By Bill Anderson
As each segment of the beverage industry gets more crowded and competitive, the need for old and new beverage entrepreneurs to deliver compelling business plans has become more acute.
In our small private equity group, we have reviewed over 100 business plans in the last year. Here are a few key takeways from the best plans we’ve seen:
Be very clear about why your product is differentiated from the rest of the pack. If, for example, you’re planning a new relaxation drink, you better have a clear message as to how you are going to compete against the 350 other relaxation products currently in the market or in development. The same goes for any homebrewer who plans to compete against the 1500 other craft brewers currently out in the marketplace.
Be honest about your management team’s strengths and weaknesses. It’s important for investors to know how your current team will be able to execute on the business plan and who else you will need to hire to be able to hit your projections.
And speaking of projections, it’s critical that they be based on conservative growth expectations. Good products take time. It took 15 years to build Blue Moon into what Coors management refers to as their ‘overnight success.’ It’s also wise to always build in a substantial cushion of additional capital. If you think you need $1.5 million, you probably better raise $2.5 million.
Knowledgeable beverage investors are going to want to know your go-to-market strategy in detail. If you’re adopting the DSD model, it’s critical that you summarize your distribution successes to date and why distributors are going to take on your product.
Authenticity and purpose is critical for any new brand – not only for marketing purposes but for the success of the team and the organization overall. Brands that are built with passion on a mission to bring a great beverage product to the market, with a fun, hard-working and extraordinary team, have a much greater chance of long-term success than business plans from founders who are motivated solely by a ‘get rich quick’ mentality.
Finally, investors will want to know if there is a well-conceived exit strategy. If you plan to sell out to a major supplier, you need to show why any of the strategics will be interested and whether there will be any hurdles to getting a Coke or an ABI to the table.