Non Conventional Business Planning

Over a period of 22, years, I have been commissioned to write or review business plans for projects for clients in different countries. Most of these requests are for securing financing for the startup of various projects or the acquisition of hotels, resorts, restaurants, car rentals, auto repair shops and tourism related businesses. I have also been a Broker representing Lenders and Investors for the past 7 years and I know exactly what Investors and Lenders look for in a Business Plan.

A banker agreed with me at one point when I said to him that every business plan is not the same and should never have the same format. According to Business & Executive Mentor and Coach , M. Ian Blanchard, “a Business Plan creates the Direction for a Destination” So to me that means a Business Plan is one’s map to creating a business.

Many times, persons present business plans to me for review and from page one, I can determine the Business Plan was created using a template. BIG MISTAKE. Now, I am not saying that one cannot use a template for certain aspects of the plan, but it must also be remembered that some of these plans were written years ago and have no relevance to the entrepreneurs’ location or planned destination.

When I wrote my first big effective business plan in 2000, the businessman wanted to source US$300 thousand to purchase a boat that would be used as a passenger ferry between two islands in the Caribbean. The banks turned down the plan because they did not see the vision for the future of transportation and hence the need for a Ferry Service, but an interested Investor read the business plan and agreed to provide the financing. The boat was acquired and served the Caribbean Countries for a number of years.

Business Plans are not to be confused with Strategic Plans. The Business Plan must be a “Pitch” that Potential Investors and Business Partners can use to determine whether or not the planned business is a viable one.

There must be specific pieces of information in the Business Plan which relates to (1) Entrepreneurs Research relating to “Assessment Need for the type of Business, location, location, location, customer base and consumer analysis and competition.

Going into real business is not a plaything, whether one is using their hard-earned money or seeking capital. There must be a plan that is realistic. The potential entrepreneur must know the industry that he/she is entering into and not just be a Copycat. Too many businesses have failed due to the lack of planning. One of the important things an Investor or Lender looks for is what we call “Skin in the Game” Yes, show your investments into the project, because that equals to “commitment” Pay for the services of a consultant, an accountant, a surveyor and the business plan developer. People have the tendency of saying they don’t want to invest in professional help until the loan or investor is secured. Let it be known that both Investor and Lender takes your previous investments very seriously. So, invest in yourself and the business in other to be considered for financing.

Before touching base on the Investor and Lenders, lets’ talk about the Banks and Credit Unions. Most Bank Loan officers do not know how to interpret a Business Plan, because all they are concerned about is how would the bank benefit and since many of our banks in the Caribbean are afraid of risk, the more detailed (in pages) that your business plan is, the more hesitant the banker would be to even read thoroughly. So, when applying for bank financing, your best bet is to provide a Lean Plan or an Executive Summary.

Investors are interested in knowing how they can make their money back and how great is the expected Return on Investment (ROI). They are more interested in a Basic Business Plan that is based on Market Research, which would include an analysis of your competition, the need for your product and your competitive advantage. So, the focus of the business plan should really be an emphasis on the Marketing Strategy, your Operations and Financial milestones. Within the Business Plan, there must, and I stress must be a Strategic Plan. The When and the How. That should be part of the Executive Summary. The bottom line is that Investors are in the business of putting money into a growing business. The Business Plan has to demonstrate your business will make them money in a reasonable time. So, to make it a “win-win” situation, consider the following:

·        Have an accountant crunch the numbers to determine your financial needs and have him/her prepare your financials and projections. Unless the Accountant is savvy at writing business plans, please do not have him/her prepare your business plan. Accountants focus on numbers and are great at their job. Business Developers are more qualified to provide the Business Plan.

·        Commission a Professional Business Plan Writer to prepare a Solid, yet Concise Business Plan

·        Make sure your products or services reflects a very Unique Idea.

·        Your Business Plan writer must be very good at Content Writing, so that the narrative can be strong, meaningful and effective.

·        Be “Business Ready” so you can interpret the information when speaking with the Investor

·        Make sure the Business Plan is Watertight and compelling, professional edited and proofed.

·        Make sure the numbers in the Financial Projections and Cash flow make sense.

For an Investor- ready Business Plan, the Writer must focus on the fact that investors are businessmen and businesswomen who are very busy, so they don’t want to read a business plan that is more than 30 pages of written content. Here is what they need to know:

·        How much of an investment is required

·        The problem you want to solve in your community or country

·        How are you solving a problem by the introduction of your product or service

·        Your Target Market – size and demographics

·        Your Sales Channels

·        The Location of the Business

·        The Marketing Plan

·        Real Financial Projections, Real Assumptions and Full Cash Flow Forecast

·        Business and Management experience of the lead key members of the company to include the owners and advisers.

I remember when I was commissioned in 2011 to spearhead the plans for the development of a Resort in the Bahamas, I spent 9 weeks gathering information, analyzing the project and the designated location, meeting with owners, architects, doing site visits, talking to stakeholders, politicians, building contractors, the local authorities and the community at large, selecting relevant key team members and having discussions with Lenders and Investors about their requirements for financing this US$164 million project. Then and only then after all the compilation of information was completed, could I have started the Business Plan at a cost to the client of US$23,000.00. The client paid for all my international and local travels expenses, accommodation and meals. That is how important my advice and planning was to the developers and investors.

Lenders on the other hand, there requirements on the business plan is more stringent due to the greater risk involved. For example, Lenders in the United States of America have a minimum of US$3 million that they would provide to fund any business located and registered in the Caribbean. Based on the information on the Business Plan, they would consider providing financing that is 80% to LTV (Loan to Value). In order words, they will only provide 80% of your required loan. That pertains mainly to projects outside their jurisdiction. In the case of an acquisition of a Caribbean based property, the lender will not finance 100% unless the loan request amount is less than 50% of the value of the property to be acquired, in the case of real estate.

Because we are talking about a loan where all the lender is concerned about is the capability and capacity for the borrower to repay the loan within a specific period, they would require the history on the borrower and the borrower's business activities (existing business). They would need to know how revenues are generated, the advisory (consulting) and management team, the present market, the economic stability of the country where the borrower wants to establish the business, then banking laws and of course, the purpose of the project.

Of course, like in all cases, there is the need for a Strength – Weakness – Opportunity and Threat Analysis, which again must be based on real situations.

Investors and Lenders will most likely perform a business plan analysis to determine whether or not a new or restructuring business is good or too much of risk. One of the main factors would be the leadership structure and the financial status of the borrower.

So, all the above has to be taken in consideration when seeking financing from a Lender. Lenders want to know the business and financial history of the borrower(s) including personal and property insurance coverage. So, with the Business Planning, consideration must be given to the input of information concerning the borrower’s income, business revenue, current cashflow, outstanding debts and how much the owner has invested in the business and must all be included in the Business Plan.

One should always include their employment history and the Business Plan must focus on the potential borrower’s Credit History – Capacity – Collateral – Capital and Conditions.

In the case of both Lender and Investor, the Business Plan must have mention of Risk Management, especially with the effects of Climate Change and the Hurricanes. Disaster Planning as part of the Business Plan is essential. What is your contingency plan in case of a Natural Disaster. How vulnerable is the business going to be based on location.

As I mentioned in the start of this article, your business plan is your direction to a business destination, but it is also the foundation of your business. So, while you need a Business Plan in order to secure financing, you also need a business plan for your own milestone guidance, your budgeting, projections, staff selection and their duties and creating a team that is aware of the objective of the business. It is a means of driving the Business Forward, and also letting the Investor or Lender know that you are prepared, you consulted the experts, you solicited professional assistance in your planning, and you are ready.

While I have written 100s of business plans, the majority having a success in securing financing, there are cases where the clients put their foot in their mouth, because they do not provide accurate information and upon Due Diligence, we would realize they are not being realistic especially with the projections and assumptions. I would request them to review and submit information that makes sense for resubmission.

While I am open to guiding the clients and providing advisory services at the start of discussions, I also take in consideration that I am to provide a Business Plan based on the client’s vision and mission and help them create a document that pitches their vision and mission to an Investor or Lender.

The proficiency in Business Plan writing or development does not come overnight. It is through acquired knowledge in Business Management, People Management, Leadership, Crisis Management and Management Consulting. It involves a combination of many aspects of the business world written, not in a structured format, but by degree of importance to the reader. A Business Plan must catch the eye of the reader from a start, not only through the Executive Summary, but with the importance of planned processes of operations, business analysis, the required management team that will form the business from the inception of the planning and also a breakdown of how the proceeds will be spent.

Fortunately for me, I have been what one considers, an All Rounder, having provided Consultancy Services to various types of businesses and individuals. My experience as a Broker to Lenders and an Advisor to Investors has prepared me to provide the most effective, non-traditional Business Plans ever read. As a Writer I do my best to ensure that the narrative is always on point and since a picture paints a thousand words,  I add also add photos or renderings to bring visual to the project and for some humor I add various graphics.

So, whether you are seeking a million-dollar loan or a grant for your business, let’s start with a business plan that reflects the uniqueness in your business, your talent and your interest. 

Author: Joseph Doway - Business Developer - Founder of Caribbean Farmers Without Borders