Business Plan Manual

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?
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Business plan basics: Why do I need a business plan?
............................................................. ........................................................ ..................................................... 5 6 78 9 10 4
What characterises a business plan?
How do backers assess business plans?
Tips for preparing a professional business plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structure and main elements of business plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Business plan structure: 1. Executive Summary
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11 12 1315
2. Corporate objectives and profile 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
4. The industry and the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1 Analysis of the industry and overall market 4.2 Market segments / target groups 4.3 Competitive situation
1618
5. Marketing (sales and distribution)

5.1 Market entry strategy 5.2 Sales concept 5.3 Sales promotion
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1920
6. Management and pivotal positions 7. Planning for realisation
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21 22 23 2426
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8. Opportunities and risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 III. Annex: Glossary
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2932 3334
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Recommended literature
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.
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.
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.
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 ones 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 readers 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 investors 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, rsums 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 companys logo. nations, clear and unequivocal wording is important. Consequently
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. Whats 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
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 companys development, however, financial bottlenecks may arise whenever it is necessary to lend precision to the companys 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.
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.
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 ones 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.
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, rsums 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.
Cope in pages
Phase 1 2 2 4
Cope in pages
Phase 2 3 3 5
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
1 1
2 2 2 6
2
~18 ~35
Recommended total number of pages (approximate)

Focal points in this phase Initial processing or continuation in this phase
Need not be processed 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.
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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.
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 readers 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. Thus you should be particularly careful when preparing the executive summary. It is decisive for whether the entire business plan will be read.
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.
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 companys 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?
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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 companys 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 companys 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 companys 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? In Phase 2 What type of organization are you planning for the companys incorporation? What business structure do you foresee? What operating site have you selected?
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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 customers 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. A prototype that is already on hand will convince potential backers that you are up to mastering the technical challenge. 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. You should also describe the details of the innovation and what lead you have over competitors. Discuss specifically your
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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 TV, 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? 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?
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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?
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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 companys 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? 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?
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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?
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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? 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?
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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 introduction 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.
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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? 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?
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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.
Nobodys 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 lan 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?
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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. 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. Four simple rules can help simplify realistic planning for you:
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. 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.
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? 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?
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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. 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. 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?
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. 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. 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?
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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? When and to what extent will these investments occur? How much do the annual depreciation values for the individual investments come to?
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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 companys 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 companys 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?
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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 disbursements. 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 At which point in time do you expect to have a surplus of receipts (total of all receipts less the total of all disbursements)?
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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. You have a choice among widely differing financing options. Your short-term financing needs can be met by way of revolv-
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.
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?
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Nothing on earth is as powerful as an idea whose time has come.
Victor Hugo (1802 1885)
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III. Annex
Glossary
Assets The wealth available to a company, comprising the circulating assets and fixed assets
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.
Balance sheet Listing of the companys wealth and indebtedness (assets and liabilities) at a given cut-off date
Business system Description of a companys 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
Bankruptcy Termination of all of a companys payments due to insolvency and subsequent dissolving of the enterprise
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 companys 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
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 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)
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
Gantt chart Survey of the time schedule for a project, depicting various project activities and showing their sequence and duration (using bars)
CTO Chief Technology Officer
Hard money Capital that has to generate returns, e.g. venture capital
Distribution Planning, implementation and monitoring transport of the products and services from the point of origin to the customers sites
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)
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
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 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.
Exit Investors or investors withdrawal from an investment by selling shares and realising the profit
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III. Annex
Glossary
Leverage Degree of a companys 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 companys 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 companys assets into cash, which is then used to pay the companys obligations; this is followed by the dissolution of the company
Net present value (NPV) Net value for a future asset item (e.g. cash flows) from todays point of view; answer to the question of how much tomorrows Euros are worth today
Liquidity Ability to satisfy payment obligations as they become due, for example by having sufficient liquid funds on hand
Non-operating income Make or buy 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 ones knowledge and belief; often also referred to as the base case Yields from a companys extraordinary business activity (stock market profits, sale of machinery above book value etc.)
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III. Annex
Glossary
Operating income Yields from a companys normal business activities or profit, less non-operating income Return on investment (ROI)
Substitute Similar products that can satisfy the same customer needs (the classical example being butter and margarine)
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 Velocity The speed at which the business plan is implemented; high velocity can create a lead over the competition
Seed phase 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 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
Small and medium-sized enterprises (SME) Small and medium-sized (also known as middle-market) companies with no more than 250 employees
Venture capital fund A fund that is used by the professional venture capitalist to finance his investments
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
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
Start-up Phase immediately following the founding of a company, often also used to designate a new, growth-oriented company (a start-up)
Worst case Assumption of a business scenario in which a majority of unfavourable conditions, events or parameters come to bear
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III. Annex
Fundamentals of business administration Arbeitsbuch Betriebswirtschaftslehre fr Existenzgrnder 3rd edition, Heinz Kussmaul, Oldenbourg Wirtschaftsverlag GmbH, Munich 2001, 54,80 Einfhrung in die allgemeine Betriebswirtschaftslehre 21st edition, Gnther Whe / Ulrich Dring, 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, Einfhrung 11th edition, Lothar Haberstock / Volker Breithecker, Erich Schmidt Verlag, Hamburg 2002, 17,80
Grndungsplanung und Grndungsfinanzierung Voraussetzung fr den Grndungserfolg 3rd edition, Willi K. M. Dieterle / Eike M. Winckler, dtv Beck Wirtschaftsberater, Munich 2000, 14,00 Planen, grnden, wachsen. Mit dem professionellen Businessplan zum Erfolg. 3rd edition, McKinsey & Company Inc., Wirtschaftsverlag Carl Ueberreuter, Zurich 2002, 35,00
Start-ups Das Existenzgrnder Handbuch Von der Geschftsidee zum sicheren Geschftserfolg 5th edition, Carsten Rasner / Karsten Fser / Werner G. Faix, Verlag Moderne Industrie, Landsberg / Lech 2004, 49,90 Erfolgsstrategien deutscher Venture Capital-Gesellschaften 3rd edition, Michael Schefczyk, Schffer-Poeschel Verlag, Stuttgart 2004, 79,95 Existenzgrndung: Die wichtigsten Bausteine fr das eigene Unternehmen Deutscher Industrie- und Handelstag, 2000, order through www.diht.de (Shop), 12,50 Existenzgrndung: Finanzierung und ffentliche Frdermittel. Mit zahlreichen Checklisten und Musterbriefen 3rd edition, Stefan Rdel / Klaus Gersmann / Bernhard Wittemer, mvg Verlag, Landsberg / Lech 2002, 15,24 Existenzgrndung fr Frauen: Frauen grnden anders Angelika Huber, mvg Verlag, 2002, 13,00 Existenzgrndung und Existenzsicherung: Vom Unternehmenskonzept zum erfolgreichen Unternehmen Nicole Manz / Ekbert Hering, Springer Verlag, Heidelberg 2000, 24,95
Business plans Der Businessplan 3rd revised edition, Roman Hofmeister, Wirtschaftsverlag Carl Ueberreuter, Vienna 2003, 17,90 Geschftsplne. Als Voraussetzung fr erfolgreiche Expansions- und Grndungsfinanzierung 3rd edition, Uwe Struck, Schffer-Poeschel Verlag, Stuttgart 2001, 39,95
33
III. Annex
Handbuch Existenzgrndung Fr die ersten Schritte in die dauerhaft erfolgreiche Selbstndigkeit (mit CD-ROM) 4th edition, Friedrich von Collrepp, Schffer-Poeschel Verlag, Stuttgart 2004, 49,95 Selbststndig mit Erfolg: Wie Sie Ihr eigenes Unternehmen grnden, aufbauen, sichern 5th edition, Uwe Kirst (Hrsg.), Deutscher Wirtschaftsdienst, Cologne 2004, 39,90 Starthilfe Der erfolgreiche Weg in die Selbststndigkeit, Junge Unternehmen Die Schritte nach dem Start, Grnderzeiten Can be ordered gratis from: Bundesministerium fr Wirtschaft, Referat ffentlichkeitsarbeit Versand, Postfach 30 02 65, 53123 Bonn, Download at: www.bmwi.de Unternehmer sein heit frei sein Mein Weg in die Unabhngigkeit Theo Lieven, Carl Hanser Verlag, Munich 2000, 19,90
Marketing BWL in der Praxis. Band 4, Marketing 6th edition, Armin Seiler, Verlag Orell Fssli, Zurich 2001, 49,00 Marketing-Management, Analyse, Planung und Verwirklichung 10th edition, Kotler / Bliemel, Schffer-Poeschel Verlag, Stuttgart 2001, 39,95
Human resources management DK Essential Managers Manual Robert Heller / Tim Hindle, Dorling Kinderskey Verlag, London 2000, 36,00 Fhren, Leisten, Leben Wirksames Management fr eine neue Zeit. 13th edition, Fredmund Malik, Deutsche Verlags-Anstalt, Stuttgart / Munich 2002, 25,00
Finances Business Angels. Wenn Engel Gutes tun! Wie Unternehmensgrnder und ihre Frderer erfolgreich zusammenarbeiten. Ein Praxisbuch. Hans Dieter Kleinhckelskoten et. al., BAAR (Hrsg.), F.A.Z.Institut fr Management-, Markt- und Medieninformationen GmbH, o. O. 2003, 25,90 DtA-Finanzberater Der schlaue Wegbegleiter in die Selbststndigkeit 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
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start2grow dortmund-project Hohe Strae 1 44139 Dortmund Phone +49-231-286 584 84 Fax +49-231-286 584 29 info@start2grow.de www.start2grow.de
Our appreciation goes to the following for their involvement in start2grow:
Publication information Publisher dortmund-project Editorial staff Udo Mager (responsible for content) Sonja Gtebier Heike Mertins Design and production CP/COMPARTNER Photos dortmund-project Dortmund-Agentur / Alexander Lorenz December 2004
Media partner: Medienpartner:
This manual was reprinted with the kind consent of NUK.

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Business Plan Manual

1 In welchem der beiden Kapitel befinden wir uns?

What characterises a business plan?

How do backers assess business plans?

2. Corporate objectives and profile 3. Product or service

4. The industry and the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5. Marketing (sales and distribution)

6. Management and pivotal positions 7. Planning for realisation

8. Opportunities and risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Five-year planning

10. Financing requirements III. Annex: Glossary

I. Business plan basics

Why do I need a business plan?

I. Business plan basics

What characterises a business plan?

I. Business plan basics

How do backers assess business plans?

I. Business plan basics

How do backers assess business plans?

I. Business plan basics

Tips for preparing a professional business plan

I. Business plan basics

Structure and main elements of business plans

Recommended total number of pages (approximate)

Need not be processed in this phase

Key questions on the Executive Summary

2. Corporate objectives and profile

Key questions on corporate objectives

Key questions on the companys profile

3.1 Benefit and utility to the customers

Key questions on customer benefits and utility

3.2 Development of the product or service

Key questions on development of the product or service

3.3 Manufacturing the product / rendering the service

Key questions on manufacturing and delivery

4. The industry and the market

4.1 Analysis of the industry and overall market

4. The industry and the market

4.2 Market segments / target groups

Key questions on market segments and target groups

4. The industry and the market

4.3 Competitive situation

Key questions on the competition

5. Marketing (sales and distribution)

5.1 Market entry strategy

Key questions on market entry strategy

5.2 Sales concept

5. Marketing (sales and distribution)

Key questions on the sales concept

5.3 Sales promotion

Key questions on sales promotion

6. Management and pivotal positions

Key questions on management and pivotal positions

7. Planning for realisation

Key questions on realisation planning (planning for implementation)

8. Opportunities and risks

Key questions on opportunities and risks

9.1 Personnel planning

Key questions on personnel planning

9.2 Investment and depreciation planning

Key questions on investment and depreciation planning

9.3 Planning for the profit and loss statement (P&L)

Key questions on profit and loss planning

9.4 Liquidity planning

Key questions on liquidity planning