Using Cerebrate’s software to start a Consulting Business

Using Cerebrate’s software to start a Consulting Business

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By: Garnet Melville – Managing Director/Business Consultant/Cerebrate Business Solutions (Pty) Ltd

Cerebrate Business Solutions (Pty) Ltd launched 2 business software apps in December 2014 initially aimed at assisting new business start-ups and business requiring financing, but later to help a new generation of Business Consultant to hone their skills and start a Business Consulting practice with no capital and no experience. They could use the business software apps to provide professional advice to these businesses.

The business apps used as a basis for Business Consulting services are:

  • BizToolkit App – (a business financial planning tool that provides 2 years monthly cash flow projections, 5 years annual cash flow projections, 5 years projected income statements, 5 years projected balance sheets and financial and business ratios with benchmark warnings and advice on how to improve these for financing requests) The tool is ideal for testing various business financial strategies to determine financial feasibility before completing a full business plan. Various pricing, costing and debtor/creditor strategies can be tested to establish suitability, and impact on cash flow. There is also a Loan Repayment function, which allows loan amounts, repayment terms and interest rates to be inserted, and these will be accounted for correctly in the Cash Flow Projections, Income Statements and Balance Sheets automatically;
  • Business Plan app – this app has been developed based on the requirements of South African financing institutions. It was developed in such a way that both start-up entrepreneurs and seasoned Business Consultants alike can benefit from the easy to use app, that provides a framework with all the required headings, and blank spaces where the information required can be typed in.

For each heading there is an easy-to-use on-screen tutorial, called a “HelpWizard” that provides explanations and advice of what information is required in each section (as per what banks and other funders require), and guidance is provided on where to find this information, how to do the research, how to evaluate and critically assess the information and finally how this information should be presented to financiers.

Cerebrate App - Executive Summary

The app allows for business plans to be completed in a fraction of the time it would take consultants to produce a business plan normally, as it has been programmed in such a way that information is never required to be captured twice, if information is required more than once in the plan, it will automatically be inserted where ever required, ensuring that accuracy and efficiency is maintained throughout. All source documents like ID Copies, Company Documents, financial statements etc. can be scanned into the system and inserted where required.

The app also includes the BizToolkit mentioned above, the business plan can be shared with 3rd party collaborators at any stage of the plan’s development, and these collaborators can be provided with either a “Read only” or “Read and Edit” functionality, so that experts can provide the writer with assistance at any stage of the plan’s development. Once completed, the system provides a “Warning Report” which provides the user with information such as:

  1. Has all information in each section (heading) been completed;
  2. Are all the financial ratios within industry benchmarks;
  3. If the ratios are outside of acceptable industry parameters, advice is provided on what should be done to improve the ratios;

Should all requirements be met, the system will advise that the Business Plan can be published, and this is in the form of a pre-formatted pdf document that can either be printed or e-mailed to financiers, investors or shareholders etc. There is no need to complete a “Table of Contents” as this is automatically done during formatting, with each heading and its corresponding page within the business plan being automatically inserted.

Due to Cerebrate’s experience in both banking, as well as business consulting, we can truly vouch for the apps and their ease of use. The system also allows for a “firm” to download either single business plans or batches of apps, and assign these to different users. These different users can be managed in terms of:

  • Plans (Business Plans or BizToolkits) they are working on;
  • When last a user worked on a plan i.e. date and time;
  • The status of a Plan i.e. how far from complete;
  • Allows the administrator to read any plan by any user at any time;

In this way, a “Firm” can employ users specifically for the purpose of completing either Business Plans or Financial Plans, and pay them according to the status of that plan, making the management and remuneration of these employees easier. They do not necessarily need to be experienced consultants, as the on-screen tutorials teach them what is required and therefor the premium salaries usually commanded by experienced consultants is not required, making the service offered to your clients cheaper, quicker and more efficient which makes the pricing of these business plans more competitive in the market.

The fact that these business plans can also be completed far quicker than traditional business plans means that monies due for business plans are recovered quicker improving cash flow and profitability.

There is other Business Plan software out there, but usually it is accompanied by thick learner manuals that need to be mastered first before trying the software, and these are usually based on either American or European business markets and environments, with very little bearing on what financiers in South Africa look for in a business plan.

Cerebrate’s Apps have been developed specifically for the South African business environment, and what South African banks want to see in business plans and can be used immediately once downloaded i.e. no lengthy user manuals to be studied and mastered first.

Typically the market price for completed plans are:

  • Financial Plan (R5,000 – R7,000); and
  • Business Plan (R7,500 – R12,500);

Terms of payment for these are usually 50% deposit before commencement of the project and the balance of payment upon completion, before final edit, client debrief, printing & binding.

Cost of App downloads are as follows:

  • BizToolkit R1,499; and
  • Business Plan App R2,499;
Cerebrate Business apps

Cerebrate Business apps

 

While this appears to be a large amount of information, we have attempted to make this introduction as complete as possible, should you however have any questions or issues not handled above, please do not hesitate to contact us or read through the FAQ’s Frequently Asked Questions

 

8 Factors That Determine the Financial Health of a Business

8 Factors That Determine the Financial Health of a Business

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Image credit: Pixabay

 

 

 

 

http://www.entrepreneur.com/author/the-staff-of-entrepreneur-media-inc

The Staff of Entrepreneur Media, Inc.

In their book, Start Your Own Business, the staff of Entrepreneur Media, Inc. guides you through the critical steps to starting a business, then supports you in surviving the first three years as a business owner. In this edited excerpts, the authors discuss all the financial factors you should investigate when you’re considering buying an existing business.

So you’ve decided to purchase an existing business instead of starting from scratch and you’ve done some initial research to find out more about the business you’re thinking of buying. What now? If the business still looks promising after your preliminary analysis, your next step is to have your acquisition team (your accountant, attorney and banker) should start examining the business’s potential returns and its asking price. Whatever method you use to determine the fair market price of the business, your assessment of the business’s value should take into account such issues as the business’s financial health, earnings history, growth potential, and intangible assets (for example, brand name and market position).

To get an idea of the company’s anticipated returns and future financial needs, ask the business owner and/or accountant to show you projected financial statements for the business. Balance sheets, income statements, cash flow statements, footnotes and tax returns for the past three years are all key indicators of a business’s health. These documents will help you do some financial analyses that will spotlight any underlying problems and also provide a closer look at a wide range of less tangible information.

Among other issues, you should focus on the following:

Excessive or insufficient inventory.

If the business is based on a product rather than a service, take careful stock of its inventory. First-time business buyers are often seduced by inventory, but it can be a trap. Excessive inventory may be obsolete or may soon become so; it also costs money to store and insure. Excess inventory can also mean there are a lot of dissatisfied customers who are experiencing lags between their orders and final delivery or are returning items they aren’t happy with.

The lowest level of inventory the business can carry.

Determine this, then have the seller agree to reduce stock to that level by the date you take over the company. Also add a clause to the purchase agreement specifying that you’re buying only the inventory that’s current and saleable.

Accounts receivable.

Uncollected receivables stunt a business’s growth and could require unanticipated bank loans. Look carefully at indicators such as accounts receivable turnover, credit policies, cash collection schedules and the aging of receivables.

Net income.

Use a series of net income ratios to gain a better look at a business’s bottom line. For instance, the ratio of gross profit to net sales can be used to determine whether the company’s profit margin is in line with that of similar businesses. Likewise, the ratio of net income to net worth, when considered together with projected increases in interest costs, total purchase price and similar factors, can show whether you would earn a reasonable return. Finally, the ratio of net income to total assets is a strong indicator of whether the company is getting a favorable rate of return on assets. Your accountant can help you assess all these ratios. As they do so, be sure to determine whether the profit figures have been disclosed before or after taxes and the amount of returns the current owner is getting from the business. Also assess how much of the expenses would stay the same, increase, or decrease under your management.

Working capital.

Working capital is defined as current assets less current liabilities. Without sufficient working capital, a business can’t stay afloat—so one key computation is the ratio of net sales to net working capital. This measures how efficiently the working capital is being used to achieve business objectives.

Sales activity.

Sales figures may appear rosier than they really are. When studying the rate of growth in sales and earnings, read between the lines to tell if the growth rate is due to increased sales volume or higher prices. Also examine the overall marketplace. If the market seems to be mature, sales may be static—and that might be why the seller’s trying to unload the company.

Fixed assets.

If your analysis suggests the business has invested too much money in fixed assets, such as the plant property and equipment, make sure you know why. Unused equipment could indicate that demand is declining or that the business owner miscalculated manufacturing requirements.

Operating environment.

Take time to understand the business’s operating environment and corporate culture. If the business depends on overseas clients or suppliers, for example, examine the short- and long-term political environment of the countries involved. Look at the business in light of consumer or economic trends; for example, if you’re considering a store that sells products based on a fad like Crocs, will that client base still be intact five or 10 years later? Or if the company relies on just a few major clients, can you be sure they’ll stay with you after the deal is closed?

An Introduction to Business Plans

Why is a business plan so vital to the health of your business? Read the first section of our tutorial on How to Build a Business Plan to find out.

An Introduction to Business Plans

A business plan is a written description of your business’s future. That’s all there is to it–a document that desribes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the germ of a plan.

Business plans can help perform a number of tasks for those who write and read them. They’re used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better.

So what’s included in a business plan, and how do you put one together? Simply stated, a business plan conveys your business goals, the strategies you’ll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even.

Sound impressive? It can be, if put together properly. A good business plan follows generally accepted guidelines for both form and content. There are three primary parts to a business plan:

  • The first is the business concept, where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success.
  • The second is the marketplace section, in which you describe and analyze potential customers: who and where they are, what makes them buy and so on. Here, you also describe the competition and how you’ll position yourself to beat it.
  • Finally, the financial section contains your income and cash flow statement, balance sheet and other financial ratios, such as break-even analyses. This part may require help from your accountant and a good spreadsheet software program.

Breaking these three major sections down even further, a business plan consists of seven key components:

  1. Executive summary
  2. Business description
  3. Market strategies
  4. Competitive analysis
  5. Design and development plan
  6. Operations and management plan
  7. Financial factors

In addition to these sections, a business plan should also have a cover, title page and table of contents.

How Long Should Your Business Plan Be?
Depending on what you’re using it for, a useful business plan can be any length, from a scrawl on the back of an envelope to, in the case of an especially detailed plan describing a complex enterprise, more than 100 pages. A typical business plan runs 15 to 20 pages, but there’s room for wide variation from that norm.

Much will depend on the nature of your business. If you have a simple concept, you may be able to express it in very few words. On the other hand, if you’re proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across.

The purpose of your plan also determines its length. If you want to use your plan to seek millions of dollars in seed capital to start a risky venture, you may have to do a lot of explaining and convincing. If you’re just going to use your plan for internal purposes to manage an ongoing business, a much more abbreviated version should be fine.

Who Needs a Business Plan?

About the only person who doesn’t need a business plan is one who’s not going into business. You don’t need a plan to start a hobby or to moonlight from your regular job. But anybody beginning or extending a venture that will consume significant resources of money, energy or time, and that is expected to return a profit, should take the time to draft some kind of plan.

Startups. The classic business plan writer is an entrepreneur seeking funds to help start a new venture. Many, many great companies had their starts on paper, in the form of a plan that was used to convince investors to put up the capital necessary to get them under way.

Most books on business planning seem to be aimed at these startup business owners. There’s one good reason for that: As the least experienced of the potential plan writers, they’re probably most appreciative of the guidance. However, it’s a mistake to think that only cash-starved startups need business plans. Business owners find plans useful at all stages of their companies’ existence, whether they’re seeking financing or trying to figure out how to invest a surplus.

Established firms seeking help. Not all business plans are written by starry-eyed entrepreneurs. Many are written by and for companies that are long past the startup stage. WalkerGroup/Designs, for instance, was already well-established as a designer of stores for major retailers when founder Ken Walker got the idea of trademarking and licensing to apparel makers and others the symbols 01-01-00 as a sort of numeric shorthand for the approaching millennium. Before beginning the arduous and costly task of trademarking it worldwide, Walker used a business plan complete with sales forecasts to convince big retailers it would be a good idea to promise to carry the 01-01-00 goods. It helped make the new venture a winner long before the big day arrived. “As a result of the retail support up front,” Walker says, “we had over 45 licensees running the gamut of product lines almost from the beginning.”

These middle-stage enterprises may draft plans to help them find funding for growth just as the startups do, although the amounts they seek may be larger and the investors more willing. They may feel the need for a written plan to help manage an already rapidly growing business. Or a plan may be seen as a valuable tool to be used to convey the mission and prospects of the business to customers, suppliers or others.

Plan an Updating Checklist
Here are seven reasons to think about updating your business plan. If even just one applies to you, it’s time for an update.

  1. A new financial period is about to begin. You may update your plan annually, quarterly or even monthly if your industry is a fast-changing one.
  2. You need financing, or additional financing. Lenders and other financiers need an updated plan to help them make financing decisions.
  3. There’s been a significant market change. Shifting client tastes, consolidation trends among customers and altered regulatory climates can trigger a need for plan updates.
  4. Your firm develops or is about to develop a new product,technology, service or skill. If your business has changed a lot since you wrote your plan the first time around, it’s time for an update.
  5. You have had a change in management. New managers should get fresh information about your business and your goals.
  6. Your company has crossed a threshold, such as moving out of your home office, crossing the $1 million sales mark oremploying your 100th employee.
  7. Your old plan doesn’t seem to reflect reality any more. Maybe you did a poor job last time; maybe things have just changed faster than you expected. But if your plan seems irrelevant, redo it.

 

Finding the Right Plan for You

Business plans tend to have a lot of elements in common, like cash flow projections and marketing plans. And many of them share certain objectives as well, such as raising money or persuading a partner to join the firm. But business plans are not all the same any more than all businesses are.

Depending on your business and what you intend to use your plan for, you may need a very different type of business plan from another entrepreneur. Plans differ widely in their length, their appearance, the detail of their contents, and the varying emphases they place on different aspects of the business.

The reason that plan selection is so important is that it has a powerful effect on the overall impact of your plan. You want your plan to present you and your business in the best, most accurate light. That’s true no matter what you intend to use your plan for, whether it’s destined for presentation at a venture capital conference, or will never leave your own office or be seen outside internal strategy sessions.

When you select clothing for an important occasion, odds are you try to pick items that will play up your best features. Think about your plan the same way. You want to reveal any positives that your business may have and make sure they receive due consideration.

Types of Plans
Business plans can be divided roughly into four separate types. There are very short plans, or miniplans. There are working plans, presentation plans and even electronic plans. They require very different amounts of labor and not always with proportionately different results. That is to say, a more elaborate plan is not guaranteed to be superior to an abbreviated one, depending on what you want to use it for.

  • The Miniplan. A miniplan may consist of one to 10 pages and should include at least cursory attention to such key matters as business concept, financing needs, marketing plan and financial statements, especially cash flow, income projection and balance sheet. It’s a great way to quickly test a business concept or measure the interest of a potential partner or minor investor. It can also serve as a valuable prelude to a full-length plan later on.

Be careful about misusing a miniplan. It’s not intended to substitute for a full-length plan. If you send a miniplan to an investor who’s looking for a comprehensive one, you’re only going to look foolish.

  • The Working Plan. A working plan is a tool to be used to operate your business. It has to be long on detail but may be short on presentation. As with a miniplan, you can probably afford a somewhat higher degree of candor and informality when preparing a working plan.

A plan intended strictly for internal use may also omit some elements that would be important in one aimed at someone outside the firm. You probably don’t need to include an appendix with resumes of key executives, for example. Nor would a working plan especially benefit from, say, product photos.

Fit and finish are liable to be quite different in a working plan. It’s not essential that a working plan be printed on high-quality paper and enclosed in a fancy binder. An old three-ring binder with “Plan” scrawled across it with a felt-tip marker will serve quite well.

Internal consistency of facts and figures is just as crucial with a working plan as with one aimed at outsiders. You don’t have to be as careful, however, about such things as typos in the text, perfectly conforming to business style, being consistent with date formats and so on. This document is like an old pair of khakis you wear into the office on Saturdays or that one ancient delivery truck that never seems to break down. It’s there to be used, not admired.

  • The Presentation Plan. If you take a working plan, with its low stress on cosmetics and impression, and twist the knob to boost the amount of attention paid to its looks, you’ll wind up with a presentation plan. This plan is suitable for showing to bankers, investors and others outside the company.

Almost all the information in a presentation plan is going to be the same as your working plan, although it may be styled somewhat differently. For instance, you should use standard business vocabulary, omitting the informal jargon, slang and shorthand that’s so useful in the workplace and is appropriate in a working plan. Remember, these readers won’t be familiar with your operation. Unlike the working plan, this plan isn’t being used as a reminder but as an introduction.

You’ll also have to include some added elements. Among investors’ requirements for due diligence is information on all competitive threats and risks. Even if you consider some of only peripheral significance, you need to address these concerns by providing the information.

The big difference between the presentation and working plans is in the details of appearance and polish. A working plan may be run off on the office printer and stapled together at one corner. A presentation plan should be printed by a high-quality printer, probably using color. It must be bound expertly into a booklet that is durable and easy to read. It should include graphics such as charts, graphs, tables and illustrations.

It’s essential that a presentation plan be accurate and internally consistent. A mistake here could be construed as a misrepresentation by an unsympathetic outsider. At best, it will make you look less than careful. If the plan’s summary describes a need for $40,000 in financing, but the cash flow projection shows $50,000 in financing coming in during the first year, you might think, “Oops! Forgot to update that summary to show the new numbers.” The investor you’re asking to pony up the cash, however, is unlikely to be so charitable.

  • The Electronic Plan. The majority of business plans are composed on a computer of some kind, then printed out and presented in hard copy. But more and more business information that once was transferred between parties only on paper is now sent electronically. So you may find it appropriate to have an electronic version of your plan available. An electronic plan can be handy for presentations to a group using a computer-driven overhead projector, for example, or for satisfying the demands of a discriminating investor who wants to be able to delve deeply into the underpinnings of complex spreadsheets.

Source: The Small Business Encyclopedia, Business Plans Made Easy,Start Your Own Business and Entrepreneur magazine.


To Investors, Startups Without Business Plans Are Expensive Hobbies

Source: Entrepreneur

To Investors, Startups Without Business Plans Are Expensive Hobbies

Martin Zwilling

Martin Zwilling
CONTRIBUTOR
Veteran startup mentor, executive, blogger, author, tech professional, and Angel investor.

If you sold your last startup for $800 million, you probably already know how to build a business, and even conservative investors won’t worry about the quality of your next business plan. But for the rest of us, don’t believe the Silicon Valley myth that all you have to do is sketch your million-dollar idea on the back of a napkin and investors will line up to give you money.

Based on my experience as an investor and mentor to aspiring entrepreneurs in Silicon Valley and elsewhere, one of the quickest ways to kill your credibility and your startup is to offer a poorly written business plan, or none at all. There really is no excuse these days, withsamples on the Internet, business-plan books in every bookstore and dozens of apps to automate the process.

Related: The Best Ways to Do Market Research for Your Business Plan

A great business plan doesn’t have to be a book in length, with extensive financial statements. Most good ones I see are in the range of 25 pages, which is more than enough to describe concisely all the business what, when, where and how. The plan must simply answer every relevant business question that you could imagine from your team, partners and investors.

In fact, the process of organizing and documenting these elements is the best way to make sure you understand the answers yourself. Would you be comfortable buying a house from a builder, or building one yourself, with no plan on timeframes, costs and features? I hope not. Most investors tend to think of startups without a plan as expensive hobbies.

There is no magic formula for a formal business plan format or sequence, but I would recommend the following 10 sections, in this sequence, with relevant content:

  1. Executive summary
  2. Problem and solution
  3. Company description
  4. Market opportunity
  5. Business model
  6. Competition analysis
  7. Marketing and sales strategy
  8. Management team
  9. Financial projections
  10. Exit strategy

Related: What Makes You Better? Business Plans and Highlighting Strengths.

A business plan that skips one or more of these topics is not complete, so don’t jeopardize your one chance to make a great first impression by offering a partial plan. It only takes a little extra work to make it a professional document, with a cover page, table of contents, headings and page numbers. Don’t try to impress constituents with technical terms, jargon and acronyms.

If you don’t have the time to write things down, or your writing skills leave something to be desired, don’t be afraid to get some help. No executive I know writes all his own contracts, but every smart one owns every one that is written for him, and understands every element. An entrepreneur who can’t manage a plan probably won’t be able to manage the new business.

Of course, if you don’t yet understand all the elements, it’s time to learn. My advice here is to check your ego at the door, and find a mentor or a partner who has business experience and domain knowledge to help you plan a viable business. Your idea may be technically right, but without a business plan, it could be dead right, which is not the result anyone is looking for.

There are no guarantees, but various studies have found that entrepreneurs who create a good plan generally double their chances of securing funding and building a successful business. In any context, and especially in the high-risk world of startups where more than 50 percent fail, you need every advantage that you can get.

Related: Expert Advice: 10 Tips to Craft a Strong Business Plan

The 8 Target Audiences for Your Business Plan

http://www.entrepreneur.com/author/the-staff-of-entrepreneur-media-inc

Source: The Staff of the Entrepreneur Media Inc. The Staff of Entrepreneur Media, Inc.

 

 

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Image credit: Pixabay

In their book Write Your Business Plan, the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what’s essential to any business plan, what’s appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors offer reasons why you may want to tailor your business plan to the audiences you’re showing it to.

The potential readers of a business plan are a varied bunch, ranging from bankers and venture capitalists to employees. Although this is a diverse group, it is a finite one. And each type of reader does have certain typical interests. If you know these interests up front, you should be sure to take them into account when preparing a plan for that particular audience.

Let’s take a look at eight typical audiences who’ll be reading your business plan.

1. Active venture capitalists.

VCs see hundreds of plans in the course of a year. Most plans probably receive no more than a glance from a given venture capitalist before being rejected; others get just a cursory inspection. Even if your plan excites initial interest, it may receive only a few minutes of attention to begin with. It’s essential, when courting these harried investors, that you make the right impression fast. Emphasize a cogent, succinct summary and explanation of the basic business concept, and don’t stint on the details about the impressive backgrounds of your management team. That said, make it concise and to the point. Remember, time is of the essence to venture capitalists and other investors.

2. Bankers.

Bankers tend to be more formal than venture capitalists and more concerned with financial strength than with exciting concepts and impressive resumes. For these readers, you’ll want to give extra attention to balance sheets and cash-flow statements. Make sure they’re fully detailed and come with notes to explain any anomalies or possible points of confusion.

3. Angel investors.

Angel investors may not insist on seeing a plan at all, but your responsibilities as a businessperson require you to show them one anyway. For such an informal investor, prepare a less-formal plan. Rather than going for impressive bulk, seek brevity. An angel investor used to playing their hunches might be put off by an imposing plan rather than impressed with your thoroughness.

4. Potential partners.

If you were thinking about becoming a partner in a firm, you’d no doubt be very concerned with the responsibilities you’d have, the authority you’d carry and the ownership you’d receive in the enterprise. Naturally, anyone who’s considering partnering with you is going to have similar concerns. So make sure that any plan presented to a potential partner deals comprehensively with the ownership structure and clearly spells out matters of control and accountability.

5. Customers.

Customers who are looking at your business plan are probably doing so because they’re contemplating building a long-term relationship with you. They’re certainly going to be more concerned about your relationships with your other customers and, possibly, suppliers than most of your readers. So deal with these sections of your plan in greater depth; you can be more concise in other areas. Customers rarely ever read a company’s business plan, so you should probably have your miniplan available for these occasions.

6. Suppliers.

Suppliers have a lot of the same concerns as customers, except they’re in the other direction on the supply chain. They’ll want, above all, to make sure you can pay your bills, so be sure to include adequate cash flow forecasts and other financial reports. Suppliers, who naturally would like their customers to order more and more, are likely to be quite interested in your growth prospects. In fact, if you can show you’re probably going to be growing a lot, you may be in a better position to negotiate terms with your suppliers. Like customers, most suppliers don’t take the time to read lengthy business plans, so again, focus on the shorter version for such purposes.

7. Strategic allies.

Strategic allies usually come to you for something specific—technology, distribution, complementary customer sets, etc. So any plan you show to a potential ally will stress this aspect of your operation. Sometimes potential strategic partners may also be potential competitors, so you may want to present your plan in stages, saving sensitive information such as financials and marketing strategies for later in the process when trust has been established.

8. Managers.

Managers in your company are using the plan primarily to remind themselves of objectives, to keep strategies clear and to monitor company performance and market conditions. You’ll want to stress such things as corporate mission and vision statements and analyses of current industry and economic factors. The most important part of a plan intended for management consumption is probably in the financials. You’ll want to take special care to make it easy for managers to compare sales revenue, profitability and other key financial measures against planned performance.

There’s one caution to the plan-customization exercise. Limit your alterations from one plan to another to modifying the emphasis of the information you present. Don’t show one set of numbers to a banker you’re trying to borrow money from and another to a partner you’re trying to lure on board. It’s one thing to stress one aspect of your operation over another for presentation purposes and entirely another to distort the truth.

How to Develop and Evaluate Your Startup’s Value Proposition

Jon Elvekrog

Co-founder and CEO of 140 ProofJon Elvekrog
Jon Elvekrog is the co-founder and CEO of 140 Proof, a social-ad platform company. With his co-founder, Jon developed 140 Proof’s patented content-matching technology to harness the massive, growing data set of the “Broad Interest Graph” and match consumers with relevant brand recommendations.
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We’ve all been there before: turning an idea over in our minds, asking our friends hypothetical questions, observing trends, and, ultimately, trying to determine if our business concept will fill a need and be welcomed in the market. Businesses succeed or fail on their value proposition. It’s not enough to be able to do, make, or provide something: It must be worth something to potential customers.  The amount of time and money wasted from buying into the “if you build it they will come,” fallacy is staggering. So before you go ahead and take the plunge, how can you evaluate your startup’s value proposition to ensure that your launch will not be met with a shrug?

Related: Know Your Unique Value Proposition.

While there are no guarantees, of course, I’ve found that the following questions are incredibly helpful when choosing your startup’s lane:

Where is the white space?

It’s obvious, but it needs to be said: Is there a real and unmet market need that your startup can address? First, start with a classic comparison list and go down the line to determine if you can fill the white space that exists.  If the answer is yes, that’s a great first step — but the more likely answer is no. Even so, that doesn’t mean you’re completely out of luck. Try viewing the market from a different perspective and consider unique positioning for your startup.

For example, Uber as another high-end car service is less compelling than Uber as a replacement for a personal vehicle or taxi — or even Uber as a logistics company offering lightning-fast delivery. Challenge yourself and your team to envision the market years down the road and use that as inspiration.

Is my product vastly superior to my competitor’s?

If someone else is already doing what you intend to do, or something substantially similar, fear not — there are still ways to show that you have an edge, and they all have to do with quality. In short, anything you create must be 10 times better than your competitor’s product.

For instance, look at Chipotle. Yes, there are other quick-serve Mexican restaurants, but why does Chipotle have lines out the door? It wins in every category: quality of ingredients, ease of customizing orders, value (amount of food for the money), overall experience, the list goes on. You can make the same argument for your startup, too, by showing investors that quality is what sets you apart.

What do my (potential) customers want?

The best advice I can give you is this: Do the market research yourself and take the time to interact with your potential customers. You’ll receive the best feedback from those who would pay for your product (or are already paying you, if you’re in beta.) Venture capitalists don’t always have the same read on buyer needs as the buyers themselves, so it’s worth your time to explore every angle.

Related: What’s the difference between a value proposition

For those of you who are launching a consumer product, the easiest way to test the market is via Kickstarter, Indiegogo or another crowdfunding platform. It’s a fantastic way to see what people are willing to pay, and there’s very little downside if the idea flops. Another simple way to test the market is via Google’s Keyword Planner, which can help you learn what potential customers are searching for as well as predict how certain keywords will perform.

Could it benefit me to launch after a competitor?

Have you ever heard the phrase, “The early bird gets the worm, but the second mouse gets the cheese?” Launch strategy is just as important as any other business decision that you will make. Many times being first-to-market has significant advantages but not always. Remember when Apple’s iPod crushed every other MP3 player on the market? While MP3 players had been around for years, Apple created a superior user interface and intuitive end-to-end user experience, making it far and away the best option.

If you can “fast follow” by letting someone else do all of the R&D and absorb the initial blowback, you can then introduce a superior product and leapfrog ahead. At the end of the day, investors want to know why it is safer to invest with you, and traction in the market will speak much louder than launching prematurely.

It’s incredibly important to vet your value proposition early, as it’s difficult to change your core DNA down the road.

Launching your startup with a well-defined focus will set your team down the path to success. What they produce, especially while the company is young, will be guided by how well your team knows what, why, and for whom they are creating. A sharp value proposition provides focus and answers many questions before they are ever asked.

Related: Understanding Your ‘Unique Selling Proposition’

You Think Your Startup Is Worth How Much?

You Think Your Startup Is Worth How Much?

http://www.entrepreneur.com/author/brian-foley

Brian Foley
CONTRIBUTOR
CEO of Buddytruk Brian Foley

Article Source: Entrepreneur

 

The most challenging thing most startups and first-time entrepreneurs encounter is raising money. Raising money is hard enough — it’s even harder when you’re pitching angel investors and venture capitalists, who get asked for money for a living.

One of the sticking points for most founders is valuation. How much is your idea really worth? If it’s just an idea, the answer is nothing. But, if you’ve pushed further along past the idea stage into an actual formulated startup with a business plan, here are five tips to defend your valuation.

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1. Revenue/EBITDA multipliers

As “Mr. Wonderful” Kevin O’Leary would say, “It’s all about the sales!” If your company is already making money, great, defending your valuation can be rather easy.

Related: How to Seek Early-Stage Funding That Won’t Spoil Your Startup

For early-stage companies or startups, a revenue multiplier is more appropriate, because chances are your company isn’t making a profit, and thus an EBITDA (earnings before interest, taxes, depreciation and amortization) multiplier would give your startup a valuation of $0. These multipliers are easy to use and vary by industry, so make sure to research your specific industry’s multiplier first.

There are plenty of resources online, both free and paid, to find such information, including Valuationresources.com.

2. Number of users X lifetime value

In the tech industry in particular, the common theme seems to be acquire users now, monetize them later. If your startup or platform has a substantial amount of loyal users, this strategy could be a great way to value your company. Although perhaps not as accurate as a revenue multiplier, this method is relatively simple to use, and thus easy for an investor to understand.

Let’s say you have 10,000 users on your blogging platform, and you found that through directed advertisements or another monetization technique, each new user is worth $20 a year. If you can prove that the average user will use your platform for five years, you could argue that the lifetime value of your user base (10,000 X $20 a year X five years) makes your blogging platform worth $1,000,000.

3. Discounted cash flows

If you haven’t made a penny yet, one of the best ways to put a value to your company is by projecting how much cash your company is going to generate for your investors in the future, and then “discounting” that cash back to today’s value.

Related: The Strategies 4 CEOs Used to Raise $50 Million in Venture Capital

Beware, DCF analysis is complex and can be difficult to use due to the number of assumptions you’ll have to get the investor to buy into — the discount rate you’re assuming, the amount of revenues you’re projecting to make in future years, and the number of years out you’re projecting.

Generally speaking, the further out you’re forecasting (three, five or 10 years), the less reliable those projections are. However, if your assumptions are reasonable, and your understanding of the cash-recovery process is adequate, then this method of valuation can prove valuable because it tells the investor that you’re valuing the company based on how much money you can pay back in the future.

4. Comparative analysis

Sites such as AngelList and Crunchbase can give you an idea of how companies in a similar space are being valued. AngelList also allows you to see what other startups in your city raise at, which is helpful because a mobile app developer in Phoenix will generally not raise at the same valuation as one in Palo Alto.

Beware: Just because both your app and Snapchat allow users to share photos, it does not mean your company is also worth $10 billion.

5. It doesn’t matter

At the end of the day, 1 percent of $1 billion is a hell of a lot more valuable than 100 percent ownership of zero. When raising money, focus more on how much money you need to raise to make your company successful, instead of what gets you the best “deal.”

The only time valuation matters is when you’re ready to sell, which brings me to my final point: Your startup’s true valuation is exactlyequivalent to what someone is willing to pay for it.

Here’s How to Grab an Investor’s Attention and Land Funding

Here’s How to Grab an Investor’s Attention and Land Funding

By: Lori Hoberman Lori Hoberman

http://www.entrepreneur.com/author/lori-hoberman

Source: Entrepreneur

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Q: What is the best way to get the attention of a potential investor?

A: I was a judge at a pitch event a couple of years ago where one of the entrepreneurs presented his company while wearing a furry pink rabbit suit. While that outfit was certainly memorable, I’m not sure it prompted any of the panelists to write a check. There are better ways to get an investor’s attention.

Related: The 5 Things You Need to Land Venture Capital

It’s who you know…

A cold email or phone call is generally not the best way to reach a potential investor. Once you do your research to make sure you’re targeting the right venture funds, reach out to your attorney or accountant or anyone else you know who networks in the venture space and see if they can make a warm introduction. A busy venture investor is much more likely to open an email from a contact and much more likely to ignore an email from an unknown party.

When I reach out to venture investors on behalf of a client, I like to send a very simple email with a very brief executive summary. All we’re doing at that stage is testing interest — if the investor wants to hear more, there will be plenty of time to wow them with your detail. Keep in mind that investors see dozens of potential deals each day and don’t have the time or inclination to view a long document.

Ideal executive summary

The best executive summary is short — no more than two pages. Include pictures, like graphs and screenshots, that illustrate the key points you’re trying to communicate. Your intended audience is mainly comprised of visual thinkers, so those pictures may resonate better than text.

Related: How to Seek Early-Stage Funding That Won’t Spoil Your Startup

The ideal executive summary hits the following five points:

  • What the company does. Look at it this way: You have approximately 10 seconds to capture the reader’s attention, so you might as well spend the time on this most important piece of information–two sentences on what the company does.
  • What industry problem does the company solve. Explain the current state of the industry you’re in and why you believe there is a problem that needs fixing.
  • How does your company solve that problem. Here’s your chance to describe your amazing solution. You can go into some detail on how your technology works to solve the industry problem.
  • What is the market for that solution. Your solution could be the greatest invention since sliced bread, but if there is no market for it, your business will never succeed. In this section, describe in great detail your target market—who they are (business or consumer), where they live, how much money they make, etc. Show that you have a deep understanding of who will buy your product.
  • How you will reach that market to make money.  This is where you discuss your go-to-market strategy. Describe competitors and explain how you differ. Discuss potential product pipeline and company growth.

If you’re fortunate enough to have existing clients, mention them on the first page of the executive summary and feature their logos (get permission first). If you’re even more fortunate enough to be making money, explain why your go-to-market strategy is working and how you’re proving your model.

What you should be ready for

If the potential investor is interested after seeing your executive summary, they will ask for financial information and a meeting or call. Have that financial information ready to go (actual and projections — three year projections are usually sufficient) and prepare a power point presentation for the meeting, with 10 to 15 slides that expand on the five points mentioned above.

Related: The Year in Startup Funding (Infographic)

6 Sobering Questions You Need To Know That Every Decision-Maker Is Thinking

 6 Sobering Questions You Need To Know That Every Decision-Maker Is Thinking

So Why Haven’t You Started Your Business Yet?

So Why Haven’t You Started Your Business Yet?
Let go of the belief that entrepreneurs are born, not made. Here’s four steps to turning your pipe dream into an action plan.

Michael E. Gerber is a true legend in entrepreneurship, helping transform 70,000+ businesses in 145 countries over the past 25 years. Michael?s New York Times best-selling book, The E-Myth Revisited, has… Full bio
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So, you want to be an entrepreneur, but you just weren’t born with that skill? Nonsense! Anyone can learn how to be an entrepreneur.

The problem is, that everybody believes entrepreneurs are born, not made. Well, I know that entrepreneurs are not those few gifted geniuses like Steve Jobs, or Bill Gates, or Anita Roddick, they are in every single one of us. But, because nobody thinks like that, few of us ever are taught how to awaken that entrepreneur that lives within each and every one of us.

In order to get in touch with your inner entrepreneur, you must start with a blank piece of paper and beginners’ mind. Then, you must let yourself dream. What do you see for yourself and your business in the future?

If you can define these four things, you can build a thriving business:

Dream

The end game, or the great result. The higher aim. Why does the world need your business?

(My Dream is to transform the state of entrepreneurship and small business worldwide.)

Vision

The mechanism through which the Dream will be realized. The Vision shows you how to achieve the Dream.

(My Vision is to invent the McDonalds of small business development services.)

Purpose

Ask yourself, ‘why’ and ‘for whom’ am I building this business? Your intention.

(My Purpose is to transform the lives of new entrepreneurs and small business owners.)

Mission

The task at hand. The actions that need to be carried out. The Mission brings the Dream, Vision & Purpose into reality.

(My Mission is to create the turnkey system through which emerging companies will grow, prosper and flourish, to be delivered at less than the cost of a minimum wage employee, by individuals who have no experience in business development.)

Once you have defined your Dream, Vision, Purpose and Mission, you will have awakened the entrepreneur within. Now roll up your sleeves and get to work building your business!

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