The Right Message
The key concern in preparing multiple business plans ismaking sure that each is tailored to the interests, needs, and fears of its readers. A business plan that is exciting to one group of readers may be terrifying or simply irrelevant to another group.
Consider a business plan for financing. A company wants toraise $3 million and isn’t fussy about whether the money comes from a banker or a venture capitalist. Chances are strong, though, that the business plan that appeals to the venture capitalist won’t appeal to the banker, and vice versa.
Here’s why. The venture capitalist is primarily concerned with the company’s market and its growth prospects. The investor wants persuasive evidence that the company’s market will be worth at least several hundred million dollars over the next five to ten years and that the company will grow to become a major player in that market—with sales of $50 million to $100 million after five years. In other words, the venture capitalist wants to see strong indications of fast growth. The business plan for this individual should build a solid case for such growth as well as for the management team’s ability to handle the growth. That means the company includes not only marketing and sales data but also financial projections that show the impact of rapid growth.
The banker, on the other hand, is concerned mainly with whether his or her loan will be repaid. The banker will focus on two primary issues: the adequacy of cash flow to cover loan payments and the existence of assets that could be liquidated to repay the loan in the event cash flow turns sour. The banker thus wants to see slow growth rather than fast growth, which could endanger cash flow. The business plan for this individual should emphasize how solid the company is—well established in its marketplace, conservative in its growth plans, and the owner of valuable assets.
The business plan tailored to the venture capitalist would probably scare the living daylights out of the banker. And the one for the banker would probably prompt a yawn and quick rejection from the venture capitalist.
The same point can be applied to other constituencies. New senior managers to whom you plan to make stock options available would probably be most impressed with some combination of the plan for the venture capitalist and banker. Your managers want as much detail and guidance as possible, so they know exactly what’s expected of them as well as how they’re supposed to fulfill the actual expectations of the targeted readers.
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