There has already been a huge amount written about what constitutes a good business plan. But in our opinion, a good business plan includes the following aspects: executive summary, a description of the founders and the team, a product description, market description and development, a competition analysis, present financial details, budgets and a description of the financing requirement. A few general tips:
• Try to write a balanced, realistic and truthful business plan.
• Ensure that the business plan is presented in a manner that indicates it has been carefully compiled and ensure all sections are complete. A well-organised and tidy business plan without spelling errors reads better and is taken more seriously. It sells better and you will also sell your business to an extent.
• Investigate beforehand what research you will need to do in order to write the business plan and ensure you carry that research out.
• A total of 15 to 20 pages should, in general, be sufficient (excluding possible attachments).
You will find more information about the writing of a business plan at Links. (link naar Links – business plannen) In particular, we want to bring to your attention the toolkit from Gate2Growth. This initiative from the European Commission (EC) and the European Venture Capital and Private Equity Association (EVCA) places a (free) toolbox at your disposal to assist in the compilation of a business plan and, ultimately, in obtaining financing. For additional information on writing a business plan, see our “Start-up checklist” on this website.
Writing a business plan is a time-consuming and meticulous activity. For those who are not yet familiar with compiling one, the following section gives several recommendations and tips based on the experience Twinning has with early stage planning. It is perhaps unnecessary to say, but the following directions are not “demands” which Twinning places on a business plan; it is only intended to assist and serve as a guideline to the writing of your plan. We use these directions to also try and give a picture of how investors will assess a business plan.
• Executive summary
An executive summary is found at the start of a business plan and gives a brief summary (a maximum of two A4 pages) of the business proposition: what problem does the product solve and why will a client pay for it? Do not forget to include in the executive summary how much financing is needed and what are the exit-possibilities for the participation (such as possible buyers and the time period in which this can occur). Ultimately, the investor will wish to exit from the participation by making a higher price per share than the original purchase price. While reading a business plan, an investor will keep in the back of his or her mind the possibility or impossibility of exiting from the participation. It is not necessary to give an indication of how much you value the business.
• Entrepreneurs
Establishing and building up a business begins with people. Investors jokingly agree: “Preferably a bad product with a good team of entrepreneurs, than a fantastic product with a bad team”. A core of truth is definitely contained in the previous statement because very few products sell themselves. Hence, in this part of the business plan, make it clear what the knowledge and experience of the entrepreneurs is. Do a self-assessment of the team and state which areas you are strong in and the areas in which you are less strong. Identify where additions to the team might be necessary.
• Product
Give a clear description of the product. What is already developed and what still needs to be developed? What does the “product road map” look like? What is distinguishable about the product? Bear in mind that the reader will probably not know as much about the product as yourself, so try to avoid technical jargon.
• Market
What is the market for the product? Who buys the product and why? Who are the customers? What is the size of the market? Is it a growing market or a saturated market? What market share do you think you can capture and when answering this, also identify planned phases and concrete objectives in client numbers and volume of deals.
In this section, you should also describe market positioning and market approach. Is the product aimed at a niche market or a mass market? Will you be a price fighter or are you going to compete on quality. How will you enter the market, via value added resellers (VARs) or direct sales?
If it is made clear that there is demand for the product, you will need to describe why your company is better positioned than its competitors to take advantage of this opportunity. Who are the competitors and who can they be? Porter’s five forces model can herewith serve as a guideline.
• Competition analysis
In this chapter, the presence of competitors will be further examined. Who are these competitors? What distinguishes your product from the product of your competitors? A simple statement stating that the product is better than that of your competitors is not enough. Why is it better? In what domain is it better? Identify the distinguishing strengths of each competitor. An incomplete competitor analysis creates a lack of confidence; clearly the entrepreneur is not convinced enough about his or her own product to mention competitors. Or, perhaps even worse, the entrepreneur is not fully informed of other suppliers.
• Financial results
Include the most recent financial results, including an explanation. An investor will always want to inspect a recent balance and (preferably monthly) profit-loss records from the past two years, if available.
• Forecasts
The supplied forecasts (balance and profit-loss accounting and a cash flow forecast!) for the coming two years should also be on a monthly basis. It is also important that you give a description of the assumptions on which these forecasts are based. An investor will not be easily satisfied with a statement saying that it is not possible to make forecasts — only in exceptional circumstances will this be approved of. An investor will expect you to consistently report against your own forecasts.
You should also apply a sensitivity analysis to your own forecasts: what happens in case the forecasts (for whatever reason) are not achieved? What are the consequences on the financial side? How will you overcome these consequences? What is the “worst-case” scenario?
• Financing requirement
A financing requirement will come to the fore from the forecasts, namely out of the cash flow forecast. But it will not do any harm to separately explain your financing requirements. Is there still a buffer built in? What will the money be spent on?
Submitting your business plan
You can submit your business plan by email at the address: businessplan@twinning.com. Naturally, you can also send your plan by normal post.
Process
We try and give the first feedback within two weeks or receiving a business plan, but circumstances can make that period longer, so please do not hesitate to make contact with us. The feedback will either be a rejection or an invitation to engage in further discussions. If there is definite interest after the first meeting, we will conduct further research into the proposition, which might lead to an investment. Although it differs with every case, you should allow two to four months from the submission of your business plan to our participation.
Confidentiality
We shall handle your business plan with confidentiality. We are regularly requested to sign a secrecy declaration, but Twinning will not sign such a document. Every Twinning employee has already signed a Code of Conduct and a secrecy declaration (in the employment contract). These documents already guarantee the confidential treatment of your business plan.
Disclaimer
The fact that Twinning has taken your business plan into consideration does not mean you may assume it will agree to an investment or has obligated itself. The same applies to every other (subsequent) handling, assessment or approval of the business plan or other information by Twinning. An agreement between the parties and hence an obligation of Twinning, will only apply when the participation contract is signed by both parties. Twinning holds the right to abandon the investment at any time before such an agreement is reached.