Writing a business plan2

1. Writing a Business Plan
Tim C. McAloone
tmca@dtu.dk
With major contributions from: Internet sources, McKinsey & Venture Cup
Unless otherwise stated, this material is under a Creative
Commons 3.0 Attribution–Share-Alike licence and can be
freely modified, used and redistributed but only under the
same licence and if including the following statement:
“Original material by Tim C. McAloone for course 42629 – Innovation and Product Development
Department of Mechanical Engineering, The Technical University of Denmark”

2. Today’s agenda
• How to identify a business idea – concept and presentation
• Developing the business plan
1. Executive summary
2. Product/service concept
3. Marketing strategy
4. Business model/system
5. Business case and risks
6. Implementation plan & Checklists
• Video case exercise
2 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

3. Marketing strategy
• Marketing is not an exact science – instinct and
common sense are often the best tools
• Beware! The worst mistakes in business plans are
often due to a bad marketing strategy
3 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

4. M1 is Denmarks best online mobile provider
M1 A/S er et mobile company. M1 blev etableret i 2003. Koncepter er at du selv kan
sammensætte dit mobilabonnement nøjagtigt efter dit behov.
M1 has no physical shops, but operates solely via the internet. Vi har
specialiseret os i at lave billig og enkel mobiltelefoni og gøre tingene så
brugervenlige som overhovedet mulig.
I 2006 den flotte anerkendelse at vinde Ernst & Young "Entreprenuer of the year" i
start-up kategorien.
I 2008 vandt M1 Dagbladets Børsens Gazelle konkurrence i Nordjylland og på
landsplan. Hvilket gjorde M1 til Danmarks absolut hurtigst voksende virksomhed i
2008, med en vækst på over 4000%.
I 2009 vandt M1 igen Dagbladets Børsens Gazelle konkurrence i Nordjylland med en
vækst på over 1.000%.
M1 kan tilbyde lave priser, fordi vi tænker nyt og enkelt. One of our largest
priorities is to keep our costs to an absolute minimum, without at the same
time comprimising quality and service. M1's kunder skal opleve den bedste
service. Vi satser derfor på online kundeservice, som giver adgang til service 24
timer i døgnet.
M1 does not have its own mobile network, men lejer sig i stedet ind hos TDC, og
tilbyder derved nøjagtig samme netværksdækning som TDC. Det betyder, at we can
use all of our energy to offer a good product and a good service. M1 har
hovedkontor i den jyske hovedstad - Aalborg, hvor kundeservice, IT, administration
og ledelse er placeret. M1 er et datterselskab af Telmore A/S.
4 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

5. Marketing strategy
• Marketing is not an exact science – instinct and
common sense are often the best tools
• The worst mistakes in business plans are often due to
a bad marketing strategy
5 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

6. Marketing strategy
1. Analyse the market and the competition
• Estimating is an important part of the planning and
decision-making processes.
• “It is better to be approximately right than precisely
wrong”
• Useful tips when estimating:
– Start from a solid basis
– Follow a logical path
– Compare your sources
– Be creative
– Check for plausibility
6 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

7. Marketing strategy
1. Analyse the market and the competition
Estimating the market size:
• Existing market or entirely new market?
• Improved version of product already available on the market:
– Figures relatively easily available
– Trade publications, public authorities, trade associations
– Forecast the growth over next five years based on history
• Completely new product on new market:
– Derive figures from number of potential customers or
customer segments
– Own market research (e.g. questionnaire)
– Interview experts or potential customers (and not just mum,
dad, and partner!)
7 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

8. What is the size of the market for
disposable nappies/diapers in
Denmark?
BUZZ GROUPS
8 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

9. Marketing strategy
1. Analyse the market and the competition
If there’s no competition, there’s probably no market…
• Anyone offering something in a market will have to face
competitors (sooner or later)
– Who are your most important competitors?
– What is their market share?
– What market/industry forces are at work?
• Think also about substitutes
– Substitutes are products that provide the
same customer benefit in a
different fashion
– E.g. the evolution of the
music playback device
market
9 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

10. Marketing strategy
1. Analyse the market and the competition
Competitor analysis:
[McKinsey]
10 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

11. Marketing strategy
2. Choosing your target market
• Your product will not be of equal interest to all customers.
Therefore you should identify this customers who:
– Will benefit most from your product/service
– Can best be reached by you
– Are ready to pay
• Criteria for “customer segmentation”
– Should yield customer groups that are as internally
consistent as possible, but large enough to allow you to
serve them efficiently
– The criteria must be applicable to product design, pricing,
publicity and distribution
11 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

12. Marketing strategy
2. Choosing your target market
• Demographics of target customer segments
[McKinsey]
12 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

13. Marketing strategy
2. Choosing your target market
Positioning your product
• Why should a potential customer buy your product rather than
your competitor’s?
– More value
– Better in some way
– Unique Selling Point (USP)
• Formulating a USP is a key task
– Positioning and branding
– Brand recognition and association
– Possibility to differentiate from competition
13 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

14. Marketing strategy
2. Choosing your target market
• Overall positioning based on segments
[McKinsey]
14 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

15. Marketing strategy
3. Determine marketing strategy
• Defines what measures you will employ to get sales of your
product
• The 4 P’s of marketing:
– Product: What characteristics must your product have to
meet the relevant customer needs?
– Price: What price can you ask for your product and what
goal are you pursuing with your pricing strategy?
– Place: How are you going to reach the customers with your
product?
– Promotion: What means of communication are you going
to use to sell your idea?
15 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

16. Marketing strategy
3. Determine marketing strategy
Product: Product Characteristics
• Consider:
– Whether your product really meets the customer needs
– To what extent the product may need to be adapted
• Product dimensions:
– Features/options
– Quality
– Sizes/colours
– Services
– Packaging
16 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

17. Marketing strategy
3. Determine marketing strategy
Price: Pricing
• Based on your positioning, you should determine:
– What price can you ask?
– What pricing strategy should you adopt?
• The price you can ask is the price the consumer is prepared to
pay!
– Price is never determined directly by cost
– But cost does of course play a role
• Pricing dimensions to consider:
– List price
– Discounts
– Bundle offers
– Credit terms
17 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

18. Marketing strategy
3. Determine marketing strategy
Place: Distribution
• Through which channel will you distribute your product?
– How many potential customers exist?
– Are thy companies or individuals?
– How do they want to acquire the product/service?
– Does your product need explaining?
– Is it in an upper or lower price bracket?
• Have you considered all dimensions of distribution?
– Channels
– Market coverage
– Locations
– Inventory needs
18 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

19. Marketing strategy
3. Determine marketing strategy
Promotion: Communicating with your customer
• Your potential customers must know about your product
– Advertising
– Customer benefit
– USP’s
– Differentiation
• Have you considered all dimensions of promotion?
– Classic advertising
– Direct marketing
– Public relations
– Exhibitions, fairs
– Customer visits
– Fee samples
19 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark

20. Marketing strategy summary
[McKinsey]
20 Original material by Tim C. McAloone for course 42629 – Innovation and Product Development 2012
Department of Mechanical Engineering, The Technical University of Denmark