Going Into Business?

Planning Is
Everything.
Today’s business environment has never been more competitive. That doesn’t mean there
aren’t great opportunities for those entering the fray, but every enterprise requires the infusion
of cold hard cash to get off the ground.

Unless you have your own financial resources close at hand, you’ll need to seek out “OPM”
(other people’s money) to get started. But before you begin, ask yourself some questions:

 Why do you need the cash? For inventory? Interim financing? To cover startup costs?
 How much money do you need?
 Can you prove that your revenue projections are reasonable?
 Do you want a bank loan or seed money from investors?
 Is your business a candidate for grant funding?

Consider what’s involved with various sources of cash:

 A bank loan will require you to document and prove the value of your collateral.
Mortgaging your home to start a business may not be the best idea, because if your
business fails, the bank will be looking to get their money back by forcing the sale of
your house.
 Private money from investors requires you to clearly demonstrate how they’re going to
get their money back plus a significant profit. And once you take investor money, you
suddenly have yourself “partners” who will want operational input.
 Grant funding from philanthropic or government entities is available if your business
clearly reflects a specific social-cultural-economic mission and you’re willing to accept
ongoing oversight.

If your business is a good risk...prove it.

Regardless of the source of the money you raise, those holding the checkbook will want to
know a lot about your business and about you personally. You’ll need to give proof of your
personal and professional background and of reasonable expectations for your business’
success. The most powerful way to show that proof is with a clearly-written business plan.

90% of potential investors/lenders will ask to see your business plan before they agree to meet
with you in person. Building a credible business plan is no mean task. A fully-developed plan
involves 20-40 pages of researched documentation that covers every element of the
investment opportunity you’re presenting to others. You’ll also need a one-page “Summary
Plan” as well as the more complete version to back it up. Either of these documents needs to
demonstrate that you understand every aspect of your product or service including the means
for its fabrication or operation, the costs and paths to building consumer awareness, the range
and strength of any competition, and your ability to sustain the effort while scaling toward
enduring profits.

A business plan isn’t just another pointless hurdle for you to jump over as you create your
business. Given the proper attention, a business plan is your blueprint for success. Think of it as
an essential a working tool that will identify pitfalls and serve as your guide on the journey
ahead. And if you encounter unexpected trouble and need additional cash to survive (a very
common issue), your business plan will be the ammunition you need to get it.

When you finally get a meeting with a true investor or lender potential (someone with the liquid
financial resources to get your business operations rolling and to sustain them over the first
several months as you gain market share), you need more than a firm handshake, nice smile, and
the “elevator pitch” you rehearsed that morning.

You need to communicate in a language that your investor or lender understands and speaks.
That’s the language of dollars-and-cents as spoken in your business plan.

Putting together a document that speaks to all elements of your enterprise is no simple task. Your
business plan will get more scrutiny by investors and lenders than the IRS gives your tax returns.

Drawing the business blueprint

Your business plan has one major objective: to earn the trust and financial commitment of
others. Keep the reader in mind at all times.

Know what is most important to your potential investor or lender and emphasize those issues.
You may know all the details of your amazing business inside and out, but if they don’t focus on
what matters to your reader, your business plan will not put money on the table.

Your opening volley: The Executive Summary

The basic elements of your business should be obvious in a clearly-written Executive Summary
that answers these questions:
  How will your business make money? No fluff here. “Working for world peace” is not a
business model. “Selling World Peace t-shirts” is a business. Investors and lenders want
something tangible that generates revenue.
 What is the competitive landscape? You’re probably not the first to enter your
marketplace, but if you have an advantage going in, spell that out quickly. “We’re really
committed to our t-shirt designs” won’t cut it. “Our t-shirts are the highest quality in the
world peace sector” is a unique selling proposition that will translate into sales.
 Who is on the team? Your business is really all about the people. If you’re not qualified
to run the business, then you need to recruit those who are. Your lender or investor will
want to know who’s running the show (they certainly don’t want to). Introducing your
CFO candidate as someone with “a lot of passion” won’t cut it. “My CFO has ten years of
experience in the t-shirt business” is more like it.
 What’s the status today? Define your current legal structure, indicate how long you’ve
been at this business, and give an indication of current/projected revenues as they
relate to costs. Everything should point to profits now or in the foreseeable future.
 What are reasonable projections? If you get the cash you need, what will you do with
it? How will those funds move the needle in the right direction? Be sure to present the
numbers to support those claims. Indicate where the business will be in five or more
years if all goes according to plan.

Because much of what goes into the Executive Summary will be determined by the analysis of
factors later in your business plan, the best practice is to write the Executive Summary last, after
you’ve compiled everything else. Then you can simply review all other elements and include
those essential details without overlooking any.

Your Executive Summary needs to focus upon “the value proposition” for your investor or
lender. This isn’t about your “passion” or your “commitment.” This is about providing a clear
and convincing perspective of risks and returns.

Getting specific: Company Description

This is where you tell prospective investors or lenders about your business. Avoid waxing poetic;
get to the point quickly by answering these questions:

 What is the origin of your business?

 Why are you investing yourself in it?
 What is your company mission statement? Values?
 What is the legal form currently? What will it be if funded?
 Who is the target market for your goods or services?
 What unique personal or business relationships will you involve?

Who else is out there? Review the Competition

You will in all likelihood be entering a market where others are already at work with varying
levels of success.

At this point, your business plan needs to address that competition.

Identify the existing players. Describe their challenges and their success.

If there are absolutely no competitors in the marketplace, congratulations. But be ready to

explain why a good business opportunity like yours is so unique that no one has ever thought of
it.

Additional headers to follow...discussion of NDA issues, engaging with investors/lenders as

partners, other critical elements of a successful business plan, strategies/posture for
presentation...