Putting together a proper business plan is the most important for all new business owners, says Jeffrey Paine. And he should know – the private equity investor and venture capitalist has been in the business for seven years, and has read more business plans than many lecturers have seen postgraduate theses.
He shares his view on what a business plan should be like.
“A business plan clearly articulates the business that you’re in, written for yourself and the other members of the founding team,” says Jeffrey, who is also Vice President and Co-Head for the Singapore Chapter of the Young Venture Capital Society. “It can also be used to pitch to potential investors.”
He believes that there are a few key elements that must go into a business plan. The first is your business or product concept. “The best concepts are unique, and in venture capitalist terms, ‘disruptive’ – this means that it is something that never been seen before,” describes Jeffrey.
“Secondly you need to establish the size of the market, which translates the scale of returns from your venture.” Jeffrey says that in Asia, the most common mistakes are overestimating the market size and underestimating the competition. “You need to do your research.”
“Financials should be simple. In early stage funding, complex financials are not that important – potential investors are likely to ask for them at a later stage. If they don’t, they are not likely to be interested in your business.” Include P&L projections, reasonable assumptions, and also a best-case and worst-case scenario, he adds.
Finally, you need understand and highlight the strengths of your team. “A good size is two or three people. Most important are the folks who research and develop the product.”
What does he consider to be a good business plan? Strange as it seems, he likes business plans presented in PowerPoint format. “Put your whole business plan into 30 to 40 slides. Investors don’t have the time to read everything. And an entrepreneur needs to do his slides anyway, so don’t waste time doing both,” he advises. “From these slides, draw out 10 to 15 slides for use in a sales pitch.”
“Keep it short and simple – many people go round and round. Who’s going to read more than 80 pages?”
Final advice? “Entrepreneurs have to ask themselves if their offering is a ‘must-have’ or a ‘good-to-have’. If you have a cure for cancer, that is a ‘must-have’. If you have a way to correct myopia, well, there’re a lot of alternatives. If it’s a good-to have, rethink the business. You may be better off not doing it.”
You can contact Jeffrey Paine at jeffrey[dot]paine[at]gmail.com.