Planning the Entrepreneurial Venture
June 25, 2008
Planning the Entrepreneurial Venture
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.
