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VC Secrets: What the Business Plan Books Don't Tell You By William F.(Bill) McCready, www.VenturePlan.comMost business plan books and software do a thorough job ofteaching you to describe your business from an entrepreneur'sperspective, focusing on your product or service. Unfortunately, if you wrote your plan in order to obtainfunding, it's vital to write it from an INVESTOR's point ofview.HOW INVESTORS READ a BUSINESS PLANA potential investor will initially spend only 5 minutes withyour plan. The following areas will be evaluated, each areataking about 1 minute!1. Determine the characteristics of (1) the industry and (2) this particular company. - What other publicly held similar companies are there? - Is there a larger company that is extremely successful? - Is the company in a 'glamour field'? (important to ensure a good public offering) 2. Determine the terms of the deal. - How much of the company is being sold for what price? - What is the form of debt or equity being requested? - How will the funds be used? o To retire old debt (bad idea)? o To undertake new activities that will, in turn, increase profitability? 3. Review the bottom line with special emphasis on years three through five. - Earnings or potential earnings are reviewed to determine company's valuation. - Sensitivity analysis, or what if analysis to see how the business model adjusts to changing prices, expenses and competition.4. Determine the caliber of the people in the deal. (The most important aspect of the business plan!) - What is the track record of the founders and managers? - How much balance and experience does the inner management team possess? - How long have the members worked together? - Who are the banker and accountant, and what are their credentials? 5. The marketing plan is reviewed with careful consideration to current and future threats. - Is the product or service in demand now or will it be in the near future? - What is the Unique Selling Proposition for the product? - What other company or companies are already in this space that could leap frog this business? - Can the customer be easily identified and marketed to successfully?*** =============== SAMPLE BIZ PLANS =============== *** High Tech and Traditional Business Plans We find that few entrepreneurs have actually seen the “real deal”. Find out how you can order a sample business plan to use as a guide as you prepare your own. Go to http://www.ventureplan.com/business_plans.html.*** ================================================ ***QUESTIONS ANSWERED BY THE BUSINESS PLAN 1. How much can I make? 2. How much can I lose? (including loan guarantees, opportunity cost, and non-financial considerations) 3. What is unique, innovative or technologically different? 4. What is the perceived value of your product versus what your product actually does? 5. Why will everyone need your product or service? 6. What will happen to your customers if they don't buy your product or service? 7. Who says this is a good investment? BUSINESS PLAN DO's AND DON'Ts 1. DO keep the business plan as short as possible without compromising the description of your venture and its potential. Venture investors are NOT patient readers. 2. DON'T over-diversify your venture. Focus attention on one or two key products or services. 3. DON'T have unnamed, “mysterious” people on your management team. A 'Mr. G. who is CFO of XYZ, Corp.' who will join your company later. 4. DON'T describe technical products or manufacturing processes with jargon that only an expert can understand. 5. DON'T estimate your sales on the basis of what you can or would like to produce. 6. DON'T make ambiguous, vague or unsubstantiated statements. Be precise about market size, rates, etc. 7. DO involve your management team in the preparation of the business plan. 8. Do disclose any current or potential problems with your venture. While a well prepared business plan is never a guarantee thatyour business will be funded, it can increase the odds in yourfavor. *** ============= PowerPoint Biz Plans ============= *** These PowerPoint BUSINESS PLAN templates have raised MILLIONS! o Five PowerPoint Business Plan Presentations o PowerPoint Guide for Your VC Pitch o BONUS - Sample Executive Summary Click here and go to the *order* button at the bottom of the page: http://www.ventureplan.com/powerpoint2.html NOTE: This is a special offer for readers of this article.*** ================================================ ***Please feel free to pass this article, in its entirety,along to your associates.Copyright 2002, Venture Planning Associates, Inc.ciates, Inc.