PreliminaryWorkWithClient

Most investors and venture capitalists are interested in projects with required sums in a range from $2 million till $50 million, though bigger sums are considered as a rule if the investment is unique and promising.

Typically 90% of hundreds annually received projects are quickly rejected and the main reason is the poorly prepared business plan.

The remaining 10% are carefully investigated, which is both time-consuming and expensive. Consultants must evaluate the product, particularly when it is new to the industry or is technologically complex. The market size and competitive position of the project/company are analyzed by many means including contacts with present and potential customers, suppliers and business associates. Production costs are reviewed. An auditor reviews the financial situation of the company and financial projections of the project. Most important and often underestimated by applying companies is evaluation of management’s character and cometence, usually with a thorough background check.

These preliminary investigations take time and expenses. They result in perhaps 10 to 15 proposals of interest.
Then, second investigations, more thorough and more expensive than the first, reduce the number of proposals under consideration to only three or four. Eventually, one or two of these will be funded.

Unless you have been previously known and worked with a lender, you should expect to have a number of intensive meetings with the firm’s principals to develop a personal relationship. You and your team will be considered as individuals. This is a relationship - both parties must get to know another well.

Remember, that the heart of relationship between investor and client is a series of procedures known as ”know-your-client” guidelines and it starts with low-tech face-to-face encounters.

The first things that will be looked for are:
--- Clear and sound marketing policy
--- Experience and professional qualities of the management team
--- The thoroughness of the Business Plan
--- Management’s ability to execute the Business Plan
--- Growth potential of the product/service

Your business plan will raise interest if it proves that the project have the potential to obtain a significant and sustainable market share by targeting an under-utilized or fast growing segment, or by introducing of a revolutionary product/service; that it will be realized by a strong management team, and the business will have stability of revenues and adequate cash flow to quickly reduce the level of debt.

As you have probably already noticed the great importance is paid to the management team, it’s strength and depth in making decisions to achieve the targets. This does not necessarily mean that a complete team must be in place at the start, but if it is not in place, management should have a clear idea of how to assemble this team and be well prepared for the thorough check of the already present team members.

Many lenders have a habit when looking at a business plan usually read the first couple of paragraphs of the executive Summary/Introduction and then go straight to the Curriculum Vitae of the top managers and financial section of Business Plan.