Business Plan Basics
William Cate
Business Plan Basics
By
William Cate
Few business plans are well written. It's why reviewers rarely read beyond the first page of the Executive Summary. It's why Venture Capital Firms can review over ten thousand business plans and fund only one.
Since the DotCom Bubble burst, professional money's Prime Directive is "Cashflow Now." The corollary to this Directive is that the equity investment should result in an asset worth a multiple of its present value, within 3-5 years. Your business plan must credibly address these investor needs to be taken seriously.
Your two-page Executive Summary, using simple declarative sentences, should excite the reader and answer these questions.
1. What Do You Have?
2. What Do You Want?
3. If You Had What You Want, What Would be the Result?
4. What Are You Willing to Give Up to Get What You Want?
The purpose of your 30-50 Page Business Plan is to make your proposal
credible to investors. The secret to credibility is being specific. Focus on proving that you have what you claim to have. Explain, beyond reasonable doubt, why the outcome of the investment that you project in your Executive Summary will be the outcome in reality, if the Venture Capitalists risk money with your company.
Your commitment to your company is essential to your business plan's credibility. If you aren't at risk, few Venture Capitalists are willing to put themselves at risk for your company's success.
Life is risk. Any business proposal has inherent risks. Acknowledge the risks involved in your business plan. Call them "challenges," if you like. But, a business plan without risk acknowledgement isn't credible.
Avoid padding. An investor isn't interested in the fact that you play tennis on weekends, that your daughter is in pre-law at Yale, or that you starred in your high school play. They are interested in the name of the institution where you got your college degree or degrees along with your date of graduation and your major. If you claim advanced degrees, add your Thesis or Dissertation topic. Your work experience is vital to your credibility. Be specific, give the name, address and phone number of past employers and include names of supervisors and exact dates of employment.
Avoid cashflow projections. They aren't credible. Use an essay format to discuss how your funded proposal will ensure cashflow now and increase your company's balance sheet value.
Don't query or submit your business plan to Venture Capital Firms that won't fund projects in your industry or country. It's a waste of time.
Your goal in submitting your business plan is to convince the Venture Capitalist to meet with you. People invest in people. They don't invest in business plans. If you get an invitation to meet with the VC staff, go to the meeting with a soft sell strategy. Focus upon answering their questions and not hard selling them on your company. Unless asked to come with your management team, keep the first meeting to no more than you and one key team member. Aim to build a business relationship with the VC staff, based upon your company's credibility and your professional competence. If the VC wants to meet a second time, odds are you will get your financing.
Should your business plan be professionally written? My advice is "no." Most professional business plan writers follow a set format that is easily recognized. They know less about your industry and plans than you do. Professionally written business plans lack the conviction of those written by the fund seeker. However, once you have your draft business plan, it is usually wise to have it edited for clarity, credibility and the removal of padding, by a professional writer. A good business writer can focus your business plan, without making it appear to be written to a textbook format.
Be credible. Be honest. Be specific. Be qualified to make your company grow. Address the needs of your potential investor and not try to feed your ego. Prove cashflow now. Be willing to sell your company when its assets justify it. At the initial meeting, soft sell your proposal. Clearly and concisely answer the investors questions. If you adopt this approach to raising risk capital, you will greatly improve the odds of finding the money of your dreams.
About the Author: William Cate is the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/], a merchant bank doing multinational M&As. He is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]. He reviews business plans for several Venture Capital firms. You can contact him at: Beowulfinvestments@Earthlink.net
About the Author
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
