Do I Need a Slick and Thick Business Plan to Impress Lenders or Investors

Contrary to what many think, the level of slick or the number of pages has little to do with the probability of a lender or investor providing the funds needed. Both lenders and experienced investors had seen hundreds, if not thousands, of business plans. Most will know right away whether the plan has manageable, realistic substance or is an elaborate work of fiction. Depending on the industry and quality of content, business plans of as little as 5-7 pages can be as effective, sometimes more useful than 30-40 page plans filled with useless, unrelated information. There are only 2 questions that need be answered for an entrepreneur to receive the funds needed:

1) Does the business have a good probability of succeeding?

2a) (Lender) Will the business generate sufficient cash flow to repay the loan?

2b) (Investor) Will the business generate sufficient profit to provide a decent return on investment?

That's it. There really is nothing else of major importance to anyone deciding to make funds available.

Shoud a Business Plan be Created by a Consultant, Accountant or Other Professional

Yes and no. In most cases, a business plan should be professionally created for all but the smallest and most basic businesses if the original primary purpose is to convince lenders or investors to make funds available. But - the raw data should be created by the business owner only. There are 2 reasons for this:

1) The business owner should know his/her business better than any professional in the business plan arena. It is their business and, if they are unsure of some of its elements, they will be experts after they expend the sometimes heart-wrenching effort it takes to create the raw data for a business plan.

2) By spending the time necessary to assemble, research and compile the information needed, the business owner develops a much better understanding of his/her business, a new depth of knowledge the owner will most likely need in the future as roadblocks and problems appear.

After the raw data is assembled, a professional should be hired to prepare the final product. They deal with lenders and investors as a regular part of their business and, if experienced, know what lenders and/or investors want to see.

Should a Business Plan Use Graphs

For all but the most simple businesses, a business plan should include graphs. Whether for the use of the business owner alone, or for the examination of lenders and/or investors, graphs provide an important aid. As the cliche states, "One picture is worth a thousand words." This is true for business plans. While the financial projections and marketing data (demographics, industry trends, etc.) will be stated in text and numbers, a reader can quickly see the "picture" and trends by viewing the graphic representations of the text and numerics. This is particularly important if the plan is targeted to lenders or investors, as they have limited time to examine requests for funds. Graphs provide an quick snapshot of the business and, if effective, may lead the reader to delve into the text and numbers with more interest.

Should a Business Plan Be Printed in Color

Depending on the business and the industry in which it operates, a business may or may not benefit from the use of color. As an example, if the business is involved in a basic industry, say electrical contracting, wholesaler of cardboard boxes, color would not hurt, but doesn't necessarily help the presentation as the financial and market projections are the critical factors. However, if the business plan is prepared for a more media-related, retail product or hospitality business, it is not only beneficial, but subconsiously "expected" by the reader that color will be used.

Why A Business Plan?

A business plan is a step by step guide to your company, product, and information. The business plan shows previous results, ideal strategy and future forecasts. It is a guide to where the company (or product) has been, where it is going, and how you will get there.

The tip is to first, take a breath. You want to begin with your key points, or drivers, of the business. What is the product? What does it do? Why does it stand out? Who will buy it? Why will they buy it? How much does it cost? What are the resources? How will these resources grow? How will the business manage risks?

Answering these questions will prepare you and your business for making the actual business plan.

Pay or Do It Yourself Business Planning.

Tailored business plans can cost a few hundred dollars or thousands of dollars, but that does not mean that you HAVE to purchase a tailored business plan.

You may want to purchase a tailored business plan if you have done the recommended Web research and are still not sure how to proceed. You may want to purchase a business plan consultant if you are looking at high up front capital (this is found especially in manufacturing and financing industries).

You may NOT want to purchase a tailored business plan if you are developing a service industry, or a small business that does not require a massive up front investment.

The decision to choose a writer or consultant for your business plan should be based on the following questions:

Do you have the TIME to write a business plan?
Do you have the ABILITY to write a business plan?
Do you lack the MONEY to pay for a business plan?

If you answered yes to any of the above, do not hire a consultant. Instead, search for simple, easy to navigate templates and outlines that will assist you. If you find that the business plan is taking too much of your time, energy, and ability, then look into hiring a consultant. Many will be happy to simply edit your business plan at a reduced price.

There is a plethora of business plan outlines and templates that are free and located on the Internet. A simple search in any search engine will bring you literally hundreds of thousands of consultants, templates, outlines, and so forth.

The Small Business Administration has several guides to writing the business plan at http://www.sba.gov/index.html

The Center For Business Planning has several business plan templates I have enjoyed using
http://www.businessplans.org/

What's All This Risk Stuff? And Do I NEED It?

Business planning needs include risk and risk management in: cost management, scheduling, equity and debt.

That's all well and good, but how do you KNOW what your risks are? Well the short of it is, you don't KNOW what all the possible risks are. You plan for production failure, and sure enough you will have a transportation of goods issue.

To understand how to overcome risks, know your resources. Since all risk can not be planned for, it is important to include who to contact in certain project risks. Know your investors, bank lenders, SBA (small business administration) contacts, local businesses, and professional associations. Keeping these numbers at hand can help you in the event of a calamity.

Good, verifiable resources for risk management include:

Books by Harold Kerzner (most of which are on Amazon.com)
The Risk Management Association http://www.rmahq.org/RMA/
The Project Management Institute http://www.pmi.org/info/default.asp

Quick Tip--Consumer Demographics

Did you know that globally, the proportion of persons aged 60 years and older is expected to double between 2000 and 2050- from 10 to 21 per cent, whereas the proportion of children is projected to drop by a third- from 30 to 21 per cent.

This has a significant impact on the types of consumers you are marketing towards. Your consumer's demographics are changing. They are more informed and are worried more about saving than spending.

Keep your business proposal based on facts about your consumer demographic and how you will market towards them.

Resource: Kuznets, Simon. 2003. “Economic Growth and Income Inequality,” in Development and Underdevelopment: The Political Economic of Global Inequality. Boulder: Lynne Rienner Publishers.

When Do I Need To Write A Business Plan?

There are many successful businesses that do not have a business plan. You will need a business plan if you are planning on getting bank or government loans and grants. You will need a business plan if you are seeking venture capitalists and investors. You will especially need a business plan if you are applying for a SBA loan (www.sba.gov)--it is a requirement for this type of loan.

SWOT Analysis

Some business plans will require a SWOT analysis. This is especially true when you are showing a business proposal to investors. The SWOT analysis is simple: Strengths, Weaknesses, Opportunities and Threats. The single most important tip in a SWOT construction is that you must be honest and remove assumptions. Assumptions will only confuse your investors.

Strengths are the foundation of your business. These are the things that you can do better than any other business in the same industry. Ask yourself why customers choose (or should choose) your business. This is your strength.

Weaknesses are the cracks in the foundation of your business. These are the recognizable components that limit your organization’s ability to compete. Ask yourself what is internally preventing the business from growing, or what is constricting the business. Weaknesses are generally internal, common weaknesses include financial debt vs. equity, high employee turn over, and lack of supply chain capability.

Opportunities are possibilities your business can build upon. These are the events that can create profit growth. Ask yourself what competitors in the industry are doing, and how they are doing it. Then ask yourself how you can do it better. This is your opportunity.

Threats are the predicaments that close the doors on your business. Common threats include major competitors, lack of supply, and extreme conditions. Ask yourself what is externally preventing your business from growing. These are your threats. Common threats include industry competition, product substitution and new technology that outdates your current technology.

If your business plan does not require a SWOT analysis, it is still a good idea to have these in mind. Constantly evaluating SWOT will keep you ready for increasing strengths and opportunities or decreasing weaknesses and threats.

For further information regarding SWOT:

http://www.mindtools.com/pages/article/newTMC_05.htm
http://en.wikipedia.org/wiki/SWOT_analysis
http://erc.msh.org/quality/ittools/itswot.cfm

Regulations And The Business Plan

Organizations today are subject to an increasing number of regulations that entail compliance. From Sarbanes-Oxley to the Health Insurance Portability Accountability Act (HIPAA), companies are required to adhere to a multitude of standards and regulations. In addition to various national and international regulations, there are many more rules that stem either from regional or local governments or industry oversight committees. The end result is that new and tenured businesses must juggle multiple sets of regulations on local and international levels while maintaining industry-specific regulations. This means that your business proposal must show that the business has done the research, knows the regulations, and how to follow them. Failure to follow regulations can result in fines. A simple one or two paragraph addition to your business plan that examplifies how you will meet regulatory standards can go a long way in establishing that your business is greater than a fly-by-night operation. Show that you have done your research.