Goals
For rapidly growing companies, a business plan is a key management tool that can be used for a variety of reasons:
- Attract debt or equity financing
- Promote relationships with joint venture partners and large customers, suppliers, and distributors
- Provide strategic guidance, operating tactics and objectives
- Furnish a standard against which to judge future business decisions and results.
- Evaluate strengths and weaknesses and identify viable alternative strategies
- Establish the operational and financial structure of a management buy-out
Regardless of the exact impetus, a business plan is a fundamental requirement for all start-up and rapidly growing businesses.
Due to the array of business plan goals and the endless variety of circumstances, there is no such thing as a standard business plan. Furthermore, a business plan should not be static.
Over its lifetime, a business typically goes through several stages. Although the number and names of these stages vary by economist, it is safe to speak of at least three stages: start-up, growth, and maturity. Generally, each stage in the life of a business represents an increase in revenues and employees -- and perhaps in product lines, assets, etc. -- and requires a greater delegation of routine functions. The transition to a new stage represents a critical phase in the life of a business. This transition, along with changes inherent in a business's growth, changing market conditions, evolving company strategies, and actual financial results, signals the need to update the business plan.
The outline presented below has been formulated based on PricewaterhouseCoopers LLP's experience with start-up ventures and rapidly growing businesses. You will need to make certain modifications to your business plan depending on whether your company is in the technology, manufacturing, service, retail or export industry. However, the basics are the same. Regardless of your business, it is important to remember that this outline should be used as a guide, not as a rigid, all-encompassing format.
A few generalizations about business plans
The executive summary is critical: This two to three page summary of the business plan is what most investors turn to first; it often determines whether they will read the remainder of the plan or decline the opportunity. This section should always be written last.
Clarify the focus: The plan should be clear about the products to be developed and the markets to be addressed by the business. Try to avoid saying that the company will develop a widget and sell it to General Motors and the grocery store down the street without explaining how it will actually be done.
Transition into a rapidly growing environment: Businesses that are emerging from less dynamic environments need to provide an accurate critique of past performances (i.e., strengths/weaknesses) More importantly, they need to clearly describe what has changed about the business and the reasons for the changes.
Avoid superlatives: The "trust me" school of thought does not work in business plans. If your product is going to be the best in the market, thoroughly explain why.
Quantity does not equal quality: A well written plan should be succinct and to the point and is usually 30 to 50 pages.
First impressions are lasting impressions: There are many things that can sink a plan including incorrect spelling, grammar or punctuation; the use of unprofessional language; numbers that do not total; or poor organization. Take the time to have the plan reviewed by at least three other members of your team.
"Slick" plans can be a turnoff: Expensive looking plans are often perceived as form over substance, frivolous and a waste of scarce financial resources. To give your business plan a professional look, consider including a plastic binding, a title page including your company name, address, date, contact name and copy number, numbered pages, and a detailed table of contents.
Support assumptions with independent sources: Assumptions made with regard to the target market and competition should be supported by independent, third-party data whenever possible. This lends credibility to the plan in the eyes of the reader.
Avoid the use of non-assertive language: Vague, qualifying words such as "might", "probably", "maybe" and "perhaps" can have a subtly negative effect on the reader. Be positive and definitive.
Confidentiality
Rapidly growing companies are usually heavily dependent upon a few key technologies which are not always patent protected and are particularly prone to competition while in a development stage.
Therefore, a business plan should be clear and concise but should not reveal information that could reduce the company's competitive edge. Two methods of promoting confidentiality are described below:
Non-disclosure Agreement: This is a statement indicating that the information in the plan is proprietary and is not to be shared, copied, disclosed, or otherwise compromised. The agreement can be verbal or take the form of signed documentation. Be prepared to negotiate on signed non-disclosures as potential investors sometimes balk at such agreements.
Control Numbering: The control number, usually included on the first page of the plan, is cross-referenced to a journal kept by the entrepreneur (e.g., copy 14 issued to Jake Johns on November 10, 1997). Control numbering helps to keep track of your plans and when they were issued. Should the recipient of a business plan not become an investor, control numbering facilitates the Company’s requests for the return of the business plan. The number of plans that you distribute should also be kept to a minimum. Excessive exposure of your idea to the investing community can lessen its overall appeal.
|
|
