Читать книгу Writing Winning Business Plans - Garrett Sutton - Страница 10
Оглавление“We live in an age of haste.Some people look at an egg and expect it to crow.”– Orison S. Marden
You may be in a hurry to put together your business plan. But don’t confuse the frenetic blur of activity with thoughtful preparation. There are some major issues to discuss in your plan, and you’ve got to think them through.
Winning business plans map out the major W’s of your proposed business – who, what, when, why and where – to help you figure out that all important H – how. Who are the major players? Who are the owners, personnel, advisors, customers, competition, even the target audience for the plan itself? What do you want to achieve? What is your sustainable advantage? What do you offer? What do you produce? When did (will) the business start? When do you want to meet particular goals? Why are you in business? Why would customers want your product or service? Where is the business located? Where is the target audience? Where do new opportunities lie? And finally, how do you get from where you are now to where you want to be?
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Rich Dad Tips
• Money follows management. Investors typically look first at the people involved in the company. The experience, education and track record of management and advisors need to be given great emphasis.
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Ideally, a business plan is the intersection of everything inside the business (costs, products, services, personnel, etc.) and everything outside the business (competition, market trends, political forces, etc). Forces inside the company meet those outside the company and a business plan is born.
Many entrepreneurs put too much emphasis on the inside forces and ignore the outside. No business is an island; no company operates in a vacuum. Even as you are tackling all the tiny details that need to be included in your plan, be sure to keep a grip on the big picture.
A winning business plan outlines goals, clearly communicates strategies and establishes plans for both the best and worst case scenarios (as well as any and all scenarios in between) that might befall your company. Seasoned entrepreneurs and investors know to expect the unexpected and at the same time anticipate the challenges inherent in each particular business.
In great business plans, you not only sell your business concept, you sell yourself. Your entrepreneurial spirit and passion are critical factors to a potential investor. Communicating your team’s experience, abilities and track record will take you even farther. The key is showing how your experience and abilities will support your business and help it to excel.
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Rich Dad Tips
• Seasoned investors aren’t fooled by “hyped” words hastily written to compensate for a lack of experience or education. If you are starting out and don’t have relevant experience, it’s best to show that you are surrounding yourself with an experienced team of advisors and employees. Business is a team sport.
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A good business plan can help you determine what you need to make your business a success – from personnel to financing, location to advertising. But to truly make your company succeed, you must pay attention to what you find during plan preparation. Be thoughtful. Don’t do the plan, figure out you need $300,000 and then try to wing it on $150,000. Be realistic in your planning, then be just as realistic in following the plan.
The hardest part of crafting a good business plan (or even a bad one, for that matter) is overcoming inertia. Most people have a great idea and fail to take action because of a fear of failure. A body at rest tends to stay at rest; a body in motion tends to stay in motion. Inertia is what keeps a body at rest (along with a comfy couch, a good TV night, high-speed internet service, whatever). Kick inertia in its thermodynamic behind, get off your couch and get started. Now. Don’t wait until you finish this book. Don’t even wait until you finish this chapter. Go now and grab a pen and a notebook and start taking notes. Sometimes the simple motion of moving a pen across a page is enough to get the rest of your body in motion.
Just as you must overcome inertia to construct a business plan, you might also have to overcome fear. A business plan sounds complicated. But it shouldn’t be. A complicated business plan is often worse than no business plan at all. Your plan should be understandable in its language (overly technical terms that confuse are not welcome); it should summarize where appropriate (leave the details for appendices); and it should truly describe your business (leave the boilerplates for metal shop). It needs to be short and to the point. Keep it simple, but make it complete. Treat your plan as if it is the only information a potential investor, lender or manager will have before making a decision enabling the success of your business.
Writing a business plan is a labor of love, but also an exercise in logic and forethought. Embarking on the task of planning on paper a business that will likely consume your life should serve several critical functions:
1. A business plan helps you clarify, focus and research your business’ development and prospects. Now, keep in mind that planning does not mean predicting the future (crystal balls are not required), but rather it means being aware of a wide range of likely futures and being prepared for them as they occur. Try to imagine the questions you might have if you were a shareholder, investor or representative of a financial institution. You will need to be able to succinctly explain the purpose of your plan (let alone the business); the vision, goals and strategies you have for your business; and any achievements and/or performances you have had to date (think financial, sales and technical). You will need to describe your product(s) or services in relation to the market and industry as a whole.
2. A business plan provides the framework to create a company’s mission, goals and key strategies. In addition to explaining each of these in great detail, this book we will insert “street smart” principles from Rich Dad’s B-I Triangle into relevant sections.
The B-I Triangle’s foundation is a company’s mission, team and leadership. Its primary elements are cash flow, communications, systems, legal and product. For a complete explanation of the B-I Triangle, read Rich Dad’s Guide To Investing by Robert Kiyosaki.
3. A business plan can serve as a basis for discussion with third parties, such as shareholders, agencies, banks, investors and the like. (Mapping out the financial position and projections for your business can be used to get funds, whether your company is established or just in the startup phase.) Most banks and lenders will need to have at least the basics of your business on paper in order to discuss the merits of your business or idea. Most must report to others (such as a loan committee) and won’t want to take you along to talk over their shoulders. In order to develop a good, useable business plan, you must understand your business finances. Funding requirements, possible sources, likely terms and projected return on investments are all real concerns to investors and lenders, as they should be for you as well. So be sure to be realistic. The temptation to exaggerate can be great, but resist. Back up your numbers with more numbers, with reasoning and with research. Though using a business plan as part of a request for funds is a legitimate use of a business plan, watch out for making this the only function. Your business plan is your road map to the future.
4. A business plan is a benchmark against which actual performance can be measured and reviewed. It allows you to quantitatively measure reality against goals. A business plan is an organic document, a perpetual work-in-progress. Comparing projections to actual numbers will help you measure performance and thereby give you what you need to keep your plan useful. Just as you don’t want to fly blindly into a business, nor do you want to implement changes on a whim. A business plan will help you get started on the right foot and then keep you moving in the right direction.
There are as many outlines for business plans as there are business plans, with each of them being minor derivatives of each other. They are all basically the same and tend to be comprised of four standard segments:
1. The Business. Also called Business Strategy or Business Description, this section might include such subsections as Business Opportunity, Organization and Operations, Legal Structure, Business Model, Operating Procedures, Operations Description, Management, Personnel, Strengths and Weaknesses, Core Competencies and Challenges, Business Accomplishments, Location, Product Offering, Product or Service, Records and Insurance. By the time a reader completes this section, he or she should have a thorough and concrete understanding of your business. This section discusses all pertinent aspects of your business. It covers every aspect of production from idea to service after the sale, including the management, personnel, equipment, paperwork and property involved. For service businesses the product is the service.
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Rich Dad Tips
• In the Business section, make sure you “sell” the one reason your business will be able to generate excessive cash flow. Remember that you are selling by communicating your experience and education, not by promoting your company with empty words and promises.
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2. The Marketing. Also called Market Strategy and including subsections such as Target Markets, Customers, Competition, Distribution, Relationships, Advertising, Pricing, Industry and Market Trends, Strategy and Market Strategy. The Marketing section is a thorough discussion of the industry and your business’ place in it. It covers all the forces that come to bear on your business. From the customers to the competition, advertising to pricing, industry trends to global economics, this section gives the reader a thorough understanding of how your business will deal with getting the product to potential buyers.
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Rich Dad Tips
• A key pitfall of many novice entrepreneurs is not knowing how to “get the word out” on their business. Astute business owners understand how to leverage public relations, viral marketing through word of mouth and the internet to attract new customers.
• Traditional advertising is often expensive and inefficient. True entrepreneurs have a guerilla marketing spirit that allows them to achieve great value from minimal marketing investments.
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3. The Financials. Also called Financial Data or The Deal and includes subsections such as Uses of Funds, Income Statements, Cash Flow Statement, Balance Sheet, Cash Flow Forecast, Profit and Loss Forecast, Income Projection, Sales Revenue Forecast, Income Forecast, Capital Spending Plan, Assumptions, Budget and Break-Even Analysis. The Financial section is all about the numbers. The past, present and future are all represented. You will include tables that lay out the money side of your business. Short-term and long-term costs and revenues are presented in ways that will help management and/or financial experts to determine the risk of your business idea.
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Rich Dad Tips
• In their haste, novice entrepreneurs underestimate the time, energy and money required to build a successful business. They tend to underestimate costs and overestimate revenues and time to achieve them.
• Many savvy investors place little emphasis on the credibility of the numbers because everyone knows they are a guess. They are looked at primarily for an investor or lender to determine if they are in a range of reality.
• It’s important to benchmark similar companies so you can show you have done your homework.
• If you don’t have financial statement experience, this is an area where you must leverage an advisor or risk losing credibility.
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4. The Supporting Material. The material used will depend upon the type of business for which you are planning as well as the contents of the rest of your plan. Common supporting documents include resumes, letters of reference, credit reports, legal documents, agreements and contracts. This is information that needs no textual introduction or explanation or that is introduced or explained in the previous sections of the plan.
In addition, most business plans have a separate cover sheet, a table of contents, an executive summary and some text introducing the business mission and goals, each of which averages one page.
For our purposes, we will use the following outline:
Cover Sheet
Table of Contents
Mission Statement
Executive Summary
The Business
Strengths and Weaknesses
Legal Structure
Business Description
Product or Service Description
Intellectual Property Description
Location
Management and Personnel
Records
Insurance
Security
Litigation
The Marketing
Markets
Competition
Distribution and Sales
Marketing
Industry and Market Trends
Strategy
The Financials
Uses of Funds
Income Statement
Cash Flow Statement
Balance Sheet
Income Projection
Break-Even Analysis
The Supporting Documents
Although not necessarily in the exact order above, we shall discuss the various elements of the outline and how to flesh them out into a winning business plan in the chapters ahead. Some funding and/or investment entities may have their own outline to follow. If you are given guidelines, follow them. Remember the golden rule. Those with the gold get to make the rules.
Ideally, by the time the plan is complete, you will have enough information to suit anyone’s guidelines. Compiling the initial information is the real work. Rearranging it into different formats should not be difficult. No matter what outline you choose, be sure to cover all your bases. It is tempting to skip management information if you are preparing the plan for loan purposes only or to skip financials if you are preparing the plan for your own management purposes. If you want to give into temptation, have a piece of chocolate. Do not let temptation shortchange all the potential usefulness of a business plan. You never know when having a complete business plan will, out of the blue, lead to a large opportunity. Be concise, but be thorough.
If there are no content requirements from lenders or investors, customize your plan to suit yourself and/or your management team. Consider the Rich Dad B-I Triangle as a useful format. Use headings that you and your team understand. For example, does “Core Competencies and Challenges” or “Strengths and Weaknesses” make more sense to you? Does your company deal with licenses rather than manufactured products? Then name and construct your sections accordingly. Ease of understanding is the cornerstone of any good business plan. Remember, there is no federal or state law mandating what has to be in a business plan. Obviously you can’t make material misstatements or fraudulent claims, but beyond that caveat the content is up to you. So write it to satisfy the questions both a novice and a sophisticated investor would ask.
Before choosing what to include in each section and subsection of your plan, you may want to do some detailed outlining – not necessarily to include in your plan, but for your own use. Know yourself so that you can build your plan to help you. If you know numbers are your weak point, spend some extra time coming to terms with the Financials section of your plan and surround yourself with experts and mentors. If you’re a math whiz, but linear goal setting sets your teeth on edge, take some extra time to build planning sections. If you have someone else help you develop your plan (which is a great way to supplement your own areas of expertise), be sure you spend the time necessary to work closely with the planner on their section because it is your business and the plan must be a reflection of you.
If you are preparing your plan for a franchise startup, pay close attention to the manuals, materials and operating procedures provided to you by the franchisor. Read everything carefully before you begin to write your plan. This information is the starting point of your plan and much of it may be able to be incorporated directly into your plan. Take advantage of the experience of those who have traveled this path before you. And be careful that your plan is not so far removed from the franchisor’s operations that your franchise becomes incompatible with the chain from which it came. Franchisors have strict guidelines they expect each franchisee to follow. We all know what happens to the nail that sticks out above the rest.
That said, business plans are beneficial to a number of businesses and activities that one wouldn’t normally associate with needing a plan. Like the franchisee that has a set program to follow, certain real estate investors know exactly what they need to do to maximize a property’s value. And yet, as we’ll learn later on, a business plan is useful in many such situations. Similarly, existing businesses may be surprised by where a plan may lead…
Pat
Pat was the proud owner of a successful plumbing business. He had put the last several years into growing the business. It was now positioned to go to the next level and seek out large government and public works projects. Pat knew writing business plans wasn’t one of his key strengths. He liked the idea of an independent advisor bringing new thoughts and ideas to his business. So Pat hired a consulting firm to help him “invent the future” and they worked together closely to create a six-year plan for his business.
The plan and the process of creating it were eye openers for Pat. Through the process suggestions were made on how to streamline inventory controls and save money using vendor discounts for prompt payment. While this was basic information it was never taught in school and his friendly competitors, naturally, never revealed such strategies. The biggest weakness and opportunity uncovered was that Pat’s company needed to increase their bonding limit so that it could pursue higher dollar projects. Although each state was different, Pat knew that his state’s contractor’s licensing division required a bond be posted for a maximum dollar amount of work to be done. So, for example, a $100,000 bond allowed Pat’s company to bid jobs up to $1 million. The bond was issued by a surety or bank or insurance company and cost Pat $10,000, or 10% of the $100,000 face value per year. The plan suggested the bonding limit be increased to $1 million. Pat was in a growing area and large public works projects were headed his way. The plan suggested that a higher bonding would allow Pat to partake in such projects.
The plan contained great information for Pat. He immediately went to his bank to see how the increased bonding could be financed. His banker indicated they would consider Pat’s request if he had a business plan that outlined exactly how the increased bonding would be utilized to generate greater cash flow for his company. Pat was quite pleased to hand his banker just such a document. Pat’s banker was impressed. The plan involved innovations and useful strategies. The bonding was increased shortly thereafter and Pat’s company moved up to the next level of business.
Pat learned that a business plan can have immediate benefits for existing business owners looking to expand to a new level. Whether you are a new company or have been around for 200 years, it is never too late, as Pat learned, in the business cycle to obtain and utilize fresh ideas and new approaches.
As our case illustrates, there are many strategic reasons for why a business plan makes sense. You might want a plan to take to potential investors and/or lenders in order to expand or rejuvenate your business. Or maybe you sense flaws in your organization – you’re not sure of your long-term goals, pricing is based on your mood, management styles change with every personnel change and the like. Small problems and even smaller poor choices can add up fast. Don’t wait for all the little problems to begin spiraling into a vortex that can take your business straight down the tubes.
Using your Plan
First, you need a business plan to get to know your business and to create the path that will describe how you will get from where you are to where you want to be. Sure, you might be able to find success without a plan. You might be able to get from Pismo Beach to Cape Hatteras without a map, but wouldn’t it be easier with one?
In addition to helping you create appropriate strategies for your business, a winning plan can help sell your ideas to customers (especially if you are pursuing a business that goes after large contracts) and employees as well. Think creatively and use your plan as a serious marketing tool.
A truly effective business plan should build ownership in key players. Don’t just write the plan on your own and stick it in a drawer. Involve significant others (partners, managers, family) wherever and whenever you can because many of them will play key roles in making your dream a reality. Keep employees and partners involved in the planning, preparation and use of your business plan. Encourage those who will be most impacted by the plan to take an interest in the continuing and evolving life of the plan.
Investors and lenders aren’t out there giving away money with no thought. (If they are, please call me!) Potential funders (loan committees, family, friends, venture capitalists, stockholders) will need to evaluate your business in order to make a decision as to whether or not your business is a safe risk. Your business plan is the document that gives them information they need in order to accurately make an evaluation. It is your chance to sell others on your business idea and strategy. Use your plan to get investors and lenders on board and then continue to use it to lead your business.
It should be noted that when you use your business plan to raise money all the federal and state securities laws must be followed. Typically, a private placement memorandum (or “PPM”) is prepared by a securities attorney. The PPM contains all the risks an investor must be aware of and a subscription agreement for shares whereby the investor indicates he is aware of all the risks. The business plan is incorporated into the PPM so the investor has an understanding of where the company is headed. While a complete discussion of the securities laws is beyond the scope of this book and we recommend that you seek qualified legal counsel and financial advice. We shall also review this issue again in Chapter 10.
Keep in mind that different potential funding entities have different interests when it comes to business investment and they will be making an immediate initial decision as to whether or not you capture their interest. You have maybe ten minutes to get a funder’s interest and instill in him or her a sense of confidence in your ability to pay back or increase his or her investment. Most entities will be looking for an interesting idea, virtually guaranteed cash flow and the business acumen to bring it all together.
Your first chance to wow your audience is with your executive summary. It’s your first impression, so it has to be powerful. It has to be captivating and promising. It lets the reader know that you have a well thought out, winning idea for a business, product, service and/or market niche and the team and systems capabilities to fully capitalize on it. If the executive summary does not deliver, the rest of the plan will not be read.
After the executive summary, potential funders may look to the numbers to see if your ideas can generate the kind of revenues they are looking for. Potential investors and lenders often look first to your income projections and then to the balance sheet and income statement to see if those projections are realistic. Non-equity funders (the kind that are not looking to share in a piece of the business) will look to your forecasts to see if and how you will be able to repay loans. Equity funders (the kind that want some ownership in your business) will also be looking for evidence of a market. But don’t think you can simply state that there is a market for your business. Don’t bother. The reader will analyze the work you present and make a determination on their own.
If the executive summary shows an interesting idea and the financials show a possibility of financial return, then the next (and perhaps last) section the potential lender or investor may turn to will be a quick review of your background and that of other pertinent management personnel. All the great plans in the world will be worthless in the hands of incompetent or less than ethical owners and/or managers. Potential lenders and investors will be looking for experience, education and evidence that you can handle all you have promised.
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Rich Dad Tips
• The executive summary is your calling card. The way it is written will immediately tell a savvy investor or lender if you have the experience and expertise to lead a business. If it isn’t a winner, the plan may never be read.
• When you initially begin sending out your business plan to investors or lenders, send it to a small portion of your potential universe so that you can get feedback. If you are off the mark, you’d rather know early and adjust. Make sure to ask for open and honest feedback (and be ready to hear it) from the people who tell you “no”. They will offer valuable advice.
• Remember again that Money follows great management. Many good business plans don’t attract money not because the deal did not attract cash but because the person controlling the deal did not attract the cash. The key to success is people, people and people. Emphasize you and your team’s track record in the executive summary.
• Keep the plan clear and concise. If complicated and technical writings must be included, place them at the end with supporting documents.
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The preparation of your plan will help you figure out how much funding you need. But don’t skip it if you are fortunate enough to need no outside funding at all. Preparation of your plan will help you plan your income and expenses, your profits and losses, and thus show you whether or not a particular business can realistically be expected to meet your financial goals.
Whether you are preparing your plan to strategize your business or to get funding (or for both reasons), don’t get so caught up in one aspect that you neglect the other. Balance is key. So is remembering that every section of your plan will likely be of primary importance to someone.
What are some of the hassles you might be saved from if you take the time to prepare a business plan? How about quitting your day job only to find your great idea won’t pay the mortgage? Or resorting to high interest credit cards to finance the business? Many businesses fail within the first five years. Of those that fail, a staggeringly high percentage of them do not have business plans. Of course, the credit card companies don’t care if you fail, with or without a business plan. They want their money. So before you risk it all, plan ahead. But be prepared for the unexpected and don’t be afraid to make mistakes.
Gathering Materials
The materials you choose to include in your plan will depend on the specifics of your business and whether or not you are using the plan to secure funding. Most plans that will be used to get funding will include a capital equipment and supply list, balance sheet, break-even analysis, income projection statements, cash flow statements and a loan application. You should also include an explanation as to the assumptions used for projections. Other materials might include: Organizational charts, management bios and/or resumes, market data and a list of who is going to receive the document. And, as mentioned, in many cases the securities laws will have to be followed as well.
The last section of your plan will be Support Materials. Though support materials compose the back end of the business plan, don’t wait until the end to start gathering them. As you write the text of your plan, you will hopefully realize what documents and information you will want to attach. Get a notebook and keep a running list as you write. Take time as you finish each section to determine if you have the support documents listed. If you do not have them, make the appropriate calls to get them. Some documents may take awhile to get to you. By making the requests as you go, rather than waiting to do it all at the end, you will save yourself a lot of time. As you will find, gathering materials almost takes as much time as the more important thought process behind the plan. The actual writing should go smoothly and quickly if you are well organized and have done enough homework to know how turn your idea into a winning business.
As you are going through the time-consuming process of gathering materials and conducting research, keep your eyes and ears open for news that is even remotely related to your business idea. Clip newspaper articles, check out books, request transcripts of radio shows. Anything that deals with your business, your market, your industry or the overall economy and regulatory environment can be useful. Consider it just another aspect of research that accompanies your personal learning from advisors, peers and mentors. It is critical that you learn the brutal “street smart” realities of your business.
Start a file system for all the information you will be gathering. You might consider breaking up information into pertinent subject headings that reflect the subject headings of your plan. Or you might want to break out information by date or source – whatever works for you. As you come across new leads or new information, stick it in the appropriate file. Then when you get down to the business of preparing each individual section, you will have at least some of your research already done.
The Issue With Questions Posed
You will note as we go through this book that a lot of questions get asked. For example, in the chapter of Marketing, many questions are asked on the nature and the type of your customers. These questions aren’t posed to harass or burden you. Instead, they are important considerations for you to review. They are put forth to get you thinking about what to write about. Like a snowflake, every business plan is unique and different. No two are alike. Different questions must be addressed and answered in each plan. But like a flake, if you totally ignore all of the questions you won’t have much to show for your efforts.
So when you are reading a list of questions to be addressed, pick out the ones that pertain to your business. And then answer them in your plan. Don’t let your eyes glaze over as you read the questions. Instead, keep them to pick out the ones that will allow you to prepare a winning business plan.
