a determination on their own.
If the executive summary shows an interesting idea and the financials show a possibility of financial return, then the next (and perhaps last) section the potential lender or investor may turn to will be a quick review of your background and that of other pertinent management personnel. All the great plans in the world will be worthless in the hands of incompetent or less than ethical owners and/or managers. Potential lenders and investors will be looking for experience, education and evidence that you can handle all you have promised.
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Rich Dad Tips
• The executive summary is your calling card. The way it is written will immediately tell a savvy investor or lender if you have the experience and expertise to lead a business. If it isn’t a winner, the plan may never be read.
• When you initially begin sending out your business plan to investors or lenders, send it to a small portion of your potential universe so that you can get feedback. If you are off the mark, you’d rather know early and adjust. Make sure to ask for open and honest feedback (and be ready to hear it) from the people who tell you “no”. They will offer valuable advice.
• Remember again that Money follows great management. Many good business plans don’t attract money not because the deal did not attract cash but because the person controlling the deal did not attract the cash. The key to success is people, people and people. Emphasize you and your team’s track record in the executive summary.
• Keep the plan clear and concise. If complicated and technical writings must be included, place them at the end with supporting documents.
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The preparation of your plan will help you figure out how much funding you need. But don’t skip it if you are fortunate enough to need no outside funding at all. Preparation of your plan will help you plan your income and expenses, your profits and losses, and thus show you whether or not a particular business can realistically be expected to meet your financial goals.
Whether you are preparing your plan to strategize your business or to get funding (or for both reasons), don’t get so caught up in one aspect that you neglect the other. Balance is key. So is remembering that every section of your plan will likely be of primary importance to someone.
What are some of the hassles you might be saved from if you take the time to prepare a business plan? How about quitting your day job only to find your great idea won’t pay the mortgage? Or resorting to high interest credit cards to finance the business? Many businesses fail within the first five years. Of those that fail, a staggeringly high percentage of them do not have business plans. Of course, the credit card companies don’t care if you fail, with or without a business plan. They want their money. So before you risk it all, plan ahead. But be prepared for the unexpected and don’t be afraid to make mistakes.
Gathering Materials
The materials you choose to include in your plan will depend on the specifics of your business and whether or not you are using the plan to secure funding. Most plans that will be used to get funding will include a capital equipment and supply list, balance sheet, break-even analysis, income projection statements, cash flow statements and a loan application. You should also include an explanation as to the assumptions used for projections. Other materials might include: Organizational charts, management bios and/or resumes, market data and a list of who is going to receive the document. And, as mentioned, in many cases the securities laws will have to be followed as well.
The last section of your plan will be Support Materials. Though support materials compose the back end of the business plan, don’t wait until the end to start gathering them. As you write the text of your plan, you will hopefully realize what documents and information you will want to attach. Get a notebook and keep a running list as you write. Take time as you finish each section to determine if you have the support documents listed. If you do not have them, make the appropriate calls to get them. Some documents may take awhile to get to you. By making the requests as you go, rather than waiting to do it all at the end, you will save yourself a lot of time. As you will find, gathering materials almost takes as much time as the more important thought process behind the plan. The actual writing should go smoothly and quickly if you are well organized and have done enough homework to know how turn your idea into a winning business.
As you are going through the time-consuming process of gathering materials and conducting research, keep your eyes and ears open for news that is even remotely related to your business idea. Clip newspaper articles, check out books, request transcripts of radio shows. Anything that deals with your business, your market, your industry or the overall economy and regulatory environment can be useful. Consider it just another aspect of research that accompanies your personal learning from advisors, peers and mentors. It is critical that you learn the brutal “street smart” realities of your business.
Start a file system for all the information you will be gathering. You might consider breaking up information into pertinent subject headings that reflect the subject headings of your plan. Or you might want to break out information by date or source – whatever works for you. As you come across new leads or new information, stick it in the appropriate file. Then when you get down to the business of preparing each individual section, you will have at least some of your research already done.
The Issue With Questions Posed
You will note as we go through this book that a lot of questions get asked. For example, in the chapter of Marketing, many questions are asked on the nature and the type of your customers. These questions aren’t posed to harass or burden you. Instead, they are important considerations for you to review. They are put forth to get you thinking about what to write about. Like a snowflake, every business plan is unique and different. No two are alike. Different questions must be addressed and answered in each plan. But like a flake, if you totally ignore all of the questions you won’t have much to show for your efforts.
So when you are reading a list of questions to be addressed, pick out the ones that pertain to your business. And then answer them in your plan. Don’t let your eyes glaze over as you read the questions. Instead, keep them to pick out the ones that will allow you to prepare a winning business plan.
“If you don’t know where you are going,every road will get you nowhere.”– Henry Kissinger
Why are you in business?
Sophisticated investors and lenders want a peek into your heart to see if you have what it takes to be successful. Their answer often lies in your mission statement. A company’s mission is sacred to true entrepreneurs because it is the essence of who they are and why they are in business. In Rich Dad’s B-I Triangle the mission is the foundation and bedrock of a company. Not having a strong and clear mission is unacceptable because it answers the most important question of all, “Why are you in business?” If your motivation isn’t strong enough, nothing else matters.
All for-profit businesses are in business to make money, hence the name for-profit. The question is:
1) Are you in business first to serve people and second to make money? or
2) Are you in business to first make money and second serve people?
Many novices fail to recognize that a
