Fatal Mistakes To Avoid When Writing A Business Plan…
By Daniel M. McGilvery
Too Much Information
When is a 25-page business plan better than a
200-page business plan. The answer is - always.
Most investors have a mental checklist of half dozen or so specific points that they look for in a business plan. Everything else just gets in the way and the last thing they want to do is wade through pages and pages of tedious and often extraneous narrative. Long complex paragraphs that fill up half a page are about as welcome as Mike Wallace knocking on your door.
The purpose of your plan is not to impress the reader with the depth and extent of your knowledge. Your objective is to focus on the key elements of the plan and make your case as succinct and as straight forward as possible. If you have pages of information that you just can't bear to part with, put them in the back of the plan under an addendum and reference the inform-ation in the body of the plan. The reader then has the option of reviewing this information if they think it's important.
Hiding Weaknesses
One of the more difficult aspects of writing a good business plan is effectively dealing with problems or weaknesses - and every business has them. Here are some of the more common theories offered by unsuccessful plan writers.
·Why draw unnecessary attention to a negative
·If we ignore the weaknesses, they may go away
·Once we get funding, then we can deal with the problems
·What the investors don't know won't hurt them
·It works for Tony Robins
Clearly you want to put your best foot forward but ignoring or glossing over a negative issue simply because it doesn't help your cause is potentially very damaging and is very often fatal. Like a heat-seeking missile, if there is a weakness in your product, service or strategy, the savvy investor will find it and probably within the first few minutes. Once this subterfuge is uncovered and it is obvious to everyone that you haven't been completely forthright, the next logical question is "what else haven't you told me." When you've lost this element of trust, you've lost the opportunity.
The best way and really the only way of properly handling problems and weaknesses is to get then out in the open and to have a detailed and well thought out action plan that effectively addresses each problem.
Distribution Channels
The portion of your plan that deals with channel strategies is fraught with potential landmines especially if you don't have a thorough understanding of distribution. How your product reaches the market is unquestionably one of the most important aspects of your business plan and your ability to effectively articulate this strategy is critical. At all costs, resist the temptation to cover all bases by listing every imaginable channel possibility.
"We will market our widgets via Internet, catalogs, distributors, value added resellers, infomercials, wholesalers, direct mail, agents, direct field sales, telemarketing, retail outlets and - oh yes smoke signals in selected areas."
What this tells the investor is that you don't have a channel strategy.
Competitive Analysis
The operative word here is "analysis." Listing the name and address of your competitors is NOT
a competitive analysis. The investor is interested in knowing what you know and expect to see from your competitors near term and longer term. What is their strategic direction, their core competencies and what makes them tick. Why do customers buy from them. Is there a possibility that they might enter into strategic relationship or an acquisition (or be acquired) and by whom. How good is their sales and support organization. What is their funding position. What are their weaknesses and can they be exploited.
Knowing little or nothing about your competition is evidence that you haven't done your homework. While it may not be fatal blow, it certainly doesn't help your cause.
Legal Entanglements
Investors today are very conscious of potential legal problems that may be lurking around the
corner. If they have any interest in your plan and business proposal, they will conduct their own due diligence. The time to address any potential legal problems, however, is during the plan review. Here are some questions to ask yourself if you're not sure of potential legal issues:
·Was your product developed while you were employed somewhere else
·Are there potential employment contracts or non-compete conflicts
·Is there any possible patent infringement issues
·Are there any disgruntled former employee(s) who could sue your company
·Is there clear ownership of your product or service
If you have doubts about any of the above questions, it's probably a good idea to have an attorney review and resolve the issue before you meet with an investor. A good rule of thumb is that you want to avoid surprises at all costs.
Assessment of Risks
Risks are different than weaknesses in that they deal with the future and are normally outside the realm of your business. Are there market forces that could prevent your plan from being successful and if so, what are they. Some common sense should lead you through this exercise. I would, for example, leave out world wars or Armageddon but I would consider the possible impact of new technology, e-commerce, changes in consumer demand and a variety of other issues that could negatively impact your business.
Financial Projections
You're sitting across the conference room table from your prospective investor. He's read through your plan, asked a lot of tough questions but things have gone reasonably well - so far. Then he turns to the financials.
There is a long pause and then he looks at you and asks, "what data do you have to support these projections?"
Dead silence. Sweat is starting to accumulate on your upper lip. You glance over at your finance guy who avoids eye contact but still manages to shrugs his shoulders as if to say "hey, I'm just the messenger."
"Well, ah - ah - our projections were based on our analysis of the market, competition and what we feel are the advantages of our product line."
"Okay, show me your analysis..." Point - set - match.
Here's a tip. First, be prepared for this question because it will come up. The likelihood that anyone will invest in your business based solely on you "best guess" of revenues and net income are pretty remote - even if you're dot-com. There is a very strong correlation between the amount of research data that you have to support your projections and the likelihood of success in securing funding. This doesn't necessarily mean that you need to spend months and thousands of dollars on focus groups, surveys and market research. What it does mean, however, is that you should have and be able to provide convincing rationale for how your projections were put together
About the Author
Daniel M. McGilvery is the President of The Business Planning Institute. BPI provides professional business plan writing and review services. Contact BPI at 561-689-7980 or e-mail at info@bpiplans.com or visit our Web site at www.bpiplans.com
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What Everyone Should Know About How To Buy Wholesale
By: Melanie Burns
Finding a supplier for the product you want to sell, at a price that you can profit from, can be a big task. The best suppliers for your online sales or auctions do not advertise their services and often cannot be found online.
Those that you can find online tend to be middle-men. It is often difficult to get a good enough price to make any real profit online.
Let me tell you about my simple 2 step system to find an untapped source for wholesale suppliers. This is so simple that it's often overlooked as a source for product. This system involves thinking outside the box and not letting policy stop you. (continued below)
The First Step to find a supplier is to find someone that already sells or has access to what you want to sell. This could be a website, an eBay seller, a manufacturer, a wholesale outlet, or a regular store in your city. This is the easy step. You know what you are looking for and you can search on the internet, not for a wholesale source, but for anyone already selling what you want to sell.
Another valuable source for a local supplier is your local phone book. The yellow pages are the best way to find local sources. This should be the first place you look. Doing business locally with someone that you can meet face to face is a big plus for your business.
Another potential source for your product is to find a distributor who would be willing to private label a product for you. You could get a very high quality product for a much lower price than if it had the name brand label.
The Second and Key Step is to convince the source you found to become your supplier.
Manufacturers and wholesale sources often have minimum orders that might be beyond your reach if you are just starting out. Online retailers, eBay merchants, and retail stores may be your best bet. Try to find a small store who is looking to expand.
But remember, you are dealing with a human being and they can be convinced to do business with you. Just be sure to sweeten the deal for them. One way is to offer the person you are dealing with at your new found source, a percentage of your profits from the products he supplies you.
Be sure to project it out for him. If he can see the benefit of working with you even though it causes extra work for him, you can be successful in making a deal.
You could offer him 20% of the profit from sales of his products. For example you could show him that you project to make at least $100 profit from each product, and you expect to sell 40 of them per month. The $4000 a month means an extra $800 per month in his pocket. You still make a nice $3200 profit for the month in this example.
On top of that, he will be ordering more products from his supplier and may be eligible for a higher price break from them. This way, his reward for the effort to work with you, is making money on both sides.
There are many benefits you can offer your potential supplier, but no matter how you look at it, the main thing it comes down to is MONEY. What's in it for your potential supplier to do business with you? If can you show him that, you have a better chance of making a deal with him and starting your online sales.
NOTE: When looking for suppliers around your city, don't go trying to impress the big stores with your $800 or even $3,000 extra income per month proposal. Try going to the little stores that are looking to expand their business, they are the ones that are usually more open to new opportunities.
The big stores are making hundreds of thousands of dollars per month in profits, so an extra couple of thousand would probably not impress them the least bit.
So now you see that by thinking outside the box, you open the door to many possibilities and increase your ability to make money online with your products.
About the Author:
Copyright © Melanie Burns
This article is free for reproduction but must be reproducted in its entirety including live links and this copyright statement. Subscribe to the iBusiness How2 Newsletter to receive hot tips, how to's, internet business tools, and relevant product reviews by sending an email to: newsletter@internet-business-how-to.com
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