The core of any usable business plan, and also any plan
that is created in order to find financing or partners, are
the financial projections. Then, most important to those
projections are the assumptions used to create these
projections.
TIP 1: BE CAREFUL ON ASSUMPTIONS
The core of any usable business plan, and also any plan
that is created in order to find financing or partners, are
the financial projections. Then, most important to those
projections are the assumptions used to create these
projections.
Are the assumptions that are the basis for your financial
projections understandable? If you've written your
business plan because you're looking for an investor or
lender, don't assume that the reader can understand your
business plan assumptions. By the time you are finished
with your projections, you will be very familiar with the
assumptions you used to construct your financial models. A
first time reader of your business plan will not. Are you
certain that you made it easy to follow your logic? It's
better to explain a little more than you have to, than not
explain enough.
The best projections for your business plan are
well-rounded ones. Telling the investor that his projected
return is 52. 444% is not any more impressive than saying
you project a return of roughly 50%. Many entrepreneurs
come down with a bad case of "spurious exactitude" when
doing projections. This seems to be a highly contagious
disease.
TIP 2: BE CAREFUL WITH "WHIZ BANG" SCENARIOS
Many people think that the more complex their financial
models are, and the more "what if" scenarios they concoct,
the higher their chances of being funded. A variation of
this is the business plan that has projections seemingly
for decades. Fifty pages of imaginary numbers are not
better than five. Particularly in this age when technology
is evolving so quickly, it is impossible to accurately
forecast 3 years out, let alone 7.
Concentrate instead on answering these questions: How fast
are we going to use the investor's money, when does the
company's cash flow turn positive, and what margins can
this company earn? It is definitely better to KISS (Keep
It Simple, Sam) than to try and wow your business plan
reader with outlandish scenarios that they will know
instantly are not realistic.
TIP 3: THE HARD TRUTH ABOUT BUSINESS PLAN SOFTWARE
There are a number of business plan software packages that
sell thousands and thousands of copies. Software can be
very helpful in developing financial models and preparing
projections. But they are not going to write the narrative
sections of the business plan for you, so you may be
disappointed in the results you get from using a computer
program in building your business plan. How can the
programmers of "Super Duper Hot Business Plan Package" or
whatever the software is called, possibly know how your
plan should look since they have never met you and do not
know anything about your company? Software can't think for
you.
Better is to learn what you need in your plan, then simply
write the plan using the correct information. You can go
to Small Business Tool Kit (www.toolkit.com) for an
excellent outline. BTW - this site is a free Wiki site to
all who use it, and they are not selling anything!
Amazing, huh?
Incidentally, for the average cost of these software
packages, you can take a family of four out to dinner, and
at least two of them can order dessert. Why not do that
instead of wasting you money on one of these software
packages that will not really make things any less
complicated for you anyway?!
The overall idea here is: Make sure your assumptions are
simple and easy to accept, then your financial projections
and the example scenarios you create will also impress and
inform your business plan readers.
----------------------------------------------------
Henri Schauffler, The CEO Coach, has dedicated the last 20
years to helping small businesses like yours to "Outmanage,
Outhire, Outsell and Outprofit All the Competition." For a
FREE business assessment and tune up to see exactly how you
are doing in all Eight Essential Areas for Business
Success, go to http://www.QuickBizQuiz.com
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