Venture capitalists view hundreds of business plans every year. The business plan must therefore
convince the venture capitalist that the company and the management team have the ability to achieve the goals of the company within the specified time.
The business plan should explain the nature of the company’s business, what it wants to achieve and how it is going to do it. The company’s management should prepare the plan and they should set challenging but achievable goals.
The length of the business plan depends on the particular circumstances but, as a general rule, it should be no longer than 25-30 pages. It is important to use plain English, especially if you are explaining technical details. Aim the business plan at non-specialists, emphasising its financial viability.
Avoid jargon and general position statements.
This is the most important section and is often best written last. It summarises your business plan and is placed at the front of the document. It is vital to give this summary significant thought and time, as it may well determine the amount of consideration the venture capital investor will give to your detailed proposal.
It should be clearly written and powerfully persuasive, yet balance "sales talk" with realism in order to be convincing. It should be limited to no more than two pages and include the key elements of the business plan.
Describe the stage of development of the product or service (seed, early stage, expansion). Is there an opportunity to develop a second-generation product in due course? Is the product or service vulnerable to technological redundancy?
if relevant, explain what legal protection you have on the product, such as patents attained, pending or required. Assess the impact of legal protection on the marketability of the product.
The entrepreneur needs to convince the venture capital firm that there is a real commercial opportunity for the business and its products and services. Provide the reader a combination of clear description and analysis, including a realistic "SWOT" (strengths, weaknesses, opportunities and threats) analysis.
Having defined the relevant market and its opportunities, it is necessary to address how the prospective business will exploit these opportunities.
Outline your sales and distribution strategy. What is your planned sales force? What are your strategies for different markets? What distribution channels are you planning to use and how do these compare with your competitors? Identify overseas market access issues and how these will be resolved.
What is your pricing strategy? How does this compare with your competitors?
What are your advertising, public relations and promotion plans?
Demonstrate that the company has the quality of management to be able to turn the business plan into reality.
The following should be considered in the financial aspect to your business plan:
Relevant historical financial performance should also be presented. The company’s historical achievements can help give meaning, context and credibility to future projections.
State how much finance is required by your business and from what sources (i.e. management, venture capital, banks and others) and explain the purpose for which it will be applied.
Consider how the venture capital investors will exit the investment and make a return. Possible exit strategies for the investors may include floating the company on a stock exchange or selling the company to a trade buyer.