Posts Tagged business plan
What are the hurdles facing the business?
Do you really understand the hurdles facing the business?
Everyone talks about managing the hurdles of the business. How will you deal with the hurdles? Do you have enough working capital to overcome the hurdles?
The first question should be: do you know what the hurdles are for your business?
There are the day-to-day issues: how do I get this project done, or this product out the door?
There are the every-business issues (what every business faces): How do I handle payroll, how do make a contract, and how do I sell?
Then, there are the business issues unique to your business:
How do I sell enough products to make a profit?
How do I get into my market?
How do I beat my competition?
How do I keep my costs down, and my quality and service level to expectations?
Each business and industry has a unique set of hurdles. Part of the planning process is to understand those hurdles and how to overcome them. You put that in the planning process and discuss it in your business plan. When the investor asks you about those hurdles you are prepared to discuss them.
For example you are a book publishing company. How will you get shelf space in the major bookstore chains like Borders and Barnes & Noble? How will you drive people to buy your books on Amazon? How will you select books and pay authors to create the content so that you have bestsellers?
These are not “everyday” or “every month” type questions that face every business. You should know the big hurdles and be able to discuss how you deal with them. Overcoming the hurdles is also what makes your business unique (or special). The way the business overcomes the hurdle can be its biggest selling point.
Investors want to know if you know the big hurdles, how you will overcome them, and therefore what makes you the more likely candidate for investment than someone else.
What is the state of your business plan?
Does a business plan exist? If so, is it used? Is it updated?
Probably the third most common question I asked an entrepreneur is: Do you have a business plan and how do you use?
(Fyi, the other two questions are: what are you doing, and what is your goal?)
At least two thirds of the answers are that they have a business plan. I usually get blank stares when it comes to how they use it. What do I mean? Should it not be obvious? You fill out some package software, shove the printout in the bottom of your desk/file cabinet/waste basket and then go on your merry way making money.
Not exactly.
Think of a business plan as a set of blueprints. You refer to it often. You check to see if you are on track. If there are differences then you either correct yourself or correct the plan. It is a way to keep yourself vigilant to the goals of your endeavors.
A business plan should be accessible to the strategic partners and elements of it accessible to everyone else in the company. For example, you plan out the budget for renting an office: $4,000 per month. What if they cannot find an office for that low and the best one comes in at $5,000 per month? How does that affect the plan? For some people seeing the company making $100,000 per month that may mean nothing and they can easily afford it. However, the planner might see that at the end of the year they have spent an extra $12,000 which means that another item may not be achievable.
How do you make the business plan accessible to update? Is it all in Word and Excel available on a common hard drive for people to review and comment? Which people? Not everyone, but how about the heads of the company?
Is it in one big document or split up by chapter and subchapter into usable sections that can be updated and modified as the business grows?
How do you use your business plan?
Executive Summary does NOT need a conclusing paragraph
In this series of installments I am discussing the executive summary and how to make it stand out. The executive summary should present the compelling reason for the investor to buy into the company.
At this point, we have discussed nine sections of the executive summary. Since this is a very short document, that is all you need. Do you need a concluding paragraph that summarizes the entire page? Typically no, unless you have a good way of wrapping up the most salient points on the page in one or two sentences AND you can keep it within the limited space. Most people will have a tough enough time keeping the necessary information to the confined space. If you run out of space, then do not worry about the concluding paragraph.
There are a few extras that are useful, which I will address in the next few posts:
- A summary table of financials
- Flow chart of the business process
- Flow chart of the business plan
List What Makes This Company Unique and Special
In this series of installments I am discussing the executive summary and how to make it stand out. The executive summary should present the compelling reason for the investor to buy into the company.
Have you ever had someone just look you straight in the eye and ask: “Enough telling me about who you are, what you are going to do, and the market size; tell me why is THIS COMPANY and project going to be successful? How am I assured that I will get my money back and more?”
In this section of the executive summary, you should list all the reasons the company will be successful and will pay back the investors. Rather than just write that, the following list of key questions can be answered, and help build a compelling story for the investors:
- What key management experience will be used for this?
- What key management decisions (i.e. focus of the company) will enable this company to be successful?
- How will the budget/cost be managed successful and affect the profitability?
- Where (channels, markets, etc) will the profits come from?
- What is the compelling need of the market? What is the PROOF of this need?
- Who are the customers? Include demographics of the largest segment. How big and what is their purchasing power?
- What makes this company and product unique or special?
- What barriers to entry exist (from outsiders and competitors)?
- Are there other reasons that this project will be successful (i.e. short ROI, short payoff of capital expenditures, key contracts)?
Notice that there are many sections of the business plan incorporated into this one section: marketing, management, sales, operations, finance. These questions pull in the key winning points from each section. When these questions are compiled into a single story, the investor will see that another company making the same or similar product/service will not be as successful. It can be simply stated as a bullet point list with the header: “How We Will Be Successful”. This section delivers the key idea that this company will be the next big winner. More importantly, it addresses how the investors will win with this company in their portfolio.
Leaving out critical items from a Business Plan
Taking another quick break from discussing executive summaries, since something just cropped up that is worth mentioning:
Recently, while reading through a business plan, I discovered that the writer left out the exit plan. Upon asking, he told me they sometimes include it and sometimes take it out, depending on who they were giving it to. In my case, they felt that I would more likely introduce them to an investor rather than invest myself, so they left it out.
My position is that you should never leave that out, or anything else out. The purpose of showing me the plan was to get my evaluation and consideration to show it to an investor. However, I am going to protect my relationship to investors. My credibility is on the line when I ask them to look at a plan that I approve. Without seeing the exit, on how the investor will make money, I cannot believably support the plan.
It wastes the investors time for them to have to ask for it and it could indicate a problem. Furthermore, it may be the first section that investor turns to when they read a plan. Most people when they read a plan first turn to the section they care about most. For some that is the financials.
If you do not discuss it, then we cannot tell if you are hiding something bad, you did not think about it, or you were just leaving it out feeling it was not necessary. Most likely, it is either something bad or you did not think about it. In both cases, an investor would turn it down.
Do not leave things out.
Avoid Boilerplate Phrases
Posted by Steve in For Job Seekers, Pitch, Plan on July 9, 2009
Quick aside from writing the executive summary, but still related.
Are you familiar with boilerplate phrases? Check out Liz Ryan’s article on Yahoo Hotjobs titled, “10 Boilerplate Phrases That Kill Resumes“ The point of her article is that these phrases have been so commonly used that they no longer indicate a strong resume. Instead she says they indicate the writer is vocabulary challenged and non-compelling. Worse, I think they hurt your credibility.
This ties into John Lucht (who I have a link in the sidebar to his website) writes in his book, “Rites of Passage at $100, 000 Plus: the Insider’s Guide to Absolutely Everything About Executive Job-Changing” about resumes: avoid catch phrases but use examples showing how you demonstrate the intention of that catch phrase.
The same thing applies in the executive summary and the business plan. People put in catch phrases and instead of making themselves stand out, they lose impact.
Ryan suggests 10 catch phrases to avoid (I am using these without permission, but linking to her article). I am reprinting them below, but please check out her article!
Check your executive summary and business plan for these phrases. Without specific examples they stand out as meaningless today. Especially check the resumes that are typically put in an Appendix in the business plan.
FYI, I did check my resume, and can safely say I have none of these phrases.
Beware the weekend business plan
Can you write an entire business plan in a weekend?
The answer is:
Yes, you can write a bad business plan in a weekend.
For a good business plan, you should spend more time on it.
In the future, we will be discussing concise ways to get your point across in a business plan that saves time for both writing it and reading it. However, doing the background work, preparing the information, planning the document, and then writing it, takes longer than “just the weekend”.
The intent of the document is to provide a guide on how you will do your business and be successful. It also instructs others on how you will be successful. This may mean the difference between getting funding and not.
Are you willing to risk that in rushing through the most important document for your future?
How can studying about investors and entrepreneurs be used?
Posted by Steve in Execution, Introduction, Pitch, Plan on April 13, 2009
Part 3 of 3.
Two weeks ago (Monday March 30, 2009), Bart Kemper asked how he could use this blog if he was not seeking investments or investors. Then and last week I pointed out:
1. I strive to provide information that in the right setting can open up more opportunities leading to more clients.
2. The information can be used to prepare the company for a merger, acquisition, sales, or other type of owner exit. All these elements make the company better and look better.
The third and final point is even simpler.
Just because you are not looking for investors does not mean you should forget about a business plan, or not have a good pitch, or not have a good strategy.
The idea is not to make the company just look better. It point is make the company actually be better, and to be able to effectively communicate that to outsiders. The 14 points are there to provide a guideline on the real qualities of a business that makes the business successful.
Each of these 14 points is not just useful for getting investors, but they are useful for growing the company. I will be writing not just about the high level stuff but also the low level details. How do you write a business plan? How do you write an executive summary? What are good interview questions?
For example, how could you use a well designed elevator pitch?
- Get investors.
- Get clients.
- Get a job.
Everyone at some point has been in a room where the audience is asked to each stand up and say something themselves. Most people are unprepared and give a rambling 20 seconds. There is nothing like standing up in this crowded environment and delivering a very clear, concise, and punchy elevator pitch. People will remember you. It will open up doors.