Your Business Road Map
Published October 18, 2010 | 
To prove and set up important credibility it is crucial that a business plan does not allow too much for market sizes, take too lightly the competition, or get carried away and project results too aggressively. To be more precise, they must present reasonable game strategies for accomplishing success, including:
• Highlight past accomplishments: One of the best indicators of future success is a company’s past record of success. The formal business plans prepared for previously funded companies must illustrate what milestones they set and were able to achieve with those funds. New businesses must show how the achievement of past successes by the management team will make it possible for the company to meet and prevail over expected challenges.
• Clearly understand and define the realistic and relevant market: Incorrect sizing of a company’s target market is an illuminating indication of a badly rationalized business plan. Let’s take the U.S. healthcare market for example, even if the U.S. healthcare market is a trillion dollar market, a company does not exist that could reap $1 trillion in healthcare sales.
To be more precise, a more meaningful measure is the appropriate market size, which represents the company’s sales if it were to secure 100% of its specific niche of the market. Always Keep in mind that defining and communicating a believable appropriate market size is considerably more persuasive than offering generic industry figures.
• Understand and accommodate to customer needs: Investors have an extremely precise focus on the company relationship with its customers. In its business plan, a business must clearly make a statement about how its products and or services meet precisely identifiable customer wants and needs, and recognize which target markets most demonstrate these needs.
The business plan must also delineate an easy to follow and reliable roadmap of the company’s strategies to fully understand its customers.
• Establish barriers to entry: A business plan must include strategies that best demonstrate how the company not only can, but plans to develop long-term barriers around its customers. Asserting a first mover advantage is plainly not persuasive enough in today’s funding environment.
• Develop realistic financial assumptions: Many lenders and investors go straight to the financial section of the business plan. It is extremely crucial that the assumptions and projections in this section be as accurate and reasonable as possible. Plans that show market penetration, operating margins and revenues per employee statistics that are inadequately logical, incompatible or purely unlikely, to a great extent harm the reliability of the whole business plan.
In complete difference, clear-headed, well-thought out financial assumptions and projections convey operational reliability and trustworthiness.
Understand it is more imperative than ever to present lenders and investors with a practical, realistic and convincing business roadmap that plans for success. Such a business plan sets a company apart from the literally thousands of other companies actively looking to raise capital, and strongly indicates to investors and lenders that your company is effectively well-managed and prepared for success.
The Benefits of Creating a Business Plan
Published October 15, 2010 | 
A business plan is the roadmap of any start-up business venture and where without exception, they all must begin. Thorough business plans assist in the creation of critical lasting value, and help Entrepreneurs raise capital. The business plan can also work as the operations manual for the company and as a valuable reference tool for bankers, investors and board members.
The process of developing the plan compels you to closely examine corporate strengths and weaknesses, opportunities, and threats. To be effective, any business plan should include:
- Focused ideas about the market opportunities and associated realistic and achievable courses of action.
- An operations and reporting track for management to follow in the early phases of the business.
- Identification of both milestones & benchmarks the management team can use to measure progress against.
- Succinct, interesting, and sufficiently solid enough information to attract prospective lenders, investors and key management team members.
- Enough flexibility to provide for contingencies and unexpected events.
Understand that to effectively compose the plan you must always keep in mind what a good investor is looking for including:
- A specific and realistic basis of value that fulfills the market gap or void created by a specific and unmet need.
- A management team with demonstrated skills that can plan and execute the plan with success.
- A sustainable market value proposition and rock-solid product/service position.
Understand How to Write Your Business Plan for Investors
Published April 29, 2010 | Let me start by reminded you that the audience you will be presenting the business plan to should be the driving fact for the way the document is laid out and constructed, and of course, since different readers expect to see different things in the plan, 
it is extremely important that you completely understand the audiences viewpoint and perception.
If you’re trying to secure equity-based capital, you cannot spend enough time on the executive summary of your business plan, since this is the first and most important thing, if not the only thing, that gets read by an equity investor.
It is very important for you to understand that the executive summary is your business plan in the miniature and it should contain the scope of the opportunity in the absence of the full plan in less than a page, and after reading the executive summary and making the decision to continue reading, equity investors always look to one section of the plan more than the rest, and that’s the management team, as savvy investors know all too well that an experienced and well-rounded management team can make all the difference when it comes to success of the business.
You should be well aware that your management team section should be very comprehensive including citing the background, education, experience, skill-sets, and responsibilities for every member of the team, and also, you 
should include all of the outside professionals that you will utilize such as an attorney, accountant, management consultants, etc.
Even well-put together plans can flounder because of the failure to appreciate the crucial difference between entrepreneurs and investors. You must understand that Entrepreneurs focus on the potential of an idea, while investors focus on its risks, and the key to raising capital is therefore lowering risk, not hyping the upside, and the Entrepreneurs with this clear understanding, and who say how they’ll reduce risk are the ones who get the capital.
Of course, investors and growing companies understand that risk is always a part of the equation, but they want to see evidence that an Entrepreneur recognizes the risk factors facing the business and has taken steps to control them, which means addressing questions about market risk, financial risk, and technological risk, stressing not the dazzling upside but the return investors can reasonably expect, weighted against a limited and carefully chosen and defined set of risks.
If an investor likes what they see in the management team section, they will usually proceed to the financial projections, and obviously one of the most important things an investor wants to see is what the potential return might be weighted against the clearly defined risks, and for this they turn to the projected profits of the business. Finally, keep in mind that while your business plan need not discuss the amount of ownership you were willing to give up (that will be negotiated later) it should give the investors some idea of what returns they might expect to receive from their investment in your business.
How to Structure the Business Plan Financial Projections
Published August 28, 2009 | 
Creating financial projections for your business is both an art and a science, and although investors prefer to see cold, hard numbers, it is difficult to predict with great accuracy what you expect your financial performance to be three years down the road, especially if you are still raising capital, but regardless, a short- and medium-term financial projection is a critical part of your business plan if you want the serious investors’ attention, and even if your business plan will only serve as a blueprint for managing and monitoring your business, it is imperative that you make financial projections, since the financial projections can be an effective guide to future business decisions.
Financial projections can be intimidating, but however, they are less a matter of mathematical aptitude and more a matter of your knowledge of your business, the industry, and the market, and financial projections are most often viewed as the most 
critical part of the business plan by investors, lenders, shareholders and other stakeholders with a financial interest in the potential future of the business and its projected growth and return on investment (ROI).
The financial projections section of the business plan should be thought of as simply quantifying the effects of what was presented in the plan narrative, although the projections are concerned with the future don’t think of the projections as merely a prediction, instead of the projection should be thought of as goal-setting with respect to revenues and expenses, and it always must be remembered that we cannot predict the future and yet this is precisely why planning is necessary, because we can make plans, that set expectations and goals.
Projections should at least include a list of required funds and their uses, a sales forecast of at least monthly for the first year, and quarterly for additional years, a variable cost of sales analysis, a fixed-expense operating budget, a projected profit and loss statement, and possibly a projected cash flow statement, balance sheet, and breakeven analysis.
You should list out exactly how much money you need to make your plan a reality, and your listing should break these costs down into Fixed Assets and Working Capital. Fixed Assets are property that usually has some sort of long-term value, and Working Capital is money that will be used to finance the short-term operations of the business.
For your sales forecast don’t let the fear of prediction stop you from arriving at projected revenue figures, as every business sells units of something, whether it be hours, projects, products, services, etc. Simply set goals for the numbers of units you believe you can sell taking into account any seasonality factors, and finally, multiply these 
units by your average established a prices and the result is your sales forecast in dollars. Each fundamental assumption that you make needs to be documented in this section since the assumptions themselves can be more important than the final numbers.
Variable costs are those cost incurred every time a sale is made and they of course vary with sales, while they are the direct cost associated with the producing or selling your products and services, which include the cost of goods themselves, any direct labor associated with creating the product, or any materials that go into the product itself.
Fixed expenses do not vary with sales and are usually tied to some contractual arrangement or indirect cost of doing business such as rent, salaries, loan obligations, insurance, and advertising, and you should develop a monthly fixed expense budget for the year detailing these amounts and when they occur.
A profit and loss statement commonly called the “P&L” combine’s the revenue, variable cost, and fixed cost amounts in order to see if the business is operating at a profit or at a loss, and this statement tries to line up all revenues and expenses to determine the profit potential of the business.
Finally, as mentioned before, financial forecasting is as much art as it is science: You’ll have to assume certain things, such as your revenue growth, how your raw material and administrative costs will grow, and how effective you’ll be at collecting on accounts receivable, and it’s always best to be realistic in your projections as you try to recruit investors for equity-based capital, and any uncertainty in the future industry trends should be reflected in the information and associated assumptions from revenue, to costs, to payroll, to operating expense, and to the bottom line/profit, and remember to always maintain a conservative approach to the projections and you will eliminate most surprises that might occur once actual operations commence.
How to Finance the Business Purchase
Published May 15, 2009 | 
A majority of all businesses sold involves some sort of Seller financing as Seller financing is attractive because you can negotiate the best possible terms, since the Seller has the incentive to finance you, you can leverage the assets greatly with the Seller, the Seller knows that this can save the deal, if the Seller does not provide financing their making a statement about the viability of the business, and if problems are discovered in the business you can always renegotiate with the Seller.
Whether the seller finances the business or a bank or investor is brought in to provide the necessary funding, any capital source will want to see you put money into the deal, in short, no one is going to finance 100% of the business you are looking to buy, so be prepared and ready to place your own money into the deal before you ask anyone else to make the same commitment.
In general, there are two basic types of money including debt and equity, and both of these types of capital operating completely different ways and each can have an entire different effect on a business, and even the business plan you write needs to be tailored to the appropriate type of capital you are seeking since each is a unique audience.
Debt is a liability or obligation owed to another person or institution and legally required to be paid by a specific date and examples of debt capital include bank loans, government guaranteed loans, lines of credit, credit cards, mortgages, notes payable, bonds, accounts payable, trade credit, home equity, leasing contracts, etc. Banks and other financial lending institutions are the chief providers of debt capital and also, owners or other outside persons may lend money to a business in the form of debt.
Banks and other providers of debt capital may be more receptive to financing a business that has a past track record of profitability as opposed to a new business startup, however if goodwill is part of the purchase, the bank usually will not be interested in financing this portion of the purchase price, and banks will generally require a set of recently audited financial statements before they can proceed with financing.
Debt can be less costly than equity capital since most interest rates are less than what an investor would require as a rate of return and also, with debt capital, you don’t have to give up any ownership in your business.
Debt capital can be rough on the cash flow of a business since you are usually required to make constant and periodic principal and interest payments similar to a home mortgage, and if the business you are buying is cyclical or seasonal or experiences a sudden downturn in sales, the inflexibility of debt repayment can cause a sudden cash crunch.
Equity is money raised from the owners of a business and examples of equity capital include common stock, partnership interest, and other ownership based interests, and equity is generally provided by the owners of the business who may include partners, private investors, customers, suppliers, angels, investment bankers, and venture capitalist that provide equity capital.
Equity capital can be much more flexible than debt as there are no collateral requirements for equity capital and repayment terms and conditions can be tailored to the needs of the business, and usually, payments to investors can be put off until the business exceeds breakeven or reaches a certain level of profitability. Needless to say, this can really help the cash flow of an emerging business and also, equity capital can be a great way of raising large amounts of money for your business.
Equity can come at a very steep price; while a debt-based bank loan might run you say 10%, an investor or venture capitalist seeks much higher rates of return say around 20% to 40%, and also, equity investors generally want a share of the business so you’ll have to give up some ownership. While these investors don’t want to run the day to day operations of your business, they usually want a seat on the board of directors where they can influence the decisions of the management team.
Your top priority, without fail, must be to secure Seller financing, and next, consider all of the options and if personal guarantees are not a concern, then the SBA is your next best bet, and after that, you know the options and what is expected of you. Regardless of the avenue that you pursue, began your research as soon as you start looking for a business and don’t wait until the last minute. Financing takes time, more time than you think it will, as you meet with or contact banks, leasing companies and the others and began gathering information, educate yourself and understand what documents you will need to furnish, and even if you do not go this route you will be more informed which will help in your negotiations with the Seller and in the future if you need these lenders and investors.