BUSINESS PLANS and PLANNING small business financing initial public offerings IPO IPOs venture capital books private financing Reg D SCOR going public direct public internet offerings venture
capital clubs groups entrepreneurs: VENTURE ASSOCIATES
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 and preparation of the Private Placement Documents that should accompany all business plan where the entrepreneur is seeking financing. Included in this service is a comprehensive review of your business
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
Rapidly growing companies require not only adequate funding, but also strong operational and financial controls. A detailed plan decreases the risks associated with rapid growth by keeping the
management team focused and financing sources up to speed. Special project plans are used to assess the reality of undertaking new markets, developing new products or services and analyzing feasibility of financial profitability related to capital
acquisition. Mergers, acquisitions and leveraged buy-outs require decisive action from a position of strength. Business plans must reflect the financial structure of the surviving company, as well as
detailing the generation of increased cash flow to meet new debt requirements. Turnaround companies must develop solid profitability. These plans describe management's strategic focus and how the plan will be implemented and properly executed to accomplish the
turnaround. It requires detailed support of increasing revenues, expense cuts, and corporate asset management to secure the proper capital sources.
The following part of this Business Plan section is an excerpt from the book, Golden Entrepreneuring by James B. Arkebauer, founder of Venture Associates.
Business plans boil down to operating the company on paper. The aim is to validate an idea and challenge every aspect of the business. A business plan is a written presentation that carefully
explains the business, its management team, its products or services, and its goals, together with strategies for reaching the goals.
The entrepreneur or team members who write the plan will find it a painstaking process. But keep in mind, this is THE selling tool, and it requires careful consideration of all the multiple facets of
a start-up or business expansion. It cannot be written as an afterthought, and it should not be taken lightly.
Check with any professional investor anywhere in the country, and you'll hear horror stories about ill-conceived, poorly written, or sloppily put together business plans. As great as the company's
potential may be, it is essentially doomed to rejection, before it can even get a foot in the door, if it has a poorly conceived business plan.
There are two primary purposes to a business plan. The first has an outside objective--to obtain funding. There's no business without capital. The second serves an inside purpose--to provide a plan
for early corporate development: to guide an organization toward meeting its objectives, to keep the entrepreneurial business itself and all its decision makers headed in a predetermined direction,
to explain in an engaging way with interesting information how the company will be run for the next 3 to 5 years.
The entrepreneur must put all the "hows" and "needs" together in one neat package. The human and physical resources must effectively interrelate with the marketing, operational, and financial
strategies of the company. Unless an entrepreneur has magical powers of persuasion, this is not the time to try to fake it.
The business plan is considered a vital sales tool for approaching and capturing financial sources, be they investors or lenders. They want to know that the plan has been carefully thought out by the
entrepreneurial team. They want to be convinced that the team has the skills and expertise needed to actively manage the company and that it is prepared to seize opportunities and solve the problems
that arise. That's why the business plan must be well prepared, professional in tone, and persuasive in conveying the company's potential.
It cannot be stressed too strongly that a good business plan is the cornerstone of successful financing. If you want investors' money, you've got to give them good reasons to buy in. The business
plan is where you lay out the reasons. It does not have to be unduly lengthy or complicated, but it must be informative and relevant. It needs to maintain logic and order, and show the company as
effectively positioned as a good investment.
More important, the business plan should be specifically directed to the funding source and satisfy its particular concerns. For example, you would orient and write the plan differently for
presentation to a banker than you would for a venture capitalist, an underwriter, or a private investor. The venture capitalist would want to know what risks are involved, whereas the banker wants
more information about how good the security is. These concerns must be individually addressed. There are no hard and fast rules for preparing a business plan--no established, formal format. The key
word is ingenuity. Strive for inventiveness; strive to be interesting and captivating.
Here are some general guidelines covering the basic elements of a business plan. These should be helpful in writing any business plan, no matter to whom it is directed.
#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
#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
#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
You're not finished yet. One of the big differences between ordinary plans and good entrepreneurial plans is that they have been critiqued to work. After you have drafted your business plan, solicit
feedback on it. Ask a cross section of people whose judgment you respect to review it.
Don't fall in love with your wordsmithing. Make any revisions that are necessary, and then prepare a good oral presentation. In fact, you should have both a 2-minute and a 5-minute oral attention
grabber. Follow up with a detailed 15- to 30-minute presentation. All should be modeled on your written business plan.
A word of caution: When preparing your financial projections, avoid the shortcut of relying on packaged computerized information--those preset formats in which you plug in figures
and percentages. Individualize your financial projections. Think them out carefully. No two businesses are alike.
Show when you bring on additional personnel, and remember that each new hire adds other costs beyond salary--items like benefits, desks, supplies, maybe even another computer or additional travel
expenses. These items need to be tracked for each expense period.
Don't just show advertising costs as a percentage of sales. Most advertising expenditures are made some months before sales result. A lot of them have to be prepaid before they are run. It's just not
justifiable to show "plugged" computer figures for most expense items. Individualize them. And keep in mind that a start-up company
will not fit the standard industry norms.
Your projectionsshould include the financial obligations of bringing your product or service to the marketplace: enlisting new management people as well as workers; taking on more physical space or manufacturing
capacity; purchasing support materials and services; and monitoring buildups in inventory and accounts receivable.
There are many specifics that should be included in a successful business plan. The following general outline contains many suggestions which may seem obvious, but it is often easy to overlook the
Again, this outline should be used as a preliminary planning guide. It's up to the reader to add lots of detail, meticulously gathered and presented in succinct entrepreneurial form. (For a complete
guide to writing a business plan, see The McGraw-Hill Guide to Writing a High-Impact Business Plan.
1. Indicate full formal name of company
ABC Company/ABC Corporation/ABC Inc. (If you have a logo, use it.)
2. Indicate ownership status
A sole proprietorship.
A New York corporation
3. List full street address
555 West Fifth, Suite 55, Anytown, State, ZIP USA
4. List mail address if different
Mail address P.O. Box 55, Anytown, State, ZIP USA
5. List phone, Fax/telecopier, e-mail and web site information
6. List principal contact name and title
E. E. Entrepreneur,- President
Home phone number (optional)
7. Date the plan
Month and year
Table of Contents
Categorize the contents. Use section names and page numbers. You have a choice of only main category headings (History, Management, Product, etc.) or detailed categories (History--date founded,
founding members, place founded, etc.). Make note of any charts, tables, or graphs.
A very important part, the executive summary briefly sets forth the contents, taking key sentences from each section of the plan to overview the project for the reader. Limit the summary to two or
three pages: more is too many.
Consider using your mission statement or a brief visionary type of paragraph. It should be concise and to the point. This section is the first thing that investors read, and they may not read
further if you haven't captured their interest. History
The first several paragraphs should briefly describe the product or service, to whom it is sold, the current status of your industry, and where your new company fits in. This is your second chance to
give the reader an overview to establish a basis for detailed understanding.
After this brief introduction, include a description of how, when, and by whom the company was started, its achievements and acceptance setbacks. Then bring these experiences to current-day
Product or Service
To succeed with an entrepreneuring company, you must know your product or service; to succeed in obtaining capital, you have to be able to clearly describe your product or service. After giving a
simple, straightforward description, outline the need for the product or service in today's marketplace, how it will make a difference, the benefits derived from using it (or what will make the
customer buy it), and its advantages.
Explain any special training needed to sell or use it. Include all relevant regulations that may affect its sale or use. Expound on any exclusivity or technological uniqueness. Unless your plan is
going only to specialists in your industry area, assume you are writing for the layperson.
Forget industry jargon and replace it with words that the nonspecialist can understand. If you tend to write overly technical descriptions, engage a professional writer.
Market Description and Analysis
This section profiles three key areas: customers, industry, and competition.
Prepare a Customer Profile
Describe what customers form your market, where they can be found, why they purchase your product or service rather than another, and whether it appeals to a single individual or to groups.
Document quality, warranty, service, and price significance: pinpoint the buyer and user. Point out political influences, if any. Describe market coverage, whether local, regional, national, or
Prepare an Industry Profile.
Discuss pertinent trends, past, present, and future. Offer available statistical data on sales and units. Use charts, graphs, and tables if they can make the presentation clearer and more
impressive. Refer to trade associations if helpful.
Prepare a Competitive Profile.
Stress advantages of price, quality, warranties, service, and distribution. Include the operational strengths and weaknesses. Project potential market share trends in sales and
Don't guess in this section. Check all your facts and note all your sources. You can be sure that these will be checked with a fine-tooth comb during an investor's due diligence process. If you're
citing voluminous reports or statistical information, note that you have them available for further review.
This is a critical section that should clearly specify the company's marketing goals, how they are to be achieved, and who will have the responsibility for achieving them. Qualify all distribution
methods (representatives, dealers, and so forth) and describe any planned advertising or public relations activities. Include references to sales aids, foreign licensing, and training plans as
appropriate. Simply, detail how you are going to sell the product or service.http://validator.w3.org/
This section is primarily oriented toward facilities, manufacturing capability, and equipment. Disclose all present capabilities as to equipment and facilities, as well as further projections for
offices, branches, manufacturing, and distribution. It often helps if you include current floor plans as well as expected future space plans for production or manufacturing companies. For all fast-growth companies, task/time charts can be
especially useful in this section. They help impress on the reader that the Entrepreneur has a real handle on the operational challenge. Research and Development
The length of this section depends on whether you're a service or product company and--if a you're a product company--on how technical your product is. The object is to explain all past research and
development efforts and accomplishments as well as future expectations.
Here is your opportunity to justify past time and dollar expenditures. Substantiate the patentability of inventions, proprietary processes, or other advantages that your company will have over the
competition and the resultant, anticipated market impact.
Describe the timing and sequential steps that will be taken to bring the company up to full speed. Graphs or charts help indicate the timing and interrelationships of the major events in the
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.
In the eyes of the investors, the quality of the management team often determines the potential success of the company. Consequently, this section should cover career highlights, accomplishments, and
positions held, with an emphasis on good performance records. Describe how the team has worked together in the past. List all directors, consultants, advisers, and other key professionals who will be
involved in company operations and point out how they add value. Detailed resumes of key management should be appended with bios of others as appropriate.
Risks 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.
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.
Show projections, including balance sheets, profit and loss statement, and cashflow studies. These should be month by month for the first year, quarterly for the second and third years,
and yearly thereafter.It is mandatory that detailed assumptions accompany all projections. It is also very helpful if the very first part of this section summarizes the details. In fact, in many cases,
details can be appended or supplied separately.
Include a glossary (if pertinent) and all essential pieces of evidence, such as resumes, product brochures, customer listings, testimonials, and news articles.
It's suggested that you seek out available books on writing a business plan. They can be found in many bookstores and all libraries. Read two or three to give you the essence of a good background for specifically outlining your plan. Each company is different and your plan must be tailor made to your particular situation. The ideal business plan just does not exist, and generic plans just don't
cut the mustard for Entrepreneurial companies.
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
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.
Some companies may question the necessity of a business plan, citing successful firms that never had one. Times are changing. When the goal is to raise money, it's not only the entrepreneur's money
that is at stake. Advisers, team members, directors, investors, and bankers need to be thoroughly convinced. They want to know that they won't be wasting their time and money. They want to know that
the entrepreneurial management team has a clear sense of direction and is prepared to move toward its established goals.
A good business plan is the answer. What's more, much of the same information would have to be gathered anyway to be made available to potential shareholders before they place their money in the
company. You should also strongly consider having a Private Placement Document to give you the maximum liability protection when seeking financing.
Another unique aspect of the good entrepreneurial business plan is the putting together of a special executive summary. This summary is not the same as that in the business plan; it does, however, take advantage of the high points in the plan. It serves as an entering wedge to semi-interested parties as well as potential investors. The business plan executive summary, discussed under the Business Plan Outline section, usually summarizes the business plan in two or three pages. The special executive summary expounds
on the most enticing parts of the business plan for about six to eight pages.
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.
Once the company is up and running, top management should convert the business plan to an operating plan. This process is simply retitling the plan as an operating plan and then religiously keeping it updated, using it as an operational guide on a continuing basis. The operating plan helps keep both management and staff focused on the tasks at hand. The parts that are pertinent to various
departments can be pulled from the master plan and passed on to the appropriate staff individuals responsible.
Continuous updates should be given top priority in all entrepreneurial companies. The basic plan should be reviewed quarterly--at minimum, semiannually. Remember, for investors, the business plan is
what they buy into. It becomes the benchmark for accountability. They intend to hold management responsible for achieving the goals and objectives that are set out in the plan.
It is inevitable that things will change as the company achieves full operation. In some cases, these changes will have only a small effect on operations. In other cases, they could result in a
drastic shift in total company focus. Given the ultimate entrepreneurial goals, it's apparent that a continuing update of business plan strategy in the form of an operating plan helps keep everyone
singing from the same songbook.
Entrepreneurial Plans Take Your Best Effort
All companies should have a business plan. Preparing it may take months, and you won't get to first base without it. The outlines presented in this chapter may not fit every company's particular
requirements, but they should contain enough general information and suggestions to provide a solid base for preparing your plan. More detailed materials and information on writing business plans can
be found in many bookstores and libraries.
For Entrepreneurs, there are some very important points that need to be given extra attention to set their plan apart from ordinary business plans. These include continually updating their plans,
paying special attention to the corporate structure and valuation portions of the plan, creating a special executive summary, and finally, converting the entrepreneurial business plan to an
entrepreneurial Operating Plan.
A company should give its plan its very best efforts. You will discover that a well-prepared entrepreneurial plan will serve as a solid sales tool for approaching any financing source--investor or
lender--as well as provide management with a written game plan for guiding operations and maintaining a check on expectations.
A final note: Failing to plan is planning to fail.
The McGraw-Hill Guide to Writing a High-Impact Business Plan
McGraw-Hill (210 pages - $17.95 at bookstores internationally)
CLICK HERE for order information on the $15.00 electronic download
Master the crucial first step that turns entrepreneurial dreams into reality! Launching or expanding your own business?
In today's tough, tight-money environment, you need the kind of high-impact business plan that will catch the eye of potential investors and win you the financing and support you need. This
comprehensive, practical guide by a successful entrepreneurial investment banker who has reviewed and/or prepared 5000 business plans shows you how to write a plan that:
Forcefully describes your company's product or service in a way that sets you apart from the competition.
Makes a "selling" first impression through the use of cover sheets and a dynamic table of contents.
Creates a total market strategy that positions your company and identifies your future customers.
Presents your financials in a manner that's clear, knowledgeable, positive and compelling to financial experts.
The McGraw-Hill Guide to Writing a High-Impact Business Plan also contains numerous checklists and workguides; a directory of new and little-known money sources. It's a one-of-a-kind reference
for all entrepreneurs who want to prepare the kind of plan that will carry them down the road to business success.
CLICK HERE for order information on the $15.00 electronic download
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VENTURE ASSOCIATES CONSULTING
The principals of Venture Associates have a great deal of experience in developing, writing and producing all forms of business plans and private placement memorandums used in obtaining
entrepreneurial financing. If you would like to discuss the availability and costs for services, please make contact via the following information: