Are you interested in writing a business plan? Is it to show to an investor? If you are planning to write a plan for your business or to help someone or are just curious about the noise made about business plans, here is a game for you to play. A game, where you get to be a virtual entrepreneur, without going into the pain of actually having a real company out there to run. If you are game for this game, think of yourself as an entrepreneur starting or running an existing business and...read on...
First: The background
Before thinking of preparing a business plan ... think through some of the points that are relevant to the plan. List them down. These could be the idea/project that you have in mind or are working on, the team, the potential or existing customers and the operational plan, amongst many other things. Pause for a while to understand ... i) your strengths, ii) where you can improve and then iii) where you want to go in a few years from today.
Once you have thought through this, please think about what an investor would like to see. Again, if you have a specific investor in mind, understand what this person or persons may be interested in funding. To illustrate, an investor in equity in a company, would look for a multiple financial return, in the normal course of business.
So how is this multiple available? This would be possible if the investor puts money into the company at say Rs.100 per share and is able to sell it in maybe 4-5 years at a multiple of 5 times, 10 times or even more, i.e at Rs.500 per share, or Rs.1000 or more. To get this multiple, many other factors come into play. The company invested in has to have super growth. To have super growth, the company must have customers who will pay to buy the offerings, whether it is a manufacturing product, a service or anything else. You can think about the other such factors which may enable the company to grow in value over time. These factors may be internal to the company, such as a great team and good idea, or external, such as growth in the economy.
In addition, the investor has to be able to sell the shares, i.e. there have to be buyers for these shares. These buyers could come through the IPO route or as another company buying this and so on. Please think of possible options of exit of the investor, and what could be the possibilities in your case.
If you have a specific investor in mind, think through this carefully. What kind of companies have they invested in? What do you think they will look for? Would they be keen on funding companies in the industry sector in which you operate? Have you seen their website/blog postings and checked with persons who are familiar with their style of investing? Do your homework adequately and go in prepared for the questions they may ask you.
Writing a business plan is somewhat like writing an exam paper. You prepare, work hard and then commit all your knowledge and hard work to the answer paper. Do you remember taking the 12th standard school leaving exam? While knowing the subject is key, it is also important to answer the questions well, so that the examiner understands that you have understood the subject well.
NOW FOR THE VIRTUAL BUSINESS GAME: Three different companies are discussed in brief below. Assume you are an entrepreneur in each of these firms or you are an advisor to the companies. You can pick your role. If you are writing business plans for them, here are some questions to trigger thinking:
NOTE: Deal issues are some key factors which may be the reason why someone may invest or not invest in a company. For example, if there is only one person driving decisions in the company, this could be a deal issue. Investors do not like to risk money in a business with only one key person in the management team.
THE THREE CASELETS
To discuss your solutions please post your comments on this blog or mail to email@example.com⊕
Please login to post a comment. If you do not have a login, please register to get one. It's simple process - takes less than a minute.
You can post comments without registering, and they will appear after approval, usually within 12 hours. We encourage you to login - then your comments appear immediately!