Whether or not the business is going to solicit outside financing, a business plan is essential to success.
The contents of a typical business plan are presented below. In all cases, the actual content will need to be customized to reflect unique aspects of every business. If you are not looking for outside capital, a few sections of the content below will not be needed.
Typical Contents Page for a Smart Grid Business Plan
- Two-Page Executive Summary (this can also function as a “teaser” document to elicit initial interest from potential investors if outside financing is planned)
- Financial forecast
- Capital requirements
- Key business risks
- Product and/or Service Offering (unique to each business)
- Hardware (e.g., component, system)
- Software (e.g., license, SaaS, “cloud”-based)
- Core Technology, if any
- Intellectual property/patents
- Technology risk
- Size and growth
- Customer segments
- Marketing and Sales
- Value proposition
- Sales cycle
- Average selling price
- After-market services
- Sales pipeline
- Existing customers
- Direct versus channel
- Customer service
- Product Development
- Product/service “road-map”
- Key milestones
- Development risks
- Outsourcing, if any
- Supply chain
- Bill of materials
- Order-to-delivery cycle
- Risks, e.g., single-sourced supply
- Strategic Alliances
- Channel partners
- System integrators
- Revenue Model
- Recurring elements
- Management Team and Organization
- Key individuals
- Organization chart with functions and number of employees
- Compensation plan
- Equity incentives
- Three-year forecast for income, balance sheet, and cash flow statements
- Historical financial performance
- Product and service line revenues
- Gross margin analysis
- Working capital analysis
- Capital budget
- Financing requirement
- Sources and uses of funds
- Previous financings
- Capital structure
- Expected additional financings
- Any Previous Material Issues
- Legal proceedings
- Business set-backs
- Senior executive/ownership changes
The above should be considered a draft requiring customization. Suggestions, comments, and/or identification of omissions are welcome in the comment box below.
Customized Business Case Services
Dr. Geraghty also provides customized consulting services off-line related to the development and analysis of SG-related business cases – see here.
Other Considerations Related to the Use of the Above to Raise Outside Capital
If you are soliciting outside capital, you can expect very detailed due diligence requests from potential investors. Do not hide anything that you feel could spook an investor - it will be uncovered anyway. Every early-stage (and later-stage) business has set-backs – investors expect it -- as long as the overall prognosis is for a sustainable, growing business, investors will be interested in taking a look at it.
Do not present a valuation expectation in the business plan, or in your investor presentation. That is a highly negotiable variable and should be viewed as one element, albeit a very important element, of the overall package of terms and conditions of an investment. Term sheets can be complicated.
However, it is not unreasonable for an investor to suggest a “ball-park” range of valuation, subject to satisfactory due diligence, as part of a Letter of Intent, and you should be prepared to agree to, or disagree with, this valuation range before detailed due diligence commences.
Almost always, you can expect potential investors will revise your revenue forecasts downward as they incorporate their own views of the business risks, and you should be prepared to defend your forecasts and critique theirs.
In today’s environment related to software platforms, Internet-based businesses, and cloud-supported applications, it is possible to start up a new business with very little capital. This is called a “lean start-up”. You may not need any outside capital initially. Today, with the availability of Web 2.0 applications, this type of start-up has some unique characteristics. We recommend the following book for a very good description of this type of approach: “The Lean Startup”, Eric Ries, published by Crown Business, 2011.