Edward French of Enterprise Ventures Ltd explains how to make an impact

Working on the Rising Stars Growth Fund, means that our team sifts through 500 business plans a year to invest in around 15. We live with the certain knowledge that some day we will turn down something that proves to be spectacularly successful, perhaps the next ARM or Smith & Nephew. This article aims to give a few pointers for how to make a business plan impress on first reading.

1. Be upfront and clear about your market and product

Every month I will receive at least one business plan that requires me to call the author to ask what the company is planning to sell! More common, are business plans that talk about markets and positioning but leave the product and its USP until somewhere in the technical section. If you put this up front, perhaps even on the cover, your reader can appreciate and put into context all your other 'good stuff'.

2. Sell the potential

'A venture capitalist invests when his rising greed overcomes his declining fear' (anon). Technology VC's don't expect their investments to make it to exit, but they do need lots of upside from their successes in order to compensate. There are many measures that VC's use; a simple check is to make sure that profits (PBIT) in year 4 are more than 5 X the money you are looking to raise. More than half of business plans fail this test or its equivalent, so it's an easy way to make your plan stand out.

3. Prove you know your market

The most effective way to show that you really understand your market is to compare yourself against the competition. About 30% of business plans I receive claim there are still 'no competitors', but I still wait to see a case without at least a substitute product or service. Tables that show comparative advantages and disadvantages against these offerings are a great way to communicate this well.

4. Highlight the exit

Although every guide and advisor will recommend putting a description of the exit in the plan, only half of plans actually mention it! Of those that do mention exit, half of those will just talk about an exit type generically, ie 'We plan to complete a trade sale to a competitor or new market entrant in year 4'. With a little research you can make your plan really stand out, and switch on that VC 'Greed Gene'. Perhaps this is best demonstrated with a fictitious example. 'We anticipate a trade sale to BigCorp Inc or Massive Plc in year 4, they will wish to purchase the business to remain competitive in the market for high pressure widgets. Recently BigCorp purchased Clever Idea Ltd for $150 million and Massive Plc has acquired It'll Never Work Ltd for an undisclosed sum to strengthen its IP in this market'.

5. Pick the VCs brains

Finally, if you have question marks over the strategic direction of the business to put into the plan, you could consider asking the potential funders. We receive as many requests for advice prior to application as we see finished business plans and we do our best to help.

There are very few that will shut the door to seeing the full business plan later. It might not be easy to raise venture capital, but I believe that the process of refining and enhancing the business proposition adds a great deal of value in its own right, and in some circumstances can transform the business. I wish anyone setting out down this path the best of luck.

Enterprise Ventures Ltd is a leading provider of private equity to high growth unquoted companies. Seeking to invest in deal sizes of £5000 to £2 million, they utilise a combination of their own liquidity and syndicating with other private equity and debt providers. For more information about Enterprise Ventures Ltd, call 01772 270570 or visit www.enterprise-ventures.co.uk.

This article was originally printed in the Summer Edition of MFL Science & Technology Insurance Broker's newsletter -InsureVation. A full copy of the newsletter can be downloaded from the news page of their website www.earlystagesolutions.com

Reference: http://www.earlystagesolutions.com