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VC Secrets: What the Business Plan Books Don't Tell You

From: Venture Planning Associates Inc. <Expert-zine@VenturePlan.com>
Date: Sat, 4 Oct 2003 00:52:17 -0400
Message-ID: <216570-22003106445217171@mail3.autocontactor.com>
To: site-comments@w3.org

Dear ,

As promised, here is your new issue of the Expert-zine.

VC Secrets: What the Business Plan Books Don't Tell You

  By William F.(Bill) McCready
  CEO/Founder, Venture Planning Associates, Inc.
  http://www.ventureplan.com

Most business plan books and software do a thorough job of
teaching you to describe your business from an entrepreneur's
perspective, focusing on your product or service. 

Unfortunately, if you wrote your plan in order to obtain
funding, it's vital to write it from an INVESTOR's point of
view.

HOW INVESTORS READ a BUSINESS PLAN

A potential investor will initially spend only 5 minutes with
your plan. The following areas will be evaluated, each area
taking 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?

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 that
your business will be funded, it can increase the odds in your
favor. 

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____________________________________________________________

This FREE newsletter is distributed by subscription only. 

Please feel free to forward this issue, in its entirety, along
to friends and associates.
____________________________________________________________

http://www.expert-zine.com / http://www.ventureplan.com

Teri McCready, Publisher  
Tel. (858) 457.3434 /  email: marketing@ventureplan.com

5370 Toscana Way                San Diego, CA 92122 USA

Copyright 2000-2002, Venture Planning Associates, Inc.
ISSN: 1529-1316

        Everyone's an expert in something, but almost no one
        is an expert in everything!
                      Teri McCready, Publisher, Expert-Zine
____________________________________________________________

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Copyright 2002 Venture Planning Associates, Inc. All Rights Reserved





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Received on Saturday, 4 October 2003 00:47:32 UTC

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