After recently reading Dermot Berkery’s book, Raising Venture Capital for the Serious Entrepreneur, I was impressed by his take on what you should be shooting for in a business plan for VCs.

The main thrust of his argument is that the main purpose of the plan is to bring out how the company will achieve and sustain market power. In his own words, “Of business plans developed, 99% do not ruthlessly cover how the company will achieve and sustain market power. In fact, most entrepreneurs don’t recognize that market power is the Holy Grail.”

The content he then urges the entrepreneur to draw out is then split into two main section: the value of the opportunity and the deal. A (too) brief summary of the structure he recommends covering is below.

I. The value of the opportunity for all shareholders (investors and founders)

1. Potential for accelerated growth in a big, accessible market

a. A big, but not too big, market

b. Company growth to come from market growth rather than market share gains

c. Capability of being number 1 (or maybe number 2) in the market

d. Identifiable access route to customers

2.  An achievable position of market power – a sustainable, differentiated product pr service proposition

a. Huge value to customers relative to competition

b. Sustainable, defensible position to allow market power to be exploited

c. Very high gross margins

3. Capable, ambitious, trustworthy management

a. Balanced team

b. Deep domain knowledge

c. Prior experiences and record

d. Ambition, not oriented to lifestyle

II. Why this is a good deal for investors

4. Plausible, value-enhancing stepping stones

5. Realistic valuation to allow the investor to earn a sizable multiple

6. Promising exit possibilities

I’m not sure this will work brilliantly as a structure to use explicitly for a business plan (for instance, I think you need to talk to the proposition before you can talk to the market) but I think it’s a great way to think about what you need to include in a succinct way. I think it will also help you to think about telling your story as opposed to just conveying facts.

If you do go ahead and try and use this, I’d strongly recommend you get yourself a copy of the book and read some of the richness behind it.

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