Funding Your Business Dream

Editorial Note: Most of the content that follows is from an article written by the author and originally published in 1991. In March 1996 Barb began publishing it on the web in an effort to assist a struggling entrepreneur she met during one of the weekly Online Marketing Insider chats on the PRODIGY® Network. The article is perpetually updated to include current resources and pointers to more helpful information that can now be found on the World Wide Web.

If you are considering entrepreneurship or are operating a thriving company, it's likely you have asked yourself at least once where you will get the money to start or expand your business. If you only need a few hundred or thousand, you might find the money you need is as close as your garage, attic, or your credit card. But if your needs are larger, you will most likely find yourself in front of an outside source that will require detailed information on you as well as your business. Perhaps you will be facing a financial angel, a private investment group, or even a local bank or savings and loan association. But how will you attract the attention you need to convince a potential lender or investor to hand over the money you are seeking?

YOU NEED A PLAN

How much money do you need? Why do you need it? When do you need it? What are you willing to pay to get it? When and how can you pay it back? The money keepers need your answers to these questions before they will even consider helping you.

I own several books about writing business plans as well as three software programs which claim to build your business plan for you. While they contain similar information, no two parallel in their suggested business plan outlines. I reviewed a number of business plan development resources and evaluated them all from a marketing perspective. While the manuals to the software included some valuable tips, those same tips are included in books which cost a lot less and the formatting capabilities of the software packages were just too limited.

In December 1991, I came upon the book, The Successful Business Plan: Secrets & Strategies, by Rhonda M. Abrams. She interviewed several well-known venture capitalists, successful corporate executives and entrepreneurs and included many of their comments in her book. While she structured her business plan outline a little differently from mine, it is the closest to what I know works in the real world, at least in the high-tech industries. So, I recommend you read her book and use my outline to produce the best plan for your business venture.

I prefer to use three-ring binders to store and present business plans. The pages turn easily, and the end product is more durable. The one-inch binders work well for most small to midsize businesses. To keep the information organized and easy to find, I customize and use the section dividers produced by Avery Corporation.

Business Plan Outline

1. Executive Summary

The executive summary should tell your entire story in approximately two to four pages (depending on plan size). You should use it as your primary marketing tool to capture the interest of a prospective lender or investor and to stimulate them to read the entire plan. You may find it easier to write the Executive Summary after you have completed the rest of your business plan. Make sure that the following questions are answered in it:

• What kind of business are you in?
• What is your business mission?
• When did the business start?
• Who runs the company?
• Who is seeking money?
• Why is the money needed?
• How will the funds be used to benefit the business?
• Why does your need for funds make good economic sense?
• How and when do you plan to repay the funds?

I used to bind and present the Executive Summary separate from the business plan; however, experience taught me that although the Executive Summary was primarily used to generate interest, when a prospective lender or investor read the entire plan, they also wanted to refer back to the Executive Summary and often couldn't locate their copy when they sat down to review the business plan. So, I now prepare two copies of the Executive Summary for every business plan. One I incorporate in the contents of the plan and the other I bind separately to use as a promotional tool.

2. The Company

Here is where you provide detailed background information about your company. Describe its legal, administrative and financial structure. Describe its geographic location and the actual business site and how the two work to your competitive advantage. Share the history behind your company and the roles of key personnel in it. Expand on your mission statement and what you have done to fulfill it so far. Describe your products and/or services.

Research Tip: Ask one of your community's most reputable local commercial real estate agents to evaluate your location to help you determine whether a move would enhance the viability of your business plan. His competitive analysis should point out the pros and cons of your location as well as provide comparable information about your competition.

3. Industry Analysis

How well do you know your industry? Is it new, stable, growing, or heading in new directions? Like it or not, you may need to do some research to get investors seriously interested in your plan. This section is where you want to expose enough about your industry to gain the reader's confidence that you are knowledgeable in your field. Be sure to address the issues of technology, seasonality, regulatory compliance, and environmental concerns. Support your findings with statistical data.

Research Tip: Trade publications and associations often provide statistical and other pertinent data. Many times, if you are a member of a trade association within your industry, you can find a "mentor" who will help you obtain further information. Often times, you can also pick up some valuable insight by visiting webs of industry professionals and resources.

4. Market Focus

Describe your geographic, psychographic and demographic markets in detail. Tell what, why, where, when and how your customers buy. What trends impact the success of your business? How will you address those trends to increase your market share?

Research Tip: Your chamber of commerce, newspaper publisher and television stations should be able to provide you with all the statistical data you need for little or no charge. Better yet, check out the statistics available on the Net.

5. Competitors

Find out everything you can about your competition as you will need to describe who and where they are and list their capabilities. Tell how your company holds or can gain the competitive advantage in your marketplace.

Research Tip: Before you begin your research, read How to Check Out Your Competition by John M. Kelly (ISBN 0-471-85670-3).

6. Marketing & Sales

What are you selling? Describe your products and/or services. What are you doing to market your business and generate sales? Include samples of your most successful advertising and direct mail campaigns. Describe your public relations and networking activities. You need to tell about past and present activities as well as your plans for the future. Describe your sales team and what you are doing to help them achieve their goals. Are you providing staff training and all the necessary sales tools? Include realistic budget and sales projections.

Research Tip: Read Guerrilla Marketing Weapons by Jay Conrad Levinson (ISBN 0-452-26519-3). If you are going to be adding the online venue to your marketing plans, be sure to review the latest books on the subject, including Guerrilla Marketing Online, the one Levinson cowrote with online industry veteran, Charles Rubin. Read Street Smart Marketing by Jeff Slutsky for some great ideas on creative ways to improve your marketing plans for the 90's. And before you leave today, be sure to check out the marketing book lists from Barb's Personal Reading Library.

7. Operational Issues

How do you run your business every day? Evaluate your business facilities, including location, size, and lease or terms. For your plan, focus on those issues instrumental to the success of your business. Be sure to account for any new governmental policies or recent regulations which could effect your success. For instance, how are you complying with the Americans with Disabilities Act? Environmental issues top the list of concerns for 90's businesses and prospective investors. Incorporate how you are meeting those concerns in your daily operations.

Research Tip: Again, a good commercial real estate agent and your trade associations can provide valuable information to help you in completing this section.

8. Human Resources

The people responsible for directing the success of your business should be highlighted in your business plan. Besides key personnel, describe any outside advisors (such as attorneys, accountants, business consultants) you call on to help you meet the challenges faced by your company. If you do not have a written policies and procedures manual, get it completed before seeking funding for your business and include in your plan a summary paragraph revealing that you have one. Recent legislation has brought many personnel issues to the forefront and prospective investors or lenders will be questioning your policies in evaluating their risk potential. If your policies and procedures are in writing, make sure they comply with current state and federal regulations. (It is a good idea to get a lawyer who specializes in this field to review your manual before you show it to employees). Be sure to include profiles or résumés of the people mentioned here in your appendix.

Research Tip: You can create a personnel policy manual fast by using Personnel Policy software but be sure that the current version covers the ADA requirements.

9. Financial Data

This is the most important section of your plan. Investors and lenders want to see how you have managed your funds in the past as well as now. You must provide current and realistic balance sheets, income and cash flow statements, and financial projections. Be sure to cover credit and collections issues.

Research Tip: Read Winning Numbers by Michael D. Thomsett (ISBN 0-8144-5958-7) for helpful ideas on how to use business facts and figures to your advantage.

10. Ways Up and Out

What are your long-range plans? How will those plans effect potential risk for the prospective lender or investor? What if the investor or lender only wants to make a short-term commitment? How can he or she get out? What options can you offer to reduce the prospective investor or lender's risk and encourage them to stay long-term?

Research Tip: For a better understanding of how investors and lenders evaluate risk, read When the Bank Says No! by Lawrence W. Tuller (ISBN 0-8306-3590-4).

11. The Bottom Line

By the time you are ready to write this section, you should be overwhelmed with excitement and enthusiasm for the prospects of your business. For those of you who are veteran salespeople, you will understand, when I say, "Here is where you close the sale." It's time to summarize the features and benefits of what you are offering the prospective investor or lender. Anticipate possible objections and reinforce why your program makes sense. Why should someone invest in your business?

Research Tip: Read books on sales and negotiating skills. Listen to motivational tapes by positive, proven performers like Tony Robbins and Tom Hopkins. Work on developing a winner's attitude!

12. Appendix

This is the place for supplemental documentation which reinforces facts revealed in your business plan.

Other Helpful Hints

While not part of the outline, the first sheet which should appear as you open your business plan binder is a non-disclosure agreement. You want to discourage anyone from taking your idea and developing it on their own.

Even with the most viable and comprehensive plan, you cannot be assured of success in obtaining the financing you need for your business. Why? Because investors and lenders are people and people are influenced largely by emotion. They must find you not only believable but likable. Encourage everyone who will play a role in influencing prospective investors or lenders to attend motivational seminars; read motivational books; and listen to motivational tapes. You must be ready to sell your plan and the attitude you project during your presentation will have an impact on not only whether you get any money but the amount the investors are willing to risk.

If you are preparing your plan for the benefit of a bank, remember that bankers are taught to use the 5-C formula (Character, Capacity, Capital, Collateral, and Conditions) in determining whether your opportunity is worthy of their participation. While they will scrutinize your character and how economic conditions will affect your repayment schedule, they are reluctant to look at any plan not addressing capital and collateral. They need to be comfortable that you have capital and collateral to secure the loan. So, make sure you have covered all five c's in your plan.

URL: www.westward.com/library/money.htm