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.
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.
Facebook is Now Worth More than CBS
Published July 13, 2009 | 
Team Altman Interesting News:
We reported back in May, that Facebook raised $200 million, which valued the company at $10 billion. Now, the same investor – Digital Sky Technologies – is allowing employees to sell shares at a valuation of $6.5 billion, the projected revenue for 2009 is expected to come in at around $500 million, and at $6.5 billion, Facebook is valued higher than CBS.
The Rest of the Story: http://mashable.com/2009/07/13/facebook-65-billion-valuation/
What are the Dos and Don’ts of Financial Projections
Published June 10, 2009 | 
Don’t provide only an income statement, and include a balance sheet and a cash flow statement, too, as it’s understandable that you are focused on sales and net income, but your banker or investors will also want to know how much money you intend to leave in the business has retained earnings and how much additional debt or equity financing you’ll need, if any, to grow your company.
Do provide monthly data for the upcoming year and annual data for succeeding years, as many entrepreneurs prepare projections using only monthly data or only annual data for the entire three or five year. Don’t. Use monthly data for the first year, and after that, use annual data, as the financial results of your first year will probably end up being different from your projections, so there’s no point in thinking that you can accurately forecast monthly results for the years after that, and this is an instance where less is more.
Don’t provide more than three years worth of projections unless your lender or investor has asked for them, as this is an extension of the less is more concept, and let’s face it, it’s a stretch to accurately forecast your company’s sales or net income for even three years out, and only in cases in which you’re looking for long-term financing for equipment or real estate is it likely that your banker will want longer-term projections.
Don’t provide more than two scenarios in your projections as loan officers and investors are already drowning in paperwork, so do what you can to make their lives simpler, as we’ve all seen projections with scenarios including the base case, worst case, and best case. The best advice is to prepare just the base case and the breakeven case, as the base case should show what you realistically expect the business to do, and the breakeven case should show how low sales could go before the business begins to lose money.
Do you ensure that the numbers reconcile as everybody knows that assets must equal liabilities plus equity, but all too often entrepreneurs will simply plug a figure into the equity slot to make things settle up, and that’s wrong. If your bank is doing its homework, your banker will check the math, and if the equity numbers don’t add up from one period to the next, you’ll be asked to explain, and even though everyone makes mistakes that’s what you want to avoid because it makes you look sloppy. Also, if after the mistake is corrected your company has a smaller net worth than you originally presented, your banker or investor may think you were being intentionally misleading, and that is never good.
Don’t be too optimistic about sales growth or operating profit margins, as all bankers and investors want to do business with ambitious entrepreneurs, but there’s a big difference between a realistic business plan and fantasy, and while it’s true that companies that have low revenues to grow their sales quickly in percentage terms, it may not be realistic to assume, that your business can double in size every year. Also, entrepreneurs often try to convince lenders that has their company grows they will achieve economies of scale and operating profit margins will improve, while in fact, as the business grows and increases its fixed cost, its operating profit margins are likely to suffer in the short run, so if you insist that the economies can be achieved quickly, you’ll need to explain your position.
Every entrepreneur always says, “I believe these numbers to be conservative,” but the problem with this statement is every lender an investor has heard this statement a million times and they know firsthand that most of the businesses in their loan portfolio didn’t get their projections and things in business always take longer than you expect, and savvy lenders and investors know this. In effect, by everyone using the “conservative” pitch, it has come to raise a red flag to an investor since they have heard the story a million times before, so just present the most realistic numbers you can and leave the platitudes at home.
Do account for reasonable interest expense on the income statement if you have debt on your balance sheet, and that sounds simpleminded, but you’d be surprised to learn how many people forget to do it. If you expect to have an average loan balance outstanding of, say, $500,000 over the year, and your forecasted average interest rate is 9%, you need to budget $45,000 for annual interest expense, and don’t budget less than a realistic amount, as this is one line item where you are always better off coming in under budget.
Don’t include every individual line item for each expense, asset, and liability figure, and although your banker or investor will probably be interested in knowing details about sales for major product or service lines, as well as the direct cost of sales associated with them, keep to the basics and other categories. With operating expenses, those would be salaries and payroll taxes, lease and rental expenses, depreciation, amortization, and any other kind of expense that consumes more than 10% of revenues. Also, don’t forget to distinguish the owners’ compensation from data non-owners, particularly if you and your co-owners are drawing above market salaries as a means of reducing business income taxes.
Do take the time to be able to understand and effectively present your projections, especially if you didn’t prepare them, as a lender or investor wants to make sure that the people who are going to manage the business understand the financial projections. Saying, “you’ll have to ask my accountant about the numbers, she put those together,” is usually the kiss of death, and if you are going to manage the business and you cannot explain the projections, that means that you don’t understand your business model and that the projections are, for all practical purposes, useless.
Digital Skies Technology invests in Facebook
Published May 31, 2009 |
Got Facebook?
According to Facebook a new investor, Digital Skies Technology, has received preferred stock for an investment of 200 million dollars. This investment is to continue the spread and community connection of the Facebook platform. Digital Skies Technology is looking to continue the investment by buying addition common stock from existing share holders. The plan is to invest another 100 million dollars above the 200 million dollar investment.
What investors worldwide are realizing is that there is tremendous opportunity in how these social networks work. Digital Skies Technology is based in London and Moscow, a well rounded company, with many internet investments in companies that draw from a population of 350 million people. For more information about Digital Skies Technology visit http://www.dst-global.com
Facebook has come a long way since the establishment in 2004. This site started out in local universities in the New England area and has boomed in a very short amount of time. We can expect to see Facebook continue to dominate the market, allowing the world communication to grow, and social media to sky rocket.