Start Your Own Business (25 page)

FINDING FUNDING

 

O
ne of the primary purposes of a business plan is to help you obtain financing for your business. When writing your plan, it’s important to remember who those financing sources are likely to be.

 

 

Bankers, investors, venture capitalists and investment advisors are sophisticated in business and financial matters. How can you ensure your plan makes the right impression? Three tips are key:

1.
Avoid hype
. While many entrepreneurs tend to be gamblers who believe in relying on their gut feelings, financial types are likely to go “by the book.” If your business plan praises your idea with superlatives like “one of a kind,” “unique” or “unprecedented,” your readers are likely to be turned off. Wild, unsubstantiated promises or unfounded conclusions tell financial sources you are inexperienced, naive and reckless.

2.
Polish the executive summary
. Potential investors receive so many business plans, they cannot afford to spend more than a few minutes evaluating each one. If at first glance your proposal looks dull, poorly written or confusing, investors will toss it aside without a second thought. In other words, if your executive summary doesn’t grab them, you won’t get a second chance.

3.
Make sure your plan is complete
. Even if your executive summary sparkles, you need to make sure the rest of your plan is just as good and that all the necessary information is included. Some entrepreneurs are in such a hurry to get financing, they submit a condensed or preliminary business plan, promising to provide more information if the recipient is interested. This approach usually backfires for two reasons: First, if you don’t provide information upfront, investors will assume the information doesn’t exist yet and that you are stalling for time. Second, even if investors are interested in your preliminary plan, their interest may cool in the time it takes you to compile the rest of the information.

When presenting a business plan, you are starting from a position of weakness. And if potential investors find any flaws in your plan, they gain an even greater bargaining advantage. A well-written and complete plan gives you greater negotiating power and boosts your chances of getting financing on your own terms.

 

AHA!

 

Still need another reason to write a business plan? Consider this: If you decide to sell your business in the future, or if you become disabled or die and someone else takes over, a written business plan will help make the transition a smooth one.

 

TIP

 

When a client refuses to pay, do you hand the case to a lawyer? Some entrepreneurs do, but others handle small legal matters on their own by using their attorney as a coach. Lawyers can be very effective in helping you to file lawsuits in small-claims court, draft employment manuals and complete other legal tasks.

 

AHA!

 

When you are starting a business, you are short of money for just about everything—including legal services. Realizing this, many law firms offer a “startup package” of legal services for a set fee. This typically includes drawing up initial documents, attending corporate board meetings, preparing minutes, drafting ownership agreements and stock certificates, and offering routine legal advice.