Euroventures is a venture capital firm that manages private investment in Hungary and Eastern Europe. It manages over $30 milion in 20 funds. In a survey of its investments, it found a need for a proper business plan and proper business modeling for companies to compete for an anticipated $300 million–$500 million in new venture capital investment in Hungary to come with EU enlargement.
Euroventures’ research showed that 70% of the companies overestimated revenue, 80% overestimated the necessary profit margin, 90% overestimated profit, and 100% underestimated the working capital necessary for the company.
"A minimum business plan would define strategic goals, lay out a business model and provide a profit and loss forecast, explained Péter Tánczos, investment manager at Euroventures. A really high-quality plan would also include a market analysis, a strategic plan including marketing and exit strategy, and balance-sheet and cash-flow forecasts, he added. Tánczos also said it is useful to include the results of sensitivity tests, showing the effects of certain variables on the company's profitability. These might include variations in the number of products sold, pricing, or the punctuality of clients' payments, he said.
István Préda, owner of corporate finance advisory firm Magánbankár Kft, suggested, “The best management teams are well skilled in putting together an ambitious business plan and executing it. But even in such cases, financial advisors can add value by helping sellers build a credible model, which at the same time maximizes the value of the company,” Préda maintained. “In fact, business modeling is a perfect tool for experimenting with various strategic options with a view to maximizing the long-term value creation of a company.”
Sound business planning is necessary in the constant competition for limited capital in all markets. What can be said about Budapest companies, can be true for our own local businesses.
posted by Silentman, Henry C. @ 06:51 hours MT(GMT-7)
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