Strategic Planning#
Market Strategy#
customers only care about what the product will do for them
a product or service need to solves a real problem in more effective way, but not necessarily
higher-tech, than available alternatives * talk with potential customers in the early step, and find out how the market works and what the real problems are * know who the competitors are, what they do, how they make money, how good their products are and why people buy them
Indirect Competition#
customer solving the problem with in-house solution
customer adopting a different working practice that makes the problem irrelevant
customer tolerate the problem as their money is limited and invest money on other things
that they think will get a better return on investment
identify where in the market to offer a product different from the competition and a customer
a compelling reason to buy * customer purchase decision-making will pay significant attention to the potential downside and the risk
Opinion Leaders#
have influence on the customers in technology markets
identify, engage and get them on the same side
it is worth to investigate whether it is possible to define market segments in terms of
them * engaging them can sometimes lead to automatic, free-of-charge business advantage
learn how the market works, decide which market segments to go for, and use the networks in
the segments to increase selling effort * product-based company should have the potential to be large and global, and the market should be at an early stage of exploitation * service-based company should allow the customer to get end result more efficiently * entering a mature market without distinct offering could lead to failure * it is important to be first to market as it will allow to shape customer expectations, charge a premium and obtain first-mover publicity
Value Creation#
Lifestyle Business, Rapid Growth, Business Goals, Business Models, Business Plan
value creation options will depend the personal choice and availability of finance
Lifestyle Business#
in control of operations, few employees, and flexible with own time and resources
primary value will be created through cash flow
choose to invest that cash in other ventures, reinvest in own business, or create other
forms of savings * will be dependent on the cash and growth in the business
Rapid Growth#
might have to give up some of shares and control
manage more complex work situations, and deal with investors
plenty of scope for travel overseas, and spend long hours on the road
Business Goals#
- New Entrepreneurs
build credibility and experience, and get an understanding of how the market works
can start with some form of consulting business
lower risks, but selling consulting services to raise money for product development
can delay that development
- Higher Risk
need financial resources, strong team and global market with significant potential
demand - can make an objective to raise sums of money from venture capital and other sources - expecting the business to grow with speed to enable investors to realise value through some form of exit, e.g. sale of shares to other business or via flotation on the stock market
Business Models#
choice of models will have an impact on the final value
be very clear about the business model
start-up companies will find it difficult to mix business models
do not develop products and deliver consulting expertise
- Licensing Idea
it may require to make further investment to prove that the technology works and
that there is a market for it - but can expect to receive a part of the value when the idea is brought to the market by those who have licensed it - need to find the right licensees, good legal advice on contracts and the protection of intellectual property - e.g. biotechnology companies develop potential new medicines and license them to pharmaceutical companies
- Full Ownership
own various forms of diluted ownership with co-investment by other firms and people
going it alone has the highest risks
must be fully committed, but can expect the greatest rewards if it all works out
fit teams who are experienced in business and have a desire to grow a large business
for a large return
- Joint Ventures
reduces the risks, but can be complicated to set up
need to find a company that is willing to co-develop the technology or the market
fit teams who are experienced in business and have a desire to grow a large business
for a large return - e.g. shared flights in the airline industry
- Product Development & Sale
growing a products business requires more capital than growing a services company
more risky as the company is unlikely to get a second chance if the first fails
but rewards can be great if the product is successful
- Services Delivery
less risky to grow the company, but growth will be slower
staff numbers will need to double in order to double company revenue
- IP licensing
very competitive and often does not appear to have more than one large player in
each market sector - important to ensure to follow through with succeeding generations of IP
Business Plan#
necessary document that will help or hinder attempts to raise outside finance
can be extremely time consuming, seek external advice
- Internal Plan
personal objectives, product or service to sell
itinerary to develop the technology, market research, recruit,and acquire other
resources - should be reviewed continuously, and make simple budgets and cash flow forecasts - style and content reflect only the internal needs of the business - becomes more formal as the business develops, and a specific plan, based on the internal plan, may be necessary
important to understand that the needs of equity investors and bankers are different
- Plan Emphasis
depends on the stage of the business
start-up: its people, product and the quality of market research
developed business: emphasise its track record
- External Plan
company and management background, staff structure, market, production, product and
details of IP - financial forecasts, competition, risk and reward for potential financiers - how the product will be sold, time scale and benchmarks, mainly for overcoming barriers to market entry - if the plan is to raise equity, must include business’s unique selling point - must be reviewed before going public
- Executive Summary
written after the plan is finished, must introduced the plan with it
has to attract attention and should be short, two or three pages
but must be sharp, bringing out the key selling points
write in a way that an investor with no special knowledge can quickly understand the
business and what is in it for him
once potential investors form a negative perception of the business, it is often
impossible to change it
Novelty#
the new offering must be sufficiently different to be attractive to clients
investors like companies whose offerings have a significant degree of novelty
product must be sufficiently novel
intellectual property, patents, in the product must be defensible, i.e. a competitor
should not be able to steal it * the product should not be launched before the market has developed * new markets are generally slower to take off than expected
most successful technology companies raise three or four rounds of finance prior to flotation
or the sale of the company * it is necessary to convince the first-round financiers that the team is credible, product is novel, there is a large global market and proposition is sustainable * execute flawlessly and maintain focus, do not think too long, and go into market and do it
Team Building#
find partners that can be trusted and get along with, two or three people make a sufficient
starting team * the founding team must have skills to create the product, identify customers and make sales * if there is no obvious leader in the founding team, recruit before or shortly after first-stage funding is secured * fill the remaining key management gaps within a reasonable period * communicate, share business vision, build trust, clarify and formalise roles through the business plan * skill required will change with the growth trajectory * hire as needed, and recruit from outside the region if necessary, but set high standards from the first and stick to them * VCs consider a business proposal based on the skills and experience of the entire team
Team Roles#
- Chair
senior wise head, has experience and contacts
resolve dispute in the company
- CEO/Managing Director
find money and manage investor relations
responsible for day-to-day running of the company
formulate policy proposals and implement the board’s decisions
usually has a marketing rather than a technical background
often not a founder member
- CFO/Finance Director
usually a qualified accountant, prepare management reports and budgets
advises on fundraising, may act as company secretary and run the administration
can have additional roles of office management and quality control
- CTO/Technical Director
invent new things, take charge of development
- COO/Production Director
run the factory and distribution chain
- VP Marketing/Marketing Director
decide what and how to sell
handle market communications and competitor information
- VP Sales/Sales Director
handles selling and customer relationship management
also manage after-sales support
- Board of Directors
Chair, CEO, CFO, CTO, COO, VPs of Marketing and Sales, and other non-executive
directors - usually business or industry experts and representatives from the VC - each has responsibilities to the company, shareholders, creditors and employees
- Scientific Advisory Board
does not have a legal role as the board of directors does
advises on scientific direction of the company
mostly very senior figures from particular area of science
- As a Manager
lead, acquire resource, and allocate disturbance
inspire other team members, and sell vision and goals
understand the individual team member’s own personal goals
obtain the resources for the team to function, e.g. investment
inform the team of changes and deal with the consequences
should not micro-manage, making every small decision
Recruitment#
make rough details of the ideal person for the job, e.g. background, experience, career
path, reason to join, options package requested and to attract * best way is to find through personal recommendation * some companies run bounty schemes to reward staff who introduce new employees * can employ an agency, but usually charge 15-20% of first-year salary * for more senior posts, hire headhunters which will minimise publicity * can also advertise, which can be low-cost and effective
all-Scientist company will stay small or fizzle out as the Scientist burns out, as he will
want to have his hands on everything the company invents or makes * all-Entrepreneur company will generate excitement and publicity, but will bankrupt quickly, as entrepreneurs have zero attention to detail and are stubborn * all-Manager company will slowly be packed away, becoming the land of the living dead
Company Structure#
a company offers limited liability, risks are taken by the company rather than as an
individual, so that personal assets can be safe if the business goes wrong * every company must have public documents such as Memorandum, objectives and share capital, Articles of Association, how the company should be run * do not allow investors to mess with the Memorandum and Articles of the company * register certain documents with the Registrar of Companies, and appoint auditors and submit audited accounts annually to Companies House * can purchase companies read-formed from company formation agents, or ask a firm of lawyers to set up with tailored Memorandum and Articles * address legal and taxation issues at an early stage * e.g. share option agreement isn’t needed when only the founders are working for the company, and directors liability insurance is only needed when a certain type of company is actively trading * as an individual, consider shareholding from family’s point of view, and find the best way to obtain income from the company in the future
Directors#
must be legally in the best interests of the company
cannot make decisions for personal benefits
have to declare conflicting interest, that will be decided by the board, to other directors
a director must not discuss or vote on any issue where there is a conflict of interest
may need to risk personal liability in some cases, e.g. signing an agreement without
unanimous shareholder approval