Anvil Partners use their experience of dealing with financiers to help management compile a business plan in a format which will appeal to investors and lenders. However, it is very important that the management team takes full ownership of the plan.

A business plan should be a fair and honest assessment of the facts and opportunities. Too often management teams understate their competitors' strengths and over-hype the opportunity and their own capabilities. The financiers will withdraw their support if the due diligence findings come up short on the business plan. Management should expect that everything will come out in due diligence! The biggest mistake of the internet boom was the absence of expectation management.

The overall objective in writing a plan is to demonstrate to financiers that it is in their own self-interest to back it.

A business plan examines the current status of an organisation and sets out an overall business strategy for three to five years with a detailed operational plan for the first two years.

Essentially a business plan should address the following questions:

1. Where are we now?
2. Where do we want to get to?
3. How do we get there?

A business plan should be concise and easy to read, preferably 25-30 pages long and in no case more than 50 pages, including appendices. Confine bulky material to the appendices e.g. detailed financial information, CVs, product specifications.

Prepare an executive summary at the outset. It helps to crystallise the thinking of the project leader(s) and gives guidance to other contributors. The summary must sell the deal from the very first line and capture the attention of the reader.

Know your audience: Private equity firms are looking for a sound proposition, evidence of good management, a good marketing plan and an exit event to get their money back. Identify your likely readers, their needs, preferences and prejudices. Think about what you would say to them if they were sitting in front of you.

1. The presentation is vague, lacks facts and details and contains too many generalisations.
2. There are clear errors of fact.
3. Specific omissions suggest that weaknesses are not being addressed with candour.
4. Potential downside consequences are not examined frankly.
5. The financial projections look unreasonably optimistic.
6. The proposed strategy is too risky.
7. The projected returns are too low.

Management
1. Can the management adequately describe their ideas? Do they have good communication skills?
2. How has the business been managed up to now?
3. What is the quality of the management?
4. Do they understand their business and its key performance indicators ("KPIs")?
5. Do they understand their market?
6. Do they understand their competition?


Funding requirements
7. How much is required?
8. What will the money be used for?


History
9. How much has gone in already?
10. Where did the money come from? Did management contribute?
11. How was it spent?
12. What was the outcome?


The future
13. What is the action plan and how will it be turned into reality?
14. What will drive future growth of the investment?


The deal
15. What percentage of the company is on offer for the proposed investment?
16. How will investors unlock the value?
17. What are the projected returns for the investors?
18. What are the risks of losing the investment?


For a lender
19. Is there security for the loans?
20. Will there be adequate cash flow to pay interest and repay principal?

• Executive summary- on two/three pages maximum
• Management team- very brief outline of backgrounds
• Products/services and unique features
• Assets of note; strengths, core competencies, competitive advantages, opportunities
• Strategy
• Key financial data - historic and projected
• Funding requirement, how it will be spent, exit and projected returns
• Business description
  • Activities
  • Brief history
  • Products and services
  • Core competencies
• Markets
  • Macro-economic impact
  • Market analysis
  • Customer analysis
  • Competitor analysis
  • Competitive advantages
• Management and staff
  • Organisation chart
  • Staff numbers by category
  • Brief biographical details of senior management team (Full CVs in the Appendices)
• Infrastructure
  • Premises
  • Factories, distribution centres, other premises
  • IT
  • Other
• Strategy and plans
  • Vision, opportunities
  • Business strategy
  • Objectives & milestones
  • High-level operating plan broken down by department
  • Assessment of benefits of strategy
  • Gantt or similar chart
• Financial analysis
  • Detailed projections in the Appendices
  • Summary tables and commentaries in the body of the document
  • 3 years of history, 5 years of projections
  • First 2 years projections by month
    • Sales projections (with detailed build-up)
    • Cost of sales
    • Operating costs
    • Profit or loss
    • Capital spending
    • Cash flow and funding requirements
    • Balance sheet
• Issue/Use of proceeds/Exit
  • Amount to be raised
  • Use of proceeds
  • Exit and projected returns
• Risk analysis
  • SWOT analysis
  • Limiting factors
  • Critical success factors
  • Specific risks and issues and proposed solutions

• Conclusion

• Appendices
  • Detailed financial data
  • CVs for the top management
  • Product brochures
  • Detailed background information e.g. technology