Tuesday, January 25, 2011

Creating Concepts and Business Plans that Sell.

1(c)A Business Plan that Sells

Who are you making the businesss plan for ?

The first answer here should be ;for your business . Business Plans serve as guiding policy documents for your business . That is, the business will continue to depend on it even after the funding has come in . It should be open to amendment so that it remains relevent to a growing business and a changing enviroment.
The second answer should be ;for your funders. Who are these people ? Funders are the people who can finance your business idea . For the sake of simplicity, I have reduced them to 4 categories :-

- Individuals.

-Bank Loans officers.
 -Angel Investors .
-Venture Capitalists. 
 

Individuals -these can be friends or family members .They are closest to you ,trust your ability and believe in you.They always turn out to be a good first option for business idea funding.It would be ideal to make a business plan they understand aand can interpret.We are not ruling out yourself as funder .


Bank Loan Officers or Banks-these people see a lot of busines plans in their work and ,therefore it important that yours stands out from thr pile . Keep it simple and lean . It should not look like a bible. Remember, they will ask for collateral security. This means in the event your business fails to pay back the loan they can recover their money. If you have no collateral-get collateral or forget about banks and find other ways of raising capital . It helps to know who is looking into your business plan . If your application is unsuccessful; ask why it failed , learn and try again.

Angel Investors -these are wealthy individuals( some are entreprenuers who have succeeded )who have a lot of funds and are willing to take a risk by lending to an entreprenuer . I am told that about US$14 million worth of Angel investor funds circulates the globe daily seeking investment opportunities.In the First world countries these are widely accessible -there are directories for such people ( check google to confirm ) . This type of investor seeks to get to the entreprenuer before the Venture Capitalists arrive on the scene and secure a favourable position,say 60 % of your business idea . Most Angel investors prefer IT start-ups as these grow faster and offer a good return on investment.Some have specific preferences ,like some avoid gambling business ideas for moral reasons . Once again, tailor-make your Business plan to appeal and make sense to them and be especially realistic on the Financial forecasts ( hire an accounting person if necessary to ensure that the figures are realistic). Should your business fail they stand to lose their entire investment so bear in mind that they will do all in their power to prevent such a loss.


Venture Capitalists -are businesses which are in the business of investing in new business ideas and existing businesses . The often prefer businesses that will grow to the point of listing on Stock Exchanges . At this point ,they sell their stake (exit point ) and realise astronomical gains or continue well after shares have been floated and the company listed . For most entreprenuers these are the best people to go with but they will do all in their power to ensure that they gain the most from your business idea .However, a well negotiated deal with a venture capitalist(VC) is one that allows the entreprenuer to buy back all or most of the shares of the business at the point the VC(not meaning VietCong) intends to exit .As stated above ,VC also stand to lose their entire investment if the business idea doesn't succeed ,therefore they will place their people (considered experts ) to sit on the Board of Directors or occupy Senior Management positions . In reality, they will attempt to reduce your influence and run the show to ensure they make a profit on their investment. If an entreprenuer intends to involve venture capitalists it is recommended that the entrepenuer seeks the services( an loyalty) of a  good accountant and a competent lawyer as preferred advisors .You will be required to fund at least 10% of your business start up as a show of your commitment to the success of the venture .

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