Today's Top TipOnline business plan scams are alive and doing very well. There's even a new wrinkle: the "crowd funding". Trust me, no one makes money but the promoters in this scheme.
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You think evaluating business plans is a piece of cake? It might be relatively easy for a classroom instructor. It is pure hell for investors.
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Tales of "lousy business plans" are legendary. Fred Smith, founder of Federal Express, received a "C" in his business school presentation of his idea. "Not practical," said the Prof. Yeah, right. And bees can't fly.
Every single investor wants The Next Great Thing, no matter what it is. And no matter what it costs.
Yet there is not a business plan that was ever written that adequately describes a business.
Honest. I've read hundreds of them.
So what's an entrepreneur to do?
There's just no getting around the fact that each and every business plan needs certain information. Every lender/investor looks for some specific pieces of information in evaluating business plans. Begin evaluating business plans by looking at:
Take the time to learn how to write a business plan. This site is an excellent beginning.
Don't be concerned if you go through several drafts. When you hit the right tone, you will know it.
If you start out with a box full of information, and end up with 20 pages, you are definitely on the right track.
As hard as it is to believe, a conversational style business plan is often your best choice.
This is not a dissertation. It is an introduction. The lender/investor is meeting you, perhaps for the first time. Let your own voice come through. Don't SELL your company. Just tell about it. Your enthusiasm and commitment will do the selling.
Before ever submitting your business plan, make sure you have these documents in hand:
Obviously, if your company is smaller, or just beginning, you won't have these documents. That's fine. Evaluating business plans from startups is a bit of a different process. But do gather together everything you've got, and make sure you have an extra copy on hand to give to the lender/investor. If the interest is there, be ready to move.
Or, you could say, "Hey, let me get back to you in a few days when I've had time to look in the attic." It's your choice.
First, evaluating business plans means knowing what a good one is, what a bad one is, and how to tell the difference. Read some. See the Business Plan Library for an inexpensive way of accessing several hundred of them.
It will only take reading a few of the sample business plans included in each package. Then you will know what lenders know: That 95% of the business plans written are soooo dull, so blah, so uninspired that it is difficult to say Yes to any of them.
That is what every investor and every lender is faced with day after day after day. Evaluating business plans is boring. Once in a great while a business plan will come across that is original, that has a bit of pizzazz. It may not be the best idea around, but it gets read.
That's your first goal: Just get it read.
Above all, don't be afraid to be human.
MAKE A GREAT FIRST IMPRESSION
From the moment the envelope arrives at its destination, you need to be spiffed up. All the basics, of course: No tattered pages, no pale print.
But first, arrive with class. Does that mean via FedEx? Not by a long shot. There was a time when this sort of flamboyance was accepted, even respected. No more. Yesterday I received two pieces: an expensive software disk/book, and a book from Amazon. Today I received a painting from a client. None of these items came via FedEx, or any other delivery service. All came via the U.S. Postal Service. I was surprised, but pleasantly so. All arrived in great condition, and each was shipped at a very reasonable cost.
And when the investor first sees your business plan, make sure that first impression is a good one. Pictures, images, graphics, charts -- use whatever represents your company in the best light. Yes, right up front on the cover. You honestly would not believe how far ahead this places you.
Bankers and investors work very differently in evaluating business plans. Being aware of those differences will help you create a business plan best suited for your purpose.
Your local banker is not usually a decision maker. S/he is more likely a conduit of information. The local banker can tell you a great deal about what the bank is looking for, what industries, what range of funding, etc. But the real business plan evaluation is done "downtown". You will probably never meet the folks "downtown", so your plan needs to communicate a huge amount by itself. SBA loans often fall into this category.
Venture capitalists will evaluate a business plan by process of elimination. The first run through eliminates about 95% of the business plans submitted. Yeah, your written plan really has to grab them, right out of the starting gate. After that it becomes more of a conversational communication. You may be asked to give presentations, provide additional information, etc.
Angel investor groups are often more committee
dominated. One or more investors review your initial presentation
and select those who will present to the group. The actual group
presentation could be a few minutes to an hour or so, depending on
the angel group.
The thread that binds all these procedures together is this: YOU'VE GOT TO GET THEIR ATTENTION. And once you've got it, you've got to show that yours is the best opportunity around.
I know this is hard to believe, but simply because you are taking
the time to research business plans now, you are absolutely 90% of
the way there. When lenders are evaluating business plans, yours is
very likely to land on top.
I'm an idealist. I don't know where I'm going, but
I'm on my way.
The People's Poet
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