Lens Board
Part 8: How to write a business plan to raise capital – Management
This is a long series of articles on how to write a business plan or information memorandum to raise capital, Part 8 describes the contents of the business plan precisely "Management".
Management
The product or service offered by a company may be excellent, but these are people who are successful companies. Venture capitalists Back committed, experienced and well balanced with management teams, hopefully, a good product or service. Not vice versa!
Emphasis is placed on many management teams, and not particular individuals. Investors are reluctant to "a band rights "because of limits on the amount one person can accomplish. They seek a well balanced team management for two reasons: —
(i) The economic activity will probably survive the loss of a key person and …
(ii) An additional skills so that the important functions of sales management of production and finance, among others – will be treated.
Accordingly, this section of the business plan provides the key to the potential investor and major figure in his investment decision.
From the perspective of the investor teams Management can be ordered from most to least preferable, as follows: —
1. All team members identified and fully engaged the company. This is the ideal situation that the team is on board and work together, especially when team members have experience and a successful trip. 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 where management now recognizes the need for further and complementary management skills, but can not bring that person on board until funding is in place. The possibility that they may not join a source of concern for investors.
3. One or more of the team have not yet been identified, namely deficiencies in the management team. In these circumstances, it is important to recognize the need and indicate how the gap will be plugged. This may include part-time staff or outside consultants until a person capable of full-time is recruited. The aspect of the recruitment team emits less useful and more risky investments.
4. The 'one man band. " It is generally an unacceptable situation for investors unless the person has an outstanding track record in developing successful businesses. It may be possible to build a team around that person.
The best position is to gather your team before the search venture capital or at least identify its members. This will significantly reduce the perceived risks and increase the probability of finding successfully finance.
The other aspect of management that will be of paramount importance to investors is their commitment to the company – Not only in terms of "blood, sweat and tears", but also financial. Investors expect the management to invest personally in Occasionally, as an explicit show of faith and commitment. If no such personal investment, venture capital, which are usually invited to introduce the most species will be reluctant to do so. If management is unwilling to support the risk themselves why an investor? The amount of this personal investment differs across cases, but the amount should be significant in terms of personal wealth.
The main points to include in this section of the business plan are: —
• Provide a brief summary of each manager review highlights career, functions and responsibilities and past achievements that demonstrate the capacity for the tasks required.
• Explain how management team must be organized and describe each member primary role. If the company is established and has an effective management structure of a chart annexed must be included.
• Talk of the board, they describe the non-executive members and their function.
• Provide details of salary packages and any personal investment in the company. Include a list of shareholders in the appendices.
• Identify the weaknesses of the team and how they will be defeated, namely training, recruitment, external advisors.
• Explain the strategy to retrain and motivate staff, ie. Options key incentive frameworks, bonuses, profit sharing, etc.
• Describe the assistance provided by professional advisors, both current and ongoing.
The contents of business plans will further discussed in subsequent articles by Len McDowall.
© Len McDowall, Integral Capital Group in October 23rd, 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.
