For Entrepreneurs
According to the federal Bureau of Labor Statistics, some 20% of new businesses fail in their first year — and almost 50% don’t make it past five years. What’s the problem?
These ventures ultimately fail because they burn through their cash, for any number of reasons: being undercapitalized, expenses exceeding revenues for too long, big receivables ending up uncollectible…the list goes on. Their owners have to keep injecting more capital — until they (or, their spouses) finally say “No more.” Their business plans most likely laid out strong marketing and operating strategies and tactics, along with financial projections focusing (only) on revenues and profits; the owners figured that if the venture earned enough of those two things, survival wouldn’t be an issue. But about half of the time, it doesn’t work out that way. Why? What more should a business plan do?
The Business Plan
If being your own boss is your next career goal, that’s a start. But what is a goal? It’s a dream, accompanied by a timeline — and a plan. If you’ve got an idea for a business venture, and have researched it to the point where you’ve decided to move forward and seek start-up capital — or, if you’ve got a company teed up and ready to acquire, and need acquisition financing — the next step is to produce a business plan, to guide you as well as to present to potential funding sources. If you can’t start up your venture or make your acquisition without outside capital, you can’t raise outside capital without a business plan. But even if you don’t need outside money, you still need a plan to guide your efforts every day. Either way, a good plan has to do way more than map out your strategies and tactics. It also has to project not just your revenues and profits, but also your asset needs — especially coming out of the starting block. Those cash balances, receivables, inventories and PP&E won’t finance themselves; there has to be a right side of the balance sheet, to finance this left side.
Until your venture reaches cash-flow-positive Nirvana — meaning that the business consistently operates without additional outside capital, and even enables you to distribute some profits out — the most critical number anywhere in your financial statements is the amount of cash on your balance sheet. Yes, revenues and profits are important, but without enough cash, even the most profitable business will eventually fail. The interplay between cash in and cash out can be easily upset, for any number of reasons, and without an adequate cash balance the house of cards then comes tumbling down. A good business plan must therefore include a robust set of realistic projected financial statements — balance sheets and cash-flow statements, not just income statements — to help you avoid that outcome, by projecting when cash balances may fall short and thus showing you a truer picture of how much capital you’ll likely need to raise in order to keep running until your business can consistently fund itself.
This plan is the single most important document you can prepare to get yourself off to a successful start (and, ultimately, a profitable exit). A good plan can perform two critical functions for you. First, in the short run, it can help you raise enough capital to bring your venture to life or acquire your target company. Nothing happens without money, whether it’s coming out of your pocket or somebody else’s. Second, in the longer run, after investing your own capital, and perhaps also leaving the closing table with an outside loan or equity investment, a good plan lays out a clear path showing you what you should be working on to make your business successful, while providing a periodic scorecard to measure your progress.
Can you do this yourself? Yes, if you have the know-how, time, inclination, patience, and financial-analysis savvy. Chances are you’ve got most of those attributes, but probably not all of them. But you need them all in order to come up with a plan that adds up to something that makes sense, because putting your time and your money on the line to become an entrepreneur is one of the biggest decisions you’ll ever make. So, you could do this yourself, if you also believe that producing your own plan from start to finish is really the best use of your time. Or, you could bring in some experienced eyes and brains — first, to collaborate closely with you to flesh out your plan’s strategies, tactics and financial projections, and then second, to synthesize them all into a presentable, professionally-prepared document for you. We are always looking a few steps ahead, to make sure the plan is moving toward a result that measures up.
Financial Management Services
Any business needs a CFO. Your bookkeeper looks backward, to tell you what happened, using debits and credits. That’s important, of course, but it’s not enough; you can’t drive a car forward while looking through the rear windshield. A CFO looks to the future, to give you a good idea of what’s coming next, using analyses, budgets and projections. Without those tools, you’re driving blind. Until you grow to the point of being able to hire a full-time CFO, bringing on Capital InterNational Advisors as a fractional one — working for an hourly fee, as a Form-1099 independent contractor on a strictly-as-needed basis — is how you afford that forward look:
Every month, we’ll oversee budget-versus-actual reporting and rolling cash-flow projections.
Every year, we’ll oversee preparation of the annual budget, and oversee a review of your risk-management program to make sure you’re getting the best deal.
If you have audited financial statements, we’ll oversee the preparation of the books and records so the auditors can do their work as inexpensively as possible.
Upon your request, we’ll analyze each of your lines of business to check that they are actually profitable.
Selected Testimonials
“John, your efforts have been greatly appreciated, but what is more appreciated is your willingness to learn our business. It is hard to sell what you don’t believe, and we asked you to build us a tool to better help us sell our vision to a bank. The final product reflects our belief, but that would not have happened if you didn’t believe. I’m happy to report that, with your work-product’s help, we got our funding. Thank you for believing in us!!” — David Leslie, RWC, President and Founder, National United Facilities Asset Management, LLC (NU-FAM)
“My business partner and I recently purchased the Pella Windows & Doors distributorship in Northern Texas. We sought a blend of financing options for this multi-million dollar transaction. John’s great process fully captured our quality story and was instrumental in getting our lenders to understand our future vision. The process was also very healthy for my business partner and me to develop a common vision before closing. The lenders had rave reviews for John’s document. In short, we got the deal done in large part due to the help of John’s work product and, more importantly, his coaching. Work with John and great things happen!” — Greg Hirsch, Owner/Principal, Pella of DFW/West Texas
“John was hired to craft a business plan for our company. He put together a credible, well-constructed and very professional document under very difficult circumstances. To begin with, the required time to get it done was very short. Moreover, the CEO and my time as CFO to work with John to provide him with important input was very limited, due to scheduling constraints. John knew exactly what questions he needed to ask of us without wasting a lot of anyone's time. Based on the information John was able to glean from us, he came back with a draft very quickly. While modifications were required, the changes made were very minimal. The final product turned out to be well written, well researched, concise, well organized, authoritative, and a great value for the dollars we spent on the project. The best part of this? The document he prepared for us allowed us to secure the funding we were seeking. What better recommendation than that?” — Joel Kaplan, CFO of Pacific Fruit & Beverage Company (formerly fractional CFO at Joseph Michaels International, Inc., John’s client)
“John did a great job on a business plan that allowed us to put a significant senior debt in place for a startup manufacturer.” — Andrew Walsh, Vice President / Business Development Manager, J. P. Morgan Chase & Company
“We have had the opportunity to refer a number of Clients to John. The Clients have always enjoyed working with John. In addition, the quality of work product and business plans he produces has always been of assistance in the financing or capital raise that we were working on for the Client. There is no question that John does an outstanding job for his Clients and does it efficiently and timely. We would highly recommend anyone use John for the preparation of their business plan.” — Greg Hext, CEO and Founder, Chapman, Hext & Company, P.C.
In short...working with Capital InterNational Advisors is how you Get Going!