Lean Business Planning and the Appendices
Published February 22, 2012 | 
In our drive to accomplish great things, we must act to reach for our dreams, and not only plan, but also believe in what we are doing.
Okay, so after you’ve completed the creation of the Table of Contents, what else is to finishing the lean business plan? The answer is there is not much left, unless you don’t want to include some material and information to support your plan in the Appendices, then your lean planning is complete for now.
In reviewing the major sections of your lean business plan, they each should only contain summarized results and focal points for your business. The inclusion of every piece of information and data you’ve obtained and gathered in the main components and sections of your business plan, results in too much information and overloads the reader (never let information overload happen), which in turn makes it quite difficult to establish if reading the entire plan is worth the energy of effort.
As an alternative, you should include any detailed research, sources, and other associated or linked information about your business and your lean business plan in the appendix. In addition, consider inclusion of the following information in the addendum or appendix of your lean business plan:
Management resumes are important to convey the experience and capabilities of the management team to execute the plan.
Pictures of products, locations, etc. help paint the complete picture of plan assets and value.
Copies of purchase orders are evidence of validity and value of the business model, and should always be included.
Floor plans are like images worth a thousand words towards the picture of the lean plan.
Marketing materials are an important component of your marketing strategies.
Details of the manufacturing process and machinery should emphasize efficiencies and direct effect on the bottom line profitability.
Market research surveys and results should include summary highlights and important focal points only.
Any other supporting documents you thinks’ important to tell the complete story or narrative of the business.
Just don’t overdo it by including way too much detail, which means exercise extreme caution not to include every last piece of material and information you have in the appendix component. “Significant support” is the key phrase to remember and apply for additional clarification for your lean business plan.
So, now take a step back because although you think otherwise, the work isn’t over yet. Remember, this is a dynamic process of lean planning, and you’ll want to spend the next phases of your business plan development on the cycle of review, fine-tuning and testing. Have your business minded friends, advisors and management team read through it and point out areas of potential improvement. This dynamic evolutionary planning process repeats itself on a regular basis as you continue to strive for maximizing efficiencies of every facet of operations, resulting in greater success and profitability.
Over the next few months, your lean planning will take you through many iterations of the plan and business. This is perfectly normal. 
Your goal is to be certain that you are presenting the exact plan that you and your team will execute when you are funded and beyond. Of course, the business will continue to evolve and change, and you want to put the most accurate representation of the actual business in the hands of not only those that invest, but your management team as well.
We understand completely the critical importance of a lean business plan and its direct effect on your desire and aspiration to achieve a lifelong dream. Let’s face it, being your own boss can be extremely rewarding. Follow this information and it will be extremely helpful as you proceed with your lean business planning.
To the maximization of your lean business success!
Lean Business Planning and the Table of Contents
Published February 21, 2012 | True entrepreneurs trust in themselves to simply make decisions for the best choices, and continue moving forward toward their vision of success.
First of all, a well-designed table of contents is part of the first impression you present to readers, as well as ensure they don’t waste their valuable time searching through your plan for the information they are specifically interested in. Understand that very few investors will actually read your entire plan. Rather, they will normally look for the precise details they need to make the most knowledgeable investment decision. Make sure you organize the table of contents to make it easy for readers to navigate your plan.
Most readers begin with your executive summary, and then want to locate specific information that they normally look for. You may want to consider placing the table of contents immediately after the executive summary.
It should be obvious that table of contents should list all the major sections within your business plan, and can also be further broken down into important or clarifying sub-sections. 75% of mistakes, sloppiness, or misspellings in the table of contents immediately presents to your reader the negative impression that you are unorganized and careless right from the start, and this never leads to successful results.
It is absolutely essential that your table of contents is clean, well organized and most important of all, free of mistakes.
Some common mistakes you want to avoid when preparing the Table of Contents include:
Important sections and/or subsections are missing. Never assume your reader is intuitive enough to know where the information is that they want to read and study.
Page numbers fail to correctly correspond with the content of the plan. Something as simple as page numbers is quite often overlooked, meaning you should pay close attention to this important detail.
The table of contents is two pages in length when it could neatly fit onto one page. Remember to keep it lean just as your plan should be.
The table of contents is cluttered with too much detail. Once again, the leanness of the plan begins with the table of contents.
The text layout is reflects sloppiness. You should make sure the text is crisp and clean for easier navigation.
The appearance of little or no thought in the creation of the table of contents. The simple appearance should reflect a well-thought out and designed table of contents, and plan.
Of course, every business plan is different, and every table of contents should be customized to reflect the content of each particular plan. Use only headings and subheadings from this example that make sense for your individual plan, and that will help your readers get the most from your table of contents.
Company Description
• Legal Description
• Business History & Description
• Current Status
• Future Plans
• Key Management
Mission & Vision
• Mission Statement
• Company Vision
• Corporate Values & Approach
Product & Service Description
• Overview of Products & Services
• Product & Service Advantages
• Proprietary Features
• Product Development Activities
• Product Liability
Industry Analysis
• Industry Overview
• Industry Participants
• Industry Trends & Growth
Target Market
• Market Demographics
• Market Trends & Growth Patterns
• Market Size and Potential
Marketing Plan
• Marketing Strategies
• Marketing Tactics
• Positioning
• Public Relations
Sales Plan
• Sales Strategies
• Sales Process
• Sales Team
• Distribution Channels
Lean Business Planning and Understanding Financial Ratios
Published February 20, 2012 | How do you recognize success, if you can’t measure where you’ve been, what you’ve done, or even planned for how you got there?
Many times misunderstood or more times ignored, the financial ratios of a business are one of the most important tools available to business owners and entrepreneurs. Why? Because the ratios enable them to quickly evaluate their businesses and health and performance, and make any necessary changes as part of the lean business planning process.
Financial ratios for the business are determined and based on the financial information presented in both historical and/or projected pro forma balance sheets and income statements. The common use for the ratios is trend analysis based on the tracking of your company’s financial information and records over given a period of time. Businesses are able to do comparison analysis based on performance in a given period versus the same financial metrics in previous periods, and even more importantly, against the financial results and metrics of other businesses in similar industries.
For a clearer focus, financial ratios put information from financial statements into the right perspective. Thus, allowing businesses to rapidly recognize threatening financial issues with a direct effect on cash flow, or possibly the overall feasible health and viability of a business. Financial ratios fall into four general categories for most privately held companies. They are liquidity, profitability, turnover and leverage.
Liquidity Ratios: Current Ratio and Quick Ratio
Profitability Ratios: Return on Assets, Return of Equity, and Return on Sales
Turnover Ratios: Accounts Receivable Turnover and Inventory Turnover
Leverage Ratios: Debt to Equity, Interest Coverage
Liquidity Ratios focus on the business capability to pay its bills in a timely manner when they come due. You may know that creditworthiness is widely used by both bankers and suppliers use to measure and determine a company’s creditworthiness. Understand that if liquidity ratios remain relatively-high for an extended period of time, it’s a strong indication that too much capital may be invested in liquid assets including cash, short-term investments, accounts receivable, inventory. In addition, insufficient capital may be devoted to increasing shareholder value. On the flip side, when liquidity ratios remain comparatively low, a business may not have adequate liquidity to satisfy continuing financial requirements and commitments.
Profitability Ratios provide a quick look at a business’ operational performance and in doing so, helps business owners and entrepreneurs determine the level of bottom line or profit maximization. The ratios also give possible insights into the extremely important return the assets and invested capital are able to generate. Of course, profitability ratios should always be matched up on a period over period basis (i.e. year versus year). 
While specific ratios used may vary from industry to industry, and often do, standard ratios include Return on Assets, Return on Equity and Return on Sales.
Turnover (Efficiency) Ratios or efficiency ratios measure the activity or changes in certain types of assets including accounts receivable, accounts payable and inventory. Understand that inadequate and weak turnover commonly indicates resources are invested in non-income producing assets.
Leverage Ratios indicate just how well a business uses its borrowed funds (debt-based, rather than stockholders’ equity or investments) to expand its business. Understand your goal is always to borrow capital or funds at a low interest rate, and use it to invest in a business activity that produces a rate of return that exceeds the “target rate of return” you have established for investments.
Lean Business Planning and Understanding Financial Ratios
Published February 8, 2012 | Whatever it is that you can do or visualize that you can accomplish; you should start lean planning and set it in motion. Your boldness has genius, power, and even a little “je ne sais quoi” in it. Begin it now!
Once entrepreneurs develop a comprehensive understanding of them, financial ratios are actually one of the most important significant tools available to business owners. The ratios enable you to accurately evaluate your company’s performance and the overall health of the business.
A good place to start your understanding is with the fact that all financial ratios use the information provided in historical and/or projected financial statements including balance sheets and income statements, to calculate resulting ratios. Most commonly used for trend analysis, ratios are used to follow and track your company’s financial figures over a period of time from daily to monthly, to quarterly and annually.
Financial ratios permit companies to compare performances, whether in a given period versus financial results in previous periods, or against the financial results of other businesses in similar industries, the ratios are the most effective tools available.
By putting financial statements into perspective financial ratios are a great tool that allows businesses to identify any financial issues that may pose a threat to cash flow, or even the overall feasibility of a specific business. Particularly for privately held companies, financial ratios generally fall into four categories: profitability, liquidity, leverage and turnover.
Profitability Ratios: Return on Assets, Return of Equity, and Return on Sales
Liquidity Ratios: Current Ratio and Quick Ratio
Leverage Ratios: Debt to Equity, Interest Coverage
Turnover Ratios: Accounts Receivable Turnover and Inventory Turnover
Profitability Ratios offer a peek into a company’s operational performance and provide real help for business owners to verify if they are maximizing their efficiencies with positive impact on the bottom line. They also present insights into the return (return on equity) a company is generating from the value of its assets and invested capital. The ratios should always be compared on a period versus period basis (i.e. year to year). 
While these ratios may normally vary depending on the particular industry of your business, standard ratios include Return on Assets, Return on Equity and Return on Sales.
Liquidity Ratios always focus on a company’s ability to pay its bills whenever they come due for payment. Both lenders (banks) and suppliers regularly use liquidity ratios to measure a company’s creditworthiness. Understand that if liquidity ratios remain comparatively high for an extended period of time, it can be interpreted that too much capital may be invested in liquid assets that include cash, short-term investments, accounts receivable, and inventory, with too little capital devoted to increasing shareholder value through capital assets. 
On the other hand, if liquidity ratios stay comparatively low, a company may have a serious situation of insufficient liquidity or cash to meet any continuing financial obligations.
Leverage Ratios present an indication of how well a company makes use of borrowed funds, instead of stockholders’ equity or investments for business expansion and growth. The business goal is to use borrowed funds while they’re at a low interest rate, and invest at the same time in business activities that generate rates of return exceeding the targeted rate of return established for investments.
Turnover (Efficiency) Ratios measure activities or changes in certain specific assets that include accounts receivable, accounts payable and inventory. Whenever there is poor turnover it is evidence that resources are allocated and invested in non-income producing assets.
Lean Business Planning and Financial Plan Mistakes
Published February 7, 2012 | When properly prepared, reviewed and executed, the best business plans are straight forward information that answer the “who, what, where, why, and how much that charts the path on your roadmap to success.
It’s always good to take a close examination of what the most common mistakes found in the financial projection component segment of lean business planning.
Believe it or not, actually failing to include the financial statements and projections (income statement, balance sheet, cash flow) in the financial plan happens more often than most think. Okay, so there is no real reason to not include financial statements and projections, so make sure you include a complete set before you let anyone review the plan.
Presenting sales and profit projections in the lean business plan that are completely unrealistic and unfounded, which is never a good sign the business has been well thought out. Well thought out and researched assumptions should always be included as support for the sales forecast, which supports the financial statements.
Another very big mistake is omitting financial assumptions to explain where the “numbers” originated. Remember that assumptions are the answer to the question “why?” If there are no assumptions presented, then there are really no answers given for any financial information presented. This can be a “deal killer” all by itself. You need to make absolutely sure financial assumptions are included, and don’t release the plan for review until this requirement is satisfied.
There is nothing more aggravating then recognizing a poor attempts at creative accounting when reviewing “creative” rather than “accepted” financial statements. There is no room for creative accounting in lean business planning, especially when prospective investors will be reviewing the resulting plan. Remember to use only “accepted” financial statements.
Underestimating expenses and not budgeting for unexpected costs. Projected expenses should be overestimated if at all, but never underestimated, just as revenues should be underestimated if at all but never overestimated. Remember to expect the unexpected and build it into your lean planning.
Lack of financial investment on the part of the founders has been referred to “no skin in the game.” No skin in the game is a sure way to scare off any prospective investors. Make sure there is a financial investment included before anyone reviews the written plan.
Including unreasonably excessive salaries and office expenses at start-up is a very bad mistake, which is on the same par with overestimating revenues. If anything, salaries should be kept to a reasonable level, especially during start-up activities. Salaries can always be adjusted with the future success of the company.
Offering a lower percentage of ownership than the investment requirement demands is definitely too common, and signals a misunderstanding of valuations. If you need the investment to make the business a reality, then you have to understand what investors are looking for and expect when taking the risk to invest. Do the work you need for a comprehensive understanding of the issues.
Offering a return on investment that is out of line for your industry, as well as unreasonable. 
Know and understand the return on investment common to your industry, as well as what is expected by your potential investors.
The absence of contingencies and projections for worst case scenarios indicates a narrow view of the different outcomes possible. Both worst case scenarios and contingencies should be addressed in the plan as a clear indication of your understanding all potential outcomes.
Financial statements that are not prepared or reviewed by a reputable accountant can result in unnecessary delays while credible financial statements are prepared. Financial statements prepared with generally accepted accounting principles should be included, and is a good indicator that you fully understand financial statement requirements.