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Avoiding Common Business Plan Mistakes

This presentation showcases the more common business plan mistakes made by entrepreneurs in new, start-up ventures.

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Avoiding Common Business Plan Mistakes

  1. 1. Common Business Plan Mistakes Presented by Bart Greenberg Haynes and Boone, LLP Entrepreneurs Forum at UCI April 7, 2011© 2011 Haynes and Boone, LLP
  2. 2. The “Business Plan” Executive Summary Marketing/Sales Plan Mission & Vision Competitive Analysis Company Description Management Team Products & Services Operational Plan Industry Analysis Financial Projections Target Market Exit Strategy© 2011 Haynes and Boone, LLP
  3. 3. Executive Summary • Lacking a specific focus • Failing to outline the terms of the investment sought • Getting too involved in the details and forgetting to sell the sizzle© 2011 Haynes and Boone, LLP
  4. 4. examples • COMPANY delivers integrated, real-time, secure ____________ solutions that provide an immediate return-on- investment for any size enterprise • COMPANY is a biomedical start up company. We have no debt. The research behind the companies Intellectual Property is based upon 8 ½ years of study of _____.© 2011 Haynes and Boone, LLP
  5. 5. examples (cont.) • GIS that are capable of running on mobile devices (e.g. PDAs, PocketPCs, handheld computers, laptops, etc) are referred to as mobile geographical information systems (MOGIS). Unfortunately, MOGIS have not evolved to the point where geoscientists can effectively collaborate in their geospatial management activities, such as geospatial data collection, file sharing, and distributed processing.© 2011 Haynes and Boone, LLP
  6. 6. Mission & Vision • Dont regurgitate a description of your business • Dont make it boring • Dont claim to be something you arent© 2011 Haynes and Boone, LLP
  7. 7. example • COMPANY has already developed the methods and schematics for its technology and will be in position to beta test within four months of funding.© 2011 Haynes and Boone, LLP
  8. 8. Company Description • Including far too much detailed information about your business • Appearing as though you have no business history or business purpose • Leaving out important business and legal particulars© 2011 Haynes and Boone, LLP
  9. 9. example • COMPANY is a Nevada corporation formed to develop and administrate a multimedia/communications enterprise taking advantage of specific markets and specific technologies while capitalizing on management’s experience in IT/telecommunications, marketing, manufacturing finance, and media production building and delivering, “A multi-channel communication broadcasting company” with an international customer base.© 2011 Haynes and Boone, LLP
  10. 10. Products & Services • Failing to identify the benefits of the product or service (focusing instead on the features) • Describing the product/service in language that is too technical • Omitting the specific problem the product/service addresses and how that problem is solved • Assuming an improved product/service will "sell itself"© 2011 Haynes and Boone, LLP
  11. 11. examples • This kit will improve medicine. Presently, the gold standard for blood draws is an eight or nine panel blood test. It is our opinion this is not enough. • The main competitive edges PRODUCT has relative to other similar radiation devices already in the market are its projected low price, compactness and inconspicuous design.© 2011 Haynes and Boone, LLP
  12. 12. Industry Analysis • Not demonstrating a solid understanding of how your industry functions • Appearing unaware about the companies that form your industry • Lacking understanding as to where your business fits into the distribution channel of your industry© 2011 Haynes and Boone, LLP
  13. 13. example • An indication of the market size can be obtained by reviewing the current state of _______ monitoring at the US borders. Customs inspectors increasingly rely on an array of high tech gadgets, including _______ scanners and hand-held ______ detectors no bigger than a pager to see inside shipping containers. A computerized container tracking system now alerts customs agents to suspect boxes while the transport ships are still at sea. Customs inspectors working at overseas ports are directing local officials to suspicious containers before they are loaded aboard American-bound ships. About 72 mobile _________ devices have been added to the 40 that agency already had and are deployed at major ports and border crossings. In the ports of Los Angeles and Long Beach, the third busiest port complex in the world, inspection of containers is up 320 percent since the Sept. 11, 2001, terrorist attacks.© 2011 Haynes and Boone, LLP
  14. 14. Target Market • Dont assume that everyone is a buyer of your product/service – Dont assume you must have a "huge" target market – A well-defined target market that you can serve is far better – Need to explain what is different about the “solution” you offer • Dont be unclear about the characteristics that define who your target customers are© 2011 Haynes and Boone, LLP
  15. 15. Target Market (cont.) • Dont jump to conclusions about why your target market needs you - instead explain how you meet their needs • Dont underestimate the value of focus – Sell a specific product/service to a specific group – Dont try to attack too many markets at once© 2011 Haynes and Boone, LLP
  16. 16. example • Historically, customers have proven that they will pay for what they want, or need, and it is the mission of COMPANY to fulfill that need. Thereby giving COMPANY an opportunity to build strong brand allegiance while building our company.© 2011 Haynes and Boone, LLP
  17. 17. Marketing/Sales Plan • Defining your target market too widely, and assuming success will result from simply capturing a "small portion" of this enormous market – Attempting to attack an entire market instead of a narrow niche – Attempting to immediately fill several lucrative but unrelated markets • Making assumptions about your target market without research or concrete support© 2011 Haynes and Boone, LLP
  18. 18. Marketing/Sales Plan (cont.) • Not specifically identifying the mediums you will use to advertise and promote your product • Making the assumption that offering a lower price will lead to increased sales – Underestimating the importance of packaging, brand name and reputation© 2011 Haynes and Boone, LLP
  19. 19. Marketing/Sales Plan (cont.) • Don’t overemphasize having signed a big contract with a major company – Over-emphasis can be perceived as a weakness – If, for example, 80% of revenues are based on that contract, what would happen if the deal goes sour • Instead, highlight that your company is adept at forging strategic relationships or winning big contracts and this skill will be used to diversify client base© 2011 Haynes and Boone, LLP
  20. 20. examples • The company estimates that at least 14,000 of the THIRD-PARTY PROGRAM customers (40% installed base) could use COMPANY’s solutions to process electronic payments with an immediate ROI. • Staying small and utilizing existing companies to leverage the market will enable COMPANY to maintain a level of profitability and success unparalleled by any formidable competitor.© 2011 Haynes and Boone, LLP
  21. 21. examples (cont.) • We will not have a direct sales force. As acceptance and validation for the product grows, single orders can be taken over the website. These orders will be filled from a small inventory of finished kits • With security concerns on the rise and a burgeoning _____ repair market currently costs $8 billion a year nationally. The U.S. Department of Justice estimates these costs at $12 billion a year. COMPANY has identified a large and growing market for it’s existing __________ technology.© 2011 Haynes and Boone, LLP
  22. 22. Competitive Analysis • Assuming you have no competition! – A business does not operate in a vacuum – Management may not foresee external factors that can impact the business • Failing to identify direct and indirect competitors • Underestimating the strength of competitors • Omitting the specific competitive advantages you hold over your competition© 2011 Haynes and Boone, LLP
  23. 23. examples • In the little time COMPANY has been in the market, the company already dominates the THIRD-PARTY PROGRAM segment. • COMPANY has many competitors in all product spaces however, there is no one delivering The total bundled services package and combined products like that of COMPANY, affiliate support services, and the patented products, technologies, unique content and specialty events, will benefit charities, and ability to share revenue streams.© 2011 Haynes and Boone, LLP
  24. 24. Management Team • Depending on unqualified friends or family • Assuming that previous success in other industries applies to your current industry • Attempting to attract top managers without sharing ownership • Failing to attract and assemble a knowledgeable board of advisors • Lack of financial investment on part of founders© 2011 Haynes and Boone, LLP
  25. 25. examples • COMPANY takes the same philosophy used in FOUNDER’S previous companies, that of a relatively small close knit family of employees who work together as a unit to a common end. • While COMPANY uses a small local accounting firm for bookkeeping services at present, COMPANY intends to recruit a major accounting firm for audit purposes upon funding.© 2011 Haynes and Boone, LLP
  26. 26. Operational Plan • Failing to outline the process by which you manufacture, distribute and sell your product or service • Failing to account for all production costs (direct and indirect) • Failing to properly plan for contingencies to meet production and staffing challenges© 2011 Haynes and Boone, LLP
  27. 27. example • We are a start-up firm and have limited capital. We are developing new and virtually unknown markets. Industry trends and technology effect demand patterns and hence prices. We are in the process of identifying a CEO with experience to compliment our existing management team; however, there is no guarantee that will attract this person. We have not identified a complete Board of Scientific Advisors. We have not identified our continued…© 2011 Haynes and Boone, LLP
  28. 28. example (cont.) our marketing team and are not sure if we can attract the right personnel to facilitate our marketing strategy. Our proprietary process and concept patent applications have not been filed, therefore, we do not know if we can protect our proprietary technology. Our cost to develop the automated _______ Analyzer is an estimated cost and we are not certain if our projected development cost will significantly impact our pricing model.© 2011 Haynes and Boone, LLP
  29. 29. Financial Projections • Presenting sales and profit projections that are unrealistic (i.e., “hockey stick”) • Omitting financial assumptions to explain where the "numbers" originated • Underestimating expenses and not budgeting for unexpected costs© 2011 Haynes and Boone, LLP
  30. 30. Exit Strategy • Assuming you have a business with the potential to go public • Failing to explain how your investor will specifically recoup their investment and a sufficient return • Completely ignoring this aspect of the planning process, or having no exit strategy at all© 2011 Haynes and Boone, LLP
  31. 31. examples • The exit strategy of COMPANY is after building the company to several million dollars in sales to sell the corporation to one of these large companies. • To either sell out or go public when the market rebounds© 2011 Haynes and Boone, LLP
  32. 32. examples (cont.) • Long range financial strategy is to go public. The IPO market is starting to heat up again. If the market continues to improve, IPO is likely to happen 2006.© 2011 Haynes and Boone, LLP
  33. 33. QUESTIONS? Bart Greenberg, Esq. Haynes and Boone, LLP Direct: 949.202.3037 e-mail: Follow Me on Twitter:!/BartTweets© 2011 Haynes and Boone, LLP
  34. 34. Thank You! Bart Greenberg© 2011 Haynes and Boone, LLP