Bankable Business Plans / Edition 1 available in Hardcover
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- Cengage Learning
Bankable Business Plans reveals the secret of creating a compelling and successful business plan for anyone who ever dreamed of starting or expanding an enterprise. This invaluable book guides readers through a comprehensive, step-by-step process to produce a professional-quality business plan that will attract the financial backing entrepreneurs need. Bankable Business Plans is the only book on the market that demonstrates how to make each business plan uniquely suited to every endeavor. It is also the only book which explains how to employ the guidelines that banks, venture capital firms and the Small Business Administration use to grant loans and other financial support to businesses. By describing how to apply the relatively unknown, but easily available Risk Management Association data to each business concept, author Edward Rogoff provides a virtual answer key to anyone seeking financial support for a business idea. Rogoff's years of experience in both founding and improving startup and established companies, as well as teaching entrepreneurship to college graduate and undergraduate students, enables him to delineate the elements that make a business plan attractive to investors and lenders. Bankable Business Plans is essential for anyone interested in opening a business, expanding an existing enterprise, or simply testing the financial reality of a dream.
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About the Author
Edward Rogoff founded and served as CEO of two media companies which owned and operated 23 radio stations throughout the United States. From 1998 to 2002 he was the Director of the Lawrence N. Field Center for Entrepreneurship and Small Business, one of the largest entrepreneurship centers in the United States, where he helped hundreds of entrepreneurs create business plans and developed corporate support and managed diverse funding sources for the Center. Rogoff designed the entrepreneurship curriculum at Baruch College where he continues to teach both graduate and undergraduate students as a professor in the Zicklin School of Business at the City University of New York. He received his B.A., M.B.A., M.A. and Ph.D. from Columbia University, where he wrote his dissertation under Nobel Laureate William Vickery. He continues to work extensively as a business consultant for firms specializing in technology, communications, urban transportation, private education, and venture capital.
Read an Excerpt
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.
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Table of Contents
THE POWER OF A BANKABLE BUSINESS PLAN,
WHAT A BANKABLE BUSINESS PLAN IS AND HOW IT CAN HELP YOU START A SUCCESSFUL ENTERPRISE,
THE TEN ESSENTIAL ACTION STEPS,
DEFINE YOUR COMPANY,
IDENTIFY YOUR COMPANY'S INITIAL NEEDS,
CHOOSE A WINNING STRATEGY,
ANALYZE YOUR MARKET,
DEVELOP A STRONG MARKETING CAMPAIGN,
BUILD A DYNAMIC SALES EFFORT,
DESIGN YOUR COMPANY,
TARGET YOUR FUNDING SOURCES,
EXPLAIN YOUR FINANCIAL DATA,
Essential Financial Statements For Lightning Larry's, Inc.,
Cash Flow Statement,
Year 1 Balance Sheet,
Year 1 (Includes Purchase and 1 Year of Operation) Statement of Sources and Uses of Funds,
Lightning Larry's, Inc.,
USE THE RMA DATA,
PUTTING IT INTO ACTION,
WHAT A BUSINESS PLAN SHOULD LOOK LIKE,
HOW TO CREATE A TIME LINE,
DEMONSTRATE THAT YOU CAN MANAGE CONTRADICTIONS,
PRESENT YOURSELF IN THE BEST LIGHT,
MAKE A GREAT IN-PERSON PRESENTATION,
OUTLINES AND A SAMPLE BUSINESS PLAN,
S & J Advertising,
Back Cover Material,