BUSINESS and shifted all burden of proof onto you. Be careful about making assumptions that are counter to known human behavior and patterns. } COMPETITION: The reality is this: competition will always exist in a market. There is a prevailing belief that you can drive competition out of a market or that direct competition is your only true competitor. Anyone and anything that competes for the mindshare of your customer is your competitor. Period. Use your competitors as the impetus for creativity and innovation and uncover ways to get better, 10X better. A plan that underestimates or underserves the competitive landscape discussion lacks credibility. Remember that given enough time and money, your competitors can copy or imitate almost everything that you have. The only real sustainable differentiator you will have are your people and the culture that you bring to life. } PROJECTIONS: Most readers do not believe projections. This is not a statement to be debated, but rather a fact to be managed. Projections and imagination are synonymous. Projections are more guesswork than science and more fiction than fact. Excel is a great program, you can lay down 1,000 line items, project out 20 years and tell me how much you’ll spend on toilet paper in year seven. I don’t care. Start your financial discussion by narrowing down the vast variables to key assumptions and key leverage points. Notes, assumptions, and comparable data are what moves projections (hypothesis) to the realm of financial forecasts which have a basis in time and in reality. Included in the discussion of projections must be a sensitivity analysis. Not a full detailed regression, but a close look at the variables that make up your assumptions and what happens if they don’t materialize at all, or if they take longer to ramp up. How does this affect cash flow? How sensitive is your business to leverage points, risk and timing? Does your pro-forma balance sheet indicate sufficient post-closing liquidity to mitigate these sensitivities? } MANAGEMENT: The concept of teams and teamwork is talked
about ad nauseam, and yet it remains a plan staple. Savvy investors and lenders view teams and individuals for upside potential, market knowledge, strategy, navigation and implementation. Think in terms of upside potential and risk management. By contrast, many traditional, older-style banking institutions do not see humanity within management but rather they see collateral and view management for its collective financial wherewithal to repay a debt if things go wrong. What is often underserved (and misunderstood) about management is that there are several, non-analytic and intangible factors that contribute to business success: character, trust, integrity, experience, and intellectual curiosity to mention a few. For me and my team at Live Oak Bank, we view these as the human factors that bring success to a venture. } EXECUTION: Few start-ups reach this stage, and even existing business that are expanding falter with basic and fundamental execution. How do you take the elements of situation, strategy, market space, competition, risk, management, displacement and differentiation, and 46
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combine them into action steps? Honesty is the key factor with execution. Honesty is overlooked and another place where human bias enters the planning process – what can you realistically accomplish? As a metaphor, there is irony with execution as many entrepreneurs fail to execute well, thus killing themselves. } WHY AND WHAT: Your story and through line
must flow and answer both why and what. If you are ever in doubt at any time during the situation and strategy stages, my suggestion is that you reflect, revisit, re-think, re-everything, and ask: What consumer need are you addressing? What is your target audience’s pain point? What is compelling and unique about your business? What is your unfair advantage? What is your point of differentiation? What is your resolve? Where are your milestones? What value will you create for your community and customers? Why will you succeed where others have failed? Here are a few more points to consider before your plan hits the inbox: • There are no shortage of businesses and people looking for capital – this is highly competitive space. • Although a business plan is not without passion, it should be a factual dissertation of outlining the economic viability of a business venture or investment decision. • Most investors or financiers will only afford a plan 10 minutes before they make an initial decision – this is simple time-management • Clear, concise, compelling, and neat are essential elements to make an impression and an interesting and honest story could advance your plan beyond the 10-minute mark. • Plans are living documents that evolve with experience, transform as you grow, and always have plan-as-you-proceed relevance. A well thought out and properly supported business plan that addresses the overlooked and underserved areas is better positioned for positive outcomes. Be prepared to spend more time and more capital than your plan indicates is necessary, and remember that investing in your people and creating a unique culture will set you apart in the long term. ❖
Ben Jones is General Manager and FEC Specialist of Entertainment Center Financing at Live Oak Bank, co-creator of F2FEC, and has been in the FEC business for over 30 years.