Excerpt
entrepreneurship.com
by Tim Burns
INTRODUCTION
Below is an excerpt from Chapter Five of Tim Burns' new book, entrepreneurship.com.
Burns is an MBA, CPA, and attorney, which means he can cover all the
angles of a business plan without getting hung-up in any one area. His
focus is on "reality-based planning," which doesn't mean your company
has to be profitable, but it has to show a clear path to profit.
Burns' most important contribution
to the literature of business plans is the "e-plan," a concept he borrowed
from venture capital guru David Cowan (Bessemer), and which he develops
in his book. Burns argues that a modern business plan should be presented
as a series of 12 PowerPoint slides plus an Executive Summary. This
approach is both unique and valuable.
An e-plan pleases potential investors by immediately getting to the
point. It's easy to update, and it helps entrepreneurs remember that
a business plan is wedded to a verbal pitch or presentation. For online
economy entrepreneurs who are serious (and in serious need of funding),
this book is highly recommended. More information about the author and
the book follows the excerpt. Good luck in your hunt for serious money!
THE E-PLAN
The Internet Entrepreneur's Treasure Map
by Tim Burns
Planning in a Real-Time Economy
Business commentators are divided
on the ability to effectively plan in the new economy. Some opine that
the pace of change is so rapid that it is impossible to plan for the
future. Successful companies during this competitive era are preparing
clear, flexible business plans that develop their vision of their intended
destination. Planning is necessary to develop your vision, but it needs
to be flexible. As a result, I am advocating a variation of the traditional
business plan that I call the "e-plan."
The e-plan helps you capture your vision while providing a flexible
platform for responding to the inevitable changes and shifts in the economy.
The new economy is no place for the 100-page business plan that flushes
out every conceivable detail. This exercise is not about earning a gold
star on your business plan from a difficult teacher or some picky banker.
Rather, it is about capturing your vision in a flexible format that facilitates
the execution of your business model -- that is the essence of the e-plan.
Enter The E-Plan
Extensive business plan were often aimed at traditional lenders who
wanted to be sure that no stone was left unturned. Chances are that in
today's economy, many of the old stones will disappear and be replaced
by new ones by the time a conventional business plan is finished.
I was never a fan of the business plan treatise. Supplementary information,
such as product circulars and marketing materials, can be included in
an appendix, but the narrative part of the plan should be a maximum of
20 pages. The object is not to unearth every conceivable detail but to
think through your business model. Few plans are read in their entirety
by potential investors, and the new economy requires an even more concise
way of formulating a business model.
This new format -- the e-plan -- is designed to help all the users of
the business plan, which includes the entrepreneur as well as potential
investors and employees. It is streamlined both for speed of digestion
and ease of use.
The e-plan consists of an executive summary and approximately a dozen
PowerPoint slides. Each slide addresses an important component of your
business model. I consider the e-plan to be more of a compass than a
map. It is designed to guide you in the right direction but is flexible
enough to accommodate shifts and changes in the marketplace. As these
changes occur, the e-plan can be used to produce a corresponding shift
in strategy.
Some of the advantages of the e-plan format are its overview, flexibility,
and presentation.
Overview. The executive summary and the slide format provide
a quick overview of all important components of your business model and
provide a comprehensive understanding of the model. The e-plan serves
as a ready reference for the big picture.
Flexibility. The slide format provides you with the ability to
change directions quickly. As changes occur in the marketplace, your
big picture can be changed accordingly.
Presentation. The slide format also facilitates the presentation
of your business to potential investors and employees. Chances are that
more people will be hearing your presentation as opposed to reading your
plan.
Elements of The E-Plan
Executive Summary
In the following text, I provide a one-paragraph summary of each of
the slides in the e-plan. Just because a plan is concise, however, doesn't
mean developing it is easy. I devote an entire chapter of my book, entrepreneurship.com to
each of these slides: what information investors are looking for, how
to gather and condense this information, and insights gleaned from the
successes and failures of other start-ups. This article is intended as
an introduction to the e-plan; my book will guide you through process
of preparing one.
This one- or two-page document is the single most important part of
your plan. In a nutshell, it summarizes your particular market opportunity
and the solution to a problem that your business offers. Busy investors
often don't have the time to read the complete business plan, particularly
when they are qualifying potential businesses. They usually rely on the
executive summary to provide a snapshot of your business model. One way
to look at the summary is to think of it as the story of your business.
What need does your business fulfill? How can you best summarize your
business in 60 seconds or less? What is your vision?
Slide 1: Name of Company
Suffice it to say that the name of any Internet business is extremely
important. As you might have already found out, selecting a domain name
these days is no simple matter. Choice domain names are being bought
and sold for heavy premiums. With the domain name so important, it is
obviously something to which you need to give considerable thought. Start
immediately searching for one if you don't have a name already.
Slide 2: Mission Statement
The mission statement is an abbreviated form of the executive summary.
In one or two sentences, what does your company stand for?
Slide 3: Management Team
The management team is of particular concern to investors. Note that
I use the word team. Writer John Dunne proclaimed that "no man
is an island." In addition, no entrepreneur is an island, either. The
entrepreneurs that can attract the right people are the one that ultimately
succeed. The management team is the backbone of the company. A founder
that cannot attract a quality management team will have trouble attracting
good employees as well as customers.
Slide 4: Market
This slide will analyze the size of the potential market as well as
its growth rate. One of the primary advantages of the Internet is that
the target markets are so huge.
Slide 5: Industry
Industry concerns a discussion of the structure of the particular industry
that you are targeting. Who are the buyers and the sellers? Who are the
suppliers? What is the market chain of the industry? How would you diagram
it? Is the industry in a growth mode?
Slide 6: Pain -- The Market Opportunity
This slide considers the pain or the opportunity in the market. Where
is that part of the market broken or inefficient? How does it create
an opportunity for you? Where is a problem that your business will solve?
The best business opportunities are based on the most compelling needs
of the marketplace. This often applies to a highly fragmented industry
or an industry with an inefficient market chain.
Slide 7: Solution
What is your solution to the problem or pain in the marketplace? What
is your answer to the disintermediation or the need in the marketplace?
How does your product or service benefit the marketplace? Why is your
solution unique from others? Do you have a competitive advantage that
can be sustained? Is your solution scalable, allowing it to be implemented
on a large scale?
Slide 8: Marketing Plan
This slide represents an overview of your marketing plan. How are you
going to attract customers? Are there viral marketing possibilities you
can exploit? Viral marketing is a strategy in which customers do much
of the marketing for you. What unique marketing advantages do you have?
What important alliances can you develop?
Slide 9: Financial Projections
This portion of the plan involves the projection of revenues and expenses
from the business. Although many investors discount projections, they
can play an important role in examining the financial portion of the
business model. The most useful projections are developed around a meaningful
unit of measure, or metric. For example, revenues and expenses could
be analyzed and expressed on a per customer basis. What is your acquisition
cost per customer? What is his or her worth in terms of lifetime revenue?
How many customers do you need to break even? Your projections should
detail your use of start-up funds, which include capital expenses and
working capital needs until the business reaches breakeven.
Slide 10: Valuation Analysis
This final slide can be thought of as a segue between where your presentation
ends and negotiation begins. Build the case for the valuation of your
company based on your business model. Choose the most relevant metrics
to compare your business with one traded publicly. This slide is very
useful in talking with potential investors and employees.
Uses of The E-Plan
The main audience for your e-plan is you. First and foremost, the e-plan
is a way of quickly capturing your vision and putting it in a format
for execution. The plan has to make sense to you and guide you in propelling
your vision into reality.
The next audience for your business plan is potential investors. Investors
today simply don't have the time to wade through long plans. A short,
direct format serves the purpose better. Moses Joseph of Anila Corporation
relayed that knowledge of the market is much more important than a written
business plan. He mentioned that he can tell whether a person really
knows the market within five minutes of talking to him or her. In Joseph's
opinion, the value is not so much the written plan but rather the discipline
of the planning process itself. This process forces you to fully examine
the particular market opportunity and confront certain critical issues
associated with your venture. It is very important for entrepreneurs
to completely and fully understand their markets.
The next audience for your business plan is your potential employees,
suppliers, and affiliates. For this use, a good business plan can show
them that your business is for real and that you have given it considerable
thought.
Copyright ©2002 by Tim Burns.
All rights reserved. Please feel free to duplicate and distribute this
file as long as the contents are not changed and this copyright notice
is intact. Thank you.
