Comparison between Business Plan Types

Picture comparing apples to oranges

Introduction

Business plans can be split into three basic types, each aimed at different target audiences:

  • Banks and lending institutions
  • Angel Investors and Venture Capitalists
  • You, for your own internal use

The following table summarizes many properties of the different concerned parties. While the points mentioned are generalizations, they are useful in determining what your target audiences expect.


  Bank/Lender Angels/VCs Your Own Internal Use
Main Concern Charging interest while minimizing risk. Selling their interest for 10x or more than they invested in your venture. Operational guide to keep you on track and to tell you how well you are doing.
Size of venture For startups, 1-10 employees generating little or no income.
  • Angels are looking for start-ups and ideas with 1-10 employees involved.
  • VCs generally invest in larger concerns with 50+ employees.
 Not applicable
Funding limits $100 to $50,000
  • Angels usually lend $1,000-$50,000 to startups and entrepreneurs.
  • VCs lend from $50,000 and up.
 Not applicable
Quantifiable Measurements
  • Assets
  • Cash flow
  • Cash flow
  • Growth rate
  • Cash flow
  • Growth rate
  • Resource allocation
Qualifiables
  • Management team experience
  • Management team experience
  • Business plan
  • Resource acquisition: money, personnel
  • Business assumptions: target markets, market size
Pros
  • Easy access — you know where to find them.
  • Will not change the ownership shares of your venture.
  • Just want their principle and interest paid.
  • Will lend money to unincorporated ventures in the form of a personal loan.
  • Willing to take risks
  • Have a horizon of 3-5 years or more before trying to get their money back with interest.
  • Often willing to assist in running your business.
  • VCs are main source of large capital investments from $500,000 and up.
  • Bragging rights and good publicity.
  • Have complete control over your venture.
  • A way of setting goals and measuring your success and your failures.
Cons
  • Are not willing to take on risk
  • Need to personally guarantee loans
  • Usually want a "superior liquidation position" so they get paid first of anything goes wrong.
  • Other than the money they lend, they do not offer much in the way of resources or operational help. They are sometimes able to give a limited level of advice.
  • Have little or no interest in your vision or hopes.
  • Venture must be incorporated, which may involve hefty legal fees.
  • May need to offer angels or VCs a piece of your venture. The percentage that they take varies greatly, often with the amount invested.
  • Always want some form of voting rights and will often their people on your Board of Directors.
  • Angels and VCs can pull the plug at any time, barring legal restrictions.
  • Takes a lot of time.
  • Needs a lot of detail.
  • Needs regular updating.

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Comparisons