The Nuts and Bolts of Business Plans

A Brief Introduction to Virtual Ink

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
The Business Plan - A SUPPORTED VISION
Mission Statement 1 paragraph
Elevator Speech 30 seconds
Executive Summary 2-5 pages

PowerPoint Presentation
10-15 minutes

Full Business Plan

20-30 pages

Competitive

Distribution
Technology
Projections

Intellectual

Sales and
Financial

Property

Analysis

Analysis
Detailed
Market

Team
Support/Foundation

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What We Will Discuss Today:
Why Write A Business Plan?
What Should Be In A Business Plan?
The Business Plan As A Financing
Document

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
Why Write a Business Plan?
Because I have to...
Needed for financing
Strategic partnering
To explain business to customers/suppliers
To attract key people

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
Why Write a Business Plan?
Because I Need to Understand My Business
The Business Plan is a result of a PLANNING
PROCESS
Who are your customers?
Why will the buy your service or product?
What will they pay?
How will you make and deliver the service/product
What resources (people, money, technology) will you
need?
Can you make money/create value?

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
Types of Plans
Operational plans
External plans
Summary Plan
Full Business Plan

Who should write the Plan?

CEO alone?
The team?
A hired writer/consultant?

The Nuts and Bolts of Business Plans

 Business Plan Targeting
Audience Issues to Emphasize Issues to De-emphasize Length

Investor Fast growth, potential large Assets 20 40 pages

market, management team
Strategic Partner Synergy, proprietary products Sales force, assets 20 40 pages

Banker Cash flow, assets, solid growth Fast growth, hot market 10 20 pages

Large customer Stability, service Fast growth, hot market 20 40 pages

Key employees Security, opportunity Technology 20 40 pages

Merger & Past accomplishments Future outlook 20 40 pages

acquisition

Excerpted from: Gumpert, David E., How to Really Create A Successful Business Plan, INC Publishing 1990

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
Size/Packaging Of The Plan
Avoid the 3" thick binder
Separate binding of Executive Summary?
How to bind?
staple
spiral
Velabind
Accubinder
Appearance should be professional but not
overly slick

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?

The Plan is a SELLING DOCUMENT

Don't lose sight of the vision
The excitement must come through
The Plan should project your image

BUT: The Plan Must Be Defensible

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
Elements of a Plan
Executive Summary
The Opportunity and the Company and its Services/Products
Market Research/Analysis
Economics of the Business
Marketing Plan
Design and Development Plan
Manufacturing and Operations Plan
Management Team
Schedule
Critical Risks, Problems and Assumptions
The Financial Plan
Appendices
Notice That Technology Is NOT A Section
The Nuts and Bolts of Business Plans
SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
Cover Page
Name of Company
Address
Telephone/fax/email
Confidentiality legend
Securities law legend
Control numbering of copies

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
CONFIDENTIAL

This Business Plan has been prepared by Virtual Ink, a Delaware

Corporation. It is being delivered, subject to prior execution of a
Confidential Disclosure Agreement, to a limited number of parties who
may be interested in investing in Virtual Ink Corporation. The sole purpose
of this Business Plan is to assist the recipient in deciding whether to
proceed with a further investigation of Virtual Ink, Corporation.
While Virtual Ink Corporation believes that the financial and other
information contained herein is accurate, Virtual Ink Corporation
expressly disclaims any and all liability for express or implied
representations or warranties contained in, or for omission from, this
Business Plan, or any other written or oral representations and warranties
which may be made to the investor in a Stock Purchase Agreement when,
as and if one is executed, and subject to such limitations and restrictions
as may be specified in such Stock Purchase Agreement, shall have any
legal effect.
This Business Plan shall not be photocopied, reproduced or distributed to
others at any time without prior consent of Virtual Ink Corporation. It has
been prepared for informational purposed related to this investment
opportunity only and upon the express understanding that it will be used
The
only for the purposes set forth above. Nuts
Upon and
request, thisBolts
recipientof
promptly return all material received from Virtual Ink Corporation
willBusiness Plans
(including this Business Plan) without retaining any copies thereof. In
furnishing this Business Plan, Virtual Ink Corporation undertakes no
obligation to provide the recipient with access to any additional
 SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
Table of Contents
Put one in
Include page numbers

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
Executive Summary
An Executive Summary is
NOT an abstract of the plan
NOT an introduction
NOT a preface
NOT a random collection of highlights
An Executive Summary IS the Business Plan
in miniature

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-Executive Summary (continued)
Size
Two pages (preferable) to five pages (max)
The Executive Summary must be
Logical
Clear
Interesting/Exciting
The Executive Summary is like a RESUME
If it gets the readers attention, the rest gets read
The Elevator Speech is to the Exec Summary as the
Exec Summary is to the Full Plan

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-Executive Summary (continued)
The Executive Summary tells
Who you are
What your strategy/vision is
What you are doing and/or propose to do
What is the market
How many $$$$ do you need and what will you do with
them
What your SUSTAINABLE COMPETITIVE ADVANTAGE is
When the reader is finished he or she should be able to tell
someone what you are up to.

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-Executive Summary (continued)
The Executive Summary Should Contain:
Description of the Business Concept and the Business
The Opportunity and Strategy
The Target Market and Projections
The Competitive Advantages
The Economics, Profitability and Harvest Potential
The Team

The Nuts and Bolts of Business Plans

 EXECUTIVE SUMMARY: ELECTRONIC COMPONENTS, INC.
EXECUTIVE SUMMARY: PEOPLE EXPRESS
Electronic Components, Inc. is a start up company that will make a variety of
The Eastern seaboard of the United States is ripe for the entry of a new, electronic components, beginning with a new type of aluminum-based capacitor.
This unique product, coupled with excessive demand for capacitor devices, will
superefficient, low-cost air carrier to provide quick, reliable inter-city air provide us with an ample share of the capacitor market and numerous opportunities
transportation. Such an entity would bring to the Northeast the same benefits that for expansion into related electronic components.

have accrued to other areas of the United States. Chief among these are: The founders are dedicated and determined to make the venture a successful
and profitable entity. Technical expertise is provided by James F. Lynch, who has
been involved in designing capacitors for 11 years. He obtained a Bachelor of
?? Frequent jet commuter service between major cities
Science degree in electronic engineering from the Massachusetts Institute of
?? Prices competitive with private automobiles Technology.
?? Fulfillment of the congressional goals in enacting the Airline Deregulation
Act of 1978 to have better service at lower fares. Technology for capacitors is changing rapidly. Electronic Components, Inc.
has an opportunity to capitalize on a major technological change by getting off to a
The new company will be able to achieve these goals for the following reasons: quick start and expanding quickly.

?? Aggressive, innovative management that has been tested in the field and This proposal pertains to two additional phases of required financing. The
been on the leading edge of innovation in air transportation marketing first phase, consisting of about $150,000 for pilot plant start-up, has been completed
from the personal funds of the principals. The remaining financing is for the
and systems
following:
?? Equipment and facilities designed specifically for the low-cost production
of air transportation Phase Two: Obtain $750,000 capital for:
?? Manpower selected, trained, and motivated to be efficient and profit ?? Hiring and training production personnel;
oriented
?? Purchasing additional equipment necessary for appropriate
?? New systems to be applied to the entire business of air transportation to productivity;
minimize investment in manpower and machines
?? Develop the market;
?? Complete the sales rep network;
All of these, when applied to the new entity, will result in considerable economies
?? Explore new markets.
vis--vis existing air carriers.
Phase Three: Increase Production and Sales
?? 40 years of regulation have created an industry heavily unionized with ?? Computerize manufacturing to triple output with minimal increase in
tremendous inefficiencies labor;
?? The economics of a new entity should be at least 30%-40% better per seat ?? Begin exporting;
mile than the current trunks. ?? Expand new marketing activity.
?? Other new carriers such as Southwest or Air Florida have shown a
consistent ability to compete on a price basis and earn extraordinary Financing will be used to purchase manufacturing equipment, hire the
returns necessary employees, and develop new markets. In addition, management intends
?? The current political, economic, and regulatory climate is ideal for the to spend between 10% and 20% of revenues on research and development of new
proposal herein envisioned. products.
?? The Northeast is waiting for someone to bring it what the rest of the
The electronic component field offers attractive opportunities for fast sales
nation already has: low air fares. and profit growth. Already, demand exceeds supply in the capacitor area as well in
other related areas.

Excerpted from: Gumpert, David E., How to Really Create A Successful Business Plan, INC
Publishing, 1990
 Virtual Ink Corporation is a computer peripherals company whose lead product automatically
transcribes what users write on existing chalk or whiteboards, thus enabling automatic,
inexpensive, error-free, real-time transcription of handwriting and sketching . Virtual Ink was
The Virtual Ink the first place runner-up in the 1997 MIT Entrepreneurship and Business Plan Competition for
its primary product, the epen . epen is a labor -saving, productivity and communication
enhancement tool that could enable the automatic capture of valuable shared thoughts

Executive Summary communicated daily between millions of office and academic users.

EXECUTIVE SUMMARY
*What is the product ?
epen is a patentable human-computer interface tool that converts any common writing
surface as large as 10 meters x 16 meters into an electronic transcription device. epen links
the writing instrument wirelessly to a personal computer replacing the need for subsequent
manual transcription. Hand sketches and notes can be captured accurately, rapidly, and
automatically during brainstorming sessions and incorporated directly into documents.

*What is the market size ?

The estimated 50 million white-collar offices world-wide with both a personal computer and
either a chalk or whiteboard are potential epen sales candidates. We anticipate initial
adoption by several hundred thousand team-oriented professionals such as management
consultants, design engineers, academics, and industrial designers. Over time, the direct
electronic capture of written group meeting notes will be as indispensable as a common
conference call or document photocopying.

*What are the startup costs ?

Virtual Ink anticipates initially requiring $320,000 to complete the beta prototype of the
epen, provide for legal and infrastructu re expenses related to startup and to cultivate
potential customers. To finance start -up we intend to seek initial capital from venture
capitalists and corporate partners. Further investment of $2.0 million is needed for finalizing
the product, further setting up company infrastructure, lining up lead vendor-channel
relationships, landing significant corporate accounts, and accelerating global marketing
efforts.

*What is the payoff ?

Virtual Ink anticipates break-even within 2 years. In addition to our product sales, we expect
royalty revenue from licensing our position sensing and software technology. Within 3 to 5
years, Virtual Ink anticipates an IPO or sale of the company to fuel further growth and to offer
liquidity to investors.

* Management Team
The technology component of the management team consists of MIT-trained engineers:
Yonald Chery (product conceiver and Chief Technology Officer), William Moyne (Software
Development Lead), Andrew Kelley (Manufacturing Development Lead), and Matthew
Verminski (Hardware Development Lead). The business component of the management team
currently consists of MIT Sloan-trained finance and marketing members: Michael Dixon (Chief
Financial Officer) and Rosaline Gulati (Marketing Director). We are currently recruiting a chief
executive officer and directors for our corporate board.
SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
The Body of the Plan-
The Opportunity
What is the Market / Opportunity?
How big is it now?
What are the trends- how fast is it or will it
grow?
Why Is This Time The Right Time For Your
Product/Service?
Convergence of Opportunity and Solution

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Market Analysis
Existing and planned products in marketplace
Market segments
Market players/competition
Competitive Advantages
Estimated Market Shares
Current Players
You

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Economics of Business
What Are Your:
Expected Gross and Operating Margins
Profit potential and erosion
Fixed, variable and semivariable costs
Months to breakeven
Months to Cash Flow Positive

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Marketing Plan
What is your Marketing Strategy?
Pricing and Distribution
Pricing and margin erosion
Distribution must match strategy/pricing
Sales Tactics
Who will be the first customer, second
customer etc.?
How will you reach the customer?
Advertising and Promotion

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Development Plan
Where is development today- product status
What development is needed?
Time and resources needed for development
Do you have to produce a complete product to
get going? Avoid Nuclear Fusion
Difficulty and Risks
Product Pipeline Plans

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
The Development Plan (cont)
Intellectual Property
Do you have patents?
How broad is your intellectual property
protection?
How do you compare to your competitors?
Other technologies?
Proprietary Rights
Do prior employers have rights?

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Manufacturing and Operations Plan
Operating Cycle
Geographical Location
Facilities needed
Strategy and Plans
outsourcing vs. in-house
Regulatory and Legal issues
FDA
Environmental

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
The Team
The Internal Team
Background of principals
How long has the company been in operation?
The External Team
Board of Directors
Advisory Board
Professional Advisors
Dont name drop if the external person has
not agreed to be mentioned

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Action Plan
What Will You Do and When?
Identification of Credibility Testers
Sequencing to build VALUE
Eliminate or Reduce Dependencies
Coordination of Schedule, Value Recognition
Events and Financing Requirements

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
Risk Factors and Critical Assumptions
Be sure to address Negatives as well as Positives
There are always negatives/problems
Set the stage for the reader
Show that you have a plan for getting around or
minimizing the negatives
Reduce Dependencies If Possible

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
The Financial Plan
Actual Income Statements and Balance Sheets
Pro Forma
Income Statements
Balance Sheets
Cash Flow Statements
Breakeven Chart
Assumptions should be stated
Get these right or defensible

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
-The Body of the Plan
The Financial Plan (cont.)
Spreadsheetitis
Do numbers balance?
Do the numbers tie to the PLAN
CASH IS KING C I M I T Y M
Use traditional financial statement presentation Now is
NOT the time to invent new methods of presentation
Get help if you aren't expert
Tie to rounds of financing/expansion

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
What Should Be In A Business Plan?
Appendices
Separately Bound Volume
Resumes of Principals
Product Literature
Trade Press/Business Press
Patents (front page)
Testimonials Letters
Technical Information
Confidentiality
Technical person to technical person discussion

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
Fine Tuning/Targeting the Plan
Have an Independent Reader Review the Plan
One or more independent readers for feedback:
Retired industry pro?
Customer(?)
Consultant?
Professor?
Accountant- yes definitely
Lawyer- yes definitely

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
The Business Plan As A Financing Document
(Excerpts From Materials Prepared By Lita Nelsen, Director of MIT Technology Licensing Office)

A. First Reading: Like a Resume

Make The Cut, So That You Get An Opportunity To
Tell Your Story
B. Second Reading: Justify The Investment
C. Third Reading: Commit To A Plan
That You And The Investors Can Live With.
REMEMBER: If you dont make the FIRST
CUT, B and C never happen.

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
The Business Plan As A Financing Document
MAKING THE FIRST CUT
An Idea Too Good To Ignore
A Financial Promise Too Good To Turn Down
A Team Good Enough To Believe In
An Action Plan Thats
Credible
Focused
Details That Give Assurance of Insight, Commitment
and Follow Through
Format and Style That Show
Passion
Sanity
The Nuts and Bolts of Business Plans
SESSION 1: BUSINESS PLAN BASICS
The Business Plan As A Financing Document
. WHY PLANS FAIL THE FIRST CUT
Insufficient Market
Non-Credible Technology
Too Wild
Too Blue-Sky (Unproven)
Not Protectible
Too Mundane
Investment Too Large For The Promise
Failure to Understand The Market

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
The Business Plan As A Financing Document
. WHY PLANS FAIL THE FIRST CUT (cont.)
Action Plan Not Credible
Too Optimistic
Nave About The Hurdles
Runs Off In All Directions
Not Ambitious Enough
Regulatory Barriers Insufficiently Addressed
Gaps Filled By Handwaving
No Promises At All
Team Not Credible

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
The Business Plan As A Financing Document
COSMETIC REASONS FOR FAILING THE FIRST
CUT
I Cant Understand It.
Filled With Market Or Technology-Specific Jargon
i.e., WHAT IS THE BUSINESS?
Nave Projections
Sloppy: Misspellings, Poor Grammar, Poor Quality
Printing
Too Damn Long
Ignores The Basics
Forget Marketing, My Technology Is Best
Nave (or Terrible) Writing
The Nuts and Bolts of Business Plans
SESSION 1: BUSINESS PLAN BASICS

SUMMARY
We Have Covered
Why Write A Business Plan?
What Should Be In A Business Plan?
The Business Plan As A Financing Document

The Nuts and Bolts of Business Plans

SESSION 1: BUSINESS PLAN BASICS
The Business Plan - A SUPPORTED VISION
Mission Statement 1 paragraph
Elevator Speech 30 seconds
Executive Summary 2-5 pages

PowerPoint Presentation
10-15 minutes

Full Business Plan

20-30 pages

Competitive

Distribution
Technology
Projections

Intellectual

Sales and
Financial

Property

Analysis

Analysis
Detailed
Market

Team
Support/Foundation

The Nuts and Bolts of Business Plans