Cultural Alliance Business

Archive for the ‘businees plan’ Category

Once you present a business plan to an investor or lender, questions may begin to fly at you. If this happens, do not be alarmed! It is evidence that they are truly interested in your business. You can prepare for these questions by running through potential questions, like these seven, ahead of time.

“Why did you choose to begin with this target market?”

“We have to start somewhere” is not a great answer. Consider why the costs are lower or returns greater with your chosen first target market, or, better yet, how tackling that market first will make entry into additional markets easier later on.

“Why can’t competitors imitate your competitive advantage?”

Know the strengths, weaknesses, and branding of your competitors to understand what will stand in their way from doing what you are doing. It could be that your competitive advantage is contradictory to what they are trying to do or that you have protected intellectual property in your business, for example.

“Why is your team best qualified to launch this company?”

Funders know that there are potential managers in the job market who could be hired to run a startup like yours. Know how your chosen team combines industry, functional, and leadership experience with an understanding of startups.

“What best practices of the industry will your business use?”

Study best practices companies in the industry use to become more efficient and know which will translate into your startup, which can be implemented only as you grow, and which will not be possible because of their conflict with your underlying strategy.

“What is your unique selling proposition (USP)?”

If someone asks what makes your new business unique, you had better have an answer. This should be stated explicitly in the business plan.

“What would it take to reach break even sooner?”

Be prepared to defend the time you estimate it will take for the company to break even and to start making a profit. If funders want to see you break even sooner, know what it would take in terms of different staff, additional resources, or increased investment, but do not be too quick to push your schedule up. This only shows funders that your estimates were based on flimsy assumptions to begin with.

“What are your projections of growth based on?”

Be able to explain the assumptions about the market and your company’s conversion rates (of potential customers to actual customers, for example) which led to your projections of growth. You should know how your projections compare to other success stories in your industry and in other industries so you can be sure there is precedent for the growth you anticipate.

For many entrepreneurs the creation of a business plan is the biggest hurdle in the development process of their fledgling enterprise. There is a mystery, almost a dread in many people when discussion of a business plan requirement is first broached. They conceptualize a boring, dry, painful experience and many would like to avoid this step if at all possible.

What is a Business Plan?

A business plan is a document that qualifies, quantifies and narrates a commercial opportunity. It is that simple to state, more difficult to execute, but anyone can customize a business plan that gets results. The plan must have an exciting Executive Summary. Like the opening scenes of a movie, or the first chapter of a book, the writer must set a hook.

Typically, active investors, angels, venture capital groups and investment bankers are deluged with business plans. Screeners typically read the document before passing along to decision-makers within the firm. However, very few move along the decision making food chain precisely because the Executive Summary lacks excitement, punch or sets a high level of anticipation about what is inside the document.

Having written dozens of business plans for clients I can attest that creating a plan that works is, well, work. No two plans are alike. The plan must be customized, well researched, structured and direct. I receive more than 500 business plan submissions annually in my consulting firm. Less than 1% have commercial potential as written. Many describe products, services, retail or new business development ideas that otherwise might be exciting. However, the plan does not convey that potential.

One of the worst things to evolve from the arrival of the inter-net is the ability to download a business plan template and write the document by filling in the blanks. The template itself is not problematic, I use a self-developed template when I customize plans. The problem is that many entrepreneurs do not have the writing skills, the research in hand, know the keys that turn on investors and thus, take shortcuts. Filling in the blanks without sweating the details and doing comprehensive research results in a document that will not be read and an opportunity that will never launch.

Rule number one in the development of any commercial opportunity: shortcuts equal failure!

I am a self-taught business plan writer. If I can do it, anyone can. In reality, however, most people just want to expose their opportunity to investors, licensees or potential partners. They don’t have writing skills, do not know the types of research necessary to support the plans sales model, need help in creating the marketing strategy, and will never be able to narrate financials.
Where can they go to create and exciting business plan document.

The following are resources readily available in most communities. Many are free.

Many colleges, community colleges and universities have developed small business incubators. They attract additional state funding, as small business growth and development are keys to job creation and an increased tax base. Take advantage of this community asset. Students, graduate students and professors are often available to direct your efforts. Ten years ago there were only a handful such programs. Today, over 1000 schools have some version of an entrepreneurial program.

Many states, regional and local governments offer business development programs. They have retired business people and mentors on hand to support, guide and train prospective entrepreneurs and guide business plan creation. There is no charge for utilizing this service, after all, your tax dollar supports these programs.

SCORE, the Service Core of Retired Executives is a Federal Government sponsored initiative. Thousands of retired, experienced business people make themselves available to evaluate commercial opportunities and direct the development and launch of those deemed to have potential. They are often intimately involved in creating business plans.

The Ewing Kauffman Foundation in Kansas City, MO is devoted solely to the development of entrepreneurial development. Mr. Kauffman started, nurtured and developed Marion Labs from a tiny drug local company into a multinational, multi-billion dollar powerhouse. He also owned the Kansas City Royals baseball team. His devotion to developing and promoting the entrepreneurial base of the United States resulted in creation of the foundation that bears his name.

Seek out a consultant. Typically consultants charge a fee, just like lawyers, accountants or plumbers. The advantage of an experienced consultant is that they write business plans for a living, will be strong writers, able to properly direct or perform research, narrate financials and differentiate a commercial opportunity by creating an exciting word picture. Always seek references and talk to several before deciding on a consultant.

Why Do I Need a Business Plan?

You might not. You might not need a deeply customized business plan if you are seeking to license or sell an invention, a patent or a prototype product. In this situation, the potential licensee would take your work product and develop a plan that fits their internal organizational needs.

However, if you are attempting to fund a start-up business, self-market a product or buy a small business you will absolutely need to create a road map. That road map is your business plan. The map is not linear, there will be curves and setbacks, but by quantifying, qualifying and narrating a well- researched, customized business plan you are much closer to success.

One of the most important documents that every business will need to construct and produce is their business plan.

These plans have a variety of uses:
They can assist a company when raising investment or funding; and They can assist the management of a business with the direction of the business; and They can assist management by providing a tool to measure and monitor business performance.

The fundamental areas which every business plan should consist of are:

· Objectives
· Description of the current status
· How to achieve the objectives (strategy and tactics)
· Consideration of the risks
· Financial budget

A business plan should contain details of the organisation’s objectives, and these objectives should follow the SMART (Specific, Measurable, Actionable, Realistic, Timed) framework, to ensure that the company is capable of realistically achieving them. For some organisations their objectives may be very straightforward such as growing revenue and profitability by X%. For others it may contain a multitude of elements.

A description of the current status may be a volumous exercise. Generally this would include a description of the current business objectives, operation, key personnel, skills gap; customer base; key suppliers; historic financial performance. Of course every business is different so the focus on a specific function will differ from one plan to another.

In determining how to achieve the company objectives often the company will need to consider researching the market and understanding not only what is happening among their direct competition but further afield more generally within the economy.

The research and analysis conducted may follow certain well known models such as a PESTLE analysis (Political, Economical, Social, Technological, Legal and Ecological) and a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). Other research and analysis may be less structured.

By understanding the market and the internal capabilities, the company is able to conceive realistic business objectives for the management and the team to achieve.

With any plan there are risks and these will need to be considered at length. Such considerations may simply be:
What happens if sales run at 75% of last year What happens if there is a delay with our ecommerce website What happens if a key member of staff leaves Or, something more complex.

The risk analysis will allow management to put in place contingency measures that are essential for both safe-guarding the prospects of the business and for the successful delivery of the business objectives.

By setting a financial budget the management team are able to determine and control what financial resource that is available will be utilised to achieve their objectives. In some cases the business may need to seek additional working capital to be able to forge ahead with its plans.

The process should not just be something that you feel you ought to do before the beginning of the financial year. It should be something that is reviewed and updated throughout the year. Companies that plan ahead, document their plans, communicate it to the team and constantly benchmark performance against the plan are most likely to succeed.