Sign Hawaii Banking Business Plan Template Later

Industry sign banking hawaii business plan template later

good to be back in 2 k's hall Lex told you that I was a founder of the competition here but I really am a serial entrepreneur when I got out of school I started my first software company within two months and actually had a total of four startups one of which completely cratered had to just shut it down but three of which eventually got sold but the one that I had for 30 years was the one that enabled me to retire and become a professor here in 2001 so I've been teaching entrepreneurship here until last year that is since 2001 it's been a wonderful wonderful experience working with so many wonderful teams of students over those those many years let me ask first of the people in this room how many of you are in the final forty two teams that made the semis that are here to learn about writing your business plan for the semi-final round okay how many of you are not among those forty two teams wow that's off to you guys i hope you get enough out of this that you can write a successful business plan and get it launched also that's very impressive but glad to have you here and also I'd like a break down how many of you have GW upstart presentations social ventures just to show of hands good good we just started that two years ago as a separate track and as you may know the number one team last year was the Social Venture and I'm sure we'll have many more great ones this year this little background entrepreneurship you may know is the number one fastest-growing course of study and universities today across the United States and obviously you're part of that because you're here tonight it's also a major contributor to our economy as you can see some of the statistics over fifty percent of GDP in our country as its normally measured to private GDP not government the private gdp comes from entrepreneurial head small businesses in fact it's become quite a big discussion about the economy the United States and importance of creating new jobs and the importance of innovations and small businesses are really far and away the leaders in both of those categories in terms of creating new jobs some seventy percent plus of all new jobs in our economy are created by by startup businesses in the first few years they're in business and so we need to have more and more new businesses being created to reduce our unemployment and create jobs and on the innovation front the statistic there is one that continues to astound me but it's still true today that if you compare new jobs created per employee between small businesses and large businesses and by the way the Commerce Department the United States breaks all companies down between small medium and large so I'm comparing the small with the large here the small ones generate 13 times as many new jobs per employee as the big businesses do great innovations 13 times as many new innovations that's that's really measured by patents and intellectual property creation 13 times as many as patents as the big companies do you just talked about why you write a business plan the second bullet talks about the one that's important to you right now inside your company you will have this plan in writing as a guide to carry you forward as you launch your new business and you can compare what happens in the real world with what you thought would happen when you were at the plant and i can predict i'll be differences maybe not great differences but that's a great reason to have a business plan but the other real big reason in the text books i'll talk about both both reasons inside the company outside the outside the company reason has to do with raising capital and finding investors because they want to read about your your business in the coherent way and a business plan is the best way to do that it also applies to lenders like bankers that might you might approach about getting a loan or line of credit it would also apply to many other situations a lot of you may end up in incubators somewhere around town when you get your business going to get into an incubator you need to show them your business plan they want to make sure that you know what you're doing or they want what you necessarily in their ink in their incubator but actually there's a third reason i'd like to mention besides the two textbook reasons and and this is one that I think you may be beginning to feel a little bit personally once you've gone through the process of writing a business plan and you've got all this evaluation the competition and how hard it's going to be and how much money you have to raise and etc etc does it really pass your own personal let miss test in terms of what your is it is it worth it do you really want to go ahead and do it and it's a reality check i guess you'd say do you really want to proceed so that's a third reason for writing it but i hope that as you as you've worked on your plan you become more and more excited about it but it is it is a reality check because you're putting down and black and white a lot of information that you've probably never written down before about the hard facts okay let's get into the structure of the plan you all probably know by now the rules it's got to be ten pages maximum plus five for the appendix and by the way the cover page and the table contents don't count so start with page one after the table of contents so you have your 10 pages maximum and do try to write all ten if you can there are eight required sections for the judges to evaluate you on and those are listed on the website I hope you're familiar with those eight because I'm going to be going through them tonight but if you have ten pages and eight sections my advice is to write at least one full page on each of the eight topics and then pick your strongest areas to write more about like if your strongest area is your value proposition and your strategy whatever section number that is write two pages on the value proposition and strategy that section or financials are your strengths write two pages on financials and then the last point is an obvious one you don't want to be too flashy too glitzy but you you want to have a nice clean well written plan it's it's it's really important that it be well-written that's actually ten percent of the points right there a few few red flags let me just comment on a couple of these you need to have when you raise money from outside investors you need to have some of your own skin in the game reminded my first startup they said it was two months after I got out of business school and I was just finished paying for my Stanford MBA myself and my total net worth was two thousand dollars actually that's in today's dollars it was actually less than that back then but in today's I was two thousand and I was talking to one of the first investors that I approached about investing in my startup and he said well how much are you putting in and I said well what do you think I should put in he said we should put in you know whatever you can afford whatever that would be and so I agreed to put in my two thousand dollars and it really not only ended up being a good investment but it was a way I could get other investors coming too because if you have no skin in the game they don't want to they don't want to get involved either usually and then the the third board I want to emphasize and you've probably heard this from Lex McCusker among others and that is don't start with assumptions that are that are global like saying you know the population of the planet is seven billion people i know i can sell at least one percent of those people and sell 70 million of my products don't use the top down approach like that use the bottom up start with your customer interviews and figure out how many people are really going to buy it and then multiply the number of sales times the price per product to figure out what your your revenues are going to be not not the other way around just a word about market research one of the real strengths of GW is position and especially a Gilman library is that there's a lot of research available beyond the primary research that you're gathering from customer interviews and actually being in the marketplace and that library research is called secondary research and it's it's already being collected by other folks let me just go to the next slide here and there's a guy over at gelman named mule been God who is GW is entrepreneurship small business librarian and if you haven't run into him there's his email address you may want to introduce yourself and there's a website live guides gwe to use / entrepreneurship a lot of information including all of the market research com data that's available it's a very expensive subscription for GW to purchase but market research Commons is a multi-volume collection of information on every major industry so if you're trying to get information about the size of your industry or your competitors it's a great great resource great place to go I recommend it get right into the structure of your plan now these are the eight sections on which the judges are going to be doing their evaluations my descript my words are really sort of a blend of the words from both the general entrepreneurship track and the Social Venture track if you look on the website to actually have slightly different descriptions words to describe the eight sections on each of the two tracks so I'm going to be using this side of descriptions tonight which is as I say sort of a blend of the two that are shown for the social judges versus the general entrepreneurship judges these eight topics will be judged and will account for seventy-five percent of your score from the judges in addition there's a 15-percent score from the judge that's their impression after reading all eight of these the viability of your new business and then there's a ten percent score that's based on the clarity of the writing you put in it's obviously total of a hundred percent but of these eight there's one that counts more than any of the others who can tell me which one that is it has a higher weight than any of the other seven you're going to have to study these I thought at least one person would be able to tell me which one it was I'm sorry no it's not customer development not value prop either not management team what was this one no not the management team it may be for some people private investors they would probably say financials but it's not for our judges it's only ten percent of this court BS the mark the fit the market fit with your product or service is a 15-percent score but you should be just make yourself familiar with the weights and I'd recommend putting a little more time into number two just for that reason I'm not going to spend more time on number two tonight but that's just a tip for you guys I'm actually going to spend more time on number four and number eight which I think are important as an investor looking at the value prop and strategy and number four and looking at the van chills in number eight but for the judges look at look at the weights on the website let me ask you guys if a judge is looking at your business plan and they've got the eight sections laid out which section do you think the judge is going to read first to get a feel for your business plan yeah executive summary I think you're right they probably will start there because I want to figure out what your product or service is and what the industry is and all the stuff you're going to put in your executive summary what about an investor that picks up the plan and wants to look at it which one which one do you think that person might look at first out of the eight financials often it is sometimes its executive summary but they often flip right to the back in fact they'll skip the number eight and they'll go to the appendix where you probably have a spreadsheet of all your financial projection numbers they want to see the numbers but everybody's different I like number for myself strategy and value proposition I think it's really critical let's go on here I'm going to talk about each of the eight and just feel free to interrupt me with questions as we go through this what the judges are looking for in the executive summary are really three things if you look at the criteria that are laid out on the website it's a description of the business the industry or sector or space that it's in and thirdly any innovations do you've come up with to make your company really stand out as being cutting edge and innovative that's what they're looking for but on the other hand i would say when i read an executive summary what I'm impressed with more than anything else is is the energy and the passion and the commitment that I see expressed in the words you need to tell your story if there's a story behind why you're starting this type of business a personal incident or something about your life that really inspires you to pursue this particular type of product or service in this particular business that you've you're writing a plan about and then you do have to include as you know and this in the rules in the a 20-word description it doesn't say where you need to put that in but it's got to be in this first section somewhere you might want to just put it right up front I think I think as a former judge I like to read that right at the top because sometimes gives me a good focus of exactly what the business is about right at the beginning and you don't distill it down to 20 words I like that last year it was 50 words but the 20 word really gets it concise just what we need any questions on executive summary okay let's go to the one that counts fifteen percent the product or services fit with the market demand what what is how well is the need being being met by your new product or service is really the question here and this is a more detailed description of the product or service than you had in your executive summary here you're digging down to a deeper level in terms of exposing exactly what your product is or how your service is delivered to what it what it is consists of and one of the things you want to be careful here is is to be very honest about how well your product meets the needs of the marketplace if it if it doesn't do everything but you think maybe in a future version of your product or service it will do everything the market needs say that and be honest about it sometimes people brag about their products and there's an elephant in the room so to speak where there's there's something lacking and if there is a something lacking your product acknowledge it and say how you're going to deal with that may be in in the future or how you're attempting to deal with it now to make it a better product or service to really fulfill all the needs that you've identified through your customer interviews in the marketplace very important right that you're clear about what exists now what will be done the future is baked tenses write about things in the future using the present tense judges take a negative view of that feel that you're trying to be deceptive even if you're not so if you're really clear but not is real what you're going to nobody expects should have built everything back many of you won't have built anything that's okay right but just be clear about don't don't be sloppy in your language you you anticipated my next slide which gets into that a little bit more about where are you in your product development or service development is it just something on paper and idea written down or do you actually have a prototype or do you have a beta test version or perhaps you're already in full production in which case you should definitely say that that's that's the best kind of company to be starting up if you've already got some revenue and you're really starting to roll but obviously you could write a business plan at any one of those levels and so you need you need to describe that it included industry information in the same section this gets back to secondary research if you don't know a lot about your space your industry or sector whatever you want to call it you can do you can find out more through secondary research it's gelman or any on the internet internet searches that sort of thing but you do need to to in this section talk about the size f the industry I'd also talk about whether the industry is growing if you can get a chart or some information or maybe it's declining nothing wrong with starting a newspaper but frankly the print print newspaper industry would be going down if you had a bar chart I mean that's a shrinking industry right now but if you're writing a mobile app it's probably got a nice steep growth curve which means you'll have some really good wind in your sails as you start your business because it's a growing industry you're jumping into so it's all important to cover that in this section and then the last point on the industry is how is it structured some industries are dominated by two or three large firms you know big big companies others are structured by lots of small businesses which is your industry characterized by or which do you think is better if you're jumping into an industry would you rather be in one that's dominated by big firms or one that's a lot of small guys like you what's better I'm sorry okay tell me what you mean by depends on mm-hmm so you could you're saying you could probably win either way but used by adjusting your strategy and your value prop accordingly depending on the structure of the industry I like that answer most people like to get in ones that are not dominated by big guys because they're afraid the big guys going to come after them I mean my first company was a several my worst software companies and I was always scared frankly the Microsoft was going to jump into my niche market that I serve and I'd be dead but fortunately that wasn't the case they kept my place among a lot of small competitors and and fortunately was first mover so I had I had the advantage of getting in there first but when you're looking at competition it's not just who you're competing with today I was like I'm saying up when I started my first software coming I was the first one in this niche market here in DC and more people came into that market every year so you got to be prepared for influx of new customers and playing for that and not just for what exists today any other questions on the product or service fit with the marketplace okay let's go on to customer development and this is one that should be very easy for you to write about because with your business model canvas you've already done interviews and you've got a lot of information available to write this section I'd caution you not to copy anything directly from your canvas into the business plan because the judges are going to have your canvas too and they don't want to see you taking a shortcut just copying stuff but obviously you can draw on the material on your canvas but you've got to write new conclusions and good english language descriptions of what went on during your customer interviews and in your customer development and then describe any pivots that you made as you went through the process of interviewing customers what changes occurred why why those changes were for the better why it ultimately means to your venture is structured today for success so you got to sort of walk the reader through that process from from the interviews right on through to the today's structure and put it but again you've got all the information you need in your head or on your canvas because you've been using the Lean Startup approach any questions on customer development let's go on to number four this is one of my favorites the strategy and value proposition sometimes called competitive advantage I'm going to really talk about target marketing and customers each of each of these points as we go through here because a lot a lot of material to cover in this in this section the three most successful strategies for starting any new business anywhere in the world are these three according to the ultimate expert on competitiveness and that's Michael Porter the Harvard Business School professor who's been doing this for 30 years and he's defined the three most successful strategies as these three low-cost strategy which is we call it the McDonald's or the Walmart strategy where you come in with the lowest price the widest selection of products or product differentiation strategy and Apple wrote the book on how to do that numbers come out with a really cool nifty product that differentiates it from anything else available or the third approach which is the market focus strategy where you dig into a niche market and become an expert in your particular niche area that's that's what I did with my first software company I was here in Washington and wanted to do a software startup in the nonprofit industry here in Washington's huge and among other things there were five to ten thousand national headquarters for membership based nonprofits what are called associations but there was no software available specialized in that niche market and so I pursued this approach some people know well everybody knows Netflix that's that's a niche market because you're within the entertainment industry big industry then within that there's a movies segment and then within movies you've got it subsections for going to the theater TV movies or the kind of Netflix ends cells which are the best sellers whatever you can get and Netflix is an amazing company they not only had the biggest increase in their market value market cap last year of any company in the United States but they've also are morphing constantly in two different methods to deliver they started out delivering everything by the through the US Postal Service now they're delivering most of the stuff through the internet who knows what they're going to be doing next but but they are just an amazing company in fact they're not only a market focus strategy they're really sort of a product differentiation and a low-cost strategy that they've sort of rolled all three strategies into one and maybe that's why they're so successful and why their stock went up more last year than any other company in the in the country another example of market focus would be you know focus on on golf clubs you know that's just a very narrow area people golfers you know love certain things about their clubs and certain characteristics and ping is one company that's really mastered that not that there aren't several others but you get down to a narrow focus and really become an expert in that one area and that that's a great way to succeed as a startup company because you'll know more about you know golfers and their swing and what kind of putter they like and everything about anybody in the world by the time you're you you know do your research on this business and then you can really succeed in fact you can think of the marketplaces being a big jigsaw puzzle and like in the nonprofit world that i was looking at i was looking at this big array of nonprofits then they're all all these that and i just took one little piece here and say okay these are the nonprofits that have memberships there in Washington DC and I focused on that that was my niche market strategy and that's the company had company that I had for 30 years we move right along here so we've talked about a lot of this but we get into these last couple of bullets you need to estimate the size of the market you know they're like I've with the nonprofit membership associations I knew they were between five and ten thousand in fact I knew it was the single largest non-government industry here in Washington DC and I did some research on that and started doing my customer interviews and meeting with association executives that manage these groups but I had no idea what the size of the market was because no one gathered information and we didn't have gelman libraries market research market research com database at that time so I went around and tried to come up with my own estimates but you do need to somehow come up with estimates on the sides of the industry you're getting into so you know what the potential is and you know how to segment it and figure out where to put your effort when you're trying to break into an industry and become a real player in that particular space and you will become an expert under unique needs and trends you'll know everything about it if you follow this strategy ah the value proposition my favorite part here come up with a way to articulate your value proposition to state it as clearly and convincingly as possible what is it about your service or your product that really makes it special in your marketplace is it innovations you you comfort they're embedded in your service in your product what is it about it that makes it really really great and once you've done this you you need to sort of articulate it like like a pitch but you even need to get down shorter than an elevator pitch I like it when you come down to something that's almost like a tagline there was one I I saw recently tell me what company this is a tagline which is really their value proposition when it absolutely positively has to be there overnight what companies at fedex yeah and they have that on their trucks they put it on on their packages all kinds of places it's it's their value proposition when it absolutely positively has to be there overnight you probably know some some value propositions like that for other products or other services I mean fedex is really a service it's not a product except for the envelopes you put it in anybody have any favorites favorite value propositions or tag lines things like that that really summarize it and when you come up with one of these for your particular product or service you want to use it over and over again you want so that as you use it people will begin to remember it and they'll see it over and over again and it can become associated with your brand name so you have a brand which you will talk about trademarks later how you trademark a name but to go with that trademark you you have a tagline or value proposition that people will remember if i have any that they want to share with us that they think of offhand for some favor product that's wonderful i love that one net and that's another company that's done extremely well over a period of many many years their market gap went soaring last year also not quite as much as netflix but it was right up there we're going to talk about amazon later the announcement they made this morning we're going to get into that ok let's let's move along here and then the last thing in this section would be your competitor analysis where you actually go into what your primary research showed from your customer interviews about your competence and that's probably the most valuable research he'll do market research is what you gathered on your own on a primary level through your own contact with people in the industry but then also what you learn through your secondary research about the industry and secondary is the research you do in the library or online through databases but the the key to success in understanding your competition is is in the primary i would say because you need to get out get out of the building as they say get out walk around see what's going on with customers see what's going on in the industry and really learn it yourself become intimate with it and remember we're talking about competitors as i said before there are three different categories the direct ones the ones you can identify today the indirect ones that have a slightly different service or slightly different product but still it competes because somebody could bypass yours and buy this other one that works differently or does something differently because the benefit might be similar enough that that in direct competitor is really going to be a major competitor for you and then they're the future ones the ones that haven't come along yet and usually when you're trying to figure out who the future competitors are you look at big companies that know something about your space but just are not competing with you today in fact it could be a company like Amazon that keeps getting into new areas or Google another example I mean Google's going to apparently develop a smart car whoever thought of Google as being an automobile company but anyway you've got to look to the big guys that have expertise as potential competitors and plan for that as best you possibly can and then the last point I said I was going to talk about trademarks want to cover all the forms of intellectual property here real quick cause this this is how you establish a barrier to entry your competitors can't compete with you if you have a patent on the product that you're selling and they obviously can't use your name if you have a trademark on your name so you really need to look at this trademark is technically not just on a name it's what's called trade dress it could be a logo a symbol could could be just the name of the company to could be all those things that you'd want to get trademark to protect your your trade dress as they call it and on copyrights that's that's really important if you have any anything that is either a work of authorship or a song or any anything written a poem and obviously when you publish a book you get a copyright on that so it's works of authorship it's what copyrights are for that day instead of applying to the Patent and Trademark Office you apply to the library of congress for a copyright but those are all pretty straightforward to get and then the last item on the list is trade secret who can describe for us what a trade secret is as distinct from these other things yeah just you it's it's it's knowledge that you have that you keep a secret exactly the classic example is coca-cola they've never tried to patent their formula they just keep it a secret that we had a when the winning teams of this competition a few years ago that came up with a new kombucha called capital kombucha and that companies doing very well now and their formula for for brewing their there probiotic tea to kombucha is a secret and nobody knows what's in it except for the founders and they don't tell anybody so it's it's a trade secret and it works at companies doing very well a lot of examples of that but don't overlook that as a possibility yeah document like I have a trade secret not going to disclose it but I i I'm not sure to incorporate it into your into this time of document no no you know you don't you just want to tell them you you don't want to disclose it preserve definitely don't disclose it to the judges but you want to tell them how you're protecting it and if you're not protecting with a patent then you describe how you're going to protect it with a trade secret approach as an alternative to a patent because once you put get a patent by the way anybody can read about that patent by going online to the USPTO US patent and trademark office USPTO gov got to know that website yeah you to minimize the cost of getting your patent oh I see mm-hmm okay very good I think you just simply describe it as best you can without giving away any information about how anybody else could could replicate what you've done by establishing the same contacts in the same network that you have you don't to give that away but you want to just explain that you you've established this and this is the secret to success I don't know how you could patent it or trademark that are copyrighted I don't think you could do any of those three based on what oh sure oh sure you can do all kinds of things through the in fact trade secrets can be protected through contracts to like if you if you have two partners and you're starting a kombucha company you want to have an agreement among the partners you're not going to tell anybody else because you trust your partners but verify by putting it writing with a contract yeah I think that's a gifted arbitrary but strictly speaking that would not be considered intellectual property right it's very important to consider barriers to entry and part of your competitive advantage and you built something that will take other companies a long time to go it's a powerful credit advantage and it's a barrier any other questions on this item before we go to the next one how do you get a patent actually I'd recommend you look at a provisional patent short term and a full patent long term and the difference is in the cost and the detail you have to include in your application to the Patent and Trademark Office provisional patent you can usually get for a thousand or so or maybe less in terms of actual dollars out of pocket it's good for one year and it can't be extended beyond one year except by getting the full patent which is called a utility patent and the utility patent is going to cost you lots usually 20,000 to 30 maybe 40 thousand depending on the law firm you hired to do the legal work on it it's a big deal getting a patent nowadays and it can take a long time I'd when to took six seven years on one company I was starting but fortunately once it's approved it's retroactive and in effect from the date that you applied for it so you're protected during all that period but i'd recommend answer your question you get a provisional patent to start with in fact Peter Weismann is going to be talking marching march eight here and peter is very good at answering questions about getting provisional patents and he's been known to help many of our teams here at GW get their provisionals we'll do an hour of consultation or any GW suit legal issue his specialty if you catch me after without to get a contact okay let's jump into number five marketing customer relationships and channels going to talk about really these five elements of marketing positioning pricing advertising versus PR sales channels and distribution channels which are really elements of this whole section of your business plan and not all as you've already figured out not everything that I'm talking about tonight applies to every company so you have to pick and choose what applies to your business but on your positioning strategy you have to know who your who your sub market is that you're really pitching to if you're selling a electric car Tesla Model S or whatever that is you got to know exactly who the potential buyers are for a 75,000 our car and why it's a very different market than the market for the nissan leaf for the ford focus electric car the i mean there are a lot of electric cars out there near but Tesla seems to be the one that's the winner nowadays so you really have to position yourself so you're advertising in the right magazines the right places the right direct mail the right websites for your pop ups everything has to be focused on your market and how your positioning it within that market same as Starbucks has a very special market that they go after and they've obviously done very well in positioning themselves within that market but it all comes down to market research and understanding your customer so you can be positioned properly pricing there they're two different approaches to pricing cost-based and value-based and frankly I don't recommend cost-based where you look at all your costs and say I want to charge ten percent or twenty percent more than that I don't really recommend that for a couple of reasons one is that you don't always know what all your costs are it's it's really hard too hard to compute it and and the second is that you're probably underpricing by using a cost basis approach you're probably better off once you've done all your customer interviews and you understand from talking to people what they're willing to pay going with what's called the value based approach and yet the other thing reason to use value prices value-based is it's usually higher so you can actually have a better profit margin at the end of the day then you would with a cost based approach and you never want to have to increase your price because you've underpriced it it's better to start with a little higher price and then if you realize you have room to come down a little bit and increase your sales as a result of lowering a price do so later but don't don't underpriced it in the beginning you want to price it as fully as you can on a full value full value basis that that's really an important thing any questions on pricing let's talk about advertising versus public relations two very different approaches to getting out into your marketplace and letting everybody know you exist which one do you think has better credibility and success at the end of the day between the two approaches public relations yeah we would you rather buy an ad in the GW hatchet and have a nice ad in there or would you rather have an article written about your your new company I'll see the articles free the ad is going to cost you several thousand dollars so to me it's it's really a no-brainer you you want to go as much as you can with public relations issue press releases get out there in the media get interviewed be on talk shows whatever you can do to get your your your story out there articles and newspapers blogs newsletter electronic newsletters you could a lot of people are now doing daily or weekly newsletters not not just monthly but with the internet it's so easy to get the word out there to your target market if you can get the email access to your target market it's just it's just fabulous whereas advertising is expensive yeah my other favorite example is last month actually earlier this month the Super Bowl 30 second ad five million dollars that's one option the other option is what under armour does all those players are interviewing after the game they've got all this under armour stuff on they paid nothing and that's much much better for their company in terms of getting the word out and selling more product than paying five million dollars for a 30-second ad much better they have to work to get that positioning they had to work to get everybody wearing this stuff and and you know it's but it's the you'll come out much much further ahead in the end not only in credibility but also in dollars say if you develop a strategy that's based on PR or publicity call it any kind of publicity versus paid advertising with any product or service there's a what's called the sales funnel where it step one you've got a huge number of prospects that you're trying to convince to buy your product and you have to work them through the steps to become customers it could be done with with a sales staff where you're actually talking to customers in their offices or in their homes whatever or it could be done through an internet winnowing process where you can narrow it down by monitoring responses to click throughs and various Google ads all varieties they have now so you have the prospects and you got to work through contacting them their words getting to email you where you're an email conversation and then you qualify the lead you make sure that they are the kind of buyer you're looking for in terms of their ability to pay the price and use the product you know you got to qualify them then you've got to get into a presentation somehow get them more information in front of them so that you can close the sale in step 6 and then the ratio of how many came in the top of the funnel and step one to the number that you close in step 6 is your prospects to customers ratio and if you can get that process quantified and defined so you know that that's you're going to close you know a good percentage of the ones that come in the top of the funnel let's step one then you've got a good sales cycle worked out I'm not saying it's easy to do that it's a lot of work but you need to figure out what your funnel looks like and how you can work people from the top to the bottom and actually get some dollars in the door at the bottom of the funnel and cycle refers to how long it takes does it take a year or does it take two days you know what's the time timeframe for working a customer through the funnel or a prospect I should say and then the distribution channel how are you going to get your product or service out there once it's once someone buys it is it something you just email to them or is it something that goes through the mail amazon our old example example here in fact i think it was in somewhere online this morning I read about Amazon's spending was 11 billion dollars a year delivering stuff to people to buy it from them and amazon prime of course you don't have to pay for that but they just had a change in their policy that they announced this morning that if you're not on amazon prime that it used to be the chip it free if it was thirty-five dollars or more you're spending and they announced this morning it was going up to forty nine dollars as being the threshold for non-prime members to get something shipped to them free and that's because this is becoming a huge cost not just for Amazon but for everybody how do you get stuff delivered and what is your distribution strategy where do you locate your products if it's a retail product you know how do you you've got to put the stores or the outlets or the email click throughs in the right place where your marketplace will see them when they're shopping online or in a bricks-and-mortar environment either one distribution is not trivial as amazon has taught us okay I'm going to move on to Section six out of the eight sections and this one's a little bit like customer development was you've got all the information you need to write section 6 in your canvas assume you've got a complete canvas because it's really just three things here we're looking for activities resources and partners and as I say here don't copy it no cut and paste you got you got to write new interesting language for your business plan separate from what's on your canvas because the judges have your canvas too but you you should be able to nail section 6 and and get the points for that if you've done a good job on your canvas but the key is being able to describe the importance that each one of these roles plays in the execution of your plan and sort of how it all comes together in fact just an example here in operations this is another another one if you have a retail business like a restaurant or anything where you're actually dealing with with customers face-to-face you gotta look at all these factors in this operation section where do you locate your outlets proximity to your customers access to the labor force suppliers in other words the transportation issue that that amazon has how much they're spending on getting stuff out there they have to look amazon has to locate their warehouses to demise the cost of getting from a warehouse to where their customers are located in cities look at you have to look at tax issues sometimes with your locating a warehouse economic incentives fact here in DC their tremendous incentives for technology companies that are founded in a certain sector of washington DC called the technology corridor and if you're in that quarter your tax free so you can't ignore minor things like tax avoidance if you qualify for it in the right ways and then proximity to to the kind of employees high quality employees that you need to find or do you locate your offices intellectual property so that all this stuff on operations sounds though on the surface but it's really important when you peel the onion and get down to the details of it very important to the success of your business any questions on operations yeah modeling if you've got a model I definitely put it in there I don't think many people here have tried to model all this tell me about your model great well yeah you may want to because I said before you don't want to take more than one or two pages for any of these sections so you have would have a space constraint if you can say it in an abbreviated form at somehow or actually a pictures worth a thousand words sometimes you can do diagrams like like the bar chart I head up here earlier you could see so much more in it in a graph or a chart form if you could do a diagram you know if you have model your model other questions yeah I'm sorry you could absolutely that's a great use of those five pages of the Appendix you can talk about it in brief in the eighth in the 10 page written section and then reference it and have a big diagram and explanation in the appendix where you can use a smaller typeface and but you know all the rules the questions okay let's move to number seven the management team and they're really just two important points I want to make about your management team you don't need to get into Board of Directors or board of advisors or all these other stuff necessarily but you need to definitely talk about your team and maybe about a Board of Advisors if your think of going that way a board of directors this is simply something corporations have to have by law if you're incorporated then you have to have a board of directors but there's really unless that's part of your plan to have a board of directors and it's going to help you sell your product and be successful I wouldn't even bother talking about the board of directors or the other professionals again if there's another professional that really is key to your success it's going to open doors for you and help you succeed talk about it so take advantage of what you need to take advantage of on this list of venture structure will call it other other people but definitely talk about your team have a brief profile could just be a sentence or something about how your team members break down in terms of their responsibilities within the company maybe you've got titles maybe you don't have titles that doesn't matter but we need to have some explanation of how each person is contributing to the success each member of the team is contributing to the success of the company and ideally what the judges would like to see is that your team is made up of complementary individuals that you're not all studying Electrical Engineering and the same program together but you actually have some you know complementary aspects in terms of what you bring to the table and what your previous experience is in past success whatever is relevant to really convince the judges that you've got a great team that's working together in concert to make the company successful and then on the board of advisors question if you do want to have a board of advisors and I recommend that you will eventually want to have one there are a lot of ways you can do it and it's usually made up of customers or you can bring customers in and give them access to sort of inside information that you can share with them on new product developments and you get feedback from them just like you do from your customer interviews in fact important advisors is a way to extend your customer interviews in a way so longer your business the more good feedback you get in my software business I'd always have what was called a user's group so the companies that are using the software would all have this feeling that they're insiders and you're listening to their their feedback and in innovative ideas in some cases on how to enhance the software for the benefit of not only them but the other other users of the software I'd go either way whatever works for you you don't have to be formal in fact it may not be a Board of Advisors mind as I said was called a user's group you can you can have a forum and the insiders forum there are all kinds of ways to do this but you want to have constant contact with your customers and this is a way of formalizing that contact by setting up some sort of a group to get together periodically either electronically or skyping or go to meeting or or in person occasionally it's nice to do in-person meetings periodically have an annual annual user group meeting that's what I would have everybody would come into and we'd move it you know since be in San Francisco one year in New York you know you moved to different cities so you'll draw different people into the actual in-person meetings on an annual basis okay let me move to the final section on the financial projections okay three things are required income statements three years cash flow statements although that we're not going to do what's an auditor or an accountant would call a cash flow state we're just going to change the income statement to put it on a cash basis to make it easy it's too much work to do an actual cash flow statement the accountants do and then thirdly the capital required I'm going to start with a XYZ corporation and this is a company that's launching in May after graduation and they've got some projected sales that are going up by two thousand dollars a month starting in May so by the end of the year it's up to 16,000 in a month of December with total of seventy-two thousand for the whole year and then we're going to talk about the expenses and I've just broken it down into these four categories of expenses to make it simple you may have more detail than this but this gives you the idea you want to always start off with your cost of goods sold assuming you have to buy stuff raw materials in order to deliver this sales and I've just made a fifty percent of this line is on this line right straight across so in december eight thousand is half of 16 and that's those are the cost of the inputs and then your fixed costs like your rent insurance you know just the fixed costs of having a business every month telephone whatever you have put a thousand a month in here and the third category of expenses depreciation so whatever you had to spend up front on buying equipment or furniture computers or whatever you had to spend up front accountants require you depreciate that over a period of time usually three years so you would have in your depreciation 136th each month for 36 months or three years and that's just way the accountants do it never you can't deduct the whole amount up front in the first month under generally accepted accounting principles you've got to spread it out because that computer is going to last three years let's say and so that's that's the depreciation line and then the last line I've got here our salaries and wages I've just put 4,000 a month for the founder to get started here then the total expenses and then when you do the math you can see there were losses starting in May pretty big forty forty two hundred and fifty dollars that month and it got a little bit less each month and they finally broke even in October and then a little profit and by the end of the year they had a little bit more profit but they lost six thousand dollars for the year this is all an income statement generally accepted accounting principles revenue on the top expenses underneath that profit on the bottom line what we're trying to get to as I had on the previous slide is the bottom line is how much capital do we need to raise from investors to launch this business can you figure out how much capital this company needs to raise from the information you see on this income statement anybody have any any suggestions how much capital they're going to need you're going to lose six thousand dollars by the end of the year I'm sorry can you speak up how much is that yeah yes but they're making money in 2017 and 18 but it is three years you're right but you're you're on the right track because you're thinking cash and and that's the right way to think and this is not cash this is generally accepted accounting principles which has this depreciation as an expense which actually they're not paying anything out every month they bought the computers or the furniture up front in the beginning and that's when they needed the cash yeah exactly so you could figure it out if you took the time to do it the way to do it is exactly what she's saying to turn it into a cash flow projection and there there are three things you need to adjust and I've highlighted in yellow it's this top line because the sale you make in may you may not collect the money for you send them an invoice in May and then hope they pay if it's b2b it's the business they may not pay it for two months maybe or one month if it's a credit card you know it may not get back to you for a certain period of time after that until the money's in your bank account but I've assume sort of a worst case here where the sales made in mark in May which was 2000 you actually get paid two months later and the sale made in June which was 4,000 you get paid in August everything is lagged by two months cash basis and then on cost of goods sold I don't have to pay for the supplies I bought in May until June assuming it's a net 30 day typical b2b transaction so I get 30 days use of the product the cost of the goods i bought before i have to pay for them so that has to be adjusted by one month the thousand I I bought that dollars worth of goods i bought in May I pay for in June then the two thousand i bought in june i paid for in july etc and then the third thing is to take out the depreciation because that was really no cash you paid for it up front by buying when i say here furniture phones and some pc networking workstations nine thousand dollars in the 9000 is going to be depreciated over 36 months so those are the adjustments you have to make these are called operating activities up here which is the income statement that's you've adjusted these are called investing activities which are capital purchases and then the last we'll get to this later is financing activities where you got money in from investors or for bank loans or something to help cover this negative cash flow so just by making those three simple adjustments there and putting in the 9000 I had to spend on the capital equipment up front I can see it's actually negative 35,000 compared to negative six thousand that we had on the previous screen right here big difference and this is this is not rocket science you can make these kinds of adjustments it's not hard the big ones are obviously the 9000 here and then that removes the depreciation because you paid for it up front these may not be that significant for you if if you're getting paid instantly and if you're paying for what you buy instantly then you really have don't have to make these two adjustments but you find out in a b2b world you want to negotiate or you don't have to pay for stuff until one months or two months later it's a great way to finance your startup is to get terms on your accounts payable so you don't have to pay your bills instantly okay so this is 35,000 is that the amount of money we need to raise to start this business is it is that the answer to the question on the back row you're saying no it's not well you've got salaries in there four thousand a month maybe heaven maybe you're doing this nights and weekends the first year this is just an example so you think you'd like to see more on the salaries line but you can put anything on that this is just a sample Jan why why 95,000 that's a good answer mm-hmm first period it's very reasonable I think 95,000 gives you life cushion there sixty thousand dollar cushion to be exact if everything goes according to plan it'd be thirty-five thousand you use of the 90,000 55,000 okay you said 90 thousand per night now that's cumulative I like that what you just said double when I took my MBA course and entrepreneurship my professor said that you should do you all your best guess on cash flow projections figure out what your needs are and then double it unless you have some reason to do less than double or more than double because of the potential volatility of the business it's all you're really trying to anticipate the fact that everything is not going to go perfectly on a straight-line basis two thousand more of revenue every month like we had in the initial projections if it's going to be a jagged curve with a lot of volatility in it and you want to up your cushion to a higher level but he said if you don't have any other reason to go higher or lower he recommended doubling it and actually when I when I started my first business I doubled it and I actually ended up needing ninety-five percent of the money I raised just barely squeaked by in other words so the doubling it worked it was enough but I ended up not having much of any cushion at all but I basically use the same approach trying to figure out cash flow and doubling it so based based on the doubling formula the answer would be seventy thousand so you've got a nice cushion in there to account for uncertainties and volatility that may occur as you go down the road so what I've done here is come up with a plan for raising 35 + 5 + 20 at 60 and then borrowing 10,000 from the bank on a line of credit secured by my receivables which are running twelve thousand a month so I could get that secure secured without my personal guarantee although the bank's always want you to personally guarantee whatever you do but anyway it would be covered by you your receivables where you have customers owing you a certain amount at a point in time and then the bank will lend you 10,000 on the line of credit secured by those receivables receivables are basically revenue that you haven't been paid yet called accounts receivable so this is a way to do the 70,000 and basically the way I've said here is when the wind 35,000 for the GW new venture competition get a certain amount from the founders 5,000th everybody's got a little bit of skin in the game among the founders and then go outside to investors for 20,000 so basically by raising 20,000 on the outside you've got a total of seventy thousand total so you've come up with a way not to have diluted your owner shares any more than you have to in the process of coming up with all the capital you need which in this case in this example i should say is seventy thousand dollars any questions on sort of that how you think think your way through this process and figure out how much capital to raise how much you'll need and I think Cheyenne is right that you don't want to have to go back and have another round in the next year or two years you want to have enough to get through a period of time ultimately you will hopefully succeed and you'll go back and you'll do a venture round later with venture capitalists and maybe in between that round in the first round maybe do an angel round so you start with friends and family then go to the angel round and then go to a VC or venture capital round later as the company grows and can sustain it okay move right up you don't need a balance sheet fortunately in the new venture competition but it's something a lot of people generate because various models that you use to project your finances and to do all this kind of projections will come out with a balance sheet so if you have one that's fine you can throw it in the appendix but it's not required we've already covered these points have the founders contribute what they can so they have skin in the game and get the rest of it from outside sources and in the first round it's usually friends and family if you're lucky enough to know you know an angel that might come in invest a little bit more than your friends do that's fine depending on how big the numbers are and just a reminder of what Lex told you earlier the deadline is noon on march first don't forget all the details about the font types and the margins and all this stuff that's important and then you'll be notified on March fifteenth hopefully that you're a winner oh and if you'd like copies of my slides this is my email address i can i can shoot you a copy of the slides just send me an email and let me know that you're interested in having the slides and I very sincerely wish you all of you good luck in getting everything done by march first and becoming a winner thank you very much how are we doing on time yes sir yeah which one are you thinking is going to be your main strategy between those three Michael Porter options that we talked about the locale low-cost strategy the first one so you're going to go big time the walmart approach I like that that's awesome if you can work in the others with that because obviously the people that are going to be inclined to buy a low-cost product you're already segmenting demographically or by income somehow differently so you can target them better I would definitely work that into your strategy so that you're not targeting millionaires with your local sure the more you can work in the better as I said netflix had a really elements of all three so the more the more the better I'd say sounds like a great idea you got we should talk other questions yeah thank you so much then you say what it must be on pricing local product these multi pricing is good to start with a high value and then is as per the value-based that's right the value based approaches the pricing is one I recommend for sure also on the local strategies that sustainable old lower-cost just integrate the market and then once you have pudding all the market but sometimes the Congo for instance when the prices are lower starting a company using the low-cost strategy is not easy because you need volume to sustain a company that's using a low-cost strategy and unless you talk to these guys on the back row and find out some secret they have I usually don't recommend that you you use them the low-cost strategy the walmart the walmart straight that's when you're talking about right yeah it's very difficult because you have to have volume which means you need a lot of capital upfront to launch the company to set up all the warehouses outlets distribution systems like mcdonalds have all that sort of thing it's not easy but if you're doing it in a small area would you be doing this in Congo or in this country in the Congo sure it might be possible there because if you if you can set it up on a on a controlled basis in a smaller area that might work you're going to have to be the expert on that one I don't know the marketplace that well there but I hope it works for you what kind of product would it be agribusiness good we should talk afterwards I think we're out of time okay thank you all