One of our blog readers, Brenda, asked to learn more about business plans:

“Hi, this is a great article… thanks! I would like to hear something about business plans if that is convenient. Regards, Brenda”

So this week our Entrepreneur University comes thanks to Dave Turkin. Dave, of Accessible Business Consultants, is a full service business consultant that has over 32 years of experience working with small-medium size businesses. Dave has designed and implemented numerous business and marketing plans, designed internal programs for accounting and operational procedures. We featured Dave in November when he wrote about How To Do An Annual Business Checkup.

To help Brenda out with Dave discusses today what a business plan should look like:

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.”

Is there a topic you would like to learn more about for the next Entrepreneur University? Leave a comment below and we’ll try to find an expert to discuss your topic!