Author Biography: Edward G. Rogoff is an Associate Professor of Management at the Zicklin School of Business, Baruch College, City University of New York. He has served for more than eight years at the Lawrence N. Field Center for Entrepreneurship, and is currently a Director. He lives in New York City.
About the Author
Edward G. Rogoff is the author of The Entrepreneurial Conversation. He is a professor in the department of management of the Zicklin School of Business and the academic director of the Lawrence N. Field Center for Entrepreneurship and Small Business at Baruch College. His articles have appeared in a variety of publications, including Family Business Review, Forbes, The Journal of Business and Entrepreneurship, and The New York Times. He is the founder of Newton Business Programs, an entrepreneurial-focused company which offers business training, and has served as a CEO for two media companies that owned more than 20 radio stations and as a consultant for a variety of businesses, including venture capital firms and entrepreneurs. He lives in New York City. Jeff Bezos is the founder and CEO of Amazon.com.
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Bankable Business Plans
By Edward G. Rogoff
Rowhouse PublishingCopyright © 2007 Edward G. Rogoff
All rights reserved.
THE POWER OF A BANKABLE BUSINESS PLAN
WHAT A BANKABLE BUSINESS PLAN IS AND HOW IT CAN HELP YOU START A SUCCESSFUL ENTERPRISE
When individuals come into the Lawrence N. Field Center for Entrepreneurship at Baruch College and sit down in my office, they usually open the conversation with one simple sentence: "I want to start my own business."
The next statement almost invariably includes one of the following four predicaments: "I have a specific idea for a business, but I don't know what to do next," or, "I know what I want to do and how I want to do it, but when I went to the bank for a loan, they said I had to show them something in writing before they would even talk to me," or, "I want to buy a business that I think I can make more successful, but I don't know how to start," or, "I'm an inventor and I've come up with a fabulous new product, but I don't have a clue how to get it manufactured — or sold."
The answer to all of these appeals for advice, whether the individual is opening a restaurant, taking over a competitor's ocarina manufacturing plant (an ocarina is a small, simple wind instrument), building a better mousetrap, selling a new kind of soap, or offering expert financial services to Wall Street investors is: "You need a business plan." Every one of these entrepreneurs is focused on a single goal: to build a successful enterprise that delivers profits and satisfaction to each owner. And no matter what that potential business is, there is one basic tool to employ in achieving that goal: a clear and compelling business plan.
Since I'm always interested in the types of businesses my clients want to develop into profitable and satisfying ventures, I ask them to tell me about their aspirations for the product or service they hope to provide. As they talk, I can sense their excitement and enthusiasm, even if they're uncertain about the next step. My job is to channel their passions into that next step: writing a strong business plan. And that's exactly what I am doing for you in this book.
Bankable Business Plans will help you create not only a strong business plan, but a bankable business plan–one that attracts financial support by meeting the needs of bankers, partners, and investors. By addressing the issues that are important to potential funders, you can convince them to believe in your concept because it will bring them success, as well as satisfaction to you. A bankable business plan is distinguished by certain characteristics: it serves a specific purpose, it doesn't follow formulas, it does follow good business thinking, it can be created regardless of your skills, it focuses on financial issues, and it can be used for starting, growing or buying a business.
Bankable Business Plans Serve A Specific Purpose
A good business plan is simply a document with a specific purpose. It will:
Test the feasibility of your business idea.
Determine the best financial resources to start your business through investors or partners.
Secure enough debt by establishing loans, lines of credit, or payment terms.
Identify the key people to work with you as employees, partners, or consultants.
Establish business relationships with your customers, suppliers, or distributors.
Create an operational template for the successful management of your business.
Most books and programs about creating business plans skip this step of defining the plan's main purpose, which results in plans that don't address the specific concerns of potential lenders, investors, or partners. Bankable Business Plans will enable you to define and accomplish this primary objective, while expressing your own confidence in your concept and attracting the support you need to start a new venture, grow your existing business, or purchase an established company.
Bankable Business Plans Don't Follow Formulas
Most books and software packages about creating business plans urge the reader to follow a template or copy an existing plan without first doing the conceptual work. This method produces a plan that sounds canned, generic, and lifeless, especially to someone who analyzes hundreds of proposals every month. It takes an experienced investor or lender about two seconds to spot a formula plan. Your business concept, and the work you accomplish to bring it to life, will make your plan compelling, and motivate others to support your efforts. Bankable Business Plans will show you how to create a unique, exciting, convincing, and thorough description of your proposed venture.
Bankable Business Plans Follow Good Business Thinking
Creating a business is a process that moves from conceptualization to implementation, and creating a business plan should follow the same sequence. Some books insist that the best way to begin a plan is to answer dozens of highly specific questions, which won't help if you haven't done the conceptual work first. Answering a question such as, "What is your profit goal for years one through five?" when you start to work on your plan, is rather like being asked to write a shopping list before you've decided what to cook. Bankable Business Plans takes you through the entire process from the conception of your initial idea, to testing it against basic criteria, to researching the market and the competition, to developing strategies, and, finally, to creating a plan for implementation. Since your resulting business plan will be based on the steps you took to create your business in your mind, it will be different from any other business plan — and it will be yours alone.
Bankable Business Plans Can Be Created Regardless of Your Skills
Many books and software packages assume that their readers are highly computer literate, with extensive knowledge of Windows, word processing, and spreadsheet programs. These are excellent skills to have and can save you tremendous amounts of time, but Bankable Business Plans is written for people at all skill levels. Although this book does not pretend to be an accounting text book, it will explain exactly what you need to learn and where you'll find the information to complete your financials. Reading this book is about creating a unique, effective business plan based on your enthusiasm for your venture and your willingness to learn about your industry. The only real skills you need to create a bankable business plan are your passion and your perseverance in learning how to do it effectively.
Bankable Business Plans Focus On Financial Issues
Most other books and programs simply ignore the fact that you're writing a document about an enterprise which, like all businesses, exists to make money. Since the people reading your plan will decide to invest in or lend money to your venture based largely on this document, your plan must address their issues. Bankable Business Plans not only takes you through the steps of producing quality financial projections, but tells you how to identify and satisfy specific concerns that matter to potential lenders and investors. Moreover, it is the only book that shows you how to make use of the Risk Management Association (RMA) data to establish your plan as credible. Since most bankers and many investors will compare your projections to the RMA data, knowing how to obtain and use these numbers is like being given the answer key to a test ahead of time.
Bankable Business Plans are for Starting, Growing, or Buying a Business
Whether you're starting a new business, growing an established business, or buying an existing business, you need to create a strong and bankable business plan. Even though the circumstances may vary and certain strategies and funding sources may be more effective than others, your basic business plan will still follow the same primary principles outlined in this book.
Your Business Plan Is An Extension Of You
Many entrepreneurs treat their business plans simply as a foot in the door, designed to elicit interest so the door opens wider. They assume that the plan will produce questions about issues not covered in the document, so reviewers will want to place a phone call or request an in-person meeting to get the answers. In my experience, this attitude is simply the rationalization of someone who is unwilling or unable to produce a quality plan.
Your plan speaks for you. If your plan is inadequate or unfocused, people will assume that you are inadequate and unfocused. If your written plan inspires more questions than positive comments during the initial reading by an executive or at a group discussion of your business concept, you can expect it to be added to the towering pile of rejects.
I am familiar with a mid-sized technology firm I'll call Duke's Photon Farm, which was founded by Duke Williams. Duke had been successful when technology-oriented firms attracted more money than there were places in which to invest it. When the love affair between the financial community and technology cooled, there were more deals than money to fund them, and Duke began to have trouble raising money.
Although he was both the CEO and the Chief Scientist of his business, Duke didn't want to answer questions from potential investors about his company's products or financial structure, including how much new investors could expect to earn from their investments. He produced what he called a business plan, but it was really only a general marketing document. It asserted that the company's products were great and that all Duke's Photon Farm needed to succeed was more money for marketing.
When Duke called to follow up, he was, predictably, asked about his company's products and financial situation and what new investors could expect to earn. But since Duke was both unwilling and unprepared to answer these questions, the discussions never led to the investments he needed. Investors were worried that Duke had something to hide, and since his business plan was inadequate, they felt that Duke was inadequate. After failing to raise the capital he needed to stay in business, Duke closed the barn doors on his Photon Farm, leaving many unhappy original investors, employees, and suppliers — none of whom had anything good to say about Duke or his farm.
Your plan must project who you are both explicitly and implicitly. By stating your background and qualifications, you are providing convincing reasons for others to consider your plan. By presenting a plan that is well organized, complete, easy to read, and persuasive, you are implying that you're the person who can make this business concept a success.
The Six Immutable Points
You can make certain that your business plan communicates your strengths by stressing what I call the six immutable points. When these six points are stated clearly and forcefully in your bankable business plan, your best qualities will be transmitted to the reader. The six immutable points are that:
1. You are profit oriented
2. You are honest
3. You are qualified
4. You are thorough
5. You are committed to meeting everyone's needs
6. You are flexible
Let's look at each of the six immutable points in greater detail, so you can make your business plan as bankable as possible:
1. You are profit oriented. Perhaps it sounds absurd to stress this goal. Isn't everyone profit oriented in the business world? Well, frankly, no. People have many reasons for wanting to start, buy, or build businesses, and profit is not always the most important goal. An entrepreneur may be driven by the desire to be her own boss, or to bring a needed product to the market. Entrepreneurs are also good at attracting people who will participate in the venture for reasons other than profit, such as to get needed experience when starting a new career. However, fundamentally, profit is what drives business and you need to make it clear that profit is your focus.
There are many examples of people who start medical research companies to find cures for diseases that afflict their family member or even a beloved pet. Investors would certainly be skeptical of a business plan for such a venture, wondering if profit were truly the founder's main motive. Funding sources may also be concerned that once the initial goal is met — in this case a cure — the founder's commitment to continue with the business and realize a profit will be negligible.
2. You are honest. If people participate in your plan by investing money, selling you raw materials, extending you credit, or becoming your employees, they need to know that you are honest. I have seen plans corrode people's reputations by leaving out key facts that are eventually uncovered, such as owning a previous business that failed, or by misrepresenting their credentials, such as claiming executive positions they held at a company when they really worked as mail sorters.
Lies are a particularly dangerous trap. I saw a business plan for a media company that listed the schools one of the partners attended and the degrees he earned. The only problem was that they were all fabrications. When one potential investor checked, as he did routinely, he discovered the lie and the plan quickly went into the trash.
Be candid and truthful about the information you present in your plan. Everyone has experienced some sort of failure, whether it's being fired from a job, training extensively for a profession you never entered, or starting a business that went belly up. Being honest about these issues and explaining how you learned an important lesson about yourself or running a business, almost always raises the esteem in which others will hold you.
3. You are qualified. The plan must demonstrate that you are qualified to undertake whatever the proposal requires. Many people feel that they need to possess all the qualifications themselves, but the business plan only needs to demonstrate that you are capable of identifying colleagues or becoming partners with others who have the technical knowledge you may lack. If you've been an airline pilot all your life, and want to open a restaurant that features squid-flavored pancakes, you must explain how you will compensate for this lack of experience, preferably by hiring a manager who has run a successful restaurant.
If your team is already in place, mention their qualifications along with yours. This will be presented briefly in a short, compelling argument for your concept, called an executive summary, more comprehensively in your business plan text and completely in your appendix, which should feature every résumé, including your own.
4. You are thorough. The plan must be comprehensive in your approach to your venture. In Part II, I've created Ten Essential Action Steps, which must be followed completely. Make a copy of the ten action steps and keep them next to your computer as you write your proposal. Don't skip any of these steps!
I recall seeing a plan for a chain of gyms that failed to mention how the owner would acquire the physical facilities in each community. When I asked about this missing piece, the entrepreneur said that he figured he'd go to a real estate agent in each town after he had raised his millions and was ready to open his facilities. Bad answer! Obtaining accurate real estate projections on both space availability and rental costs are critical steps in creating an effective business plan for a chain of gyms. This entrepreneur's omission may have been a sign of his inability to understand all the requirements of running a profitable business.
5. You are committed to meeting everyone's needs. Entrepreneurs have moral, ethical, legal, and self-interested reasons to treat everyone who participates in their enterprise fairly. There are contracts with the capital sources, as well as numerous legal requirements regarding the treatment of investors and employees. These include providing timely and complete financial statements, keeping the company current in all its taxes, and, of course, sharing profits according to the company's shareholder agreements. The plan must demonstrate that you are aware of these responsibilities, that you take them seriously, and will dispatch them fully.
I am familiar with the owner of an entertainment company, I'll call him Mr. Prince, who was brilliant, but scattered and disorganized. Mr. Prince raised a great deal of money because his plans made great sense and he was very smart. However, he never raised capital from the same source twice. Mr. Prince's disorganization prevented him from meeting the deadlines for providing financial statements to his investors and lenders, who liked his business, but refused to work with a company that didn't meet these basic requirements.
Excerpted from Bankable Business Plans by Edward G. Rogoff. Copyright © 2007 Edward G. Rogoff. Excerpted by permission of Rowhouse Publishing.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Foreword Jeff Bezos XV
The Power Of A Bankable Business Plan 1
What A Bankable Business Plan Is And How It Can Help You Start A Successful Enterprise 3
Bankable Business Plans Serve A Specific Purpose 4
Your Business Plan Is An Extension Of You 7
Entrepreneurship Is A Team Sport 14
The Ten Essential Action Steps 17
Define Your Company: What Will You Accomplish For Others...And Yourself? 19
What Will Your Business Accomplish For...
Your Customers? 21
Your Investors? 21
Your Lenders? 23
Your Suppliers? 24
Your Employees? 25
Identify Your Company's Initial Needs: What Will You Require To Get Started? 29
The Major Expenses 32
Real Estate 33
Employees and Employee Benefits 33
Startup and Capital Costs 34
Advertising and Promotion 34
Choose A Winning Strategy: What Will Distinguish Your Product Or Service From Your Competition? 37
Create A Powerful Competitive Advantage 38
Use aSWOT Analysis To Determine The Competitive Advantage Of An Existing Business 44
Plan Ahead: Anticipate An Exit Strategy 45
Match Your Strategy To Any Type Of Industry 45
Stagnant and Declining 52
Industries with Dominant Leaders 54
Analyze Your Market: Who Will Want Your Product Or Service? 57
Research Your Potential Market Thoroughly 60
Target Your Market Like A Bull's-Eye 65
Test Before You Launch 66
Develop A Strong Marketing Campaign: How Will You Reach Your Customers And What Will You Say To Them? 69
The Four Ps 72
Build A Dynamic Sales Effort: How Will You Attract Customers? 83
Get An Order Today-Or Yesterday 87
Make Sales A Priority For Everyone 87
Never Delegate Yourself Completely Out Of Sales 88
Create The Right Ethical Environment 89
Be Highly Organized 89
Compensate Based On Long-Term Performance 90
Your Sales Force Can Be Your Competitive Advantage 91
Design Your Company: How Will You Hire And Organize Your Workforce? 93
Structuring Your Company 96
Product Organization 96
Geographical Organization 97
Functional Organization 97
Matrix Organization 98
Hybrid Organization 99
Means Of Control 99
Human Resource Management 99
Legal Structures 103
Matching The Legal Structure With Your Investors 105
Target Your Funding Sources: Where Will You Find Your Financing? 107
Potential Sources Of Financing 111
How Banks Decide On Loans 115
Explain Your Financial Data: How Will You Convince Others To Invest In Your Endeavor? 119
The Essential Financial Statements 121
The Six Key Financial Assumptions 125
How To Create Statements 128
Financial Statements For Lightning Larry's, Inc. 131
Use The RMA Data: Check Your Answers Against The Answer Key 139
Working With The RMA Data 140
The Answer Key Revealed 143
It Really Is That Simple 146
RMA Data Pages-Retail Florists 148
Putting It Into Action 153
What A Business Plan Should look Like 155
The Physical Qualities 156
The Actual Layout 159
Have Outsiders Read It 167
How Long Should It Take Me? 168
How To Create A Time Line 169
The Primary Components 170
Examples Of Time Lines 172
Demonstrate That You Can Manage Contradictions 177
Keep It Simple...Yet Detailed 177
Focus On Growth...Even In Mature Industries 179
Reassure Investors...Even With Competition All Around 181
Commit To Your Plan...But Be Willing To Pursue Other Good Opportunities 182
Present Yourself In The Best Light 185
The Text Of Your Business Plan 188
Your Resume 190
Make A Great In-Person Presentation 195
Outlines And A Sample Business Plan 203
Outline For A Simple Business Plan 204
Outline For A Complex Business Plan 206
S & J Advertising Business Plan 223
RMA Data - Advertising Agencies 237
What People are Saying About This
Here's the book entrepreneurs have been waiting for . . . a no-nonsense approach to putting in writing what lenders and investors demand to see. [This book] tells entrepreneurs exactly how to pull together what they need before they see the people with the money. (Frank Hoy, professor of business, University of Texas-El Paso)
Most Helpful Customer Reviews
For anybody who wants to raise money for their new business, this book is a must read. I am toying with the idea of starting a IT consulting company and this book has forced me to really think things through. It is not easy to get a succesful venture started and it helps if you do all the hard work before you meet with potential investors.
OK ¿ so you want to start a business but you do not have a Mickey Goldmill 'Rocky Balboa¿s trainer in the Rocky movies' in your corner. Well, you can get the next best thing -- Ed Rogoff¿s ¿Bankable Business Plans.¿ Rogoff¿s ¿Bankable Business Plans¿ guides you through the fundamentals of building a plan, illuminates some all too common errors, as well as uncommon successes, provides useful exercises to sharpen your message, and, in general, challenges you to take a disciplined and comprehensive approach to pursuing your dream of starting your own business. Writing a business plan is like training to be a boxer -- you need a plan and you have to work at. So fire up the laptop, fire up your heart by watching the old Rocky trailer ('type in 'Rocky trailer 1' into Google and you will see YouTube of it), open up Rogoff¿s book and start typing! Good Luck!