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Hub You - Business Plan Tips - Advice from a VC Gatekeeper
Recruiting, retained or contingency, involves (or should, anyway) directly approaching individuals who, based on their title or position, might well have the experience to handle the job description and position for which the client is seeking someone. The individuals who are approached, of course, are usually currently employed at one of the client's competitors.If that individual is you, what would you do? What would you do when a recruiter calls and briefly outlines an opportunity with an unnamed company? Obviously if you're unhappy where you are and the opportunity sounds interesting, you're going to bite. But I'm not talking about that scenario. I'm talking about the response when you ARE happy where you are. Because there's a smart way to respond and a not-so-smart way to respond. And either choice impacts your career far more than you'd think it does!So there you are, sitting at your desk working on an important project, when the phone rings. And you pick it up. It's a recruiter, who introduces himself, his firm, and asks if you have a minute. What do you say? "Thanks for calling, but I'm happy where I am." And hang up the phone? WRONG ANSWER!!!!Why? Because you just cut yourself off from knowing what's moving and shaking in your industry, which
Second, people with money to invest or lend are among the busiest people on earth. None of them have time during the business day to sit and read more than 50 pages. The ideal length of a business plan is 20-30 pages, which is more than long enough to concisely state everything you need to. In my experience, every business plan longer than 50 pages contains unnecessary filler. Filler is bad. No matter what you read in that business plan book, your business plan does NOT need to include patent applications, folded-up blue prints,
If you are a struggling small store owner fighting for customers in the face of stiff competition then, for goodness sake, concentrate on customer service! This is one area of your offer where you need spend no (or very little) money to get it right. You are dealing with your fellow human beings who are willing to hand over some hard earned cash for your products, so treat them with respect.Disrespect"Of course I treat customers with respect", is what many shopkeepers will say. No you do not, or at least many of you do not. I know from personal experience, and so do thousands of others, that customers in shops are often treated as an inconvenience. They get in the way. They ask awkward questions. Sometimes they buy things and then complain. Worst still, others do not buy anything and still complain. Some customers treat your shop like a meeting place, others just buy one newspaper a week and nothing else. Some of you might say: "look, I do complain about customers, but never on the shop floor and always behind closed doors." Wrong! Do not treat customers with disrespect, even if they are out of earshot. Just.....do not treat customers with disrespect at all, anytime, anywhere.Customer Service not Lip ServiceI'll give you examples f
Before I delve into specific recommendations, let's briefly review the purposes of a preparing a business plan.
In practice, a business plan has three purposes and three purposes only: (1) to demonstrate the validity of your business model (including the existence of a market); (2) to establish the qualification of your team to execute your business model; and (3) to convince investors/lenders that the only thing you're missing is capital. That's it. Anything else you try to make it will detract from these goals.
If you want your business plan to make it to the Loan or Investment Committee, consider following these 8 recommendations:
1. Present the Right Type of Plan to the Correct Audience
Generally speaking, there are three types of business plans: Loan-Targeted; Equity-Targeted and Operating-Only. Do not send an equity investor a loan request and do not send a lender a request for an equity investment. Operating-only plans do not seek to raise capital and thus are not discussed in this article.
Loan-targeted and Equity-targeted business plans are quite different. Lenders are principally concerned with collateral and cash flow. They tend to give a lot of weight to the debt coverage ratio. Equity investors focus on the Return on Equity generated from anticipated liquidity events like a lucrative acquisition or initial public offering. There are other differences. For example, if you're trying to raise equity, then your business plan will likely be known as a Private Placement Memorandum. This terminology comes from Regulation D of the Securities Act of 1933, a federal law which applies to your business plan if you're attempting to raise private equity across state lines. This document has a specific format that investors are accustomed to. Failure to follow this format is a sure sign of a novice.
2. Abide by the 50/50 Rule
Your business plan should be no longer than 50 pages and no more than 50% of its content should be quantitative in nature.
There are two compelling reasons to keep your page-count under 50 pages:
First, whether your business plan is 20 pages or 200 pages, in most cases an analyst will reduce it to a 10-page summary called an Internal Credit Memorandum. The ICM is the only thing the decision-makers will ever see. Save the trees and save your time.
Second, people with money to invest or lend are among the busiest people on earth. None of them have time during the business day to sit and read more than 50 pages. The ideal length of a business plan is 20-30 pages, which is more than long enough to concisely state everything you need to. In my experience, every business plan longer than 50 pages contains unnecessary filler. Filler is bad. No matter what you read in that business plan book, your business plan does NOT need to include patent applications, folded-up blue prints,
"Above all, we know that an entrepreneurial strategy has more chance of success the more it starts with the users — their utilities, their values, their realities ... the test of an innovation is always what it does for the user...it is by no means hunch or gamble. But it is also not precisely science. Rather, it is judgment." — Peter Drucker, Innovation and EntrepreneurshipJust because a company is spending money on research (such as markets, customers, or new technologies) and development doesn't mean they will get innovation. Innovation, as with advertising, training, or many other organization investments, depends on the quality of the investment as much as the quantity of resources put in it. A high proportion of innovative new products, services, and companies flop. That's often because managers build better mousetraps without first making sure there are any mice out there. Or that people still want to catch them.Many innovations come from a deeper level of customer and market understanding. They go beyond what current customers say they need. They solve problems that customers either don't realize they have or didn't know could be solved. These innovations create needs and performance gaps only once customers start using them and get turned on to the pos
If you want your business plan to make it to the Loan or Investment Committee, consider following these 8 recommendations:
1. Present the Right Type of Plan to the Correct Audience
Generally speaking, there are three types of business plans: Loan-Targeted; Equity-Targeted and Operating-Only. Do not send an equity investor a loan request and do not send a lender a request for an equity investment. Operating-only plans do not seek to raise capital and thus are not discussed in this article.
Loan-targeted and Equity-targeted business plans are quite different. Lenders are principally concerned with collateral and cash flow. They tend to give a lot of weight to the debt coverage ratio. Equity investors focus on the Return on Equity generated from anticipated liquidity events like a lucrative acquisition or initial public offering. There are other differences. For example, if you're trying to raise equity, then your business plan will likely be known as a Private Placement Memorandum. This terminology comes from Regulation D of the Securities Act of 1933, a federal law which applies to your business plan if you're attempting to raise private equity across state lines. This document has a specific format that investors are accustomed to. Failure to follow this format is a sure sign of a novice.
2. Abide by the 50/50 Rule
Your business plan should be no longer than 50 pages and no more than 50% of its content should be quantitative in nature.
There are two compelling reasons to keep your page-count under 50 pages:
First, whether your business plan is 20 pages or 200 pages, in most cases an analyst will reduce it to a 10-page summary called an Internal Credit Memorandum. The ICM is the only thing the decision-makers will ever see. Save the trees and save your time.
Second, people with money to invest or lend are among the busiest people on earth. None of them have time during the business day to sit and read more than 50 pages. The ideal length of a business plan is 20-30 pages, which is more than long enough to concisely state everything you need to. In my experience, every business plan longer than 50 pages contains unnecessary filler. Filler is bad. No matter what you read in that business plan book, your business plan does NOT need to include patent applications, folded-up blue prints,
However adverts are used to gain much more purposes. An organization usually sponsors media advertising to convince consumers that its products will benefit them. However this is no the sole motivation behind sponsoring advertisements. Some are merely intended to inform but not persuade. For whatever reasons the advertisement is made it is meant to affect the consumer in the process spawn benefits for its sponsor. It must therefore be made in such way as to make achievement of its purpose highly. Its impact on consumer should lead consumer to the action that is favourable to advertiser. Large--scale efforts are made, often with impressive success, to channel consumers unthinking habits, purchasing decisions and thought processes by the use of insights gleaned from psychiatry and social sciences.Advertising is meant to have a serious economic purpose. It is meant to provide information about products to the consumer who can then make buying decisions. It is meant to allow producers to invest in their brand equity which in turn protects consumers because it means that any drop in product quality has disastrous financial consequences for the consumer to buy better. If advertising is to be effective and handled with maximum efficiency it is necessary to know what is inten
Loan-targeted and Equity-targeted business plans are quite different. Lenders are principally concerned with collateral and cash flow. They tend to give a lot of weight to the debt coverage ratio. Equity investors focus on the Return on Equity generated from anticipated liquidity events like a lucrative acquisition or initial public offering. There are other differences. For example, if you're trying to raise equity, then your business plan will likely be known as a Private Placement Memorandum. This terminology comes from Regulation D of the Securities Act of 1933, a federal law which applies to your business plan if you're attempting to raise private equity across state lines. This document has a specific format that investors are accustomed to. Failure to follow this format is a sure sign of a novice.
2. Abide by the 50/50 Rule
Your business plan should be no longer than 50 pages and no more than 50% of its content should be quantitative in nature.
There are two compelling reasons to keep your page-count under 50 pages:
First, whether your business plan is 20 pages or 200 pages, in most cases an analyst will reduce it to a 10-page summary called an Internal Credit Memorandum. The ICM is the only thing the decision-makers will ever see. Save the trees and save your time.
Second, people with money to invest or lend are among the busiest people on earth. None of them have time during the business day to sit and read more than 50 pages. The ideal length of a business plan is 20-30 pages, which is more than long enough to concisely state everything you need to. In my experience, every business plan longer than 50 pages contains unnecessary filler. Filler is bad. No matter what you read in that business plan book, your business plan does NOT need to include patent applications, folded-up blue prints,
I was reading the local paper and came across a picture of the cleanest garage I ever saw. In addition to a picture of the garage there was a picture of a gentlemen, in his late 60's cleaning the cobwebs with an extension pole. I thought to myself I have never seen a garage so clean in my life. The accompanying article was discussing how this individual and another had painted and put cabinets in their garages, and how you could eat off this garage floor. Now we have all seen those storage cabinets for garages, but how many of us ever get them and if we do, don't we fill them up and then the garage goes back to looking like it did before we got them. Imagine if someone would come to your home, condo or townhouse and clean out, paint and organize that garage for you; and you would tell them how you want it done. I am not talking about those expensive ads we've all seen where they can come in and re-do your garage. Not many of us have thousands of dollars to spend on our garages. It got me to thinking that this could be the perfect business for someone who loves to clean and organize. You could network with one of the local home depot places to provide you cabinets, or you could take your re-sale number and purchase them directly from the manufacturer, rathe
2. Abide by the 50/50 Rule
Your business plan should be no longer than 50 pages and no more than 50% of its content should be quantitative in nature.
There are two compelling reasons to keep your page-count under 50 pages:
First, whether your business plan is 20 pages or 200 pages, in most cases an analyst will reduce it to a 10-page summary called an Internal Credit Memorandum. The ICM is the only thing the decision-makers will ever see. Save the trees and save your time.
Second, people with money to invest or lend are among the busiest people on earth. None of them have time during the business day to sit and read more than 50 pages. The ideal length of a business plan is 20-30 pages, which is more than long enough to concisely state everything you need to. In my experience, every business plan longer than 50 pages contains unnecessary filler. Filler is bad. No matter what you read in that business plan book, your business plan does NOT need to include patent applications, folded-up blue prints,
The single easiest way to increase sales is to look professional. People believe what they see. If you look the part, you get the part. You must be committed to keeping a positive image in the mind of every customer. What you may not realize is that a high public image may not cost as much as you are led to believe. In a small business, image is fifty percent (50%) of your business. The impact you have on your customers, whether it be your appearance, cleanliness of your store, equipment, uniforms or the style of your classy color brochures. You must continually re-audited your small businesses image. Even if your first impression is great, you can lose it just as fast if you fail to handle simple details, because things change and customer buying behavior and perceptions change with local, regional, national and world events and views.Here are a few areas that are the cornerstone of your “new image” if you choose to audit your current image for a slight make over. Customers will judge you by:The clothes you wearThe way you carry yourselfThe equipment you useThe people you hireThe advertising you choosePhone conversationsYour work qualityCleanliness of your equipmentYour general appearanceLiter
Second, people with money to invest or lend are among the busiest people on earth. None of them have time during the business day to sit and read more than 50 pages. The ideal length of a business plan is 20-30 pages, which is more than long enough to concisely state everything you need to. In my experience, every business plan longer than 50 pages contains unnecessary filler. Filler is bad. No matter what you read in that business plan book, your business plan does NOT need to include patent applications, folded-up blue prints, job descriptions, research studies, brochures, or pictures of your children. If and when I need any of these items, I will request them from you during the due diligence phase.
The reason you should limit your quantitative content to no more than half is because your business plan should tell a persuasive story that your numbers support. The numbers themselves are not the story.
3. Your Narrative Must Match Your Numbers
In many cases, the person who writes the narrative portion of a business plan is not the same person who prepares the financial portion. This often leads to inconsistencies, usually because your plan was not proofread or because one section gets updated without updating the other. A common example is where the Narrative lists executive salaries that amount to one figure but the Income Statement calculates salaries as a percentage of revenue, resulting in an entirely different figure. In addition to appearing sloppy, the problem with such inconsistencies is that they force the person analyzing your business plan to decide which of the two figures to accept. When I'm that person, I always pick the more conservative figure. That's usually bad for the applicant.
4. Show Them the Money
An entrepreneur once famously remarked, "If I succeed, everyone wins. If I fail, the bank loses." Your investors have heard this one too, but they're not amused. Investors and lenders are much more favorably inclined towards projects where the sponsor will be sharing the risk of the venture by co-investing some of its own capital along side theirs. They also saw the movie "Other People's Money," which may be why they instruct their analysts to discard business plans that include no sponsor equity.
5. Pass the Acid Test
One of the first things most analysts do with a new business plan is go straight to the Balance Sheet and check if Cash plus Cash Equivalents is greater than Current Liabilities. It's called the Acid Test. A ratio of less than 1 is a danger sign. Without getting too deep into financial theory, it's a warning that you have (or will have) a liquidity problem, or worse, a solvency problem. There are several acceptable methods of calculating this ratio. Pick the most favorable method. For most businesses, the most favorable method is to include the value of accounts receivable in the numerator.
6. Pass the Common Sense Test
No one wants to invest money in a profit-making enterprise that doesn't make any profits. Don't submit a business plan that projects a loss in the first few years but great profits thereafter or one where your product loses money on each sale but claims profit will be made "on volume." Even if yo
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