Tweet

A Look at Business Plans

Written by: Accessible Business Consultants

Article Overview: What is the role of a Business and Marketing Plan as viewed by lenders whether they are traditional lenders, venture capitalists, angel investors or insurance companies? Some of the do's and don'ts in the development of the plan.

A Look at Business Plans

There are many clichés and misunderstandings surrounding Business and Marketing Plans than any other part of the capital raising process. These range from the belief that plans are not needed (my concept is so good it sells itself) to the “thicker the better” school of Business Plans. I have seen Business Plans that are over 100 pages that includes 25 pages of newspaper clippings and a scholarly treatise on the industry complete with an additional 20 pages of charts and graphs, which by initial sight is very impressive, but never read. The failure of this approach stems from a misunderstanding of the role of a Business Plan in the world of capital venture.

Contrary to popular belief, no capital venture firm or “angel investor” hears a presentation or reads a plan and becomes so excited that he sits down and writes a check immediately. An Angel Investor is no different than a capital venture firm, bank or insurance company in his or her desire to make a prudent and sound investment. I have heard client’s state that Angel Investors or Venture Capitalists are no better than banks or traditional lenders because they want experience management, collateral, growth industries, and ability to repay the loan as well as significant returns on their investment. They thought an Angel Investor suspended all prudent business practices and just threw money into any project presented to them. Nothing could be further from the truth. Each venture capital source must present a detailed Business Plan to a committee or advisors to determine if further processing is warranted. The Business Plan is the door opener, if the plan is favorably received the company will proceed to the next step, due diligence.

What does the Lending Community want to see in a Business Plan? The projects that are selected achieve a business comfort level that encourages further pursuit. If the business is inherently unsound, a skillfully drafted plan can not cure the flaws, nor does a poorly written plan automatically condemn an excellent company’s chance for financing, however the poorly written plan


What do capital sources want to see in a Business Plan?

• What is unique about this company or project?
• What does the company do?
• How will the company succeed and attain profitability?
• What benefits will be derived from a capital infusion?
• Is management capable of implementing the Business Plan?
• Do the Financial Projections Make sense/are they realistic?
• Is there an exit strategy for the investor?



A Look at Business Plans
Page Two…



The Don’ts of A Business Plan

• Don’t provide only an income statement; include a balance sheet and a cash flow statement too.
• Provide monthly data for at least two years.
• Don’t provide more than two years worth of projections unless the lender or investor has asked for them.
• Don’t provide different scenarios in your projections.
• Don’t assume the numbers reconcile.
• Don’t be too optimistic about sales, growth or operating profit margins.
• Don’t forget to include all existing debts.
• Don’t forget to add reasonable interest rates for the loan you are seeking.
• Don’t forget to include assumptions to your projections, be able to explain as well as defend them.
• Don’t believe the investor will be the only one at risk


If the Business Plan is prepared properly and answers the questions as indicated above it has served its purpose. Remember that it is the job of the lender, venture capitalists or angel investor to ask questions.

Does the format and style of the Business Plan make a difference to an investor? It definitely does. Most investors look more favorably upon a Business Plan that is professionally prepared, easy to read, well laid out and written in acceptable business plan style.

The style of a good Business Plan is unique. It is between the syntax of a SEC document in which every aspect of the business is doomed to failure and a marketing piece in which everything about the business is wonderful. It is a factual document, but it also a presentation piece, in which the positives can be featured, but not overly emphasized, and the negatives are disclosed as well as explained.

An attractive professionally packaged Business Plan can be beneficial. Always set a positive tone, and don’t turn off the reader with a large number of pictures or a volume of the encyclopedia.



A Look at Business Plans
Page Three…



Should an existing business or start-up hire a consultant or professional business plan writer?

This is a question of time, ability and money. A typical Business Plan takes at least 20-50 hours to reach a final project when prepared by a professional. It will take considerably longer if a learning process or research process is involved. There are many software programs to serve as guides, but most of them not worth the price they cost. Business Plans require a high level of writing ability to draft the plan, a real understanding of the business environment and industry, financial knowledge of the proper accounting methods and preparation of budgets and projections. So the answer to the question is that if the business or start-up has the ability and the time, it is a feasible option.

Retaining a professional consultant has many advantages. Since a Business Consultant, who prepares Business Plans for a living, can be produced faster and written at a professional investor friendly level. The consultant is also detached from the business allowing for a realistic presentation of the business and its future. Investors can always detect a Business Plan prepared from a software package (“canned”) versus a professional prepared plan. Investors favorably note that the company or individual has gone through the expense to present a professionally prepared plan, understand the importance of utilizing professionals and are serious about their business. The cost of having a plan professionally prepared is small in comparison to the amount of money the average business is seeking. Business Plans usually start at $3,000 and can increase to $7,500 or more depending upon the complexity of the Business Plan.

A professionally prepared Business and Marketing Plan, designed by a Business Consultant, is usually an excellent investment for all businesses.

Related Articles
  Successful Business Plans
  Dental Insurance Plans
  Mental Health Benefits Update
  Entrepreneurs - Want To Start A Business With The Best Possible Chance Of Success?
  How to Create a Business Plan

Article Tags: angel investor, angel investors, business comfort, business plans, capital venture, charts and graphs, contrary to popular belief, due diligence, experience management, insurance company, marketing plans, misunderstandings, newspaper clippings, prudent business practices, scholarly treatise, sound investment, traditional lenders, venture capital source, venture capitalists, venture firm



Related Forum Posts
New Study - Women prepare better business plans - I found an article in Business Week and I found this quite interesting. [quote:ka7lg35i]Who Prepares Better Business Plans, Men or Women? A new study based on four years of data from men and women in a training program for microenterprises finds that they come out the same in quality scores. "However, women scored significantly better on the presentation of their plan to judges," conclude the study's authors, Ronald G. Cook, Paul Belliveau, and Christine Lentz of Rider University, in a paper presented at a recent meeting of the Small Business Institute. [/quote:ka7lg35i] What do you guys think?
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
Money I made while in School - While in university I did have a Student Loan (still paying that bugger off) and had a part-time job as a Call Center agent (inbound). *Canada* I also designed websites (outsourced all the work). I just worked on getting new customers, managed the projects to completion and helped create Marketing Plans for my clients (Online and Offline). *Canada* When I was studying the in the States I also made some money as a Part-time Flight instructor. *USA*
Re: HOw to market a B2B consulting company - [quote="zohahunt77":428owzbi]Hi, I was wondering if anyone can tell me the difference between B2B and B2C. I don’t know about b2b marketing but I have done marketing so know things about it. I will suggest you to take online services which will spread your business all over web network. Online marketing is the best way to market any business.[/quote:428owzbi] B2B = Business to Business - You are marketing to other businesses. B2C = Business to Consumer - You are marketing to consumers.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Improve E-mail: Avoid the Quicksand

Why Use an Advertising Agency

Leader's Success Secret: Celebration

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.