FoxBusiness.com published a write-up by Susan Schreter on how to go about presenting a business plan to prospective investors.  One major concern of budding entrepreneurs is the possibility that their business idea may be stolen by people they turn to for financial support.  Schreter listed three tips to minimize such occurrence.

Q: I’m afraid to send my business plan to investors. After all they can just steal all my ideas and go make all the big money without me. What can I do to protect myself?

A: During the earliest days of business building, entrepreneurs know they are vulnerable. They’ve heard the stories. Yes, there is competition everywhere, but nothing is worse than thinking your best ideas will be usurped by the very people you turn to for financial support. I’d like to give you assurances that your business plan won’t circulate among potential industry competitors, but I can’t. It happens.

What I can assure you is active angel club investors and venture capital funds are not likely to steal your ideas and morph into your main competition. The purpose of startup and early stage investors are to fund high-potential companies like yours, not operate them. Savvy investors are happy to let you do the hard work of perfecting products and services, and steadily building the value of a company to a lucrative sale.

Here are some recommendations:

No. 1: Don’t send entire business plans, patent filings or other detailed proprietary information to potential investors as part of an initial solicitation. Start with an executive summary.

No. 2: Take the time to read about a venture capital fund’s portfolio companies.

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Some families that own franchise businesses want to pass on their businessses to their children.  Children, when on school vacation, usually help in the business and immerse themselves in the business.  They may discover that they like what they are doing and may take it upon themselves to succeed their parents in running the business. William Slater Vincent, co-author of the IFA’s handbook Franchise Succession Planning and Transfers told Entrepreneur.com, “More and more children want to continue the family franchise.”

Sharing a business can do much to strengthen familial bonds. But passing a family business from one generation to the next can be a complicated process. For various reasons–fear of mortality, or the inability to let go of an enterprise that was years in the making–the original owners often fail to discuss with their families a plan for what should happen if they die, become ill or take an early retirement.

Leaving succession plans up in the air is an almost certain death sentence for a family business. According to the International Franchise Association (IFA), only 30 percent of family-owned franchises make it to a second generation. That’s in part because, above and beyond any emotional issues related to succession, the franchisor has veto power and is the sole decider as to whether Junior is qualified to step in as boss.

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Shelly Sun of BrightStar shares her experience regarding financing franchises.  She says that the most common cause “for failure for franchisors is under-capitalization”.  In her article in Enterpreneur.com, she gives advice on where and how to get a franchise loan.  Banks, government programs, friends and family can give you the financing you need.

The No. 1 reason for failure for franchisors is under-capitalization.

If you’re thinking about franchising, it’s important that you have enough capital to launch and enough capital to sustain the operation until recurring royalties can cover your overhead.

Many franchisors wrongly assume that the amount they collect from selling franchises in initial franchise fees will cover overhead. But often the franchise-fee revenue does not fund the necessary infrastructure, leaving the emerging franchisor scrambling. If you’re not sitting on a cash war chest of $500,000, you may run out of cash.

When I was launching my health-care staffing franchise, BrightStar Care, in 2005, we estimated we needed to invest $300,000. I contributed $100,000 of our own money and accessed $200,000 in debt financing. We were about 18 months in when the cash began to get painfully tight.

We had overspent on unnecessary or ill-advised hiring.

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Business Interruption Insurance, or Business Income Insurance, is one of the most important coverage for a business, but is most often overlooked. It is the coverage that will keep a business up and running or restore it after an event, such as a fire, hurricane or earthquake. Business Interruption Insurance is not a stand-alone policy, but is rather an add-on provision to a comprehensive policy. This coverage will not compensate the physical damage to the business; it covers the profits that would have been made during the period of interruption. Business owners should be certain they inquire about this add-on while getting a cheap insurance quote from their provider.

Business Interruption Insurance may vary from company to company, but will basically cover the following:

• Business Profits – Verified by the businesses prior accounts receivable and/or financial statements
• Operation Expenses – This is determined by previous accounts payable records, such as electricity, phone and/or water bills
• Temporary Operating Costs – Expenses incurred due to operating out of a temporary location while business is being repaired/rebuilt

Due to the volume of insurance companies, it is best for the owner to get further details on what the plan will cover while getting their cheap insurance quote when first obtaining business insurance or adding the Business Interruption Insurance provision to an existing policy. However, regardless of the company, it will only cover the interruption period which is usually defined as the first day of damage through the first day of restored normal operating conditions.

Again, to purchase Business Interruption Insurance is imperative for any business, especially small businesses and it is not a stand-alone policy. This must simply be added to a property or comprehensive policy as an add-on.

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Sports teams play hard to win, and so does your business. The desire to take a victory lap, however, isn’t the only similarity. Business owners and sports teams watch rivals closely, strategize at every turn and work together to reach the final goal, whether it’s the trophy, a customer win or the successful deployment of a long-running project.

In business, we often look at our competitors to better understand what we’re doing right and wrong. I believe there’s similar value in looking outside the business world for examples. As a basketball fan, I often look at teams and how they succeed or fail. Not surprisingly, the best teams engage in certain practices that make them winners. Apply these practices to your business and you can come out on top, too.

Practice Point No. 1: Remember the Name of the Game
Basketball players who strive for home runs or touchdowns don’t get far. Their goal is to land the ball in the basket at either side of the court. Knowing what game you’re playing is the obvious first step to scoring more points than the other team and eventually winning the game.

Business Application: A surprising number of employees have no idea what game they’re playing and only a foggy notion of what it means to win. As they aim for home runs on the hardwood, their performance will be unsatisfactory, and their chance of success will be nil. As the coach of your business, discuss with every player/employee the game you’re in and define what success is. The big picture might be obvious to you, but it’s not necessarily clear to them.

Practice Point No. 2: Understand Your Position
A power forward knows he’s in the game to catch rebounds. A point guard knows he’s the team’s best handler and passer. A shooting guard knows his job is to get the ball in the hoop.

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Starting an online business? Have a great product idea that you think can make millions?

As you start developing your idea, the first thoughts coming to mind are probably technology focused. Who is going to build your site? How much will it cost? How quick you can launch your site?

Unfortunately, the phrase “if you build it, they will come” does not apply to online businesses.

There have been many entrepreneurs that have built great products, but have made little money in doing so. The way the Internet has evolved, if no one knows about your great product, it can and will be a bust.

To prevent this, consider user acquisition just as important as your product itself.

In fact, in recent years, I’ve seen mediocre sites make more money than those with sound business plans, with the primary driver being website traffic.

So how do you get the traffic?

You have two main options. You can pay for your traffic via pay-per-click (PPC) campaigns like Google AdSense, or you can plan ahead and have a great search engine optimization (SEO) strategy in place.

The PPC route can yield quick results, but my best advice is to make sure you have a healthy set of conversion metrics in place. With any PPC campaign, you are required to pay for every click a user makes. If the conversion rate is low, you can quickly find yourself in a money losing situation.

Those successful in using PPC campaigns as their main traffic and revenue drivers typically have a complex reporting mechanism in place, which allows them to quickly asses the profitability of a campaign. This undoubtedly helps, as under-performing campaigns can be swiftly addressed to minimize loss.

The other approach to traffic acquisition is SEO.

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Bringing a business for sale transaction to fruition is a trying, lengthy learning venture.  You, the buyer, have to try your best to negotiate with the seller in a civil and honest atmosphere.  Pleasantness, reasonableness and fairness are needed for the process to proceed smoothly.  Once you decide to buy a business, you have to move fast or it might slip through your fingers.  You have to signify your serious intention to the owner by formalizing your bid. 

Before making a formal offer, you have to determine how much the business for sale is worth.  You do not want to pay more than its real value.  For this, you have to engage a business appraiser knowledgeable of the market trends for this particular business or industry.  A CPA or accountant should also be consulted to examine the proposed transaction from a tax perspective.  Going in on your own is not recommended.  A lawyer can draft your offer proposal in its entirety or at least review one that you have prepared.  Although the former is the better way to go, it is also the more expensive route.  However, if you have a verbal agreement with the seller on key issues and you have prepared a draft following available purchase agreement forms or templates, bringing in a lawyer later will cost you less.  Remember though to never sign a contract associated with the purchase of a business without first having this reviewed by a lawyer. 

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Every Business Needs an Exit Strategy. Do you want to Run Your Business Forever? Do you Want to Sell your business? Do you want to leave your business to your children? Do you want to sell your business to Your Employees? Do you Just want to close your doors and Move on? How do you want to exit your business? And when? Recently a good friend of mine that is a successful business owner contacted me about the prospect of selling his business in a few years. He asked me to contact him regarding what he may want to be doing now to prepare his business for sale. He has a successful growing business, he has grown his number of employees from 10 to 75 over the last 18 months. He is effective at gaining new contracts and growing revenue, but like so many businessmen, he has never attempted to sell his business.

Normally during the startup of a new business the thought of an exit strategy is not even a consideration. Then small business owners get so involved with the day-today operation of theirbusinesses that again an exit strategy is either not even thought of or possibly just put on the back burner. Taking some time to put some thought into your exit strategy can go a long way to increasing your odds of exiting your business the way you desire to.

Planning, gaining knowledge, and preparing may be the 3 most important measures you can take when considering an effective exit strategy. If your exit strategy involves an interest in trying to successfully sell your business in several years, what sort of measures or actions should a business owner take to make this successful:

1. Make sure your financials are in order. Clean understandable Income Statements and Balance Sheets will add value to your business.
2. Systematize and document your operations and procedures.

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When you set off to start your own business for the first time, a very good idea is to go with a franchise.  After all, the systems are already in place, the business model is already proven, and you will have help getting your business off the ground from your franchiser.  But like anything else in life, starting a franchise business should have a franchise business plan.

When you write a business plan for a franchise, there are plenty of different aspects you are going to need to consider.  In a franchise business plan, you are going to have to account for a variety of variables beyond just the product and the logo (which the franchiser should already have well in hand).  Any one of these facets, if handled poorly, could derail your business… or derail your plans to get financing from a bank, a broker or hard money funding.

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With an estimated $800+ billion in funding available for the entrepreneur annually (even in bad times), you may think that venture capital and R&D partnership firms would be falling over each other to fund the latest wave of scientific and technological proposals. Wrong.

Venture capital companies such as R&D Funding Corp., Early Stages Co., Mayfield Fund, Asset Management, and others receive an average of 100 of technology and service/support proposals each month, even when the economy is “less than desirable.”

Unfortunately, instead of paving the way for funding, the proposals are often more detrimental than helpful. The sad truth is that the majority of the business plans presented are not just badly written, they’re very badly written. That makes the evaluation – finding the winners – even more difficult.

Pyramid Your Plan
The business plan should be presented to potential investors in the same manner that products and services are presented to potential customers–quickly and effectively.  A simple way to accomplish this is with a pyramid-style presentation.  It starts with a tight, action oriented summary and expanded sections toward the base.

After you get through the legalities and disclaimers, themost important part of your plan is the executive summary.  This one- to two-page summary clearly states what the company is going to do, what the market potential is, how the company plans to achieve market penetration, the time period involved, the product/service plans, the amount of money needed and how that money will be used.

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Creating Your Dream Business
Behind every successful company is a founder who had a dream that eventually became a reality.  Examine any of today’s prominent entrepreneurs and you will discover a shared thread of traits.  These are talent, vision, and perseverance in the face of all obstacles.  If you possess an idea that you believe would make a great business, there’s no time like the present to make that move.  Innovative business ideas are spun off into new enterprises all the time – both in good financial times and bad – so don’t abandon the fight due to a perceived weak economy.

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Creating a Viable Business Planning Strategy
New owners of businesses should feel compelled to engage in the business planning process, whether they are starting a brand new venture or taking over one that is already up and running.  Anyone who fails to take this all important step – akin to jumping out of an airplane before making sure that your parachute is working properly – is in for a big surprise at the end of that journey.  A business plan makes good sense for so many reasons, but primary among them is the fact that no one will loan you money unless a formal, written business plan is available – and one that realistically examines the pros and cons of your enterprise.  In its most basic form, a business plan serves two functions.  First, it must convince a banker or some other investor that your enterprise is worth their effort to put money into it.  Second, and more importantly, it is the master blueprint you will follow to achieve your financial success.

Business Plan Process: Small Goals Lead to Greater Achievements
There are some simple goals that every business owner shares.  They want to build an honest business that makes them proud to own it.  They want to make a comfortable living commensurate with the effort they expend.  They want to build something for the future.  They also believe in the product or service they are offering for sale, convinced that it will improve the lives of their customers in some large or small way.  Your business plan does not need to be hundreds or even dozens of pages long – unless you’re building the next Intel or Microsoft, in which case, best of luck!  Anywhere from four to ten pages should be enough to get your point across, both to your investors and yourself, especially if your goals are small and easily attainable early on.

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Cashing In on a Business Start Up
More people than ever are deciding to start their own businesses, so why should you be any different?  Whether you choose to acquire an existing company, start one from scratch, or purchase a franchise, there are a number of costs associated with buying a business.  Knowing what they are and calculating in advance how much you’ll need for each item will save you tons of time, headaches, and even money down the road.

Primary Business Start Up Costs
Different small business start-ups will have all sorts of different start up costs.  For example, retail businesses need storefront locations and the people to run them during business hours.  Work from home businesses need none of that, but you will instead incur costs to remodel and stock the spot in your home from which business will be conducted – as well as investing in a secure lock to keep out the kids while you’re trying to close a big sale.  The business cost start up variables you will most likely encounter – no matter what kind of business you choose to own – include the following:

• Fees to professionals – Any owner of a new business requires the services of an attorney to draw up articles of incorporation or other company-forming materials, plus an accountant to keep the books straight and the I.R.S.

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What is a Business Plan?
Business plans are essentially resumes for companies.  They provide a description of what your business involves, how it hopes to operate, what level its earnings are expected to reach, and how soon those milestones will be met.  Anyone who wants to start a business must write a business plan, primarily because no financial institution will loan you money without first seeing your blueprint for success.  There are countless business plan templates available online or at your local bookstore, and sample business plans are usually sufficient to provide all the necessary information for more than 90 percent of prospective business owners.  Here is a business plan example to get you started.

Sample Business Plan
The term “template” can mean a standardized document that contains a basic layout in which details are added to customize it for a specific use.  A template business plan is an outline where you add information about your company to create a unique presentation.  Every business plan should contain the following sub-headings:

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Do I Need a Franchise Business Plan?
Unless you have enough money to buy a franchise outright, including all the start-up costs and a nice safety net of cash to carry you through the lean times until your business is more firmly established – of course you need a business plan!  Even if you’re independently wealthy, a business plan will serve as your road map to success.  Besides, most corporations won’t even consider selling you a franchise without first seeing at least a rudimentary business plan.

How to Write a Business Plan for Your Franchise
There are a number of places to go in order to create the perfect business plan for your franchise.  There are books for sale at your local bookstore as well as many Web sites with valuable information.  Surprisingly, your franchisor could be a worthwhile source, and they can certainly offer advice on the sort of material they want to see from you.  The basic business plan, whether for a franchise or any other kind of enterprise, should contain the following elements:

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One question I get asked a lot goes something like “I’ve got an idea for a business. I need to get finance from the bank, buy stationery and equipment and do some research. I’m not sure how to plan everything that I need to do.” Do you feel like this? Do you have a business idea and so much to do to get it up and running, that you feel overwhelmed and don’t know where to start?  If so, you’re not alone. Thousands of new business owners feel like this and that’s why it’s vital to put down on paper what you need to do. Here’s how: 

Take a big piece of paper and then write down everything that comes into your head that you’ll need to do to set up your business. Don’t worry if it sounds silly – just get it down. You might want to carry this piece of paper round with you for a couple of days just in case you think of anything else you need to do. Once you’ve got down the vast majority of all the things you’ll need to do, now is the time to start organising them. The first thing to do is group them. For example, anything to do with finance, group them all together (you could do this using a highlighter pen or writing them in groups on a separate sheet of paper); anything to do with getting a loan, group this too. Keep grouping the categories until you have five or six main headings to do. With grouping, what you’re trying to do is firstly realise that a lot of the tasks you need to do are related and can be done together and secondly reduce the number of things you need to do into five or six areas. As such, if when you do this exercise, you find that some things don’t quite fit into a category, that’s fine – feel free to break them out into another heading. 

When you’ve got your groups, take a good long look at them. Is there a logical order in which they need to be done?

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Today there is a lot of discussion about vision, mission, and goals.  In fact I see many companies investing loads of time, money and effort in coming up with their “mission statement.”  Usually this is a few inspiring sentences that are placed on plaques to hang on the wall or printed on the back of business cards or put on the company web site.  With few exceptions, this often amounts to a big waste of time! 

The fact is few of these mission statements accomplish what they were intended to do.  That is “motivate employees to perform at a higher level.”  Ironically, however, after a month or so not even the CEO, let alone the employees can even remember one word of the mission statement. 

So does this mean establishing a mission for your company is a useless task? 

Not necessarily.  Yet in order to understand how to make mission planning a valuable tool we must first understand WHAT a “mission” is.  In short, a mission is a course of action that a company decides to pursue.  It is the road they will travel in order to ensure they arrive at their ultimate destination.  It is their plan for achieving their vision.  A mission is not something we say, it is something we do. 

Mission Statement Development

A mission statement describes “how” you will achieve your vision.  It describes the “road” that you will walk.  It outlines your values and is a summary of your plan to accomplish your goals. 

Here are some basic guidelines in writing a mission statement:

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It is not often that I find myself without words. I usually have plenty to say about any topic imaginable. But recently when speaking with a CEO who had asked my advice about how to deal with a particular challenge in his business, I was rendered speechless. This CEO had recently lost a key supplier to the competition thereby disrupting his supply chain and causing production and delivery problems.

As we discussed his challenges, the CEO seemed forthright and was open to hearing ideas of how to handle this. So I told him about several other clients that had experienced the same problem and how they created a foolproof method for avoiding such circumstances in the future. I suggested he engage in some planning to create a network of suppliers with contingencies for those that fail to maintain loyalty. I suggested that in the future, he should try to avoid depending too much on any one supplier unless there was an exclusive arrangement in place. I told him that the key was doing some careful planning to identify competitive suppliers and play one against another. 

His response both stunned and surprised me. He said. “Wow, that sounds like it would take a LOT of time. I don’t have time for planning!” I asked him if he now had time to find a new supplier. He answered a sheepish, NO and went on to tell me about how he was working 60+ hours per week just trying to manage all of the details of his business. 

I think this is a fairly common problem with business leaders today. We spend so much time working IN our business that we fail to work ON the business. Peter Drucker said that on the average one hour spent planning is worth 5 hours of execution. Are you spending enough time planning? Do you need to take a step back and look at the big picture and identify some contingencies?

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Writing a business should be the first step before you start your business. Reducing your ideas to writing will greatly assist you along the way as you develop and mature your thoughts and decision making. It is often in the process of writing the plan itself that your vision is strengthened and galvanized into you mission statement and direction. Though a business plan, in order to be effective, needs to be a working and actionable document updateable at least on an annual basis and more often if situations warrant. A good business plan will contain the below components which are essential to the overall plan’s depth and ultimate success:
 

Cash Forecasts. Perhaps the biggest failing of entrepreneurs and business owners alike is their failure to carefully contemplate and plan for amount of cash that will be needed to adequately fund the business’s growth and day-to-day operations. It has been often said, “tongue in cheek,”  that one should carefully evaluate and plan for the cash flow that will be needed to run a business and then they should double it Often owners will spend cash without thinking ahead or re-forecasting for the next months and years only to find, if they had a “do-over” that they would have been more prudent with their spending. Developing a systematic and cautious methodology for spending that includes checks and balances, layers of approval, ample cushions and available credit are good defenses to ensure sound cash management practices. Great caution should be exercised to ensure that credit is only used when needed and not when convenient, when there is adequate investment in the expenditure/project by the company, and when there is a sound, reliable and predictable basis for repayment.
 

Budgets.

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Helping to lift the veil of business is a key concern and goal for all those concerned in pursuing the furtherance of your business venture. Keeping these basic tenants in mind will do much to ensure your business success, and in so doing will enable the spiritual goals of it as well. These considerations will help you along the way and to ensure that your plans are both achievable and achieved.
 

Financial Model/Business Plan

Perhaps the most important first step is the development of a Financial Model/Business Plan. Such a plan should take the form of a written document and should be detailed enough so that someone independent of your operations would be able to review and to quickly discover your business resources, talents, goals, and plans to get there. A good business plan would contain all of the following:

• Description. Knowing and documenting who you are and what your short and long term vision are the essential components of this section.
• Marketing. Knowing how you plan to grow your business, church or ministry is integral to having a workable and viable plan.
• Financial Management. Knowing your financial strengths and weakness and your cash flow needs and need for capital are a critical part of the process.
• Management. Knowing not only the needs of key management players and the “trigger dates” for bringing on additional staff and administration are integral components of the success quotient.

Writing a business plan is your first step to maintain order and to develop a well-thought out and seasoned plan. It is during this process that many “missteps” can be avoided with wise and judicious planning.
 

Plan, Plan, Plan

Business Planning and its continual updating are essential.

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