Business Plans

Part 8: Writing a Business Plan to raise capital – Management

This is a continuing series of articles on writing a business plan or Information Memorandum to raise capital, Part 8 discusses business plan content specifically € ™ â € ~ Management.

Administration

The product or service offered by a company may be excellent, but they are the people who make companies successful. The new venture capitalists committed, experienced and well-balanced management teams, with, hopefully, a good product or service. Not vice versa!

The emphasis is largely on management teams, not individuals. Investors avoid â € ~ one man bands € ™ due to limitations in the amount one person can accomplish. They are seeking a well balanced management team for two reasons: – It

(I) business is likely to survive the loss of a key person walking € |
(Ii) A complement of powers ensures that the important functions of production management, sales and finance, among others – will be served.

Consequently, this section of the business plan is the key to the potential investor and major figure in the investment decisions.

From the perspective equipment management for investors can be classified most preferable to least as follows: –

1. All team members and fully identified committed to the company. This is the ideal situation as the team is on board and working together, especially when team members have experience and a successful track record registration. This is one of the main reasons that investors are willing to back management buy-outs of parent groups.

2. All team members are identified, but not everyone is on board. This is a typical situation in the current management recognizes the need for additional management capabilities and complementary but can not bring that person on board until the funding is in place. The possibility can not be admitted is a source of concern for investors.

3. One or more of the teams have not yet been identified, namely, differences in the management team. In these circumstances it is important to recognize the need and indicate how the gap is blocked. This may include staff or part-time external consultants until a suitable full-time person is recruited. The appearance recruitment team makes the less desirable and more risky investment.

4. The â € ~ one man band € ™. This is usually an unacceptable situation for investors unless the person has an outstanding record in developing successful businesses. It may then be possible to construct a team around this person.

The best position is to build your team before seeking venture capital or at least identify its members. This will significantly reduce perceived risks and increase the likelihood of success in finding finance.

The other aspect of management that will be of critical importance to investors is its commitment with the company – not just in terms of â € œblood, sweat and tears €, but also financial. Investors expect management the opportunity to invest personally in an explicit show of faith and commitment. If there is no such personal investments, venture capitalists, who generally are asked to bear most of the cash would be reluctant to do so. If the address is not ready to support the company themselves why one of the investors? The amount of the personal investment differs from case to case, but the amount must be significant in terms of personal wealth.

The main points for inclusion in this section of the business plan are as follows: –

â € ¢ Provide a brief synopsis of each administrator to review Milestones of his career, duties and responsibilities and past achievements that demonstrate the ability of the task.

â € ¢ Explain how the management team will organize and describe each membered € ™ s role. If the business is established and has an efficient management structure of an organization chart is shown should be included as an appendix.

â € ¢ Talk to the board, outlining the non-executive members, and its function.

â € ¢ Provide salary package information and other personal investment in the company. Include a list of shareholders in the appendices.

â € ¢ Identify any weaknesses in the team and how they will be overcome for example, procurement training, external consultants.

â € ¢ Explain strategy to train and motivate staff, ie. Key executive stock options, bonuses, profit sharing etc.

â € ¢ Describe the support provided by professional consultants current and ongoing.

The contents of business plans to be more covered in the following articles by Len McDowall.

 © Len McDowall, Integral Capital Group October 23, 2007
www.integralcapital.com.au

About the Author

Len McDowall was previously inaugural Chairman and Managing Partner of Bird Cameron Chartered Accountants (now known as RMS Bird Cameron), which employed 1000 people in 50 offices in Australia and Hong Kong. Len McDowall has extensive experience in all facets of financial management with a particular emphasis on structuring and negotiating joint ventures and capital raisings. Following his retirement from the accounting profession Len and his partners established the Integral Capital Group(www.integralcapital.com.au) which specialises in mergers and acquisitions, public floatation’s and capital raisings.

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