Articles and Resources

Business Plan Basics
By Palo Alto Software, Inc.

The best way to show bankers, venture capitalists, and angel investors that you are worthy of financial support is to show them a great business plan. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen. Your business plan is like your calling card, it will get you in the door where you'll have to convince investors and loan officers that you can put your plan into action.

Once you have raised the money to start or expand your business, your plan will serve as a road map for your business. It is not a static document that you write once and put away. You will reference it often, making sure you stay focused and on track, and meet milestones. It will change and develop as your business evolves.

Do I need a business plan?
Not everyone who starts and runs a business begins with a business plan, but it certainly helps to have one. If you are seeking funding from a venture capitalist, you will certainly need a comprehensive business plan that is well thought out and contains sound business reasoning.

If you are approaching a banker for a loan for a start-up business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favorably on your application if you have one.

Reasons for writing a business plan include:

• Support a loan application
• Raise equity funding
• Define and fix objectives and programs to achieve those objectives
• Create regular business review and course correction
• Define a new business
• Define agreements between partners
• Set a value on a business for sale or legal purposes
• Evaluate a new product line, promotion, or expansion

What's in a business plan?
A business plan should prove that your business will generate enough revenue to cover your expenses and make a satisfactory return for bankers or investors.

1. Executive Summary--features the highlights of your plan and sells your idea in two pages or less.
2. Company Summary--a factual description of your company, ownership, and history.
3. Products (or Services or both)--describes your products and/or services and how they stand out from competitive products and services.
4. Market Analysis-provides a summary of your typical customers, competitive landscape, market size, and expected market growth.
5. Strategy and Implementation-describes how you will sell your product, how you will put your plan into action, and establishes milestones.
6. Management Summary-provides background on the management team, their experiences, and key accomplishments.
7. Financial Plan-contains key financials including sales, cash flow, and profits.

What makes a successful business plan?

• A well thought out idea
• Clear and concise writing
• A clear and logical structure
• Illustrates management's ability to make the business a success
• Shows profitability

How do you write a business plan?
Sitting down looking at a blank computer screen as you prepare to start your business plan can be daunting. You may want to look at some alternatives that will make the process a bit easier.

Hire a Professional
A professional consultant will create the business plan for you, but you still have to be prepared to think through your business and understand the underlying concepts in your business idea. You will have to work closely with the consultant to ensure that he or she develops a good plan that accurately represents your business or business idea. You can find a list of business planning consultants at www.planconsultants.com.

Buy a Book
There are many good books on the market that will help you to understand what needs to go into a good business plan. You can read Timothy Berry's "Hurdle: the Book on Business Planning".

Use Business Planning Software
A good business planning software package will provide you with an outline for a well-developed, objective-based and professional business plan. Software packages will remove the problem of starting from scratch by structuring your plan for you. The software should ask you the right questions that will pull out the most important underlying concepts within your business idea. Find out more about the leading software package on the market, Business Plan Pro.

Business planning resources

Business Plan Mistakes
By Palo Alto Software, Inc.

Often you may hear about what a business plan consists of. While including the necessary items is very important, you also want to make sure you don't commit any of the following common business plan mistakes:

1. Putting it off.
Don't wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.

Don't wait to write your plan until you think you'll have enough time. "There's not enough time for a plan," business people say. "I can't plan. I'm too busy getting things done." The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.

2. Cash flow casualness.
Cash flow is more important than sales, profits, or anything else in the business plan, but most people think in terms of profits instead of cash. When you and your friends imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don't spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.

3. Idea inflation.
Plans don't sell new business ideas to investors. People do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas.

Don't overestimate the importance of the idea, particularly the importance of the uniqueness of the idea. You don't need a great idea to start a business; you need time, money, perseverance, common sense, and so forth. Very few successful businesses are based entirely on new ideas. A new idea is much harder to sell than an existing one, because people don't understand a new idea and they are often unsure if it will work.

4. Fear and dread.
Doing a business plan isn't as hard as you think. You don't have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).

5. Spongy, vague goals.
Leave out the vague and the meaningless babble of business phrases (such as "being the best") because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.

6. One size fits all
Tailor your business plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.

7. Diluted priorities.
Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.

8. Hockey-stick shaped growth projections.
Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

Buying a Business

Copyright © 2005 The Powerful Promoter “A needle in the haystack!” or “A diamond in the rough”, both popular saying’s apply to what’s involved in finding your ideal company to buy! Any seasoned business buyer will tell you that finding viable companies that can be purchased for reasonable terms is a “numbers game”. Thousands of company purchase candidates defined, that lead to hundreds of contacts to be made, resulting in tens of acquisition conversations that hopefully lead to ONE company acquisition! Many merger and acquisition veterans will tell you “It takes 100 potential opportunities to get one good deal” … a numbers game. At any point in the business buyer’s purchase process, for any number of valid or invalid reasons, either the business buyer or the business seller can call off the potential deal. Most potential business mergers and acquisitions pursuits do fall apart. The human and financial costs to both parties involved can be significant, sometimes devastating.

Start thinking about buying an established business if you want to avoid the immense risks involved in starting one. Not everyone wants to start a business from scratch, and buying a business with the infrastructure in place lets you focus on building it up, as opposed to getting a new business off the ground. This is not to say that it’s easy to buy an existing business; it’s a fairly complicated process throughout which you need to know exactly what you’re doing. First off, decide that you do want to buy before you begin your research. This way you will look at options more carefully. A particular business may not be exactly what you’re looking for, but if you’re sure that you do want to buy, then you won’t brush it off immediately, without first considering how you might grow with it. Business Broker’s deals with a wide range of businesses and will surely help you make up your mind quickly. Talk to the people in your life who are likely to be affected by the venture. Let them know the hours that you are likely to have to work and the risks involved. You might need their support if you initially go through a rough patch.

Using a Broker It would be more prudent to use the services of a broker in buying your business. All the important groundwork in terms of research would already have been done. And, you can focus on finalizing the deal. A broker will handle all those complicated negotiations which you may just find too much to handle. And, when things turn unpleasant you can leave it all to your broker. Brokers are supposed to have systems in place to take care of deals. The sale is usually a time of some stress for both the buyer and the seller, so having someone to put everything together and take care of the paperwork is very helpful. You will appreciate a broker’s services as it will allow you to concentrate on getting a worthwhile deal, and not have to worry about whether all the documents -and there are a lot of them- are in order. Of course, your broker will charge you a substantial commission, but it will all be worthwhile if you get the deal you want.

Business Essentials Once you figure out your particular area of interest, think about the size of the business that you want to buy, the location of prospective sellers etc. Know your financial resources so that you don’t waste time looking at businesses that are beyond your reach, even if you have always fantasized about being a ship-builder. Identify your strengths. Are you good at sales? Operations? Look out for a business that is in a position to benefit from your particular strengths. Once you’ve identified a business that you want to buy, make contact with the seller but hire professionals i.e. accountants, attorneys, etc. to take care of different aspects of the purchase.

Allow yourself a gut instinct about the seller and the business. Feel free to ask why they want to sell the business, and evaluate your decision based on their reasons. It might just reassure you that you should go ahead with the deal.

Company Valuation There are many methods of valuing a company, and it is up to the seller to decide how to go about it. Make sure the price is a fair representation of how valuable the company is likely to be to you. It is obviously disadvantageous to you if a non-performing company that is heavy in assets is priced based on the net value of its assets. The asking price is negotiable. Even in a situation where the seller is firm on her price, enquire as to the method of valuation and challenge it if you think it leaves you with an unfair deal. While negotiating, be prepared to challenge the seller with facts and statistics. Find out what specific concerns the seller has about the deal, and address them. Be sensitive to the fact that selling a business can be an emotional process but at the same time make sure that you don’t end up paying for its sentimental value.

Financing the Deal To finance the deal, seller financing is probably the best option available to you. You won’t get a bank loan without offering 100% collateral. The Small Business Administration does offer some financing but only for deals that meet a strict set of criteria. The good thing about seller financing is that it shows that the seller is being serious and honest about the deal, and is not trying to offload an ailing business onto you. It shows that he has enough faith in the business he is selling to share the risk involved in running it with you. There’s no better way to be sure that a business is really worth buying. Seller financing also allows for far greater flexibility than any other kind of financing. Most people who start looking for a business to buy never actually end up buying. If your first deal doesn’t come through, don’t let it deter you from looking for other businesses. Learn from the experience and use it to sharpen your skills so that the next time around, you know exactly what you want and how to go about getting it.

Services 1. Initial Consultation - You will have a one-on-one via phone or in person with a broker in your area to discuss all of your questions and concerns regarding the business buying process. Our brokers are trained to help you with business concerns as well as personal concerns. We realize that this is not only a financial decision, but a lifestyle decision as well. 2. Buyer Profile - Once all of your concerns have been addressed and you have signed a buyer registration agreement, your Business Broker will create a buyer profile by which he/she can search for the exact type of business you are looking for. 3. Viewing Listings - Once we have entered your criteria into our database, our computer will generate matches. Your professional business broker will then go with you to take a look at the listing and address any questions you may have. 4. Offer To Purchase - If one of these businesses fits what you are looking for and you have had a chance to think about making an offer (sometimes you may have to make several visits to the business to be certain), your broker will help you fill out an offer sheet. This sheet details the price and terms at which you would like to purchase the business. Here the experience of your broker will help you in making the best offer. 5. Due Diligence - Once the offer has been accepted, the buyer conducts a period of research on the business. Basically, due diligence is the process by which you work with the seller to verify the financials of the business as well as a period in which you learn the inner workings of the business. This process typically takes two weeks. A buyer may want to bring in his/her attorney or CPA to help during this phase of the purchase. Your broker will be available to assist you in the due diligence process in every way. 6. Contract & Closing - Following a successful due diligence period in which all of your concerns have been addressed, a contract will be drawn up between yourself and the seller of the business. Typically this is done between your attorney and that of the seller. If the contract meets all contingencies you have set forth, it can be signed and a closing date set. At closing, the business will officially change hands and you will have completed the buying process. Keep in mind that our brokers are here for you every step of the way to ensure that you are making informed decisions.

Matt Bacak, The Powerful Promoter and Entrepreneur Magazine e-Biz radio show host, became a "#1 Best Selling Author" in just a few short hours. He has helped a number of clients target his specialty, opt-in email direct marketing systems. The Powerful Promoter is not only a sought-after internet marketer but has also marketed for some of the world's top experts whose reputations would shrivel if their followers ever found out someone else coached them on their online marketing strategies. For more information, visit Bacak's site at http://www.powerfulpromoter.com or sign up for his Powerful Promoting Tips at http://www.promotingtips.com