I'm not going after capital. Why do I need a business plan?

A business plan is not just to attract an investor, it is also used to guide those involved in the business. It answers the critical questions that come up so often during the operation of a business.

Can I raise money without a business plan?

Yes you can ... IF you can borrow the money from a bank on personal credit and collateral or you have friends and family who believe in you and your abilities.

Is it better to do my own plan or have a professional develop it?

That depends on your skills at writing and finance. It's more than writing down what you want to do and putting down some numbers. It is preferred to have the entrepreneur write the plan so the investors get a better idea of the skills of the entrepreneur in whom they are considering investing.

What can I do if my idea is so world changing I am not willing to tell an investor what I'm doing?

We have actually heard that a lot. Unfortunately, it is extremely rare that someone comes up with something no one else has ever thought of. Success is reserved for those who actually get it to market. While it may seem wise to keep the information under wraps, unless you have the ability to go it alone, you will never see the fruits of your labors. There are ways to bind people to secrecy but they will not oblige unless they have a concept of what it is you are doing - maybe not the details, but enough information to want to be a part of it.

There are many offerings on the Internet that are cheaper. What makes your offering better?

You're right, there are a lot of offerings. But, compare what you get and the track record of the company. First, over 87% of our clients have been successful with the plans we helped them prepare. Second, you are not just buying the tools. You are also getting a live person who you can contact using ReGL or email. This person will not only help you with the technical questions you may have with the tools, but will also help you as a consultant on your project. They will apply their business background to help with other questions such as strategic planning, market research, etc. Other companies offering those services charge as much as $5,000 to get one-on-one consulting help.

What mistakes are often made by entrepreneurs when preparing projections?

• Changing time frames (e.g., from months to years) and missing the implication of the last time frame on future time frames. For example, some projections will show a monthly growth for the first year. Then, the totals for the next year are projected as a percentage of the prior year's total instead of keying on the implication of the values of the last month of the prior year.
• Relying on rules of thumb rather than looking at each individual number in its own right. Sometimes the validity of a projection is sacrificed for the expediency of using a rule of thumb when, with a little effort, more realistic projections can be made and defended.
• Using compounding percentages to extrapolate growth and developing unrealistic possibilities. Occasionally, the values for the last year as determined by these percentages become outrageous. They are often ignored or missed because the percentage seems reasonable.
• Adjusting or projecting values while not accounting for the effects on related numbers. We have seen personnel counts change radically with no corresponding changes in rent, supplies, insurance, telephone, travel, etc.
• Entrepreneurs sometimes develop the total numbers over time and then forget exactly how they were determined. This makes them hard to defend.
• Sometimes, a simple typographical error, or error in researching a particular number, can lead to disastrous results. Every number should be double-checked, but rarely is.
• Sometimes, values are considered insignificant until their relationships to other numbers are explored and the true impact determined.
• Summarizing groups of numbers in the mind of a planner can often hide significant areas for study and control. For example, total payroll is one thing; breaking it into individual job categories makes the total number more defendable.
• Many entrepreneurs completely miss the impact of accounts receivable or payable on cash flow. They also miss the impact of how much money can be tied up in financing receivables.
• Most projections in business plans omit the cash flow statements.
• Expense categories are often overlooked in projections when they are not determined in detail.

What can I do to prepare myself to meet bankers or investors?

The first thing is to realize that information is the key to dealing with banks and investors alike. And it's not the amount of information, it's the kind of information that's critical. You need to show them that you can work with numbers as well as they can. You must present yourself as one willing to look at things the way they do ... from a realistic viewpoint. This means realistic projections and properly thought-out plans and goals.

Do I need to become a CPA to communicate with a banker or investor?

Absolutely not! We're not talking accounting here ... it's planning and presentation. This may come as a shock but most CPA's are not skilled in this area. They are very helpful in the process of collecting data, but planning and presentation is something they generally don't do. You are more qualified to do this job than anyone else ... if you learn how.

How do I keep myself from blowing the first visit with an investor or banker?

Very simply by being prepared. Now, this doesn't mean that being prepared with the right information can make up for a lack of collateral. Banks still have their rules and regulations. But it can make the difference between getting good, sound advice and assistance in finding other forms of help or getting a quick "I'm sorry I can't help you."

What is it that bankers and investors want from me?

Banks are looking for the following types of information, but remember, unlike most investors, collateral is a major factor. The more you offer (that fits their acceptance) the more flexible the terms and help, to a point. They still need personal and company financial information, past tax returns (3 years), company history, credit request information, references (company and personal), information about how you plan to use the proceeds, information about any legal situations. (Note: each bank may have additional needs.)

Whether you're approaching a venture capital firm or a bank, you will need a business or funding plan. Investors and bankers will judge you by your company resume (business plan). Many times, they aren't looking for what you put in it as much as what you leave out. You have one chance to make a first impression ... so make it a good one.

What if I find I can't go through a bank?

Then you have the decision to make whether you're willing to go the venture capital route or you're going to rely on funding from family and friends. Being properly prepared is the key.

What's the difference between banks and investors?

Banks and venture capitalists have some distinct differences. One is accessibility. You can walk into a bank on your own. The best you can do is bump into a VC on your own. Banks are pay-back oriented; VCs are exit-method oriented. Banks talk interest; VCs talk ROI. Banks are heavily regulated; VCs are not. Banks don't become a partner; VCs do. Banks are usually less costly then VCs. VCs are usually more flexible than banks (most of the time). Banks can offer services that VCs can't. Bank's are typically consistent in their requirements; VCs are typically not.

I've been told that money is scarce and that's why it's hard to get it. Is that true?

That generally is not true. What's scarce is the proper information these people need in order to make a decision. There are investors everywhere. Approaching them successfully is the issue. Anyone who says that money is scarce is only telling you that they haven't found a way to get to it.

It isn't laying around just to be picked up either. The best people to talk to about the way to get to investor's or bank's money is the investors and banks themselves. That's why we prepare our clients to meet them the way we do ... because it's the way the investors and banks want them prepared. The difference is that we prepare you in a way that you learn it too! After all, it's your future ... shouldn't you be in charge?

One other thing ... in today's economy, banks are very slow to loan money. Venture capital firms are now being swamped with proposals. They can afford to be much more picky. In some respects, they have become as conservative as the banks used to be. Angel investors may be a better source for risky money.

How long does it usually take to get funded?

The actual funding process typically doesn't take more than 30 to 90 days once the terms are agreed upon. Believe it or not, getting the funding isn't the issue. It's getting the investor to take you seriously. That's the challenge. Understand that investors want to invest. That's why they're called investors. But they don't want to simply throw their hard earned money "against the wall and see what sticks." They want to know what they want to know, the way they want to know it. So the real question is how long does it take to prepare to be funded? Now that depends on you. If you're very knowledgeable about the business you're in, then it can happen in as little as 30 days. If you are going to have to research out most of the required information then you're talking longer. Even if you think you're knowledgeable about your business, don't be surprised if you still need to do a little research. The questions must be answered. There's no room for fooling around, unless you enjoy wasting your time.

So what do you do better than others to prepare me?

What makes us stand out is that we're more thorough and organized than most. It took us years to systematize the funding process in order to get consistent results. We do things easier than others because we don't have to rethink everything each time. Our tools make complicated things easy and, because we have a system, we're quick to adjust and can monitor the outcomes. You'll learn things about your business that few others teach and this is reflected to the investor.

Are you saying that unless I use your services or tools I won't get funding?

For us to say that would be absurd. Let's put it this way. In the industry today, the average venture capital firm receives hundreds and hundreds of funding plans a year. They fund around one-half percent of those or less. We have found the rate of those we have helped that have been successful is 87% plus. Now we don't count a client only after we have an interested investor. We count them when they become a client. A large portion of that 87%+ we only prepared for funding and they went out to find the investor.

If your system is so good, why can't you guarantee that I'll be funded?

Mainly because we're good, not stupid. Be really careful about those who promise and guarantee things outside the realm of their control. Look, we can guarantee that you'll be prepared if you do what we ask, because we can control that. But you and the investor have to come to an agreement. If you don't, well... there you are. We aren't going to force you or the investor into something you don't want even if we could. Anyone who guarantees something they can't control is a fool, and maybe a crook.

Should I first find out if anyone would be interested in my project?

Many people want to know that there's someone out there willing to look at their project before they take the time and effort to prepare. You could check out the horizon and find that certain someone but why should they look at your business unless you're prepared? Aren't you an investor? Aren't you investing your time, energy and money? Why aren't you demanding of yourself the same discipline that any other investor would require?

Do I have to buy all of your services or tools?

No. Our services and tools are designed to go into as much detail as you and the investor need. If you want us to help in the funding process, then we require a minimum standard. The investors are expecting it from us. Don't waste your breath trying to get us to skip steps, it just won't happen. But you can choose which services and tools fit your budget.

Why can't you write my plan for me quickly so I can get on with it?

Get on with what? The whole purpose for doing what we do is to help you eliminate mistakes. You don't need to learn things the hard way, though this seems to come naturally to some folks. You can be the beneficiary of our knowledge. The investor wants to know that you know what you're talking about. Would you give money to someone who you didn't think could handle it? We prepare you, not us, to meet the investor.

If I have you write the plan, why can't I just pay you out of the proceeds of the loan or investment?

We have found that pay-as-you-go clients are easier to work with. We are preparing you for more than just funding. The work we do is carried into the daily business decisions you make. This is your business, not ours. If you're a consultant and you want to invest in your client's project, you have our blessing. We simply don't recommend it, from past experience.

How do I protect myself from you or a lender stealing my idea?

People are funny. They think they're the only ones to ever think up something. Investors have worked hard for their money and now want their money to work for them. They're in the business of investing not acquiring. If you feel that a funding proposal from an investor jeopardizes your position, then have the courage to discuss it or turn it down. There are those horror stories of an investor taking over, but it's usually because the investment was in trouble and someone had to control it or lose it. Simply being intelligent about your business and investors goes a long way to protecting your interests. Quite frankly, at this point, no one is as excited about your project as you are. If you feel, however, that the nature of your project is such that you need to, then by all means require a Non-Disclosure/Non-Circumvention Agreement. Be very cautious though in approaching the investor this way. It's a common mistake entrepreneurs make and can quickly become a wedge between you and the investor, instead of a protection.