attractively presents your product
or service
Entering Hill’s Kitchen, customers are engulfed by the aroma of warm, hearty
soups and freshly baked breads. They relax to music and peruse our menu of
original gourmet recipes and freshly baked breads.
A friendly and
knowledgeable kitchen staff person greets them at the counter to offer
suggestions and health information, and to take their order. Within moments
the customer is served a generous portion of hot, hearty, and delicious Hill’s
Kitchen soup. Accompanying the soup is a large slice of freshly baked bread
and a fresh fruit choice, all of which can be carried out or enjoyed in our clean
and comfortable dining area. In just those few brief moments, Hill’s Kitchen
has served another healthy and delicious meal, and satisfied yet another
customer.
Product or Service Life Stages
Death
Discovery
Differentiation
Optimization
Retrenchment
Differences Between
Services and Products
Products are generally tangible, services intangible
Services are created and delivered at the same time
Services cannot be inventoried
Services are highly visible to consumers
Some services have low barriers to entry
and exit
Location is often important to service
design, with convenience as a major factor
Service systems range from those with little or no customer
contact to those that have a very high degree of customer
contact
Demand variability alternately creates waiting lines or idle
service resources
Differentiation Road Map
•Delivery
•Warranty
•Installation
•Time of sale
•Service
•After sales
•Special terms
•Usergroups
•Design help
Communications
Augmented Benefits
Tangible Benefits
Core Benefits
What’s it for?
What’s it do?
Example:
Morton Salt
•Brand
•Features •Trademark
•Packaging•Bundling
•Quality
•Color
•Size
•Style
•Options
•Timeliness
•Customize
Morton Salt
Core Benefit
Flavor enhancer, preservative, health
Tangible Benefit
Iodize, pourability, granule size, color
flavor, packaging, organic, sea salt
Augmented
Delivery (restaurant, road dept.),
healthy recipes
Communication
“When it rains it pours” (girl with
umbrella)
Company Overview
Company Overview
Introduction (1 paragraph)
Name
Geographic location
Legal form of organization
Vision Statement
Mission Statement
History and Current Status
Markets and Products
Objectives
Vision Statement
Pithy 4 to 10 word statement of company purpose
Expresses the fundamental idea or goal of the firm
Use in business plan, advertising, descriptions of
business, business cards, etc.
Mission Statements
What is a mission statement?
What makes a good mission
statement?
Why does the organization exist?
What do we do differently?
How do we create value?
Mission Statements
What makes a good mission statement?
 Compelling
 Inspiring
 Clear, measurable objectives
 Concise
Marketing Plan
Marketing Plan Objectives
Most important piece of your plan
Build on industry and marketplace
analysis – define your niche
Identify your customers
Demonstrate how you will solve
problems for customers
Describe how you will reach
customers – advertising sales
Convince reader that there is an eager market for
your product or service
Marketing Plan Outline
Introduction
Target Market
Product/Service Strategy
Pricing Strategy
Distribution Strategy
Advertising and Promotion
Sales Strategy
Sales and Marketing Forecasts
Introduction
Seven sentence introduction
1.
2.
3.
4.
5.
6.
7.
The first sentence tells the purpose of the marketing strategy.
The second tells how you’ll achieve this purpose, focusing upon your
benefits.
The third tells your target market – or markets.
The fourth, the longest sentence, tells the marketing weapons you’ll
employ.
The fifth tells your niche.
The sixth tells your identity.
The seventh tells your budget, expressed as a percentage of your
projected gross revenues.
Introduction – Example
The purpose of Prosper Press is to sell the maximum number of
books at the lowest possible selling cost per book. This will be
accomplished by positioning the books as being so valuable to
free-lancers that they are guaranteed to be worth more to the
reader than their selling price.
The target market will be people who can or do engage in freelance earning activities. Marketing tools to be utilized will be a
combination of classified advertising in magazines and
newspapers, direct mail, sales at seminars, publicity in
newspapers and on radio and television, direct sales calls to
bookstores, and mail-order display ads in magazines. The niche
to be occupied is one that stands valuable information that helps
free-lancers succeed, the ultimate authority for free-lancers.
Our identity will be one of expertise, readability, and quick
response to customer requests. Thirty percent of sales will be
allocated to marketing.
Target Market Strategy
Identify the market niche you will serve
Be as specific as possible
Better to be too specific
Benefits to target market
What problems do you solve?
What needs do you fulfill?
Two Types of Benefits
Emotional
Hope, fear, love guilt, greed,
convenience
Financial
Increased profit, value pricing,
save money, payback period
Talk to Your Customers
Imperative that you talk with customers!
Casual conversations
Interviews
Surveys
Focus groups
Identify needs
Listen!
Target Market Questions
What buy now? How get service?
Would you be interested in …?
Demographics
Newspapers, magazines, TV
Would you buy?
Where would you expect us to
advertise?
Who do you consider our competition?
Other comments?
Levinson, “Guerrilla Marketing” 3rd edition
Creating New Market Space
HBR, Kim & Mauborgne
Reduce
What factors might be reduced well below industry standards?
Eliminate
What factors might be
eliminated that the
industry has taken for
granted?
Create
New
Market
Space
What factors might be
created that the
industry has never
offered?
What factors might be raised well beyond industry standards?
Raise
Product/Service Strategy
Describe how the design of your
product/service fulfills unmet
marketplace needs
Differentiate your product/service
from the competition
Explain why and how customers will
switch to your product or service
Describe how you will defend your
product or service from competition
Product Attribute Map
Attribute 1
Competitor 3
You
Competitor 1
Attribute 2
Competitor 2
Pricing Strategy
Describe and justify
your pricing strategy
Provide evidence that
your target market will
accept your price
Position your strategy
relative to current and
potential competition
NOTE: Low price often (usually) is NOT a good strategy
for a startup!
Advertising/Promotion
Describe how you will communicate with current
and potential customers
Advertising
Public relations
Personal selling
Printed materials
Other means of promotion
Explain why this be strategy is most effective in
reaching your target market
Note: See Guerrilla Marketing
Distribution Strategy
Explain how you will deliver your product or service to your
customers
 How will your customers acquire your product or service
Describe and justify the distribution channels you will use
Describe how you will gain access to your planned
distribution channels
Sales Strategy
Describe to whom you must sell your product
or service (not always obvious)
Explain how you will “sell”
 An internal sales force
 Manufacturer's representatives
 Telephone solicitors
Describe how you will support your sales
effort
 internal staff
 service operations
Goals for Marketing Plan
Compelling “story” that there is a
need in the market
Need flows logically from industry
analysis
Product/service designed to fulfill
market needs
Advertising, price, distribution, and
sales all flow logically, convincingly
from characteristics of the market
“WOW! What a great idea! I wish I
had thought of that…”
Management Team
Management
Company Organization
Management Team
Management
Company Organization
Organizational structure
Ownership structure
Board of directors/advisors
Management
Management Team
Key managers
Duties and responsibilities
Unique skills
Compensation
Planned additions to the team
Operations Plan
Operations Plan
• Operations Strategy
Added Value
• How will we use operations to add value for
customers in our target market?
• Operations Emphasis
• How will we win in the marketplace on the
dimensions of cost, quality, timeliness, and
flexibility?
• Which dimensions will we stress and which will
we de-emphasize?
• What comparative advantages do we
have with our operational design?
Operations Plan
Scope of Operations
• Make vs. Buy
– What will we do in-house and what
will we purchase (make vs. buy?) Why
does this make sense for our
business?
• Partnerships
– What will be our relationship with
vendors, suppliers, partners, and
associates?
• Personnel
– What kind of people will we need to
hire?
Operations Plan
Ongoing Operations
Execution
 Describe ongoing operations
 Specific to your business – hard to
generalize
 What will you be doing on a day-to-day
basis?
Critical success factors
 Key performance indicators
Include detail in an appendix, as
necessary.
Development Plan
“Welcome to the Graveyard of Good Ideas”
“Development” Defined
What must be done between
now and when you open your
doors for business (or collect
your first dollar in revenue)
Development plan may include
 Product / service development
 Organizational development
 Successive products / services
 Roll-out strategies
Development Questions
What work remains to be done?
What factors must come together?
What are we doing to bring them together?
What are the risks our development?
Are they technological risks? Cost risks?
How will we mitigate these risks?
Competitive risks?
Traditional Product
Development (Old School)
Start
Concept Freeze
Market Introduction
Development
Implementation
Total Lead Time
Development
Implementation
Start
Concept Freeze
Market Introduction
Flexible Product
Development (New School)
Sense the Market
Specification
Design
Testing
Implementation
Stabilization / Ramp-Up
Total Lead Time
Market Introduction
Development Timeline
Schedule for development
Major milestones
Tie-in with marketing plans
Major obstacles and mitigation plans
Development Timeline
Tool for illustrating timeline…