IDEA COMPETITION BUSINESS PLAN GUIDE 2012‐2013 potx

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IDEACOMPETITIONBUSINESSPLANGUIDE 2012‐2013

WelcometotheIDEACompetition!IDEA(whichstandsforIngenuityDrivesEntrepreneur
Acceleration)isaprojectofIngenuityFrontier,acollaborationofpartnersjoinedbyacommon
purpose—togrowtheeconomyofNorthwestMinnesotabyoutfittingthenextgenerationof
homegrowninnovatorsforsuccessintheglobalmarketplace.
IDEAismanagedbysever
alpartners:360°ManufacturingandAppliedEngineeringCenterof
Excellence,AgriculturalUtilizationResearchInstitute,BemidjiStateUniversity,EnterpriseMinnesota,
HeadwatersRegionalDevelopmentCommission,MinnesotaDepartmentofEmploymentandEconomic
Development,NorthlandCommunityandTechnicalCollege,NorthwestMinnesotaFoundation,
NorthwestRegionalSmallBusinessDevelopmentCenter,NorthwestRegionalDevelopment
Commission,andUniversity
ofMinnesotaCrookston.
Yoursuccessisoursuccess.Thisplanisaguidethatwehavedevelopedthroughyearsofexperiencein
assistingindividuals(suchasyou)inbringingpromisingid eastomarket.Launchinganewbusinessis
complicated,butwehopethatthisguidewillhelpyoutoorganizeyourideasinsuchawaythatyour
applicationw
illge
ttheattentionoftheIDEAjudges,andultimately,helpyoutosuccessfullylaunchyour
idea.
Launchinganewproduct,serviceorideaisachallengingprocess.Statistically, lessthan 1%ofallnew
productsorservicesdevel
opedgoontobecomeacommercialsuccess.Thequestionyouneedto
answeris“howwillIbeattheoddsandstandamongthosewhosucceedinintroducinganewproductor
service?”Althoughtherearemanyreasonsthatbusinessesfail,thereisonethingthatsuccessful
innovationsshare—acomprehensivepl
anforexecutionoftheidea.
Don’tunderestimatetheimportanceofduediligence.
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Doingyourhomeworkwillpayoffinmoreways
thanone.AlthoughyouwanttowriteacompetitiveIDEABusinessPlan,moreimportantly,youneedto
determineforyourselfifyourideaisreallygoingtowork.Canyouactuallymakemoneywithyouridea?
Asmuchaspossible,verifyandconfirmyourassumptions.You’llneedtogatherlotsofinfor
m
ation.
Howlongdocompaniesinyourindustrytaketopaytheirsuppliers?Willyou needtobuyinbulkto
reduceyourcosts?Howlongwillittaketogetyoursupplies?Willitbemorefeasibletodoallthework
in
‐houseortocontractsomeofitout?Themoreinformationyoucangathernow,themoresolidyour
planwillbe,andultimately,thechanceofsuccessfullycommercializingyourideawillbemuchbetter.
Awordofcaution:asyoudevelopyourplan,bereal.Don’toverestimateyourrevenuesorth
e
potentialofyouridea.Byallmeans,youhavetobelieveinwhatyouaredoingandthatpassionand
excitementshouldbeevidentinyourwrittenplan(andifyouadvancetothefinals,inyouroral
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presentation).However,youwon’tdoyourselfanyfavorsbybeinganythinglessthanhonestandas
realisticaspossible.Ourjudgingpaneliscomprisedofbusinessprofessionals,financiers,andangel
investors.Anythinglessthanasincere,realisticapproachwillbeevidenttotheirpracticedeyes.
Finally,asanIDEAparticipant,youareencourage
dtotakeadvantageofthealltheresourcesprovided
toparticipants—podcasts,samplebusinessplans,templates,andpersonalizedconsultingavailable
throughtheSmallBusinessDevelopmentCenter.Ifyouhavequestionsatanytimeduringthe
competitionyoumaycontactIDEACompetitionProjectCoordinator,Michelle Landsverk,byemailing
orbyphoni
ng218‐435‐2834.
 JUDGING CRITERIA
Asyoudevelopyourplan,bemindfulofthefollowingIDEACompetitionjudgingcriteria.Winningideas
arethosethatreceivethehighestscores,basedonthefollowingcriteria:
 YourInnovation:Canyourideabeconsideredinnovative?Whetheritisanideaforanew

technology,productorservice;whetheritwouldbeconsideredhig
h‐tech,low‐techorno‐tech;
yourideashouldbeuniqueanddifferent,andprovideacompetitiveadvantage.Ideasthatshow
thegreatestinnovationwillbeviewedmorefavorably.
 YourCommercialPotential:Canyourideabecommercializedwithintwoyears?Canyouridea
createorserveamarke
tneed?Whatbenefitswillyouprovideyourcustomer?Whatisyour
strategyforturningyourideaintoahigh‐growth business?Judgeswillbeevaluatingyouridea
onitspotentialtogeneraterevenue,profitsandem ployment. 
 YourFinancialPotential:Canyourideabecomeprofi table?Isitreasonabletoex
pectthata
lenderwouldborrowyoumoneyforstartupcostsbasedontheevidenceshowninyourwritten
plan?Haveyouinvestedmoneyinyourownidea?Ifnot,willyou?Howmuch?
 YourTeam:Whatrolewillyouplayinlaunchingyourbusinessidea?Tellusaboutthekey
strengthsandlifeex
periencesthatmakeyouideallysuitedfortheroleyouhaveidentifiedfor
yourself.Whoelseisonyourteam?Whowillyouneedtofillkeypositions?
IDEA PLAN STRUCTURE
Theoutlineonthefollowingpagesincludesninesections.Thesesectionswillhelpyoutoorganizeyour
ideas.Thesub‐pointsineachsectionaresuggestions,butarenotstrictlyrequired.Youhavethe
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freedomtoaddsections,expand,orevenomitsectionsasyouseeappropriate,keepinginmindthat
youwillbescoredonhowwellyoumeeteachoftheabovejudgingcriteria.
Youmustnotexceed15pagesforyourideaplan.Supportingdrawings,pictur es, schematicsorfinancial
tables,maybeincludedintheAppendi ces, whichshouldnotexceed10additionalpages.
I. TheTitlePage(cover)

A. NameofCompany
B. Logo(ifdeveloped)
C. OneLinePitch

D. TeamMembers:individualswhoareeitherco‐ownersorpartnerswithyouinthe
business
E. DisclaimerWarrant:“Thisbusinessplanisintendedsolelyforinformationalpurposesto
assistyouwithadue‐diligenceinvestigationofthisproject.Theinf
ormationcontainedhereinis
believedtobereliable,butthemanage mentteammakesnorepresentationsorwarrantieswith
respecttothisinformation .Thefinancialprojectionsthatarepartofthisplanrepresent
estimatesbasedonextensiveresearchandonassumptionsconsid eredreasonable,buttheyare
ofcoursenotguaranteed.Theconte
ntsofthisplanareconfidentialandarenottobe
reproducedwithoutexpresswrittenconsent.”

II.
ExecutiveSummary


 Althoughnomorethan2‐3pages,yourExecutiveSummaryisthemostimportantpartofyour
IDEABusinessPlan.Itneedstocapturethereader’sattentionandmaketh emwanttokeepreading.It
shouldprovideabrief,succinct,yetpowerfuloverviewofthehighlightsofyourIDEABusinessPlan.
YourEx
ecutiveSummaryshouldcontainthefollowing:
A. TheOpportunity
1. ProblemorNeedYourIdeaAddresses:beforeyoutellusaboutyo ur idea,tell
usabouttheproblemorneedthatledtothedevelopmentofyourconcept.Whatisthe
customerproblemorneedyouaresolving?Whatisthemarketinefficiencyyo uare
capturing?Howdoyouknowtheopportunityis real?Canyougiveasupportingfactor
twoinyourfavor?
2. YourInnovativeSolution:i
ntroduceustoyourconceptandhowyouwill
addresstheproblemorneedidentifiedinpointAabove.Giveabriefoverviewofwhat

yourideaisandwhatmakesitinnovative.
B. TheMarket
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1. YourTargetCustomer:whowillbeyourfirst,yourbest,yourprimarycustomer?
Whoisingreatestneedofthesolutionyouareproviding?
2. YourCompetition:telluswhoyourcompetitorsareandwhyyourideagives
youanadvantage.
C. DevelopmentTimeline
1. Howlongwillittaketobringyourideatomarket?Identifyyourmostcritical
milestonesandwhenyouexpecttoreachthem.
D. Management
1. Telluswhatroleyouwillplayinlaunchingyourbusinessidea.Tellusaboutthe
keystrengthsandlifeexperiencesthatmakeyouideallysuitedfortheroleyouhave
identifiedforyourself.Whoelseisonyourteam?Whowillyouneedtofillkey
positions?
E. FinancialHig
hlights:(finalroundonly)
1. Startupcosts:Howmuchmoneywillittaketogetyoustartedandwherewill
thatmoneycomefrom—yourself,family,friends,debtfinancing,orequityinvestment?
2. Projectedcashflow:Whatisyourbestestimateofmonthly operatinge xpe nses
andrevenue?

III. TheOpportunity

A. ProblemorNeedYourIdeaAddresses:youhavealreadyintroducedustotheproblem
orneedintheExecutiveSummary.Now,giveus moreofthedetails. Howwidespreadisthe
problem?Howbigistheneed?Theproblemorneedyouaredescribingbecomesyourbusiness 
opportunity.Itistheuniquespacethatyourideacanfill,ifsuccessful.Theanswertothat
questionwilltellyou(an
dyourreaders)justhowlargeyouropportunityis.

B. YourSolution:brieflytellusyourstory.Whyisyourventurenecessary?Whatinspired
you?Whatisitthatmakesthisa breakthroughidea?Whyisitinnovative?

IV. TheIDEA:YourInnovativeSolution

A. StageofDevelopment:howfarhaveyoutakenyouridea?Isitstilljustaconcept?Do
youhaveaprototype?Areyouintheseed,
ii
startup
iii
orgrowth
iv
stage?
B. IntellectualProperty:isthisideauniquelyyours?Haveyoutakenstepstoprotectit?
Makesureyouclearlystatethestatusofanyintellectualpropertyuponwhichyouridearests.
C. FeaturestoBenefits:
v
featuresarethespecificcharacteristicsofyourproduct(red,
metal,25lbs.,etc.)Benefitsarewhatthecustomergainsfromyourproduct.Askyourself
what’sinitforyourcustomer,orwhyacustomerwouldpurchasetheproduct.Turnyour
productfeaturesintocusto merbenefits.
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D. MarketComparison:aretheresimilarproductsoutthere?Othersolutionstothe
identifiedproblemorneed? Theyareyourcompetitionandeachofthemhasasliceofthepie.
Wheredoyoufitin?Whatisyouruniqueposition inthemarketplace?Whatadvantagedoes
yourproductprovideincomparisontotheotherchoicescurrentlyavailable?

V. YourMarketingPlan

A. MarketResearch:thebestmarketingplansarethosebasedongoodinformation.In

conductingyourmarketingresearch,youwillprobablywanttoutilizebothprimaryand
secondary
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sourcesofinformation.Theinformationyoufindshouldbringyoutosome
conclusionsthatyoushareintheIDEABusinessPlan.Makesuretoincludeinformationon
industrytrends,customertrendsandonyourcompetitors.
B. TargetCustomer:Whowillyousellyourproductto?Howmanycustomerswillyou
have?Thinkofabullseye;ifyouweregoingtoaimyourproductatonespecificcustomer,who
wouldthatbe?Launchingabrandnewproduct is veryexpensive.Focusingyoureffortsonthe
earlyadopterwillbringthebestretur nonyourmoney.Anearlyadopteristhefirstcustomer
typeorgrouptopu
rchaseyourproduct.Providedemographicandpsychographicinformation
onyourtargetcustomer.Keepinmindthefactthatacustomer‐focusedplanrarelyfails.
C. TargetMarketStrategy:yourtargetmarketstrategyshouldbedevelopedinresponseto
yourtargetcustomerandthebestmethodofreachingthatcustomer.Thin kaboutwhereand
howyoucanmakeameaningfulandeffectiveconnectionwiththecustomer.Productsdonot
sellthemselves.Tellushowyouwillsellyourproduct.
D. ProductStrategy:howwillyoupositionyourproducttoachievethedesiredlev
elof
sales?Productpositioningisallaboutidentifyingyourmarketniche—thatdistinctplacethat
onlyyoucanfill.Itisbasedonathoroughunderstandingofyourcompetition.
E. PricingStrategy:pricingisbothanartandascience.Yourpricingstrategywillneedtobe
developedwithathoroughunderstandingofyourcompeti tion,yourcostsofproduction,yo ur
fixedcosts(overhead),andwhatyourcustomerwillpayforyourproduct.
F. DistributionStrategy:distributionstrategyisnotabouthowyouwillshipyourp roduct
toyourcustomer—itisaboutthepathyourproducttakestogettoitsfinaldestination.Are you
sellingtoawholesaler?Toa distributor?Directlytotheenduser?Haveyoualready
establishedarelationshipwiththeentityyouwillbepurchasingyourproductdirectlyfromyou?
G. AdvertisingandPromotio
nalStrategy:you’vealreadyidentifiedyourtargetcustomer.

Howwillyougettheirattention?Howandwhereareyourcompetitorsadvertising?
H. SalesStrategy:whowillbedoingtheselling?Howwillthey(sales‐people)beinterfacing
withcustomers?Howmanysaleswillyoumakeandwhen?

6
VI. DevelopmentTimeline

A. DevelopmentStrategy:whatneedstobedonetogetyouridea offtheground?Isthere
asequentialorder?Whowillberesponsibleforeachstep?
B. DevelopmentTimeline:whenwillyouhaveeachstepcompleted?
C. DevelopmentExpenseEsti mates:whatwillitcostyoutocompleteeachstep?
D. Break‐evenTimeline:howlonguntilyoureachyourbreak‐even
vii
point?

VII. YourManagementPlan

A. Legalentity:whatisthelegalentityofyourbusiness?Willyoubeasoleproprietor,a
partnership,acorporation,anLLC,oranLLP?Whatmakesthemostsenseforyouandyour
business?
B. Location:wherewillyourbusinessbelocatedinitially?Outofahomeofficeorshop?In
theindustrialortechnologypark?Inabusinessincubatorfacility?
C. CurrentManagementTeam:Givebiosforeachteammember.Whatrolewilleachof
themfill?Whatresponsibilitieswilleachofthemhave?Howwilltheybecompensatedandat
whatlevel?
D. ManagementTeamNeeded:Whomwillyoubehiringandwhataretheunique
characteristicsoftheidealindividualsyo uwillneed?
E. OtherEmployees:willyoubehiringothers?Howmanywillyoubehiringandhow
muchwillyoubepayingthem?
F. CorporateBoardofDirectors:Whatisthesizeandstructurethatwillbedevelopedas

thisventuredevelops?
G. AdvisoryBoards:Everycompanyneedsknowledgeablecontributorstohelpthe
companydevelop,grow,andultimatelybecomesuccessful.Whoaretheycurrentlyandwhom
wouldyouideallytargetifyoucouldgetthem?
H. StrategicConsultants:Therearealwaysextra peopleyoumayneedtocountonfor
specificcontentknowledgeorskilllevel.Whomightthesepeoplebe?
I. GrowthPlans:Itisimportanttobeawareofhowyourcompanywillgrow.Whatwillbe
youremployeeneedsasthisventuregrows?Canyouestimateatimelineforemployee
acquisitionandforwhichcorporatefunctionstheywillbeneeded?Canyouestimatetheir
salaryrequirements?Canyouidentifymajorlimitationsinavailablepoolsofemployeesor
findingthoseemployeesthatwillneedspecializedskillsets?

VIII. YourFinancialPlan(youmayskipthissectionforRoundTwo)

7
A. Summary:thesummaryshouldgiveanarrativeaccountofthehighlightsofyour
spreadsheets.Focusonthekeypoints,ratherthanonthedetail.Althoughthesummaryshould
beplacedbeforeyourassumptionsinyourwritten document,youshoulddevelopyour
assumptionsandcompleteyourspreadsheetspriortowritingyoursummary.Theassumptions
andthespreadsheetsgiveyoutheinformationthatisincludedinyoursummar
y.Yourfinancial
planshoulddemonstratethefeasibility
viii
ofyouridea.
B. Assumptions:writingyourassumptionsisthefirststepincreatingyourfinancialplan.
Beginbyitemizingyourunderlyingfinancialassumptions.Forexample,ifyoustatethatyouwill
generatesalesof$100,000inyearoneofyourfinancialprojections,youwillneedtoexplain
howyouhavearrivedatthatexactnumber.Isthatselling1,000widgetsat$100eachorisit
selling10,00
0widgetsat$10each?Ifyoustateinyourfinancialprojectionsthatyouwillspend

$50,000inwagesinyearone,youwillneedtoexplainhowmanyworkersyouhave,howmany
hourstheywillwork,whatratetheywillbepai d,andhowmuchtheaccompanyingpayrolltaxes
willbe
.Ifyoustatethatitwillcostyou$10tomanufactureeachwidget, youwill needtodetail
ifthatisbasedonaquote,andifsofromwhichmanufacturer.Inshort,youwillbeexpectedto
explainindetailtheunderl yingrationalebehindther evenues andexpensestha
tformthe
backboneofyourfinancialplan.Itwillbecriticaltothejudgeswhoreviewyourfinancialplanto
thoroughlyunderstandALLofyourunderlyingfinancialassumptions.
C. Spreadsheets:youwillneedtousetheprovidedtemplatestocreatecashflow
projectionsforthefirsttwoyearsofoperationsandtabulateyourstartupcosts.The
spreadsheetscanbeplacedintheAppendix anddonotcounttowardyour15‐pagelimit.

IX. CriticalRisks,Problems,andAssumptions

Whatarethemarketforcesthatplayagainstyou?Whataretheriskstothebusiness(takemarket
and/ortacticalrisksandmonetizethem).Whenisthewindowofmarketopportunitylikelytoclose?
Whataretheoperationsrisks?Whataretherisksofcompetitorsrespondingtoyourentryintothe
market?Wha
tfinancialdamagecancompetitorscauseyou?Whataretheliabilitiesshouldthisventur e
notliveuptoitspotential?Whatarethecriticalmilestonesthatmustbemetandtheirconsequenceif
missed?Howcanyoumanageorminimizeyourrisk?

OTHERRESOURCES

SampleBusinessPlans
8
Intheregistereduser’sareaoftheideacompetition.orgwebsite,youwillfindsamplebusiness
plans.Notwobusinessesarealike—notwobusinessplansarealike,either.Usetheseplansas
anexampleandasareference,notastemplates.Yourownideawilldeterminewhichstyleis

correctforyourplan.Thesearenotprovidedascopytemplates.Otherexamplesmaybefound
onlinebyGoogling“BusinessPlans,”orbygoingtosampleplans.com.

SmallBusinessDevelopmentCenter
WeencourageallIDEACompetitionparticipantstotapintotheresourcesavailablethroughthe
NorthwestRegionalSmallBusinessDevelopmentCenter.Theirconsultantsareavailableto
assistyouatnocost.Youmaycall218‐755‐4255tosetupanappointment.

AdditionalResources
AdditionalresourcesareavailableontheIDEACompetitionwebsite.Thememberssectionis
wherewewillpostresourcesthatareonlyavailabletoparticipants.Youwillalsowanttocheck
theResourcestabonthewebsite.Awidevarietyofresourcesarelistedthere.

ENDNOTES

i

Duediligence
Theduediligenceprocessrequiresobjectivity.Theprocessofduediligenceisusedbylenders
andbankerstoverifyandvalidatetheassumptionsofabusinessplan.Theoutcomesofdue
diligencearetheverificationandvalidationoffeasibility,viability,anddesirability.

ii

SeedStage

Seedmoneyprovidesstartupcompanieswiththemoneytheyneedtofueltheirinitial
developmentandgrowth.Theinvestmentcanbeintheformofaloan,aninvestmentin
preferredstockorconvertiblebonds,oraninvestmentincommonstock.Angelinvestors
Areofteninvolvedinseedstagefundingrounds.


iii
StartupStage
Atthestartupstage,abusinessisbornandexistslegally.Productsorserviceshavebeen
defined,andthefirstfewcustomersareonboard.

iv
GrowthStage
Companiesinthegrowthstagehaveestablishedacertainlevelofmarketpresenceandare
experiencinganycombinationofthefollowing:increasingrevenues,increasingcustomers,new
9

productorserviceofferings,additionalemployees.

v
FeaturesandBenefits
Featuresareproductcharacteristics;benefitsarecustomerneedsservedbythosefeatures.
Someexamplesoffeaturesaresize,color,horsepower,functionality,design,hoursofbusiness,
andfabriccontent.Benefitsarelesstangiblebutalwaysanswerthecustomer’squestion:
What’sinitforme?

vi
PrimaryandSecondaryResearch
Primaryresearchisinformationthatyougatherdirectlyfromthemarketplace.Itcanbe
gatheredthroughconductingsurveys,interviews,focusgroups,testmarketing,oranyother
methodinwhichyougatherinformationdirectlyfromthemarketplace.Ifyouhavea
consultantofprofessionalfirmgathertheinformationforyou,itisstillconsideredprimary
research.Secondaryresearchusesalreadypublishedsourcesofinformation—articles,reports,
tradeassociationpublications,theInternet,etc.
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vii
Break‐EvenPoint
Thebreak‐evenpointforaproductisthepointwheretotalrevenuereceivedequalsthetotal
costsassociatedwiththesaleoftheproduct(TR=TC).Abreak‐evenpointistypically
calculatedinorderforbusinessestodetermineifitwouldbeprofitabletosellaproposed
product.
 breakevenpoint(foroutput)=fixedcost/contributionperunit
 contribution(p.u)=sellingprice(p.u.)‐variablecost(p.u)

breakevenpoint(forsales)=fixedcost/contribution(pu)*sellingprice(pu)
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viii

Feasibility

Afeasibleplanisonethatiscapableofbeingdone,practicable,possible,likely,reasonable,
probable,suitable.Itdemonstratesthatthereisamarketfortheproductorservice,theplan
presentsastructureadequateforenteringandservingthemarket,andtheresources(money,
marketing,andmanagement)existorareaccessibleforenteringandservingthemarket.
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