PLAN VALUATION 2

As I said last week, “investors do not place their money on good plans, but on good plans sponsored or prepared by good people who have the ability or potential of transforming this plan into a good and profitable business.” I have found that many entrepreneurs approach the task of writing up a business plan from an external point of view focusing primarily of impressing the reader. While this is important, I think you need to note that the reader is also evaluating you and your business. A great deal of the time, your target audience approaches your plan with a very critical if not suspicious mindset. So he is also checking to see if your facts add up.

I will not bore you with issues like content, presentation and ‘how tos’. There are many books on these but I will like to highlight a few points which I think every entrepreneur should note when preparing a business plan. To this end, I would categorize the contents of a business plan into four. Viz – The (Executive) Summary; The Sponsor; The business and The Profit.

THE SUMMARY This should be a short 3 minute or 3 sentence-summary that can awaken the interest of your audience. You should be able to put in all the relevant facts in this summary such that the listener or reader definitely wants to know more .It should contain an overview of the whole plan which must include history or background, business dynamics, the profit to be gotten and why you are the best person for the job.

THESPONSOR: Remember that the trust is not in a piece of paper called a plan, but the promise of delivery by a capable person. Therefore, you need to convince the audience that you have enough expertise and enthusiasm for the project at hand. You need to highlight your experience or training and the fact that you really believe in the viability of the project.

THE BUSINESS: The questions to answer here are “What do you want to do” and ‘How do you want to do’. Any investor, banker, staff or stakeholder is interested in how sound the business is and what steps will be taken to achieve success. It will cover issues like production, marketing, sales, risk analysis and implementation steps.

THE PROFIT Resist the urge to inflate or exaggerate. If your projections look too good to be true, then you invite deeper scrutiny. Only a fool and his money is easily parted. If you know the audience is of sound mind, its better to present realistic and believable figures based on facts or clearly stated assumptions.

There are many definitions of a business plan, but this one by Tim Berry is what I find most appropriate for now. He says ‘A business Plan is any plan that works for a business to look ahead, allocate resources, focus on key points and prepare for problems and opportunities.’ (The book on Business Planning by Tim Berry)

So if you ever need to put a value to a plan, please keep these issues in mind. The true value of the plan is what it helps you do in terms of this business. If your plan promises huge profits but is silent on the actual business process or your capabilities, it is incomplete.