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.
Saturday, September 19, 2009
PLAN VALUATION 1
PLAN VALUATION
Many entrepreneurs start out with grandiose ideas about what they would like to do with their business. Seven to eight months down the line, the fire is out. You need to pull, prod, and prick before you can really get a hang of what they are about. It has been said a million times, ‘A good business idea is not enough to make a good or profitable business’. You need much more.
You need to be able to transform the idea into a saleable product that is unique enough to ensure you are not driven out of the market by copycats. There are a million things you need to do between the idea and business success stage that we do not have enough space to list, but I think in a nutshell I’d say ‘You need to put pen to paper.’ This is called planning. You need a Business Plan which could comprise of so many other sub-plans (if I can use such a word) like marketing plan, sales plan, operational efficiency plans, brand management plan, customer service plan … The list of plans is endless, but we need to realize the plans are not ends in themselves but tools to help you get to your destination – a profitable and enduring enterprise. The true worth of a plan is not the beauty of the prose or presentation, but the quality of decision it engenders.
I asked participants at a training recently organized for aspiring entrepreneurs why the felt they were ‘bankable’ or worthy investment. A common response was that they had good plans on ground. Though this is ‘nice to have’, I told them 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 plans into good and profitable businesses. In order words, your plans should adequately consider the financial implications of the intended activities. How much it will cost, how much it will generate, and what you need to do to ensure you can deliver on the promise.
In my work as a Businesses Development Professional, It is important that I believe in the companies and the ability of the initiator to succeed in that line. But my faith in the dreams is constantly challenged by the fact that many times, they seem blissfully unaware of the financial angle of the business. My major point today is that if you hope to attract investors, get a loan or even perform efficiently and turn a profit, your plans cannot be all flowery words and superfluous promises. It must be backed by financial facts based on sound statistics and logic. Anything short of this is just an exercise in busyness a waste of your time. More on this next week.
Many entrepreneurs start out with grandiose ideas about what they would like to do with their business. Seven to eight months down the line, the fire is out. You need to pull, prod, and prick before you can really get a hang of what they are about. It has been said a million times, ‘A good business idea is not enough to make a good or profitable business’. You need much more.
You need to be able to transform the idea into a saleable product that is unique enough to ensure you are not driven out of the market by copycats. There are a million things you need to do between the idea and business success stage that we do not have enough space to list, but I think in a nutshell I’d say ‘You need to put pen to paper.’ This is called planning. You need a Business Plan which could comprise of so many other sub-plans (if I can use such a word) like marketing plan, sales plan, operational efficiency plans, brand management plan, customer service plan … The list of plans is endless, but we need to realize the plans are not ends in themselves but tools to help you get to your destination – a profitable and enduring enterprise. The true worth of a plan is not the beauty of the prose or presentation, but the quality of decision it engenders.
I asked participants at a training recently organized for aspiring entrepreneurs why the felt they were ‘bankable’ or worthy investment. A common response was that they had good plans on ground. Though this is ‘nice to have’, I told them 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 plans into good and profitable businesses. In order words, your plans should adequately consider the financial implications of the intended activities. How much it will cost, how much it will generate, and what you need to do to ensure you can deliver on the promise.
In my work as a Businesses Development Professional, It is important that I believe in the companies and the ability of the initiator to succeed in that line. But my faith in the dreams is constantly challenged by the fact that many times, they seem blissfully unaware of the financial angle of the business. My major point today is that if you hope to attract investors, get a loan or even perform efficiently and turn a profit, your plans cannot be all flowery words and superfluous promises. It must be backed by financial facts based on sound statistics and logic. Anything short of this is just an exercise in busyness a waste of your time. More on this next week.
Everybody Blow Your Trumpet! 4
How Boring can the Music get.
Why do consumers disbelieve companies that come on air to say they are the best? Personally, I think it is because we have heard it one time too many.
Each telecoms service provider interrupts my favorite program to tell me they have a better deal and I wonder “what is new”? More than one television station is a ‘T.V station of the year’ courtesy of some merit award. Only problem is that some omit to state the year they worn for and I have to wonder who is lying and who is truthful. And even the banks have joined in. ‘Banker of the year, Best bank in the Africa, Most popular bank’ e.t.c. I am sure they have some other priorities now with ‘Sanusi’ in power. Really, ‘I am the best’ is so cliché! It is actually boring.
Now for somebody advocating that you blow your trumpet, you are probably wondering if I changed my mind. Not at all. I just think there are much better ways to go about it. Why be dogmatic. Marketing Experts in the western world have concluded that the ‘first’ and ‘best’ brackets have become overcrowded and advocate some more creative positioning or categories. Kodak is not the best, largest, or oldest camera film maker. It is simply helping to preserve memories. Disney land is not the best park in the world. They are just out to make people happy and the millions that visit each year find this believable. Nike says they empower you to – ‘Just do it’. Entrepreneurs should learn from this.
As an entrepreneur, you need to go back to the drawing board and find out what value you add to your customers life. Something they can really measure and agree with because it is what they get. Just like I have said earlier in this series - say something different in a nicer way. Detergent companies are fast ditching the ‘brighter and better’ campaigns. The 10 tough dirt spots or learning and playing without worries is much better.
And if you are the best, get others to say so; Staff, friends, customers and even the competition. You need a large orchestra playing that tune. There was a time almost all my friends actively marketed a certain bank. The delight of their customers did more for them than any advert. Before long I was an account holder.
To go far in business, put your message on the mouths of old and young, babes and suckling, friend and foes and you will see business boom. That is why the giant corporations hire celebrity spokes persons.
Your to do?
· Expand your band. Bring in drummers, flutist, guitarists and singers.
· If you must stick with just the trumpet, Sing a new tune. Forhget the competitive slogans. After all, why do you buy ‘Milo’ and not ‘Toya Choco’? It is not that its the sweetest, but I believe it has something to do with its being for future champions.
Why do consumers disbelieve companies that come on air to say they are the best? Personally, I think it is because we have heard it one time too many.
Each telecoms service provider interrupts my favorite program to tell me they have a better deal and I wonder “what is new”? More than one television station is a ‘T.V station of the year’ courtesy of some merit award. Only problem is that some omit to state the year they worn for and I have to wonder who is lying and who is truthful. And even the banks have joined in. ‘Banker of the year, Best bank in the Africa, Most popular bank’ e.t.c. I am sure they have some other priorities now with ‘Sanusi’ in power. Really, ‘I am the best’ is so cliché! It is actually boring.
Now for somebody advocating that you blow your trumpet, you are probably wondering if I changed my mind. Not at all. I just think there are much better ways to go about it. Why be dogmatic. Marketing Experts in the western world have concluded that the ‘first’ and ‘best’ brackets have become overcrowded and advocate some more creative positioning or categories. Kodak is not the best, largest, or oldest camera film maker. It is simply helping to preserve memories. Disney land is not the best park in the world. They are just out to make people happy and the millions that visit each year find this believable. Nike says they empower you to – ‘Just do it’. Entrepreneurs should learn from this.
As an entrepreneur, you need to go back to the drawing board and find out what value you add to your customers life. Something they can really measure and agree with because it is what they get. Just like I have said earlier in this series - say something different in a nicer way. Detergent companies are fast ditching the ‘brighter and better’ campaigns. The 10 tough dirt spots or learning and playing without worries is much better.
And if you are the best, get others to say so; Staff, friends, customers and even the competition. You need a large orchestra playing that tune. There was a time almost all my friends actively marketed a certain bank. The delight of their customers did more for them than any advert. Before long I was an account holder.
To go far in business, put your message on the mouths of old and young, babes and suckling, friend and foes and you will see business boom. That is why the giant corporations hire celebrity spokes persons.
Your to do?
· Expand your band. Bring in drummers, flutist, guitarists and singers.
· If you must stick with just the trumpet, Sing a new tune. Forhget the competitive slogans. After all, why do you buy ‘Milo’ and not ‘Toya Choco’? It is not that its the sweetest, but I believe it has something to do with its being for future champions.
Everybody Blow Your Trumpet! 3
We are still on the trumpet series and the last but one question is what I am addressing today viz
Is anybody listening: Sure. Somebody is listening. There is the fable about a local man who claimed to have heard a frog croaking in Oke Arin Market in Lagos. When he was told that it was impossible to hear such a sound the midst of the hustle and bustle of the noisy market, he proceeded to prove them wrong by dropping a coin. It was observed that everyone around quickly checked their pockets at the drop of the coin. The busy people who could not hear the croak of the frog could hear the twang of a coin on tar. Lesson: People hear what they listen for.
Back to trumpets and business. I posit that even when we are all busy with our own music and instruments, we are still subconsciously listening for something. We may not be able to place it but when we hear it, we sit up and pay attention. As an entrepreneur, you cannot afford to play the same tune as everybody else. You need to find a unique piece to play; something different. Note that I did not say something better, or magnificent, or earth shattering. No, I mean just different. This is the where the relevance of concepts like branding, niche markets and positioning comes in.
Come to think of it - what is the difference between a ‘Timex’ and a ‘Rolex’? Which one tells the time most accurately? I dare say neither. But Rolex was soldto us in a different manner. The manufacturer knew we were listening for celebration. And we get this when tells us his watch is for the most successful people around. Same goes for Mercedes and some other premium brands.
Why did we all suddenly move to ‘Ariel’ and forgot about other brands of detergents? Because they showed us they cared about us when we asked for a more affordable pack. They did not reduce the real price or quality of the product, but they put it within our reach with the mini packs. We did not have to accept suspicious looking blue detergents tied in nylons as ‘Omo’ or ‘Elephant’. They proved to us that they were listening. So when they spoke, we returned the courtesy by buying. Consumers may not have realized it, but they were actually waiting for a product that showed they had been heard. This is critical for you as an entrepreneur. You must play to ensure somebody hears, even if they were not listening initially. Blasting away your music mindlessly is just lost resource. That is money going down the drain.
So what should you do to be heard-
· Find a beautiful tune lying deep in your heart and play it out. You will be applauded
· Play during the intermission, you will be a welcome refreshment.
· Ask those around what they would like to hear play it.
· Play a tune that has not been played for a while.
Is anybody listening: Sure. Somebody is listening. There is the fable about a local man who claimed to have heard a frog croaking in Oke Arin Market in Lagos. When he was told that it was impossible to hear such a sound the midst of the hustle and bustle of the noisy market, he proceeded to prove them wrong by dropping a coin. It was observed that everyone around quickly checked their pockets at the drop of the coin. The busy people who could not hear the croak of the frog could hear the twang of a coin on tar. Lesson: People hear what they listen for.
Back to trumpets and business. I posit that even when we are all busy with our own music and instruments, we are still subconsciously listening for something. We may not be able to place it but when we hear it, we sit up and pay attention. As an entrepreneur, you cannot afford to play the same tune as everybody else. You need to find a unique piece to play; something different. Note that I did not say something better, or magnificent, or earth shattering. No, I mean just different. This is the where the relevance of concepts like branding, niche markets and positioning comes in.
Come to think of it - what is the difference between a ‘Timex’ and a ‘Rolex’? Which one tells the time most accurately? I dare say neither. But Rolex was soldto us in a different manner. The manufacturer knew we were listening for celebration. And we get this when tells us his watch is for the most successful people around. Same goes for Mercedes and some other premium brands.
Why did we all suddenly move to ‘Ariel’ and forgot about other brands of detergents? Because they showed us they cared about us when we asked for a more affordable pack. They did not reduce the real price or quality of the product, but they put it within our reach with the mini packs. We did not have to accept suspicious looking blue detergents tied in nylons as ‘Omo’ or ‘Elephant’. They proved to us that they were listening. So when they spoke, we returned the courtesy by buying. Consumers may not have realized it, but they were actually waiting for a product that showed they had been heard. This is critical for you as an entrepreneur. You must play to ensure somebody hears, even if they were not listening initially. Blasting away your music mindlessly is just lost resource. That is money going down the drain.
So what should you do to be heard-
· Find a beautiful tune lying deep in your heart and play it out. You will be applauded
· Play during the intermission, you will be a welcome refreshment.
· Ask those around what they would like to hear play it.
· Play a tune that has not been played for a while.
A CASE FOR FINANCIAL RECORDS 2
The Balance Sheet – This is a definitive report that gives a picture of a company’s business and financial position at a point in time.
The simple logic of business is this – If for any reason a company needs to settle all its liabilities e.g creditors, taxes, investors (e.t.c) at a point in time; the total of its asset (debtors, stock, property e.t.c.) must be adequate for this purpose. That is a company should not have more liabilities than it can settle with its assets. A company that violates this principle headed for trouble. The Balance Sheet is all encompassing. An accountant can get so much information from this report alone. It is usually key in analyzing a company’s performance or for comparing 2 similar operations.
The Balance Sheet is the most important report of all because all activities that affect the financial position of the company (up to that point) will find its way into the balance sheet. The other reports support the Balance Sheet by describing what the company has done over time to get to this position. The Profit & Loss gives details of activities that affect profit while the Cash Flow gives details of transactions that affect the cash position. However, any activity would ultimately affect either the asset or liability positions. The Balance Sheet, simply lists all the assets and liabilities side by side.
The essence of all of these is that it is important for a business to keep accurate records of its transactions. You may need the services of a professional to draw up the Financial Statements, but the singular basis of a true and accurate Financial Statement is an accurate record of transactions. It is essential for every business person to maintain accurate and complete records of financial activities.
Many small business people can not understand the importance of keeping financial records. They reckon, if they have done well thus far, why spend more on an accountant or on records keeping. Well you need to know that ‘head knowledge’ can only take you so far. If you plan to grow your business to a status where it will be highly respectable and would be considered by a going concern by external stakeholders, a finance department or function is sin qua non. Can you imagine a Zenith Bank, a Tastee Fried Chicken, or a Chair Centre without financial records? These companies were started by individuals like you and I.
Do not say those are big companies. Remember they started small and a key factor in their phenomenal growth is the fact that they had all the financial information they needed to make important decision at any point in time. They also had what it took to attract other people who share their vision to partner with them in their pursuit.
The simple logic of business is this – If for any reason a company needs to settle all its liabilities e.g creditors, taxes, investors (e.t.c) at a point in time; the total of its asset (debtors, stock, property e.t.c.) must be adequate for this purpose. That is a company should not have more liabilities than it can settle with its assets. A company that violates this principle headed for trouble. The Balance Sheet is all encompassing. An accountant can get so much information from this report alone. It is usually key in analyzing a company’s performance or for comparing 2 similar operations.
The Balance Sheet is the most important report of all because all activities that affect the financial position of the company (up to that point) will find its way into the balance sheet. The other reports support the Balance Sheet by describing what the company has done over time to get to this position. The Profit & Loss gives details of activities that affect profit while the Cash Flow gives details of transactions that affect the cash position. However, any activity would ultimately affect either the asset or liability positions. The Balance Sheet, simply lists all the assets and liabilities side by side.
The essence of all of these is that it is important for a business to keep accurate records of its transactions. You may need the services of a professional to draw up the Financial Statements, but the singular basis of a true and accurate Financial Statement is an accurate record of transactions. It is essential for every business person to maintain accurate and complete records of financial activities.
Many small business people can not understand the importance of keeping financial records. They reckon, if they have done well thus far, why spend more on an accountant or on records keeping. Well you need to know that ‘head knowledge’ can only take you so far. If you plan to grow your business to a status where it will be highly respectable and would be considered by a going concern by external stakeholders, a finance department or function is sin qua non. Can you imagine a Zenith Bank, a Tastee Fried Chicken, or a Chair Centre without financial records? These companies were started by individuals like you and I.
Do not say those are big companies. Remember they started small and a key factor in their phenomenal growth is the fact that they had all the financial information they needed to make important decision at any point in time. They also had what it took to attract other people who share their vision to partner with them in their pursuit.
Saturday, September 12, 2009
MONEY WORRIES
Money definitely does not guarantee happiness. Our attitude towards money or our money management aptitude could have significant implications for our emotional state and happiness. Researchers have observed that money has surprisingly little relation to personal happiness above the poverty line. With the current global financial crisis, personal financial management and stability have become a major concern. However, money woes are quite common in times of abundance. Again it comes down to attitude and discipline.
While some people are constantly in a state of anxiety over their finances, others live free of anxiety and worry whatever the situation. This state of peace occurs when you have freed yourself from being enslaved by money. Go through the checklist below to see if you have totally mastered you finances.
Do you avoid discussing finances because of the anxiety it causes?
Is money often a subject of family squabbles?
Do you spend compulsively?
Do you constantly worry about your bills and debts?
Do you know your exact total income?
Do you know exactly how much you spend on personal needs?
Do you know how much you owe (or are owed) on the whole?
Do you pay bills and debs with money earmarked for other things
Do you pay your bills late e.g school fees, utility charges, e.t.c?
Do constantly reschedule your debt payment?
Do you take out new loans to pay off old ones?
Do you have any savings?
Do you find it difficult to finance monthly running expenses.
Check how you score on this list. Like I said last week, you may need to adjust your lifestyle. Change in the way you handle your finances may bring you more peace of mind and a happier life. “Money is the root of all evil.” This is quite a popular saying. But I beg to disagree. Money is an essential and critical resource. When well managed, it gives you the freedom to pursue more important things. It need not be a source of constant worry or sorrow.
Since it has been established that both the rich and poor may be enslaved by money. Moreover the richest men in the world have often expressed a desire to be without money in exchange for some other things. “I am not to be envied. How can my wealth help me? I am sixty years old and I cannot digest my food.” This statement was credited to Andrew Carnegie. He was then one of the richest men in the world. But his wealth could not buy him what he desired most then – good health.
The struggle to get and keep wealth will leave little time or energy for any other thing if not kept in perspective. It is therefore clear that both the ‘poor’, ‘the rich’ and ‘the on the way there’ need to keep a right attitude in other to leave free of worries.
While some people are constantly in a state of anxiety over their finances, others live free of anxiety and worry whatever the situation. This state of peace occurs when you have freed yourself from being enslaved by money. Go through the checklist below to see if you have totally mastered you finances.
Do you avoid discussing finances because of the anxiety it causes?
Is money often a subject of family squabbles?
Do you spend compulsively?
Do you constantly worry about your bills and debts?
Do you know your exact total income?
Do you know exactly how much you spend on personal needs?
Do you know how much you owe (or are owed) on the whole?
Do you pay bills and debs with money earmarked for other things
Do you pay your bills late e.g school fees, utility charges, e.t.c?
Do constantly reschedule your debt payment?
Do you take out new loans to pay off old ones?
Do you have any savings?
Do you find it difficult to finance monthly running expenses.
Check how you score on this list. Like I said last week, you may need to adjust your lifestyle. Change in the way you handle your finances may bring you more peace of mind and a happier life. “Money is the root of all evil.” This is quite a popular saying. But I beg to disagree. Money is an essential and critical resource. When well managed, it gives you the freedom to pursue more important things. It need not be a source of constant worry or sorrow.
Since it has been established that both the rich and poor may be enslaved by money. Moreover the richest men in the world have often expressed a desire to be without money in exchange for some other things. “I am not to be envied. How can my wealth help me? I am sixty years old and I cannot digest my food.” This statement was credited to Andrew Carnegie. He was then one of the richest men in the world. But his wealth could not buy him what he desired most then – good health.
The struggle to get and keep wealth will leave little time or energy for any other thing if not kept in perspective. It is therefore clear that both the ‘poor’, ‘the rich’ and ‘the on the way there’ need to keep a right attitude in other to leave free of worries.
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