Lecture 2: Business Plan

September 25

Labor Unions

• Downstream will be influenced by labor union strikes - things aren’t being produced, supply chains become backlogged

• If farmers decide to strike, restaurants and those businesses’ livelihoods will be affected

• If you see a component to a car, and you sell car axels (e.g., Goodyear selling tires), and workers go on strike, that’s a strong upstream effect

Common Things in Startups

• SBA: Loans

• Texas State Government: Permits

• NerdWallet: Consumer side, credit cards

• Common: Have a business plan (written document that describes your business)

Business Plan

• Different sections, different components

• If you write down a business plan, it’s very useful, much like an engineering plan

  • If you have a plan and work through all the details, get to a point where you understand, rather you document out all steps and processes. Who you’re buying from, who you’re selling to, the market, etc.

  • As you delve into details, you will see your business alive.

  • Deal with issues that might come up - delivery & strategy, partners, financing, etc.

    • Solve those issues when it’s easy and cheap to solve, rather than making a mistake that’s costs your reputation, opportunities, partnerships, failures in the marketplace, or money.

    • Get it right in the planning stage → amaze the marketplace and become known for that thing.

• Leading question to ask entrepreneurs and managers are things that come from a business plan.

  • Somebody did Chick-fil-a: Execute a strong plan, highlight speed of service, quality, hospitality. Revolutionized the fast food world and ability to get people in and out of the restaurant, making it so that the drive-through takes 2 minutes. Planned and designed → good execution.

  • Getting loans, pitching, describing the inner workings of how the business functions.

• There is no right one way, correct way to build a business plan. No preset business plan.

  • Some things that are core to all business plans

  • May be more or less sections of a business plan depending on which business you’re running.

  • Some people may add some more sections.

  • Not a predefined business template that must be used.

  • Give-or-take situation.

• Couple of models for business plans

Models of Business Plans

1. Traditional Model: Full Model

   • Legacy, full-report, very hefty document.

2. Lean Model/Canvas

   • Traditional model that’s trimmed down.

   • Hit just the core highlights that you need to do right away for a business.

   • Normal traditional model (i.e., software methodologies) will get to later

   • Just define the first high-level things, short, sweet, to-the-point

   • Works great for pitching

   • Smaller, lite version → might not have full supply chain defined, but that’s not needed for funding.

   • Start working faster towards something before everything is defined

Components of a Business Plan

• 20-30 page business report

1. Executive Summary

   • The abstract of a research project, the plot synopsis of a movie

   • Couple of paragraphs, maybe a page

   • Highlights, high-level overview, TL; DR.

   • Named that so that executives could read it.

   • Possible to change executive summary for target audience, but most people would write a cover letter instead of changing the executive summary.

   • Every business plan should have one, otherwise it’s not quite useful.

   • Targeted towards MBAs

2. Company Description

   • Usually the very first thing in our document in our business plan after the executive summary that talks about the company that we have.

   • The name, who are you

     • Examples: “Wetzel’s Pretzels”

     • Examples: Google is a number with 100 zeroes after it, now they call it Alphabet

   • What you do

   • Founding date

   • Mission statement or value statement, quote

   • What sets you apart, Unique Value Proposition

   • Location, where are you

     • Different vibe and feel of different parts of Austin

   • Anything unique that sets you apart that’s not your products/services

   • Put graphics in here, like a map

3. Market Analysis

   • “Ideal customer, who do you serve, B2B, B2C, who do you sell to”

   • Need to know the target audience: demographics, what does market look like today, description of the buying power, size of the market, etc.

   • SWOT Analysis: Strengths, weaknesses, opportunities, threats

     • Every business should have SWOT Analysis in their Market Analysis

     • Issues that I might be facing, might also be in the risk analysis

   • Example: Patent law business ideal customer will sell mostly to businesses that are patenting ideas, maybe to individuals here and there, and will also have price tags for people who can afford patents. When it comes to the SWOT Analysis, almost every patent law office does more than just patents, like trademarks, copyrights, defense, legal advice/consulting/management, witnesses, etc.

     • In Austin, there are a lot of patent lawyers. If you don’t think through the market analysis, it would be a recipe for disaster.

   • Free market is the battlefield and you’re competing against other businesses.

     • Competitive and substitute goods.

     • Example: Easy Tiger is competing against other bars, but if they don’t know that, they’re also competing for the same dollar. Not just other bars, but other restaurants, and other ways of spending discretionary income. They can’t just charge $100 for a drink.

   • You can get a full college degree in just Market Analysis.

4. Organization and Management

   • LLC, S-Corp, C-Corp, how you’re organized & filing as a business

   • Done anything uniquely to organize people, and where resumes and management people go - who you are, why you’re good for that position.

   • Put your expertise and management.

   • Those that have done businesses for long periods of time will tell you that success/failure of business is not determined by what you sell and product, but rather by the people that run it.

   • You can have an awesome product, but people can ruin it for you. You can have a mediocre product, managers can make amazing money.

   • Some businesses start with good products and good people, will pivot the business and do something entirely different, and still succeed.

   • Who are you?

   • Partners & experience, the people, manufacturers.

   • Lots of really great products that are defunct and out of business.

   • Why they should loan money to you.

   • Business leadership team, executive team, what knowledge/skills that you bring to the people, where you put your resume and CV

   • Put your hiring in

   • You can get a full college degree in just Organization and Management.

5. Products or Services

   • What you’re selling

   • Will detail out the product or service: how does it exist, what it takes to deliver it, types.

   • Example: Subscription packs, seasons, monetizing later on. All products that you will sell, deliver, what it takes to make it happen.

   • Solid-state batteries: production, facilities, (close to two-billion dollar round of building factory!), what it takes to make it, what supply chain looks like

     • Texas runs on oil money, education system, UT, A&M, Texas State run on oil money, highways, roads, big part of Texas budget, but because of solid state batteries are associated with renewable energy (waste of storage), there’s a lot of election factor that backing something renewable would take away from oil. Stupid, but average voter is dumb. ☹

     • Chicago offered 20 years no taxes, but the senator from South Carolina decided to put in 50m dollars, it’ll take many years to equal 20 years worth of taxes

   • Product and service line, supply chain, how part is developed

   • You can get a full college degree in Products & Services.

6. Marketing and Sales Strategy

   • How you’re attacking the market, how you will make people aware of it

   • Growth strategy, word-of-mouth (not the greatest strategy for growth)

   • Marketing and sales strategy

   • You can get a full college degree in Marketing.

7. Financial Plan

   • You can get a full college degree in Financial Planning.

   • Finances, where the money is

   • Where you talk about how money works at your business

   • Pragmatically, everything else is just fluff for the business if you don’t talk money.

   • Numbers and math here.

   • Balance Sheet

   • PNL (Profit & Loss), AKA Income Statement

   • Statement of Cash Flows: Projection

   • Written by accountants

8. Funding Request

   • You can get a full college degree in Entrepreneurial Funding.

   • Ask and use of funds.

   • Pitching to VC, bank to get a loan, what you’re asking for and what you’re going to use it for.

   • Only if you’re asking someone for money.

9. Risk Analysis

   • You can get a full college degree in Risk Analysis.

   • As an entrepreneur, almost all successful entrepreneurs & CEOs have one trait in common: confidence.

     • They will be optimistic, that this great idea in their head will become successful.

     • This is the place where you’re honest and pessimistic on everywhere where the business could go wrong.

   • Exit Strategy/Exit Plan: Plan for how you do your business, good, bad, ugly scenario. Under what circumstances do I get out.

     • Conditions that business did not work out. Indicators.

     • Shutdown (AP Micro!)

   • What happens if the world shuts down again (COVID-19), dependency on supply chain, China invdemogasion of Taiwan and takes over markets, what happens to suppliers and stockowners.

   • Reference demographic report.

10. Appendix

Supplementary Materials:

• AUX Plan (Operational Plan)

  • Day-to-day operations

  • IUs, Microsoft 365

  • Operating hours

  • Restaurant, storefront, open 6 days a week instead of 7

  • Some businesses need this more than others