1. Determine the characteristics of (1) the
industry and (2) this particular company.
•What
other publicly held similar companies are there?
•Is
there a larger company that is extremely
successful?
•Is
the company in a 'glamour field'? (important to
ensure a good public offering)
2. Determine the terms of the deal.
•How
much of the company is being sold for what
price?
•What
is the form of debt or equity being requested?
•How
will the funds be used?
3. Review the bottom line with special
emphasis on years three through five.
•Earnings
or potential earnings are reviewed to determine
company's valuation.
•Sensitivity
analysis, or what if analysis to see how the
business model adjusts to changing prices,
expenses and competition.
4. Determine the caliber of the people in the
deal.
•What
is the track record of the founders and
managers?
•How
much balance and experience does the inner
management team possess?
•How
long have the members worked together?
•Who
are the banker and accountant, and what are
their credentials?
5. The marketing plan is reviewed with
careful consideration to current and future
threats.
•Is
the product or service in demand now or will it
be in the near future?
•What
is the Unique Selling Proposition for the
product?
•What
other company or companies are already in this
space that could leap frog this business?
•Can
the customer be easily identified and marketed
to successfully?
Source: “How Investors Read a Business Plan,”
Venture Planning Associates
