Business Plan Deal Breaker Factors

Executive Summary
It all comes down to a few words. Get it right! How much money do you need and how you will protect the interest of your investors?
Why you need to know your business competitors…and make yourself stand apart from them.
What will your market penetration be?
What is the exit strategy for your business?
The ownership and form of your business: What investors will want to know.
Know your customers: Why you need to know who your customers are for the sake of your business.
How will your business protect the interest of your investors?
How will investors make money with your business?
How much money does your company need? Why you need an exact figure before you approach investors.
How easily can you be copied?
Does your business plan explain how your customers will get to know about your products and services?

Strategic
What are the factors that may hold your business back or make it thrive. How to show investors that your strategy is sound.
Identifying the key milestones for your business.
How will you measure the success of your business?
Your business lifeline: What are the 10% to 20% of activities that could account for 80% to 90% of your business success?
What key relationships do you need to sustain to help your business to survive and thrive?
Outlining the long-term and short-term goals of your business.
Identifying and targeting the factors that may hold your business back and prevent you from achieving your business goals.
How can you leverage key activities for your business to produce greater results?
How are you qualified to run your business?
Explaining the organizational strengths of your company.
Discussing the factors meaningful to your customers – How to show investors that you know your customers.
Business values to guide your company.
Assessing your resources – why you need to know the current status of your company’s resources.

Business Model
What business you are in? How you will make money? What threats and opportunities exist to your survival?
Why you need to establish your track record to impress investors.
Why do you need the money, anyway? – Explaining how investor funding will be used to achieve your company’s goals.
What business you are in? Why you need to know and how you can find out!
Preparing your business the right way: Picking the right business structure for the right reasons.
Making your business venture appealing to investors.
Establishing your long-term objective for setting up and expanding your business.

Products and Services
Why will your customers buy from you? How will you show investors that you stand out among your competitors?
Your Customers: Explaining why your customers will buy from you.
What is it about your products and services? What your business plan needs to explain about the products and services you offer.
Pricing Policies: What investors will want to know about how you’re pricing your products and services.
Keeping your customers.
How are you different? Showing your Investors that you stand out among competitors.

Industry Analysis
What are the barriers to entry into your business?
The Face of the Competition: Knowing your competitors, direct and indirect.
Protecting Your Business: What you need to consider about trademarking, copyrighting, and patenting.
Knowing your market and which factors are important to customers, clients, and partners.
How large is the industry that your business competes, or plans to compete in?
Finding your unique selling point.
Explaining the factors that affect your target industry.
Explaining government regulations that affect your industry – points your business plan should cover.
Business Planning: Barriers to Entry.
Assessing your business competition: How many companies are expected to enter your industry in the future?
Assessing the long-term security of your business – How long will it take an existing competitor or new entrant to overcome your business model’s advantages for stakeholders?

Market Analysis
Knowing your target markets and identifying them for investors.
Your market development timeframe and why it is important.
What investors want to know about your market: Is your market growing?
What are the sales trends in your market for the last 5 yrs?
What are the growth prospects of your market and what are the future sales trends in your market for the next 5 yrs?
Validating your business plan: what investors want to know about the research you have done to develop your business idea.
Specifying your markets: explaining to investors where you are going to be doing business.
Searching for untapped markets: Why you should do business with the customers everyone else ignores.
Purchase Values: What are your estimates?
Planning Your Business: How to assess the annualized market size in 2-4 years.
Knowing your target markets (and identifying them for investors).
Identifying key prospective purchasers.
How much of your target market do you intend to capture with your business?
Distribution, Promotional Methods, and Marketing Expenditure levels.
Describing historical shifts in your industry: key points for investors.
Assessing the seasonal aspect of your market.
Assessing the resilience of your business: Is the industry cyclical with the economy?
Assessing regulatory and structural restrictions on trade.

Competitive Analysis
Knowing whether your market is fragmented and why it matters to investors.
Who are the top three competitors for your business?
What are your competitors’ marketing strategies?
What are your competitors’ channels of distribution and why do they matter?
Knowing whether your market is fragmented and why it matters to investors.
Improving upon your competitors’ product offerings.
How do your competitors promote their business and why investors want to know.
How are your competitors competing? Recognizing the most important factors for your business.
Establishing your ‘market share goals’: how much of the market do you intend to capture and how fast?
Developing your pricing strategy: how to make sure the pricing of your goods or services is competitive.
Assessing the size and strength of your competitors.

Sales and Marketing Plan
Launching your business into your target market: how to prepare an initial market entry and development strategy.
Forecasting your marketing and sales expenses.
Developing a contingency plan for sales.
Creating a pricing model.
Building your sales team.
Building your marketing team.
Budgeting your sales and marketing.
Breaking down your marketing and sales budget.
Applying the 80-20 rule for profitability.

Management and Talent
Identifying your weaknesses and convincing investors you can compensate for them. Highlighting your talent acquisition strategy.
What is it you do? Why and how you should explain your role in your business.
Outlining the strengths and weaknesses of your management team.
Identifying your weaknesses and convincing investors you can compensate for them.
Creating your management team.
Building your business: how many employees do you need?

Risk Management Contingencies
Planning for the worst-case scenario: How will you mitigate any setbacks, delays, or unforeseen delays to your execution strategy?
What is your “plan B” if you cannot execute your business plan?
What are the inherent and perceived risks to your business?
What are the final projections for the first year of your business?
Planning for the worst-case scenario: How will you mitigate any setbacks, delays, or unforeseen delays to your execution strategy?

What Business to Buy

There’s a twofold answer to the question ‘What Business to Buy’ simply because in its’ core it involves two aspects: You and The Business.

At first it is all about Your Skills, Knowledge, Experience and Interests. When looking for Opportunities in Business You are a fundamental Part of the Process. Make list to narrow down personal interests, traits and characteristics and look for a Business that suits these traits. Most of the time when entrepreneurs buy Businesses that don’t match their Temperament, they end up unsuccessful, unhappy and selling the Business.

Ask yourself the following questions to get Your Ideas for Businesses:

What are my 5 Strongest Personality Traits? You can also opt to ask your Friends and Family to send you lists with their observations (can be very revealing).
What are my 5 Strongest Skills when it comes to doing my current or previous jobs?
What Role do I want to Play in the Business?
What Destination and Location do I want my Business to have or can it be a Business without a fixed Location (such as internet based).
Do I prefer a large-scale Business with many contacts and customers or do I prefer to focus on a niche market, dealing with a smaller number of contacts and clients?
Do I want a Product Supply Type of Business or a Service oriented Business?
What is my Business Investment Budget?

When going over all the answers to these questions, you will have a Clear Picture What Type of Business you want to Buy.

Find a Business to Buy

After having identified What Type of Business you want to Buy it is time to Find a Business to Buy. You will want to opt for a Business that offers Value for Money. Its Valuations have to be backed up by Reliable and Detailed Financial Data.

Some Investors are Buying Businesses because they are Cheap compared to their core Value. They believe that as long as the Market undervalues the Business relative to the core Value, they are making a Solid Investment. This way of Investing fully depends on the reasoning that the market will eventually realize it has undervalued the Business and will correct its Course.

Below some questions you can ask yourself when determining What Business to Buy:

Does the Business Match my Personal Characteristics and Expectations?
Is there a Solid Business Plan available?
What are the Top-5 Competitors of the Business?
Do I have access to all Detailed Financial Data?
What is the Trend in Profits over the last 5 years?
Does the Business show healthy and consistent cost margins?
What is the expected Return on Investment?

How much you will eventually profit from your Business depends on the level of Original Investment and Your Management and Marketing Skills.

What Does Selling A Business Involve

Some people only ever be involved in a business sale once, typically when they are looking to retire. Others will find themselves having businesses for sale a number of times during their careers as they move from one project to the next and this pair of articles looks at what is involved in realising the value of a business.

So What Is So Difficult About Selling A Business?

It’s important to realise however that there are fundamental ways in which selling your business will differ from the process of selling your car outlined in Part 1.

When you sell your car, you don’t expect:

- To worry about giving out information to prospective buyers about the car.

- To worry about advertising that the car is for sale.

- To be asked to lend the purchaser the money to buy the car.

- The final price to be uncertain until you have worked out exactly how much petrol is in the tank.

- To be expected to have to give written confirmation that the car has not broken down in the last two years.

- To be required to give your purchaser driving lessons.

- To promise the new owner that you won’t buy a new car.

- The final price to be dependent on how well the car keeps running over the next two years.

- To consider the tax implications of a sale.

- To need anyone else’s permission to sell (assuming that you have paid off any hire purchase).

But when you sell your business you may well find:

- You need to be careful about how much information you give out during the process as for example, you don’t want your main competitors picking up your key customer list for free.

- You want to keep the fact the business is for sale secret from suppliers, staff or customers until the deal is done.

- You have to allow the purchaser some credit to enable them to pay you in part over time out of the profits of what was your business (known as ‘vendor financing’ or deferred consideration).

- The final price will have to include stock at valuation (‘SAV’) at the date of sale.

- You are asked to confirm some facts about your business in writing (‘give warranties’).

- You have to agree to stay on for anything from a few weeks to a few years to help train the purchaser in running your business or to smooth the introduction of the buyer to your customers.

- You are asked to sign an undertaking not to set up business again in any way that will compete with the business you have just sold.

- The price agreed includes clauses that adjust the total paid up (‘escalators’) or down (‘clawbacks’) based on future performance.

- Tax planning may be vital to ensure you obtain the best net result from your sale.

- You may need agreement for the sale and transfer of assets or contracts from your landlord, franchiser, or even suppliers or customers with long term contracts that include clauses covering change of business ownership.

In addition, just as there are specific price guides, key criteria for valuing (make, model, age, condition and mileage), and specialist magazines for selling cars, there may be similar ‘standard approaches’ that are specific to your business such as:

- traditional routes to sale – such as specialist agents who deal with licensed premises, agricultural land agents or brokers who specialise in professional practices,

- standard information required on which purchasers make decisions or on which businesses in your industry are valued – such as barrelage for pubs, or

- traditional sale terms – such as SAV (‘stock at value’) for pubs.

So How Will These Issues Affect Your Business Sale?

The degree of complexity involved in the sale process and the issues arising from it will vary dependent on the size and complexity of the business and the nature of the sale.

- A small husband and wife or lifestyle business such as a pub, small shop or guest house might typically be selling to other individuals. To reach these they might advertise for themselves in the small ads section of the relevant business press, or engage specialist estate agents. They would normally expect to achieve a relatively quick hand over although a deal might involve some form of vendor financing (where part of the payment is deferred over time), and a short period of ‘on the job’ training in running the business.

- A small service business or professional practice such as a vets, dentists, accountants, estate agents or solicitors will often use specialists firm of business brokers to sell to other firms looking to expand although junior partners within the firm may have the option to buy out older partners who are looking to retire. This type of deal will often require a period of consultancy of up to say two years to allow for an orderly hand over of the trade and client base to the new owners and the price may involve some form of ‘earn-out’ where the value agreed will include an element to be determined by future performance.

- An established industrial business with a turnover of over a few million is likely to need to engage accountants to assist in preparing the business for sale, marketing the business and dealing with the purchaser’s advisors. The buyer may be another business (such as a competitor in the industry) by way of a ‘trade sale’ or a team from within the business’s existing management (a management buy-out or ‘MBO’) backed by venture capital (VC) firm. The purchaser will employ accountants to undertake a detailed review of the business’s financial position and trading performance and prospects (a ‘due diligence report’) and payment might in part be made by way of shares or options in the acquiring company (‘paper’) rather than cash.

- A rapidly expanding high tech business with high growth plans will need to engage a team of specialist corporate finance advisors to market a stake in the business to potential funders to raise money for the business’s expansion. Depending on the scale of funding needed, potential investors targeted could be wealthy individuals looking to invest in (and often to become actively involved as a director of) growing companies (‘business angels’); venture capital (‘VC’) houses looking for investment in the sector; or obtaining a listing that involves a number of external investors buying the company’s shares such as an Ofex or AIM listing. This process will require the preparation of a detailed sales document (‘prospectus’) requiring a range of projections and professionally prepared information that needs to comply with complex regulation and the transaction can involve a complex range of capital instruments such as preference shares and/or options put in place as part of the new financing arrangements.