It is Venture Associates experience and belief that business plans assist the development of the overall structure of a company's financial and management needs. The day-to-day success of an enterprise and its ability to attract capital depends to a large degree on the completeness, clarity and precision of the business planning process.
Strategic business plans meet specific needs of a company in various stages of its life. Venture Associates specializes in the creation of short-term and long-term Comprehensive Business Plans used for both management control and for presentations to the appropriate capital sources, including our own, and we are specialists in the preparation of the Private Placement Documents that should accompany all business plan where the entrepreneur is seeking financing.New ventures needing capital must depend on a well documented and frequently updated plan. The objectives are two fold. First, to give prospective investors a realistic valuation of the feasibility and risks involved with a thorough analysis of capital needs and applications. Secondly, to provide the entrepreneurial team with a detailed operational guideline.
#1 - Make It Easy to Read
There is so much competition for investment dollars today that if you want to get the jump on the next person, your plan will have to be well formatted and easily understood. Your introductory statement summarizing your operation is one of the most important sections; it must capture readers' attention and motivate them to read the balance of your plan. Caution: If they need a dictionary at their side in order to read, they'll stop. Construct a glossary if you have to use a lot of technical words.
#2 - Be Sure Your Approach Is Market Driven
Not product-driven. If you want to obtain money, you must understand that investors are primarily interested in how the product or service will react and be received in the market. Before they buy into your plan, they want to see your research demonstrating and substantiating how the customer will benefit and be motivated to purchase.
#3 - Qualify the Competition Start by qualifying your product according to cost or time savings and revenue generation. Also show your projections for sales growth, how your product or service is superior to others, and how you intend to exploit the competitive advantage.
#4 - Present Your Distribution Plan
Be specific as to how the company will sell and distribute its product or service. Clearly describe the methods and what it will cost to get the product or service into the ultimate customer's hands.
#5 - Exploit Your Company's Uniqueness
Explain what will give your company a competitive edge in the marketplace--special attributes like a patent, trade secrets, or copyrights.
#6 - Emphasize Management Strength
Show proof that the company is comprised of highly qualified people who can cover all the bases. Indicate the incentives that will keep them together, and how they, the directors, and the advisers possess the necessary credibility.
#7 - Present Attractive Projections
Paint a realistic picture--substantiated by assumptions--of where your company is going with funding. Be detailed and keep it credible. Good validated projections and forecasts are impressive.
#8 - Zero In on Possible Funding Sources
As mentioned earlier, it's different strokes for different folks. Design versions of the plan to fit the idiosyncrasies of each source you plan to approach. A banker's interest lies in stability, security, cashflow coverage, and sound returns, whereas a venture capitalist is more interested in high leverage resulting in outrageous returns. Both want to know how the proceeds are going to be spent.
#9 - Close with a Bang
Drive home the point that you're offering a good deal. Be definite about how investors will get their money back and when. Specify the return rates; state how the risk investor will receive a 30 percent or 50 percent compound annual return, or whatever you're offering. For lenders, show that their funds are adequately secured and that your cashflow more than covers their interest and principal payments.
Take it month by month for the first year. Thereafter, indicate the progress expected quarterly. Areas that may be important include completion of prototypes, starts of beta tests, early significant sales, when key people are to be hired, physical expansions or moves, opening of branches, trade show or convention dates, major equipment purchases, and the like.
ManagementRisks and Problems
Risks could be a red flag. There are diverse opinions about the inclusion of this category. Some investors object to the obvious and prefer to discover their own negatives. Others prefer that the company openly acknowledge risks and potential problems. It's a toss-up; however, high-profile, success-threatening risks should be brought out.
Use of Proceeds
Judiciously present a timetable indicating how much money will be needed, when it will be needed, and how it will be used. Most companies require multiple stages of financing, including both debt and equity. Show the proposed capital structure, including who is going to own what part or percentage of the company at what stage. Start-up plans need to detail start-up use of proceeds and then generalize on the additional stages.
Finances
Present the company's current equity capital structure as well as future plans. Itemize the equity payments made with dates paid. List all outstanding stock options. Include both historical and current profit and loss statements and balance sheets. Present current and proposed salary structure for those who are already on board and those who will come on board at a later date.
Expect to spend a minimum of 2 or 3 months and 200 to 300 hours writing your plan. It's not unheard of that an entrepreneur spend up to a year putting together a detailed plan.Additionally, you'll have to spend some time preparing and rehearsing your oral pitch. Remember, your words and story not only have to paint a pretty picture; they must be persuasive as well. It's of little use to approach the writing of a business plan as a necessary evil. Rather, look at it as a helpful tool that can be used to exploit the advantages of your product or service.
In essence, it's a condensed business plan that shows the company to best advantage. It's an entree, when initially seeking help, to locate and identify potential financial sources. It can also be used as an overview for those who do not need to know all that much about the company (like staff personnel or suppliers), or for those from whom management wants to keep proprietary information. It can be changed and adapted to any particular audience. It's kind of the bait before the hook, a plan used to capture one's initial interest and motivate one to request more information.
A special executive summary should not be taken lightly. It is indispensable, and should be kept updated. This is easier to do than revising a whole business plan if the entrepreneurial team simply wants to test some new plan ideas or gain some quick feedback. It may very well be the key to reaching the right source.
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