The Private Equity Toolkit

7Analyzing the Business Plan

Key Topics in Chapter 7:

• Why skilled investors explore business fundamentals before diving into the numbers
• Key problem areas to spot immediately in every business plan you review
• How to poke holes in overoptimistic projections and make your investment case add up
• Ten cold, hard questions that every solid business plan needs to address
• My trusted business plan tool: Master List of Most Common Drivers of Value Creation

Introduction to Business Plan Analysis

I started my first full-time job in private equity on a lucky Monday: the 13^th of September 2004. Unusually for mid-September in London, it was a warm and sunny day. I was a post-MBA graduate and joined one of the largest pan-European private equity funds focusing predominantly on mega-buyouts. I was thrilled with my first full-time private equity role and particularly excited to become a member of the firm's consumer team. To me, it seemed like the most interesting sector for private equity at that time: I simply could not wait to evaluate and invest in retailers, leisure groups, and consumer products companies. “Maybe I will even get to invest in luxury brands!” I thought to myself.¹ Several weeks later, on a gray and rainy day in London, I was tasked with analyzing my first business plan of a consumer company that had already passed my fund's initial deal screening process. I felt confident that I knew what to do: my first instinct was to dive into the numbers immediately. “I can ...