- Explain the different types of plans used by entrepreneurs. [SLIDE 1] It is not a matter of writing or not writing a business plan, but what type of plan is most appropriate for the entrepreneur at what stage. Different types of plans include back of a napkin, sketches on a page, the business model canvas, the business brief, the feasibility study, the pitch deck and the business plan. [SLIDE 2] The simplest of all entrepreneurial plans is sketching out the idea on the back of a napkin. While this type of plan would not pass muster in a formal presentation to investors, it can be a highly effective way of gaining clarity on the business idea and how it will work. The simplicity and immediacy of the visual approach helps to clarify the idea, both for ourselves and for other people. The back of the napkin technique has connotations of social settings in cafes, restaurants and bars where people meet to discuss their ideas and find themselves jotting down spontaneous ideas on the closet thing to hand. Indeed, many great ideas started on the back of a napkin. For example, Allison Rugen and Carlo Marchiondo jotted down plans for a chili distribution company on a cocktail napkin while at a bar. The company went on to become Southwest Chili Supply. [SLIDE 3] Using sketches on a page to write your plan is a little more complicated than the back of a napkin. While it is also informal, it requires a more focused approach based on how the product works or can work in the future. Sketches on a page help you think about the idea today and also what is could become in the future. The idea can be sketched by hand or electronically using software like Prezi or PowerPoint. A simple technique is to create a gallery sketch. Arrows, color and labels can be used to indicate the major components of the idea, with clarifying notes added as needed. If the idea is for a service, try sketching a map of the events that take place when the service is provided. Another idea is to draw a before and after scenario. Scenarios are short stories that depict the business, product or service in action. The 'before' scenario shows that the lives of customers are like today, while the 'after' scenario shows what lives could be like after the venture is started. The 'after' scenario represents what you dream the business could be and the impact it could have on customers in the near future. The Vivid Vision exercise challenges the entrepreneur to imagine what a business could be three years into the future. Three years is a reasonable amount of time to nail down specific, measurable goals. Vivid Vision is not just fantasizing so far into the future that it becomes pure speculation. Three years makes you stretch just enough to think about how to get from today to your idea of success in year three. A good way to do this exercise is to visualize answers to questions like: what does the business do? Who does it serve? Remember that this exercise does not involve how you are going to build the business or the steps you need to take to get there. It is simple a description of how the business looks in the future – specifically, three years down the road. [SLIDE 4] The Business Model Canvas, introduced a few lessons ago, is another type of visual plan. It is especially useful for identifying any gaps in the business idea and integrating the various components. It is visual because the entire business is depicted on one page by filling in the nine blocks of the business model. By thinking about all nine components of the business model, you'll be able to visualize how the various parts work together: the value created for customers, the processes you must have to deliver value, the resources you need, and the way you'll make money. [SLIDE 5] The business brief is less visual than the two previous types of plans and requires a bit more detail and writing. Typically, a business brief is a 2 to 3 page document outlining the company overview, value proposition, customer, and milestones. Its something you can easily send to stakeholders that will give them an at-a-glance understanding of who you are, the business, and its potential. Creating a business brief is not too time intensive, and it indicates that you're doing your homework and thinking critically about the business. The table lists the points to include in the business brief: [SLIDE 6] A feasibility study is an essential planning tool that allows entrepreneurs to test the possibilities of an initial idea to see if it is worth pursuing. It serves as a solid foundation for developing a business plan when the time comes. The feasibility study focuses on the size of the market, the suppliers, distributors and the skills of the entrepreneur. Every entrepreneur should conduct a feasibility study because it determines whether your idea is workable and profitable. It is typically created to assess the viability of a business concept. The information you gather for your feasibility study will help you identify the essentials you need to make the business work: any problems or obstacles to your business, the customers you hope to sell to, marketing strategies, the logistics of delivering your product or service, your competition and the resources you need to start your business and keep it running until it is established. From the entrepreneurs' perspective, the feasibility study is a useful way to assess whether they have the time, energy, abilities and resources to get their venture off the ground. The conclusions you draw from the study will determine whether you venture is viable or not. Ultimately, the feasibility study is a valuable exercise in answering the question: Will my venture work? This feasibility study is for your eyes only which means you need to be as honest as possible with the conclusions you draw from the study. If there are constraints, describe them and be realistic about whether your idea is worth further investigation. The feasibility study is a written document of no more than 10 pages. It takes all of the action components and places the learnings from the actions into a structure that can be used for decision making such as, "I do or do not want to move forward with this venture" – in short, a Go/No-Go decision. [SLIDE 7] The feasibility study addresses the most critical elements entrepreneurs need to consider during the initial conceptualization of the venture. The key is speed -- it is a quick way to prompt you to zero in on what you need to know. It requires you to pursue answers to your questions, and to gather real data from your interactions with potential customers, suppliers, distributors and others. To produce a study, there must be action, testing, information gathering and analysis to reduce uncertainty and gain greater confidence about the opportunity and the approach. [SLIDE 8] Though there is no one best format for a feasibility study, the template shown is a good start. The end of the study should include the final decision -- identifying whether the idea is a go or a no-go. Is your idea feasible and worthwhile, or should you draw a line through it and move on? Make sure you state the reasons for your decision. Some issues can be overcome. For example, imagine you want to start a gourmet food cart that offers mayonnaise as a condiment. A proper feasibility study might reveal that health departments do not allow carts to sell dairy-based or edible-oil based condiments. This might make you pivot your menu. While a no-go may feel disappointing, remember that a decision not to go ahead is also a valid and valuable outcome. It has saved you the time, effort and expense that you may have spent on a concept that does not have the potential to succeed in the market. Knowing your constraints can also lead to doors opening in areas your might not have otherwise considered. For example, the founders of Blue River Technology had an idea to build robotic mowers for golf courses but after speaking to 100 customers, they realized the solution was not viable. However, during the research, they did identify a huge demand from farmers for an automated way to kill weeds without chemicals. This gave the entrepreneurs the 'go' they were looking for. They built and tested the prototype and received $3 million in venture funding less than a year later. [SLIDE 9] The pitch deck is a brief presentation highlighting many of the essential elements found in a feasibility study and a business plan. Some call it a launch plan. In many venues, the pitch deck has replaced the formal business plan. It is needed for collegiate competitions, applications to accelerators and incubators, and for angel and venture capital funding. The purpose of the pitch is to describe the idea and obtain interest. It might also be used to present to professional investors. There are no strict rules for length or style. Founder of About.me and Socialcast, Timothy Young, raised more than $10 million in funding for both startups with just five PowerPoint slides on his iPad. Young believes that presenting on his iPad was an advantage because it forced him and his investors to share a screen which made the process more relaxed and informal. [SLIDE 10] Although the business plan has been replaced by the pitch deck in many venues, many traditional investors and bankers still require a formal business plan -- a document that provides background and financial information about the company, your goals and how you intend to reach them. The business plan needs to be very thorough and research-based. However, it should be considered a work in progress because nothing goes to plan! The traditional business plan usually consists of 20-40 pages plus additional pages for appendices and financial statements. It is loosely-divided into four parts. The first part is the concept, where you discuss the industry, products and services and how you plan to make the business a success. Second is the market, where you describe potential customers and competitors. Third, you discuss how you intend to design, develop and implement the business, and provide detail on operations and management. Finally, the financial section includes details of income and cash flow, balance sheets, and financial projections. [SLIDE 11] In the order of entrepreneurial activities, business plans come after idea generation, business model canvas, feasibility study and pitch deck. By following these steps, you have a better chance of creating a sold, evidence-based business plan to present to potential investors when the time comes. [SLIDE 12] Each plan is appropriate for different audiences and purposes. In addition to these plans, there are many others, such as LeanLaunchLab, used to test hypotheses and refine the business model, or Plan Cruncher which allows you to summarize your idea on one page. Regardless of the approach used, by gathering, testing and analyzing real data, you will be able to illustrate your passion to create, the resources you have used, the actions you have taken to get your business on the move, the risk you have taken, the experiments you have carried out and where to go next. In short, you will be able to prove that your product works, a real market exists, and your financials are not based on guesswork.