and Business Resources
By CoWin Investment, China. From the web.
How Entrepreneurs Win Venture
Five Guidelines for an Effective Business Plan
1.Determine what will make the company product/service
unique in the market
Ensure there is enough of a need or a problem to solve, creating enough
demand for the product orservice around which to build the company.
Develop a solution that is unique enough to give the company a strong
competitive position in themarket.
2. Perform a detailed market analysis
Obtain an in-depth understanding of the market niches to be pursued, as
well as the current and futurecompetitors the company expects to encounter.
Insufficient market research can result in the outcome suggested by the
axiom: GARBAGE IN, GARBAGE OUT.
3.Develop realistic financial projection
Utilize the data gathered through market analysis to generate financial
Be conservative in developing the projections as business and investment
decision will be based uponthese numbers
4.Determine the company liquidity position
Ensure that the company will have sufficient short-term liquidity¡ªcash
Determine what the venture capitalist long-term liquidity or exit strategy
will be before entering into a VC agreement.
5.Assemble a strong management team
Ensure the management team brings the necessary technical, marketing,
financial skill to enhance the company potential for success.
Consider bringing on a board of advisors or directors that will complement
the management team skill.
Outline of Business Plan
A description of the business and the target market for the product r
service, the distinct competence the product or service brings to the
A description of the management team, emphasizing the relevant experience
and special skills of each key executive.
A summary of financial projections for the next 5 years and the amount
of capital being sought and how that capital would be used.
An overview intended principally to catch the interest of prospective
sources of financing and encourage them to read the detailed information
in the business plan.
2. Business history
Before prospective investors can evaluate where a business is likely to
go in the future, they need to know where it has been in the past.
Define precisely what the company intends to develop and market
Written in layman terms so it can be understood easily by non-technical
Describe the distinct benefit the product or service brings to the marketplace.
A clear and comprehensive description of the present and future market
Provide reasonable market research data to support all market assumptions.
Describe what the historic and forecasted growth rates are for those market
and which specific customers the company intends to pursue in each of
Identify all of the company current and future competitors and their strengths
Address how the company expects competitors to react to its entering the
If no other firm currently offer the product or service, then the competition
is going to keep the customer continue purchasing the company product
Develop specific strategy to be implemented to sell to those target markets
How the company plans to convince buyers that its product or service is
superior to alternatives available in the market.
7.Manufacturing and operation
Summarizes the nature, quality and extent of its manufacturing and research
facilities and processes if the business is a manufacturer. Or Identify
the operation to deliver the planned service and all necessary resources
bring the product or service to the marketplace.
Many investors consider the presence of a first-rate management team to
be the single most important criterion in the evaluation of any funding
opportunity. So this part should emphasize the experience and competence
of each key management executive, especially in three primary areas: understanding
the technical aspects of the business, possessing the marketing ability
to sell the product or service and the financial ability to oversee the
fiscal aspects of the business.
The company historical financial statement for the last three years if
Current financial statement Projected balance sheet for the next 5 years.
Revenue and expense project and cash flow projects on a monthly or quarterly
basis for the first two years and on an annual basis for the subsequent
All underlying assumptions Working with the Venture Capital
To make sure the company and its financing request meet the general investment
criteria set forth by the venture capital firms to be targeted: preferred
investment stage---seed capital, first and second stage funding, mezzanine
or expansion stage financing etc; industry preference, geographic preference,
minimum and maximum investment amounts.
Submit the business plan for venture capitalist to review and follow-up
in 2 weeks to inquire on the status of the review. If the VCs is interested
in the business, he will have an meeting with the company to obtain more
information about the business. Then the VCs will begin conducting a detailed
review of the company, known as due diligence: visiting company facilities;
speaking with key employees, creditors, customers and suppliers; reviewing
The company also should conduct due diligence to see
if the VCs can be a partners/alliances in growing other companies in which
the VCs invests;
if the VCs brings more than just money to the deal such as strategy consulting,
networking contacts, industry experience;
if it is easy to develop a positive working chemistry between the entrepreneur
and the venture capitalist.
Develop the term sheet to outline the major terms of the proposed deal.
After all negotiation are completed, a contract is signed and the entrepreneur
receives the funding and begins implementing the strategies st forth in
the business plan.
The company should keep the venture capitalist abreast of major events
occurring within the company and dram on the VCs expertise in making major
By doing so, the company will benefit from its insight and contributions
and the venture capitalist in turn will feel more comfortable about the
overall control the entrepreneur maintains over the company.
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