The Ernst & Young Business Plan Guide, Third Edition

Chapter Fourteen. Financial Plan

An Exit Strategy

While you are committed to the venture, your funding source is probably more committed to his funds. No venture is funded without an exit strategy. We recently reviewed a business plan for a venture requiring in excess of $1 billion. The entrepreneur, with a history of successful ventures, was meeting with a funding source. He opened the meeting by saying, “Let’s get this out of the way first! Turn to the multiples on sale. In five years we will have an enterprise value of $3 billion, plus we will have paid off the money you loan us.” The meeting continued with the rest of the business plan. He knew the potential funding sources would pay more attention to the rest of the information if they had a sense of the exit strategy first. He had comparable sales of similar companies, market capitalizations for public companies, and other information all set to help them with the ultimate goal of every investor.

The purpose of the financial section of a business plan is to formulate a credible, comprehensive set of projections reflecting the company’s anticipated financial performance. If these projections are carefully prepared and convincingly supported, they become one of the most critical yardsticks by which the business’s attractiveness is measured.

While the rest of the business plan communicates a basic understanding of the nature of the enterprise, projected financial performance addresses itself most directly to the bottom-line interests ...