1. business and industrial

42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 1
Business Plan Manual
Headline
foundation
From the business idea to
start2grow!
within a few months with
The new Dortmund.
1 · In welchem der beiden Kapitel befinden wir uns?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 2
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 3
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
I. Business plan basics:
Why do I need a business plan?
.............................................................
What characterises a business plan?
........................................................
How do backers assess business plans?
5
6
.....................................................
7–8
Tips for preparing a professional business plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
Structure and main elements of business plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
II. Business plan structure:
1. Executive Summary
.......................................................................
2. Corporate objectives and profile
11
........................................................
12
3. Product or service
.........................................................................
3.1 Benefit and utility to the customers
3.2 Development of the product or service
3.3 Manufacturing the product / rendering the service
13–15
4. The industry and the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16–18
4.1 Analysis of the industry and overall market
4.2 Market segments / target groups
4.3 Competitive situation
5. Marketing (sales and distribution)
......................................................
19–20
5.1 Market entry strategy
5.2 Sales concept
5.3 Sales promotion
6. Management and pivotal positions
.....................................................
21
..................................................................
22
8. Opportunities and risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
7. Planning for realisation
9. Five-year planning
9.1
9.2
9.3
9.4
........................................................................
Personnel planning
Investment and depreciation planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Planning for the profit and loss statement
Liquidity planning
10. Financing requirements
24–26
..................................................................
27
........................................................................................
29–32
III. Annex:
Glossary
Recommended literature
....................................................................
33–34
3
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 4
Introduction
You are looking to found a company and start2grow offers you
a wealth of support when doing so. We are pleased to be able
to help you turn your business idea into reality and want to extend a cordial welcome to start2grow. At the
www.start2grow.de website you will find a complete survey of
the services we offer.
Now, having a good business idea is one thing, but implementing it successfully in practice is an entirely different story.
Along your – and our – joint path toward this goal, one central
topic will arise again and again – in every phase of the competition and well beyond the actual founding of your company, in
cooperation with your mentor, in discussions with any of a
number of experts or in the online coaching context:
It all revolves around your business plan!
This plan can be your passport to one of the lucrative prizes in
the start2grow Founders’ Contest. But above all, this document
is the basis for your future entrepreneurial success. The effort
you invest here will pay off in any case because without a business plan hardly any new enterprise can be founded successfully.
As the basis for working out your business plan, start2grow is
making available to you this manual (as hardcopy but also
ready for downloading at www.start2grow.de). It is intended
to help you develop your business idea, to examine it in light of
various aspects, and finally to depict your idea convincingly –
both for yourself and for others.
4
In the section discussing the “Business plan structure” you will
find key questions that are to help you make a critical assessment of your business plan. These key questions are valid for
all types of business and can be applied to a wide range of business ideas. You should, however, see them as inspiration to
formulate your own questions and put your business plan to
the test! The requirements in regard to content and scope become more demanding during the two phases in the competition and the questions in this manual are tailored to match
those two phases. In spite of this, you can enter the contest in
progress at any time and can often make use of the recommendations regardless of the particular phase in which you are
working.
Nor do we leave you on your own in mastering the many questions. In exchanges of ideas with your mentor, the experts and
other start2grow participants you will find the fertile soil upon
which your idea will thrive, readying it to pass the first tests before implementation in the real market arena.
One urgent request in conclusion:
Be absolutely sure to use the forms and tables provided for participants in the start2grow contest (found as a download at
www.start2grow.de). Standardisation such as this helps simplify
the work of your coaches, the experts and ultimately the jury in
their evaluation, but also helps you to reach a clear and understandable depiction of your business plan.
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 5
I. Business plan basics
Why do I need a business plan?
The business plan is your calling card in the business world; it
facilitates making new contacts and reveals the strategy you intend to apply when using an idea to either found a new company or expand an existing firm.
The business plan explains your overall entrepreneurial concept
in detail. It describes the business setting, the stated objectives
and the ways and means to be applied. Originally, the business
plan served in the United States as an aid when acquiring capital from private investors and venture capitalists who are involved as co-owners and as such contribute equity capital.
Submitting a written concept for founding a business such as
this has been a matter of good practice for some time now in
Germany whenever dealing with professional backers. As a rule,
backers will only promote projects that are based on a properly
crafted business plan.
Formulated and used correctly, the business plan becomes the
key document in evaluating and steering the company. The
business plan is used:
for submission to investors
for planning and monitoring attainment of corporate
objectives and
to present the company in the business world.
The great significance assigned to the business plan is not a
matter of accident. In submitting it you demonstrate your
capability to depict both clearly and understandably the many
and varied aspects involved in founding and managing a business. Preparing the business plan forces you to think systematically through your business idea, will disclose gaps in
knowledge, demands decisions and thus fosters a structured
and focused approach. With its clear analysis of the situation
the business plan promotes the effectiveness of your operations and, moreover, serves as a guideline for your efforts. You
can align your activities with the plan and determine the extent to which you have reached the goals that you had originally set for yourself.
5
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 6
I. Business plan basics
What characterises a business plan?
The project for which the business plan is written and the purpose
for which it is intended will have decisive influence on its design. If
the plan is being written in preparation for founding a new company, for example, it will look different than for a company intending
to launch activities in a new business sector.
In spite of the differences, business plans all exhibit some common
features. They should make it possible to undertake a comprehensive estimate of the opportunities and risks inherent to the business
activity while at the same time remaining clear and concise. This is a
major challenge that implies certain requirements in terms of form
and content.
Observing some instructions and basic rules can promote the success of a business plan.
every plan – whenever possible – should be presented to a test audience (e.g. coaches in the course of the contest) before its ultimate
submission. This will help to cull out fuzzy passages and to identify
areas that require additional clarification.
› A business plan convinces by way of objectivity.
When presenting your own good idea you might be tempted to go
over the top. In spite of all the – very desirable – enthusiasm, the
tone should remain objective and the representation should allow
the reader to carefully weigh the arguments presented one against
the other. An overly effusive depiction, similar to advertising copy, is
more likely to be distracting; it provokes suspicion, scepticism and
prejudice.
Equally inappropriate is an overly critical depiction of one’s own project, referring to various misjudgements and errors in the past. This
› A business plan is “a living thing”!
can instil doubt regarding capabilities and motivation. Information
The business plan also matures, bit by bit, along with your business
in the business plan should be objectively correct and given accordidea. At the beginning you will work through just a few topics;
ing to best of your knowledge and belief. Weak points should
more will join them as time passes. New findings will make it necesnever be discussed unless accompanied by the steps for improvesary to rework and update individual aspects again and again.
ment that are being planned or have already been undertaken.
The assumptions, projections and results will have to be harmonised one with another in order to avoid errors in content. The
work will be simplified by using processes incorporating forward› A business plan must also be understandable to technical
laypersons.
looking planning. Here it is necessary to number the topics and to
Never attempt to impress readers with your expertise by including
note all the cross-references. All source material should be sorted by
exhaustive technical details, complex engineering drawings or assubject.
sessment sheets with lots of fine print. Only in very rare cases will
technical specialists or engineers be reviewing the explanations. The
› A business plan impresses with its clarity.
readers are usually not technical people and they will appreciate a
The business plan has to deliver a suitable answer to all the reader’s
simplified depiction and, where appropriate, an explanatory drawquestions. When reviewing it, the reader must be able to detect
ing or photo. Technical details on the product or manufacturing
specific accents, depending on the investor’s interest in your busiprocess belong in the appendix, if mentioned at all.
ness project. This means that the plan must be clearly structured in
Remember: you are fully familiar with the material and run the danorder to enable quick orientation and decision-making.
ger of assuming too much knowledge on the part of your readers.
A business plan does not convince its readers by the extent of the
analytical and data material, but rather by prioritizing individual
› A business plan needs to be as though from a single pen.
As a rule, several persons will work on the preparation of a business
statements and concentrating on the essentials. All the topics that
plan. At the end all the contributions will have to be “unified” so
might be of interest should therefore be dealt with concisely, but
that you do not wind up with a document that appears to have
nonetheless completely. A scope of about 35 pages appears approbeen thrown together haphazardly, with its parts differing in the
priate for a detailed business plan. Five pages more or less would
type and depth of depiction. Thus it is beneficial for a single person
certainly be permissible. You should use the space afforded in the
to be made responsible for final copy and uniform layout.
annexes to provide supplementary information such as organisation charts, important calculations, patents, résumés for members
of management, advertisements and articles from the press. Pay
› A business plan is the visual calling card.
Finally, the business plan should also present a uniform appearance.
careful attention to ensuring that the annex remains manageable
Important here is the use of typefaces and fonts associated with
and does not become a “data graveyard.”
particular structures and content, clean inclusion of graphics that
Since you will not be present while the business plan is being read
present clear information and, if appropriate, a header incorporatand you will not be immediately available for questions and explaing the company’s logo.
nations, clear and unequivocal wording is important. Consequently
6
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 7
I. Business plan basics
How do backers assess business plans?
When preparing a business plan it is important to know how
backers work and what they pay attention to. This applies both
to classical bank financing and public subsidies and to the socalled “intelligent capital” that is invested by venture capital
companies and business angels.
Many new companies, often technology-oriented, require participatory capital even in a very early phase just before or after
founding in order to fully exploit their (great) growth potential.
Their preparedness to take on both silent and active partners
during the difficult start-up phase has risen markedly in recent
years.
What’s more, new technology companies also require support
in various disciplines during the initial years in business – in
regard to business strategy, day-to-day operations and active
management consulting. At this point in time commercial consulting companies are usually too expensive. Public consulting
agencies, by contrast, can render only very limited support.
Young high-tech companies are indeed deemed to be very
risky but, when compared with new start-ups in many other
fields, they exhibit a high survival rate. They also exhibit expansion potentials that make them extremely lucrative for investors. Successful growth rates among technology-oriented
companies show that even in the setting in Germany, in the
past deemed fairly unfavourable, good returns are possible for
investors who get in on the ground floor.
This is the intention pursued by venture capital companies.
These are investment funds specialising in growth industries,
contributing risk capital to young companies and providing
support services in the early years.
At first glance venture capitalists’ behaviour might seem to be
curious. They commit capital without demanding either a fixed
interest rate or repayment schedule and demand no security.
When studied more closely, however, this behaviour makes
sense. Those who sink risk capital acquire in return for their
financial support holdings in a company that is felt to have
great growth potential over the medium term. The anticipated,
calculated growth in value of the invested capital is, as a rule,
between 25 and 50 per cent per year! By contrast, the advantage for the young company is that it obtains equity capital at a
very early point in time, when other backers can hardly be persuaded to undertake a larger financial commitment due to the
lack of security and the uncertain prospects for the future.
Venture capitalists help companies in which they have holdings
not only with funding; they are also available for assistance and
support – for example by arranging contacts and advising in
difficult situations. That is often why venture capital is also referred to as “intelligent capital.”
When seeking capital for your business project you are naturally interested in forfeiting the smallest possible share of the
project that you see as promising great success. Start-up financing for an innovative new company is therefore fostered,
in addition to risk capital, by way of numerous schemes to
promote new companies; these are operated both by the federal and state governments in Germany. This is also of benefit to venture capitalists, who are not terribly fond of seeing
7
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 8
I. Business plan basics
How do backers assess business plans?
themselves as the only investors. Thus, as a rule, venture capitalists will acquire less than 50 per cent of the shares in the
business. They signal that they view themselves more as partners than as financial backers and co-owners.
Venture capitalists sell off their shares after about five to seven
years. Those who might be considered to acquire the shares
could be the other partners in the company or other companies and even direct competitors (provided that this is not expressly prohibited in the contract with the venture capitalists).
In some cases the company floats an initial public offering on
the stock exchange. Venture capitalists hope to achieve very
high returns from the sale, at rates that exceed many times
the yields expected by conventional lenders (such as banks).
Successfully financed companies can achieve value growth of
at least 25 per cent annually. This can more than compensate
for any investments in “flops.”
Particularly in the early phases of a company’s development,
however, financial bottlenecks may arise whenever it is necessary to lend precision to the company’s concept, talk with potential customers about their needs and expectations, clarify
the patent situation and negotiate with investors and lenders.
At this juncture there will be hardly any bank (and often no
venture capital companies, either) willing to finance the prevailing capital requirements, which can easily rise into the six-figure range.
Deemed to be the ideal solution in this situation are therefore
private investors who bring with them pertinent professional,
industry and management experience and who, with both
financing and know-how, can set the course for successful
company development at an early date. These so-called business angels are successful, well-to-do individuals – entrepreneurs for example – who become something of a patron for
the new project, supporting it with money but, above all, with
advice and counsel. They have usually put their own company
on the stock market or have sold their shares and are now
investing their “intelligent capital” preferably in industries in
which they have experience. In addition, they are usually interested in taking an active role in the company, at least in a consulting capacity (on an advisory council, for instance). Moreover,
experience in other countries shows that their expectations in
regard to yields are more moderate, their rejection rate is lower
and their participation usually over a longer period than for
venture capital companies. The American high-tech landscape
is no longer conceivable without informal participatory capital
(i.e. business angels); many renowned companies such as Microsoft and SAP started up with informal capital.
8
These observations make clear what venture capitalists, private
investors and the financial professionals at banks are looking
for in a business plan:
The business idea must have a clearly definable benefit for
customers, expressed most simply as lowered costs for
known benefits, or novel utility with a reasonable amount
of expenditure for market participants.
The company is to supply, on the medium term, a large and
growing market, one that is usually also international in its
orientation.
The project or service should be innovative. A thoroughly
new technology or a superior manufacturing process has
significant advantages because this makes market entry
more difficult for competitors.
The business concept used to penetrate the market has to be
consistent and accurate. Projections and estimates should
be precise, i.e. based on convincing assumptions and facts.
A high degree of confidence in planning is a basic requirement for business success. It can be a major contribution to
avoiding liquidity problems and thus can even fend off a
bankruptcy.
Every investor and lender pays particular attention to management because ultimately the business project will stand
or fall, based on the capability of company management to
implement the business concept. To be taken into account
here is in particular the mixture of capabilities required for
innovative companies, a mix that those who are involved in
founding the company can only rarely cover entirely on their
own.
That is why the key people, their training, experience, creativity, motivation, nerves of steel and naturally their ability
to handle money are carefully scrutinised. Successes already
achieved are assigned greater weight than academic titles.
The ability to work in a team is also deemed to be an additional yardstick for the investment decision.
All in all, the management team should be interdisciplinary (e.g. including specialists for development, production,
marketing, sales and business administration) and should
accept participation by venture capitalists.
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 9
I. Business plan basics
Tips for preparing a professional business plan
Investors and lenders are interested in the finished business plan
and not in the process that resulted in its creation. They value a
document that is well prepared and from which they can
clearly see the opportunities and risks in an enterprise right
from the first “skim.” Consequently, when writing this document you should always keep sight of the business objective,
the utility for customers and the potentials for returns on
capital investment.
The following notes are intended to help you when preparing a
professional business plan:
› Proceed according to a plan!
Preparing a business plan is a complex assignment. Many individual aspects will have to be taken into consideration and systematically analysed in a logical sequence. Thus detailed planning
should be undertaken for the preparation of the document. This
begins immediately after sketching out the initial ideas.
It is advisable either to follow this manual (see the section on
“Structure and main elements in business plans”) or to follow
the business system (e.g. research and development, manufacturing, marketing, sales, delivery and administration).
› Key questions tailored to your own project!
When preparing a business plan it is helpful to refer to a list of
questions. Which of the individual questions are to be posed and
what answers are incorporated into the business plan will derive
from the product and the service as well as the degree of technology orientation, the nature of value addition, and also the
knowledge required by the target group made up by the readers.
The basis for compiling the blueprint for your own work could
be the key questions that are listed in this manual, subject
by subject. These key questions are to provide inspiration for
thinking and are only exemplary in character; they lay no claim
to completeness.
›
› Keep the final product in mind!
In the framework of a project such as this there is always the danger of losing one’s way in a thicket of individual analyses. Thus it
is advisable to lean back from time to time and examine critically
whether the amount of information compiled in the meantime is
sufficient and what additional value could be contributed by
additional analyses. In this context we would note once again
that the complete business plan should not encompass more
than about 35 pages (plus an annex if appropriate).
›
› Seek support at an early date!
When working on the business plan it is important to obtain
support in many fields. Thus it is highly advisable to join forces
early in founders’ teams (contacts can be found, for example, in
the Online Coaching area at www.start2grow.de). In teams with
complementary technical and business backgrounds the tasks
can be distributed among the team members depending upon
their capabilities; this simplifies preparation commensurate with
the subject matter. Neither should you be shy about calling on
external help and doing so at an early date. You can recruit
support from the start2grow network!
›› Test your own draft again and again!
Decisive for success are the understandability and the consistency
of the document. That is why it is important to present it, repeatedly, to a test audience. Outsiders who look through the
document can contribute, in advance of the presentation, to
identifying weak points and, under certain circumstances, can
even provide important new inputs for subsequent work.
9
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 10
I. Business plan basics
Structure and main elements of business plans
Business plans, in spite of all their differences, have ten main
elements in common; these are divided again into individual
sub-elements. This is augmented with an annex or appendix.
You should use the space available in the annex to your business plan for supplementary information such as organisational charts, important supporting calculations, patents, résumés
of the members of management and advertisements and articles from the press. Ensure that the annex remains manageable
in scope and does not become a “data graveyard.” The structure of a business plan, divided into main elements and individual elements respectively, is depicted in the illustration below.
This depiction involves a recommendation for the length of the
business plan. The degree of detail with which each of the ten
major elements in the business plan will be worked out will
depend on the significance in each case. The recommended
number of pages for the fundamental business plan (Phase 1)
and the detailed business plan (Phase 2) are based on values
gained in practical experience; they have proven their correctness in previous contests. The weighting of the main elements,
the recommended number of pages in each case and the key
areas for the work in phases 1 and 2 are also depicted in the
following illustration.
Phase 1
1.
2.
3.
3.1
3.2
3.3
4.
4.1
4.2
4.3
5.
5.1
5.2
5.3
6.
7.
8.
9.
9.1
9.2
9.3
9.4
10.
Executive Summary
Corporate objectives and profile
Product or service
Benefit and utility to the customers
Development of the product or service
Manufacturing the product / rendering the service
Industry and market
Analysis of the industry / overall market
Market segments / Target groups
Competitive situation
Marketing (sales and distribution)
Market entry strategy
ales concept
Sales promotion
Management and pivotal positions
Planning for realization
Opportunities and risks
Five-year planning
Personnel planning
Investment / depreciation planning
Planning for profit and loss statement
Liquidity planning
Financing requirements
10
2
2
4
3
3
5
4
5
4
5
1
2
2
2
6
2
~18
Initial processing or continuation in this phase
Within the structure depicted above, which is largely fixed, the
business plan will grow organically. At the beginning, only
certain key elements and individual topics will be dealt with.
Then new elements will join them; at the same time the content
already present will be expanded. By and by the business plan
will in this way be filled with content. Ultimately the individual
observations will be drawn together to form an overall picture
whose individual components are harmonised one with another.
Cope in pages
1
Recommended total number of pages (approximate)
Focal points in this phase
Phase 2
Cope in pages
~35
Need not be processed in this phase
In order to simplify your efforts, the following chapters provide
key questions for the main and individual elements in the business plan. This does not mean that you need to answer each and
every question. It is left to your discretion, which questions are
the right ones for your project, the ones needed to understand
the business project. You yourself must think about whether additional questions not listed here ought to be answered.
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 11
II. B u s i n e s s p l a n s t r u c t u re
1. Executive Summary
The Executive Summary should spark the reader’s interest and
particularly that of backers. It contains a concise review of all
the major aspects in the business plan. In particular it should
give insights into the product or the service along with benefits
to the customer, the pertinent markets, management competence and investment requirements with potential returns.
This summary is what a venture capitalist will look at first; usually he or she will only skim it. The quality of the presentation
alone will hardly persuade a venture capitalist to support your
project. Poor quality can, however, turn the backer away. With
a clear, objective and consistent depiction of your project,
which has to be understandable for the technical layperson,
you can demonstrate that you understand your business.
The summary is a separate element; do not confuse it with an
introduction or brief description of your business idea on the
cover sheet. Write this summary last; only after all the other
sections are complete will you be able to formulate your ideas
and objectives concisely and precisely.
It should be possible to read and understand the Executive
Summary within five to ten minutes. Test this by submitting
your Executive Summary to a person who has no previous
knowledge of your business idea or of its technical and scientific background.
Thus you should be particularly careful when preparing the
executive summary. It is decisive for whether the entire business plan will be read.
Key questions on the Executive Summary
In Phase 1
What long-term objectives do you want to achieve with
your enterprise?
What is your business idea? To what extent is this idea
unique?
Is your product or service idea explained in a way that
is understandable for readers?
Is the benefit to customers clear?
What target groups are you addressing?
What markets and industries are relevant for you
company?
What competencies does the team have?
What are the opportunities and risks?
In Phase 2
What market entry strategy are you planning?
Can you present references?
What does your company’s business system look like?
Who are the partners with whom you cooperate?
What are the most important milestones along the road
to the destination?
How extensive are investment needs for your company
in the next five years?
What returns (yields referenced to sales or yields referenced
to the investment) can you achieve with your company?
11
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 12
II. B u s i n e s s p l a n s t r u c t u re
2. Corporate objectives and profile
The purpose here is not to anticipate the business plan or to
give a second summary. Instead you should draw up a vision of
your company for your readers. Ideas and objectives are in the
foreground here.
The primary emphasis in your depiction should be the company’s future positioning. Explain the strategy, success factors
and important milestones.
Clarify the nature of your business and show that you understand it. Experience already amassed in regard to your future
business sectors should be mentioned briefly here. Describe
clearly what you are thinking about, do not get lost in details
and make no references to other sections in the business plan.
Show the expansion possibilities for your business, based on
an estimate of the market potential.
Key questions on corporate objectives
In Phase 1
What is your company’s vision?
What long-term company goals have you set for yourself?
What are your main success factors?
What strategy do you intend to use to achieve these
objectives?
What are the most important milestones for that purpose?
What do the first (or next) steps look like?
In Phase 2
Lay out the timetable for the founding of your company,
showing the milestones in an illustration (such as a
bar chart).
What employment potentials do you foresee for your
company over the medium and long terms?
Key questions on the company’s profile
In Phase 1
What is the exact nature of your business?
What market sectors and what product or services
ranges will you be covering?
12
In Phase 2
What type of organization are you planning for the
company’s incorporation?
What business structure do you foresee?
What operating site have you selected?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 13
II. B u s i n e s s p l a n s t r u c t u re
3. Product or service
Your business will be based on an innovative product or services idea. This idea and its advantages for the customers will
have to be depicted in detail; also needed is a comparison with
competitors’ capabilities. In addition to this, you should provide
information on the development of the product or service and
on the requirements for manufacturing.
3.1 Benefit and utility to the customers
Founding a company based upon a new product or services
idea makes sense only if the new “output” is superior to what
is already on the market. That is why you should explain what
function the product or service satisfies and what utility the
customers can draw from that. If comparable products and services are already being marketed by competitors, you will have
to explain convincingly what additional utilization (and possibly
cost savings) the customer can realise with your new
idea. To do this, put yourself in your customer’s shoes and
weigh the advantages and disadvantages thoroughly. Evaluate
your competitors’ products or services using identical criteria. If
you are offering several innovative services or products, subdivide
your ideas into logical business sectors, e.g. by products or target
groups. Define the boundaries between these business sectors.
Key questions on customer benefits and utility
In Phase 1
What target groups are you addressing?
What needs do the target groups have?
What functions does your product satisfy in this context?
What requirements have yet to be met in order to
achieve this utility for the target group?
What additional benefit or utility will your product or
service offer?
What partnerships are necessary for complete realisation
of this utility for the target groups?
What competitive products are already in existence or under
development?
3.2 Development of the product or service
When discussing this topic put yourself in the position of the financial backers who want to keep their risk as low as possible.
Attempt to do without technical details and to explain everything as clearly as possible.
Where it contributes to understanding your product, include a
photograph or drawing of your product. It is of great advantage
if references can be cited to demonstrate that your product or
service can actually be utilised.
A prototype that is already on hand will convince potential
backers that you are up to mastering the technical challenge.
You should also describe the details of the innovation and
what lead you have over competitors. Discuss specifically your
13
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 14
II. B u s i n e s s p l a n s t r u c t u re
3. Product or service
protection (by way of patents or registered utility models)
against duplication or imitation. If there are any problems or
open questions regarding development, always indicate the
way in which you intend to overcome these difficulties.
A further source of uncertainty is represented by legal requirements for products and services. Describe the certification (e.g.
by the TÜV, Federal Health Office etc.) you have already been
awarded, have applied for or have yet to apply for.
Key questions on development of the product or service
In Phase 1
What is the state of the art at present?
To what extent is your idea innovative?
Why is your product or service or a comparable or
competitive product not yet on the market?
In what development stage is your product or service?
What further development steps or releases of your
product or services are you planning?
What important development milestones have yet to
be achieved?
What versions of your product or service are planned
and for what applications and target groups?
Is the manufacture of your product or rendering of your
service permitted by law?
Have you obtained patents or licenses?
What patents or licenses does the competition hold?
14
In Phase 2
What does your range of services and products look like?
What product and services guarantees do you offer?
Use a summary (profile of strengths and weaknesses) to
compare the strengths and weaknesses of your product or
service with those of your most important competitors.
What resources (time and expense) are you planning for
later developments?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 15
II. B u s i n e s s p l a n s t r u c t u re
3. Product or service
3.3 Manufacturing the product / rendering
the service
Explain your planning for the manufacturing process or services
delivery process and the plant configuration; list the capacities
needed to achieve the targeted sales volume and what investments are associated therewith.
Key questions on manufacturing and delivery
In Phase 1
What processes are you planning to install in order to
manufacture the product or render the service?
How many units do you intend to manufacture or what
scope of services do you intend to offer?
What means and resources (quantitative and qualitative) do
you require to manufacture the product or render
the service?
How great is your need for inputs (e.g. raw materials, materials) required for manufacturing the product or rendering
the service?
What components and services do you intend to outsource?
In Phase 2
What capacities for product manufacture or rendering
services (piece counts) are you planning?
In what way can you create these capacities at short notice?
What expenditures would be required to expand capacity?
What quality assurance measures are you intending to
install?
If you require warehouse space, what warehouse organisation structure do you envision?
What do you see as your personnel needs and cost
structure in manufacturing?
How much will the preparation and delivery of your product
or rendering and delivering your service cost?
15
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 16
II. B u s i n e s s p l a n s t r u c t u re
4. The industry and the market
Massive expansion of the value of your company is to be expected only if there is commensurate market potential. It is necessary to ascertain this potential by analysing the industry and
the market. For your potential financial backers it will not be
sufficient to simply quote the figures.
They will be looking for information on those factors that influence demand and the sales strategy so that the feasibility of
the company’s objectives can be examined and the risk better
estimated. Thus it is necessary for you to make it clear how you
arrive at your conclusions.
You can limit your amount of effort by following an organised
plan for your industry and market analyses. Work with hypotheses and compile questions that you would like to answer.
List what information you require for this purpose and where
you can obtain that information.
The data required for the analysis is often easier to obtain than
you might assume. Make use of all the available sources (e.g.
literature, trade journals, market studies, monographs),
industry directories, associations and government authorities
(statistical offices, chambers of commerce, patent office),
banks (industry reports), databases and the Internet. Often it is
helpful just to pick up the phone and make a number of calls.
Sketching out a “script” will boost your own efficiency and
productivity along with willingness of your interviewees to provide information.
The individual items of information might under certain circumstances not provide a direct answer to your question. Thus
it is necessary as a rule to arrive at certain estimates on developments in the industry or the market. You should always substantiate these estimates.
While evaluating the information – including the analysis of
the industry, segmenting the market and identifying individual
target groups and the sales volumes that could be realised in
those groups – you achieve a step-by-step refinement of your
picture of the industry. Indicate with an analysis of the competition what difficulties are to be anticipated in exploiting the
market potential.
4.1 Analysis of the industry and
overall market
First provide a survey of the industry to which your enterprise
will belong. Also discuss the main factors exerting an influence
on the industry. Initially describe the status quo and – building
on that – the anticipated trends. Make it clear what will influence development (e.g. new technologies or initiatives launched
by lawmakers) and what relevance these factors will have for
your enterprise.
Your explanation should include information on the size of the
market (sales and turnover), returns typical for the industry, the
roles of innovations and barriers to entry, competitors, suppliers and other target groups and distribution channels.
Key questions on the analysis of the industry and the market as a whole
In Phase 1
How does your industry develop and how dynamically does
it change?
What part do innovations and technological advance play
there?
How large is total turnover and total sales in your industry?
What is the current trend?
What direction are prices taking?
16
In Phase 2
What economic developments exert an influence on
your industry?
How does legislation influence your industry?
What determines the growth rate in your industry?
Describe the competitive arena.
What strategies are being pursued?
What barriers exist in regard to market entry and how
can these be overcome?
What yields are realised in your industry?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 17
II. B u s i n e s s p l a n s t r u c t u re
4. The industry and the market
4.2 Market segments / target groups
Follow up on the analysis of the industry and market with a
definition of your target groups and the market success you
are planning (sales, turnover, market share and profit).
Divide the market into segments for this purpose. Your may
select the segmentation criteria at will as long as you ensure
that, firstly, the number of customers in each segment and
their behaviour can be ascertained and, secondly, that these
can all be reached with one and the same sales strategy.
Often used as criteria are utility to customers, buying patterns
or regions.
Ascertain the potential turnover for each segment within a
time period you specify. Here be sure to take your sales strategy and the behaviour of competitors into account. Depending
on the industry, you should also take account of a potential
decline in prices.
Key questions on market segments and target groups
In Phase 1
How are you segmenting the market?
Who makes up the target groups?
What examples of customers can you list?
What (sales) volumes are present in the individual segments
today and in the future?
What sales, turnover and profit levels are you expecting in
the first five years (estimate)?
In Phase 2
What growth rates are you forecasting for both volume and
potential?
What market share do you hold? What market share are
you striving to obtain?
How profitable are the individual segments, both now and
according to estimates for the future? How great is the
potential?
How great is the turnover potential for individual business
connections, both now and in the future?
How many such business connections are there today and
in the future?
What assumptions are your estimates based upon?
Under what assumptions can your estimates be generalized?
What are the factors that influence the purchasing
decision?
What part do service, consulting and maintenance play?
To what extent are you dependent upon large customers?
17
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 18
II. B u s i n e s s p l a n s t r u c t u re
4. The industry and the market
4.3 Competitive situation
Finally you should sum up your competitors’ strengths and
weaknesses. To do so, evaluate your most important (potential)
competitors according to the same criteria, e.g. sales and turnover (pricing), growth, market share, cost picture, product line,
customer service, target customer groups and distribution
channels. In the interest of clarity, avoid overly extensive
details. Include your own company in this evaluation and determine by way of a comparison how enduring your competitive advantage is likely to be.
Key questions on the competition
In Phase 1
What important competitors offer comparable products and
services?
What new developments are to be anticipated?
What target groups do the competitors address?
How does your product or service distinguish itself from
that of the competitors?
18
In Phase 2
What market shares do your competitors hold?
How profitably do your competitors work now and how
profitably will they work in the future (estimates)?
What strategies are the competitors pursuing now and
what will they pursue in the future (estimate)?
What distribution channel do the competitors use?
What marketing strategies are the competitors following?
Compare your competitive strengths and weaknesses with
those of your competitors; compile them in an overview
(development, distribution, marketing and location).
How enduring will your competitive advantage be
and why?
How will the competitors respond to your appearing on the
market? How do you intend to respond to this reaction?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:26 Uhr
Seite 19
II. B u s i n e s s p l a n s t r u c t u re
5. Marketing (sales and distribution)
In the marketing concept you explain how you intend to distribute your products or services. Distribution efforts and all the
measures you intend to undertake to exploit the market potential
identified for your company will be explained in greater detail
here. Assign great significance to these subjects and by no
means underestimate the amount of effort involved. You
should depict convincingly and in detail your strategy for market entry, the sales concept and the sales promotion work you
have planned.
5.1 Market entry strategy
New enterprises have to introduce their product or service to the
market step by step. Experience has shown that costly campaigns are often less promising than closely targeted intro-
duction by way of references. That is why you should attempt to
acquire companies that are deemed to have a good reputation in
the industry as customers for your products or services.
Key questions on market entry strategy
In Phase 1
What steps are you planning to introduce your product or
service?
What is the timetable and what are the important milestones?
In Phase 2
What reference customers do you already have?
How do you intend to acquire new reference customers?
5.2 Sales concept
Products or services have to be taken to the customer. The
sales concept depicts this selling process in detail, names the
planned distribution channels and takes into account the
costs they trigger.
Describe your idea for the structure of your sales operations;
explain requirements as to the number, qualification and motivation of your sales associates. Might you initially have to
make use of sales agents or representatives because your products are very expensive and require intense customer support? Also make projections for the future and consider
whether, with increasing complexity of your products or services, you will want to send your own development personnel
“to the fore” to respond to customer questions. If you are offering high-volume, low-priced products, examine the possibility for distribution via wholesale operations already in
existence.
Another item to be included in the development of your sales
concept is setting up the appropriate price structure. When
determining the prices you should use for orientation the
prices asked for comparable products or those products or
services that are used at present. Estimate where the added
value of your product or service is to be found and how convincingly you clarify this added value for the decision makers
in your client companies. Consider the additional costs your
customers might incur in conjunction with using your product
or services. If you make use of trading companies, you will
have to calculate their mark-up.
Finally, determine whether and how you can cover costs with
the price you can realise.
19
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 20
II. B u s i n e s s p l a n s t r u c t u re
5. Marketing (sales and distribution)
Key questions on the sales concept
In Phase 1
What does the typical process for product or services sales
look like?
What distribution channels will you use?
What sales channels are used to reach specific target
groups?
What final sales prices are your products or services to
achieve?
What turnover level do you want to attain?
What strategies are you pursuing in selecting the price
structure?
In Phase 2
What requirements for the distribution organisation are you
planning and what are the associated expenditures?
What sales associates are you striving to achieve? What
qualifications must they have and what equipment will
they need?
What mark-up do you have to calculate in for each
distribution channel and product or service (estimate)?
How will sales and contributions to profits be assigned to
the individual distribution channels (estimate)?
What market shares do you want to reach with each
distribution channel?
5.3 Sales promotion
Indicate briefly how you intend to draw your target groups’
attention to your product or service. Are you striving to achieve
a high recognition effect or – better yet – spontaneous association of your product or service with its utility for the customer?
Depending on the service and price of your product or service,
you will select among various sales promotion options such as,
for example, advertising, press releases or trade fair booths.
Key questions on sales promotion
In Phase 2
How will you draw the attention of the target groups to
your product or service?
How much time and what capacities will have to be
committed in order to obtain customers?
What advertising media will you use to do so?
What is the significance of service, maintenance and
hotline support?
What product or performance guarantees are you
granting?
20
What expenditures will be incurred during introduction
and later?
What price will you be asking for your product or service
in each of the target groups and distribution channels?
What payment policies will you put in place?
What payment periods and discounts will you be
granting, for example?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 21
II. B u s i n e s s p l a n s t r u c t u re
6. Management and pivotal positions
Potential backers will often turn to the subject of management
right after reading the Executive Summary since they want to
know whether the management team has the know-how necessary to run a promising enterprise.
That is why you should deal carefully with the topic of management and pivotal positions. When depicting the qualifications
of management staff, emphasise those aspects that are significant for implementing your project. Professional experience
and successes already attained count for more than academic
titles. Indicate what persons you intend to place in pivotal
positions within the enterprise. Also sketch out how authority
is to be assigned within the company and indicate those positions for which you are planning reinforcement. If inexperienced persons are to be entrusted with pivotal positions, you
should substantiate the decision in detail.
Nobody’s perfect! That is why you should not have any qualms
about naming your most important consultants, as well.
No one can possess all the qualifications and experience needed to found a company. Selective involvement of outside professionals, from the fields of auditing, public relations or
management consulting, for example, indicates a degree of
professionalism and will reassure potential backers.
You should also deal openly with planned remuneration schedules for management. Be sure that you do not exceed salaries
that are typical for the industry. Also consider the possibility of
performance-based bonuses that are tied to achieving certain
milestones, sales levels or profit objectives, which will make
venture capitalists confident that the required degree of élan
will be devoted to pursuing the targets you have set.
Key questions on management and pivotal positions
In Phase 1
What is the professional background of the management
teams and those occupying pivotal positions in the company
(training, career etc.)?
What professional successes have been registered?
What experience and capabilities does the team have in
regard to the business project?
In Phase 2
Who is to manage which groups or business units?
What experience and capabilities does the team lack?
How and by whom will the team be supplemented?
What is the design for the remuneration system?
21
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 22
II. B u s i n e s s p l a n s t r u c t u re
7. Planning for realisation
Milestone planning for the realisation of your business project
will have an essential influence on the financing and risks associated with the business. Planning helps you and your potential
backers to think their way through all the aspects and to analyse the effects of individual steps in implementation.
› Ask the experts!
Utilise the advice of specialists in order to underpin major steps
in planning. Marketing specialists, for example, could show
you how long it will take to develop and conduct a given campaign.
Realistic planning is, however, not simple, above all when founding a new company. Attempt in spite of that to sketch carefully
the individual steps needed to implement the business plan. In
this way you gain credibility among your backers and business
partners and enhance the chances for the success of your business.
› Set priorities!
Every overall planning concept comprises a series of events and
assumptions that in some cases run in parallel and are linked
one with another. Certain activities can, if delayed, endanger
the entire project – similar to assembly line production that
comes to a halt, if certain parts are lacking. Activities such as
these are referred to as the “critical path.” You should devote
particular attention to them in your planning.
Four simple rules can help simplify realistic planning for you:
› Subdivide the tasks into packages!
› Reduce risks!
Try to schedule activities that will reduce risks for the beginning
Since there is a great deal of detail work to be carried out when
of the realisation phase. You could, for example, carry out marsetting up a company, there is always the danger of losing sight
ket studies immediately or just shortly after market entry. If you
of the big picture. Thus you should always organise the individo not carry out such surveys or polls until a later point in time
dual activities in “packages.” The business plan should, howand find that there are not enough customers for your product,
ever, not contain more than ten such packages; you can specify
all the previous work may have been in vain.
them further at a later date. A concrete objective is to be set
for each package.
Key questions on realisation planning (planning for implementation)
In Phase 2
What are the milestones in developing your company and
when do they have to be reached?
What core questions have to be clarified here? What lead
times and what expenditures are associated with clarification?
Depict your activities on a timeline.
What tasks and milestones are dependent directly one upon
the other?
22
What is the “critical path”?
What tasks appear in addition as the company grows and
how will you organise those tasks logically into work “packages”?
What do the first and subsequent steps look like?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 23
II. B u s i n e s s p l a n s t r u c t u re
8. Opportunities and risks
Young, rapidly growing companies have to set the course
for their future at an early point in time. Their development
and their latitude for action will be dependent in large part
upon the ability to detect risks early on and to counter them
effectively.
Increase your sensitivity to opportunities that are to be expected. Another company might encounter delivery difficulties
and you might be able to cover customers’ needs; a change in
the law might expand latitude for action that had previously
been limited.
In this chapter we are dealing with the realistic estimate of the
opportunities and risks as you see them now, or which are to
be expected with great likelihood in the future. Indicate what
positive or negative consequences these could have for your
company. Sketch out how you intend to respond to risks in
order to limit the extent of any damage. Prepare an optional or
alternative plan; it will have to mesh with your overall concept.
When preparing your alternative plan, attempt to maintain objectivity and do not paint an overly rosy picture. Be sure to go
into critical aspects, since this will earn respect among potential
backers. A thoroughly founded depiction identifies industry insiders who are prepared to meet every eventuality.
Risks are lurking everywhere: perhaps your competitors will
respond to your market entry with a massive counteroffensive.
Suppliers with similar and better products could appear. How
do you protect yourself against your own employees being
pirated off by the competition and taking confidential information with them?
The ideal situation is to draft two scenarios, one being the best
case and the other representing the worst case. Identify your
prime opportunities and major risks. Vary the parameters such
as pricing and sales to clarify their influence on your planning.
Key questions on opportunities and risks
In Phase 1
What fundamental opportunities and risks exist for your business project (in regard to technology, customer
behaviour, competition and the like)?
In what areas of your company will you have to make
adjustments, if certain events occur in the future, and what
might those events be?
How probable is the occurrence of negative events?
How can you possibly avert these in advance?
In Phase 2
How would you modify your plans in case such an event
or such events occur?
What alternative response options do you see for your
own company?
What effects would these potential events have, if you
were not to respond?
To what extent could you, by modifying your plans, limit
these effects (in the case of risks) or utilise these effects
(in the case of opportunities)?
How could an expanded capital base help in such a
situation?
What would your planning for the next five business
years look like in the best and worst cases?
23
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 24
II. B u s i n e s s p l a n s t r u c t u re
9. Five-year planning
Here you examine whether your business concept can be financed and will be profitable. To do this you will have to compile and consolidate the results from all the previous sections.
The profit and loss accounts show the increase in value to be
expected. Essential to five-year planning is liquidity planning,
which shows the needs for interim financing. Before attempting to prepare these plans, you should give some thought
to personnel planning and investment planning.
There are many possibilities for presenting this wealth of figures. To simplify this we are providing planning tables in the
appendix to this manual; they are also available on our website, ready for downloading.
9.1 Personnel planning
Prepare a detailed personnel plan for the first five years in
which your company will be in business. During your planning
ensure that there will be sufficient staffing and take into account any outside services you might avail yourself of,
together with temporary and free-lance associates. Assign cost
volumes to your personnel planning in order to determine overall personnel costs (salaries and fringe benefits) to be used in
your profit and loss statements.
Key questions on personnel planning
In Phase 2
What personnel requirements and what personnel costs are
you anticipating in the individual areas of your company in
the next five years in business?
9.2 Investment and depreciation planning
You will include in investment and depreciation planning all
the investments that are posted to assets (capitalised) and the
depreciation rates applicable in each case. The depreciation
rate will depend upon the planned period of use for an asset.
Normally an asset will be fully depreciated at uniform annual
amounts (linear depreciation) in a period of between three
and ten years.
Investments have to be taken into consideration when planning liquidity; the total for depreciation each year is included
in the profit and loss statement.
Key questions on investment and depreciation planning
In Phase 2
What tangible assets are required in order to achieve the initial turnover?
What does your investment planning for the very near term
and the next five years look like?
What major investments will be required in the future?
24
When and to what extent will these investments occur?
How much do the annual depreciation values for the
individual investments come to?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 25
II. B u s i n e s s p l a n s t r u c t u re
9. Five-year planning
9.3 Planning for the profit and loss statement (P&L)
Potential backers must be able to estimate how much will be
left over at the bottom line at the end of each year. The profit
and loss statement helps them make this estimate.
In contrast to liquidity planning (planning for liquid assets),
which comes later, the question in the foreground as regards
the P&L is whether any given transaction will result in an increase (yields) or decrease (expenditures) in your company’s net
worth (understood to be the sum of all assets, less debts).
Examine your entire business plan and decide whether and
to what extent the assumptions you have made will be reflected in expenditures and returns. If you are in doubt about the
exact amount for the expenditures, obtain cost estimates. Do
not forget to include the costs for your own private living expenses. If you intend to form a private limited company, you
will need to pay yourself a salary as the general manager.
Indicate the depreciation values determined in investment
and depreciation planning. The expenditure for any given
investment, i.e. the purchase price for the machinery or equipment, is not included in the profit and loss statement because
this payment does not result in a change in your company’s net
worth.
The item entitled “costs for materials” includes all the expenditures for raw materials, auxiliaries and operating resources
and for goods and services you purchase. Taken together as
personnel expenditures are the wages and salaries, together
with fringe benefits and taxes; these were determined in the
personnel planning section.
Put simply, the miscellaneous operational expenses are a
catch-all for items such as rent, insurance, office supplies, postage, advertising and legal advice. Please be sure to comply with
legal requirements when assigning individual returns and
expenditures (governed by Title 275 of the German Commercial Code)!
Then calculate the difference between all returns and all expenditures in a given business year and determine the annual
surplus or shortfall. In this way you obtain an overview of
business yields but no reliable insights into liquid assets at
any given time. Liquidity planning serves this purpose.
If, for example, you sell your product or service during the
current business year but payment is not made until the following year, you have to post the yields resulting from the sale
even though no money has found its way into your cash box.
The situation is the same for expenditures.
The profit and loss statement utilises one-year planning periods. A profit and loss statement should be drawn up monthly
during the first year in order to improve confidence in planning; statements should be drafted quarterly in the second and
third years. A P&L statement every six months will suffice in the
fourth and fifth years.
You could use as a basis the tables that you will find either in
the appendix to this manual or ready for download on the
start2grow website.
If you yourself have no experience in finance and liquidity planning, it is highly advisable to ask the coaches in the start2grow
network (e.g. from the fields of tax consulting and auditing) for
their advice. You should discuss with a tax professional the
problems associated with VAT and taxes on yields, disregarded
here in the interest of simplification. You should keep in mind
that most business projects fail due to inadequate financial and
liquidity planning. It makes the most sense to include in your
team someone with the appropriate experience and knowledge in this field.
Key questions on profit and loss planning
In Phase 2
In what way will your turnover, expenditures and yields
develop in the next five years? (Kindly use the P&L table
provided for the compilation of your data.)
In what year do you expect to reach the break-even point?
25
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 26
II. B u s i n e s s p l a n s t r u c t u re
9. Five-year planning
9.4 Liquidity planning
In order to avoid insolvency, which would mean bankruptcy
and thus the end of your company, your firm will have to be
“liquid” at all times. This should be ensured by way of detailed
liquidity planning. Its principle is simple: all receipts will be set
off against all disbursements.
In this context please remember: writing or receiving an invoice
does not mean that the money is already in your cash drawer
or that you have settled the bill. Decisive for planning liquidity
is the date on which payment is actually made. Consequently,
only those transactions that result immediately in a change of
your cash assets are decisive in liquidity planning. Depreciation,
reserves and your own capitalised output do not belong to this
calculation.
Record the amount and time for all receipts and disburse-
ments. Your company will remain liquid only as long as the sum
of the receipts in each and every period is greater than the sum
of the disbursements. If there will be periods in which, according to planning, this is not the case, it will be necessary to add
capital. The sum of all the individual values results in overall
capital requirements across the planning period. The further you
look down the road into the future, the greater the planning
uncertainty will be.
Consequently, liquidity planning should take place monthly
during the first year, quarterly during the second and third
years, and semi-annually in the fourth and fifth years.
You can use for your calculations the tables that you will find in
the annex to this manual or available for download on the
start2grow website.
Key questions on liquidity planning
In Phase 2
How do you expect your liquidity to develop over the short
and medium terms?
a) For the first business year: break down expected disbursements and receipts by month
b) For the second and third business years: break down the
expected disbursements and receipts by quarters
c) For the fourth and fifth business years: estimate payments
and receipts semi-annually
26
At which point in time do you expect to have a surplus
of receipts (total of all receipts less the total of all disbursements)?
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 27
II. B u s i n e s s p l a n s t r u c t u re
10. Financing requirements
Liquidity planning will indeed show us how much capital will
be required at what time but not, however, the sources from
which it is to derive. Here it is important to coordinate individual financing items with suitable and willing suppliers of
capital. Among the items requiring financing are the costs for
development, investments, production start-up and establishing the warehouse or rendering the service through to the
point that a liquidity reserve is established.
Choosing from the large number of sources of financing (venture capitalists, holding companies, public agencies and startup business promotion schemes, established companies,
private persons, banks, your own private capital etc.), select
the proper mix for your enterprise.
ing payments or credit granted by suppliers. When you seek
long-term financing, both loaned and equity capital are
suitable.
Non-equity funds include public funding, bank loans and personal loans. To be counted among equity funding are cash
contributions, contributions in kind, shares in the company (to
include voting shares) and equity capital assistance (e.g. the
Equity Capital Assistance Scheme operated by the European
Recovery Program).
If you should decide to sell shares in your company, remember
that your goal has to be to sell the smallest possible amount of
voting capital at the highest possible price.
You have a choice among widely differing financing options.
Your short-term financing needs can be met by way of revolv-
Key questions on finance requirements
In Phase 2
How extensive are the financing needs for your company
as derived from liquidity planning?
Which sources of financing are available to you to cover
financial needs?
27
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 28
“Nothing on earth is as
powerful as an idea
whose time has come.”
Victor Hugo
(1802 – 1885)
28
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 29
III. Annex
Glossary
› Assets
The wealth available to a company, comprising the circulating
assets and fixed assets
› Balance sheet
Listing of the company’s wealth and indebtedness (assets and
liabilities) at a given cut-off date
› Bankruptcy
Termination of all of a company’s payments due to insolvency
and subsequent dissolving of the enterprise
› Business plan
Corporate concept that provides clear and concise information
on the all aspects of a new company that are of importance to
backers; included here are statements on the product idea,
market, team and management of the future company, business administration analysis etc.
› Business system
Description of a company’s individual activities and their mutual interdependencies; the business system shows what activities have to transpire in what way so that a product can be
manufactured or a service rendered
› Cash flow
› Best case
A business scenario based on the assumption of favourable
events or series of events in the majority of the cases
The excess of liquid funds that are relevant to success and
generated within a given period. Cash flow is derived from the
data in the annual accounts (or planning figures), and in particular from the profit and loss statement. It is an indicator for the
company’s own, internal financing capabilities
› Break-even point
In conjunction with founding a new company: the time at
which positive cash flows are achieved and, more generally,
the time at which the profit threshold is crossed and a profit
is realised
› CEO
Chief Executive Officer
› CFO
› Burn rate
Chief Financial Officer
The rate at which a newly-formed company spends cash on
start-up costs, research and development, and other expenses;
this is expressed, for example, in Euros per month
› CIO
Chief Information Officer
› Business angel
Wealthy individuals (usually experienced entrepreneurs)
who assume something like a godfather position for a
company being founded and who provide the company
with capital and, above all, with advice (a.k.a. private
venture capitalist)
› Circulating assets
Asset items that, in the normal course of business activity, can
be converted at short notice into liquid funds
29
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 30
III. Annex
Glossary
› COO
Chief Operating Officer (occasionally: chief organization
officer)
› Exit strategy
Strategy for realising the profit from an investment
› Expansion phase
› Copyright
Protection for the originator of something new and novel in
order to prevent imitating an idea, a name or a product
› Credit line
An amount of credit that has been granted, up to a specified
maximum, that need not be called in whole; interest is due
only on the amount that is actually used
› CTO
Chief Technology Officer
› Distribution
Planning, implementation and monitoring transport of the products and services from the point of origin to the customers’
sites
› Distribution channel
Physical path along which a product passes from the maker to
the customers; there are various types of distribution: direct
sales, retail sales, agency sales, franchising, wholesaling
Further intensive growth of a (new) company, following initial
market successes, for example, (when a new company has
been funded, this phase follows the start-up phase)
› Gantt chart
Survey of the time schedule for a project, depicting various
project activities and showing their sequence and duration
(using bars)
› Hard money
Capital that has to generate returns, e.g. venture capital
› Hurdle rate
Minimum yields (internal rate of return) that has to be achieved
so that an investment appears to be interesting (between 30
and 40 per cent for venture capital)
› Internal rate of return (IRR)
Discount rate at which the net present value of all negative and
positive cash flows is equal to zero
› Joint venture
› Early stage
Stage in the development of a company from the founding to
its debut on the market and first market successes
› Exit
Investor’s or investors’ withdrawal from an investment by selling shares and realising the profit
30
This can be a source of considerable confusion. In English the
term is used to denote a common subsidiary founded by two
or more parent companies in order to carry out a specific project or activity or conduct specific business. The words “joint
venture” are used far more loosely in German to designate any
type of cooperative arrangement between two companies to,
for example, exploit synergies, penetrate a new market or promote common projects, often for a specified period of time.
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 31
III. Annex
Glossary
› Leverage
Degree of a company’s external indebtedness, usually expressed by the ratio of outside to equity capital
› Market analysis
Analysis of supply and sales markets made with the objective
of determining whether and how a certain market will accept a
product
› Liabilities
› Market entry barriers
Includes all the sources of capital and the obligations of a company associated therewith
Disadvantage of a company newly entering the market in comparison with the vendors already active on that particular market
› License
› Market entry strategy
Authorisation acquired by contract to manufacture a patented
product or to render a service, usually associated with license fee
Strategy for launching new business, i.e. to overcome market
entry barriers
› License fee
› Market penetration
A fee that has to be paid in order to acquire a license; this is
distinguished from royalties, which are ongoing payments
based on the number of items produced or the turnover
achieved pursuant to using the license
Percentage share of a company’s sales in relationship to an
overall market (which has to be defined exactly)
› Marketing mix
› Liquidation
The four elements in marketing: product, price, place, promotion
Converting a company’s assets into cash, which is then used to
pay the company’s obligations; this is followed by the dissolution of the company
› Liquidity
› Net present value (NPV)
Net value for a future asset item (e.g. cash flows) from today’s
point of view; answer to the question of how much tomorrow’s
Euros are worth today
Ability to satisfy payment obligations as they become due, for
example by having sufficient liquid funds on hand
› Non-operating income
› Make or buy
Yields from a company’s extraordinary business activity (stock
market profits, sale of machinery above book value etc.)
Decision as to whether a product is to be manufactured or a service
rendered in-house or is to be bought in from an outside source
› Normal case
› Margin
Difference between the sales price and prime costs, also called
the profit margin
Assumption of the most likely business scenario according to
the best of one’s knowledge and belief; often also referred to
as the “base case”
31
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 32
III. Annex
Glossary
› Operating income
Yields from a company’s normal business activities or profit,
less non-operating income
› Substitute
Similar products that can satisfy the same customer needs (the
classical example being butter and margarine)
› Return on investment (ROI)
Unique selling proposition
The ROI indicates the relationship between yields and the invested capital
Concept from the field of marketing, i.e. convincing sales argument or special property that gives greater customer utility for
a product or a service
› Seed capital
Capital invested during the seed phase
› Seed phase
› Velocity
The speed at which the business plan is implemented; “high
velocity” can create a lead over the competition
Phase prior to the formal founding of a company
› Venture capital
› Skimming-the-market-policy
Pricing strategy in which a high price is set in order to achieve
the highest possible growth margin and thus high returns; this
is used, for example, with innovative products or services
where there are few alternatives for the customers
› Small and medium-sized enterprises (SME)
Small and medium-sized (also known as middle-market) companies with no more than 250 employees
› Soft money
Capital for which there is no absolute obligation to generate
yields; is usually made available by family members, friends and
acquaintances, the state, or trusts or foundations
› Start-up
Phase immediately following the founding of a company, often
also used to designate a new, growth-oriented company (a
“start-up”)
Money made available by investors to finance new, highgrowth companies; “risk capital”
› Venture capital company
Mutual fund specialised in growth-oriented industries that
provides risk capital to your company and supports the company,
often through consulting, in the early years
› Venture capital fund
A fund that is used by the professional venture capitalist to
finance his investments
› Win-win situation
Situation in which all the persons or companies involved in a
transaction realise a profit or from which all the participants
receive equitably divided utility
› Worst case
Assumption of a business scenario in which a majority of unfavourable conditions, events or parameters come to bear
32
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 33
III. Annex
Recommended literature
Fundamentals of business administration
Arbeitsbuch Betriebswirtschaftslehre für Existenzgründer
3rd edition, Heinz Kussmaul, Oldenbourg Wirtschaftsverlag
GmbH, Munich 2001,
€ 54,80
Einführung in die allgemeine Betriebswirtschaftslehre
21st edition, Günther Wöhe / Ulrich Döring, Vahlen Verlag,
Munich 2002,
€ 29,00
Finanzwirtschaft der Unternehmung
13st edition, Louis Perridon / Manfred Steiner, Verlag Vahlen
Franz, Munich 2004,
€ 25,00
Industrielles Rechnungswesen – IKR
32nd edition, Siegfried Schmolke / Manfred Deitermann,
Winklers Verlag, Darmstadt 2004,
€ 30,80
Jahresabschluss und Jahresabschlussanalyse
19th edition, Adolf Gerhard Coenenberg, Landsberg /
Lech 2003,
€ 49,95
Kostenrechnung 1, Einführung
11th edition, Lothar Haberstock / Volker Breithecker, Erich
Schmidt Verlag, Hamburg 2002,
€ 17,80
Business plans
Der Businessplan
3rd revised edition, Roman Hofmeister, Wirtschaftsverlag Carl
Ueberreuter, Vienna 2003,
€ 17,90
Geschäftspläne. Als Voraussetzung für erfolgreiche
Expansions- und Gründungsfinanzierung
3rd edition, Uwe Struck, Schäffer-Poeschel Verlag,
Stuttgart 2001,
€ 39,95
Gründungsplanung und Gründungsfinanzierung –
Voraussetzung für den Gründungserfolg
3rd edition, Willi K. M. Dieterle / Eike M. Winckler, dtv – Beck
Wirtschaftsberater, Munich 2000,
€ 14,00
Planen, gründen, wachsen. Mit dem professionellen Businessplan zum Erfolg.
3rd edition, McKinsey & Company Inc., Wirtschaftsverlag Carl
Ueberreuter, Zurich 2002,
€ 35,00
Start-ups
Das Existenzgründer Handbuch – Von der Geschäftsidee
zum sicheren Geschäftserfolg
5th edition, Carsten Rasner / Karsten Füser / Werner G. Faix,
Verlag Moderne Industrie, Landsberg / Lech 2004,
€ 49,90
Erfolgsstrategien deutscher Venture Capital-Gesellschaften
3rd edition, Michael Schefczyk, Schäffer-Poeschel Verlag,
Stuttgart 2004,
€ 79,95
Existenzgründung: Die wichtigsten Bausteine für das eigene Unternehmen
Deutscher Industrie- und Handelstag, 2000,
order through www.diht.de (Shop),
€ 12,50
Existenzgründung: Finanzierung und öffentliche Fördermittel. Mit zahlreichen Checklisten und Musterbriefen
3rd edition, Stefan Rödel / Klaus Gersmann / Bernhard
Wittemer, mvg Verlag, Landsberg / Lech 2002,
€ 15,24
Existenzgründung für Frauen: Frauen gründen anders
Angelika Huber, mvg Verlag, 2002,
€ 13,00
Existenzgründung und Existenzsicherung: Vom Unternehmenskonzept zum erfolgreichen Unternehmen
Nicole Manz / Ekbert Hering,
Springer Verlag, Heidelberg 2000,
€ 24,95
33
42376_CP-Handbuch_Busines ENGL.
11.04.2005
16:27 Uhr
Seite 34
III. Annex
Recommended literature
Handbuch Existenzgründung – Für die ersten Schritte in
die dauerhaft erfolgreiche Selbständigkeit (mit CD-ROM)
4th edition, Friedrich von Collrepp, Schäffer-Poeschel Verlag,
Stuttgart 2004,
€ 49,95
Selbstständig mit Erfolg: Wie Sie Ihr eigenes Unternehmen gründen, aufbauen, sichern
5th edition, Uwe Kirst (Hrsg.), Deutscher Wirtschaftsdienst,
Cologne 2004,
€ 39,90
Starthilfe – Der erfolgreiche Weg in die Selbstständigkeit,
Junge Unternehmen – Die Schritte nach dem Start,
Gründerzeiten
Can be ordered gratis from: Bundesministerium für Wirtschaft,
Referat Öffentlichkeitsarbeit Versand, Postfach 30 02 65,
53123 Bonn, Download at: www.bmwi.de
Unternehmer sein heißt frei sein – Mein Weg in die Unabhängigkeit
Theo Lieven, Carl Hanser Verlag, Munich 2000,
€ 19,90
Finances
Business Angels. Wenn Engel Gutes tun! Wie Unternehmensgründer und ihre Förderer erfolgreich zusammenarbeiten. Ein Praxisbuch.
Hans Dieter Kleinhückelskoten et. al., BAAR (Hrsg.), F.A.Z.Institut für Management-, Markt- und Medieninformationen
GmbH, o. O. 2003,
€ 25,90
DtA-Finanzberater – Der schlaue Wegbegleiter in die
Selbstständigkeit
Download at:
http://www.aknw.de/mitglieder/service_fuer_mitglieder/index.
htm?krisenmanagement.htm~content
Wirtschaft, Investition und Finanzierung
5th edition, Klaus Spremann, Oldenbourg Verlag GmbH,
Munich 1996,
€ 54,80
34
Marketing
BWL in der Praxis. Band 4, Marketing
6th edition, Armin Seiler,
Verlag Orell Füssli,
Zurich 2001,
€ 49,00
Marketing-Management, Analyse,
Planung und Verwirklichung
10th edition, Kotler / Bliemel,
Schäffer-Poeschel Verlag,
Stuttgart 2001,
€ 39,95
Human resources management
DK Essential Manager´s Manual
Robert Heller / Tim Hindle,
Dorling Kinderskey Verlag,
London 2000,
€ 36,00
Führen, Leisten, Leben – Wirksames Management
für eine neue Zeit.
13th edition, Fredmund Malik,
Deutsche Verlags-Anstalt,
Stuttgart / Munich 2002,
€ 25,00
42376_CP-Handbuch_Busines ENGL.
11.04.2005
start2grow
dortmund-project
Hohe Straße 1
44139 Dortmund
16:27 Uhr
Seite 36
Our appreciation goes to the following
for their involvement in start2grow:
Phone
+49-231-286 584 84
Fax
+49-231-286 584 29
info@start2grow.de
www.start2grow.de
Publication information
Publisher
dortmund-project
Editorial staff
Udo Mager (responsible for content)
Sonja Gütebier
Heike Mertins
Design and production
CP/COMPARTNER
Photos
dortmund-project
Dortmund-Agentur / Alexander Lorenz
December 2004
This manual was reprinted with
the kind consent of NUK.
Media
partner:
Medienpartner: