Your executive summary can make or break your business plan

While only 2 pages in length, the executive summary is by far the most  important component of your business plan or proposal. It is designed to  summarize the key elements, capture attention and most importantly, showcase the  financial highlights.

So, if you only have 2 pages to convey a significant amount of information  and summarize the financial upside, how do you decide what to put in and what to  leave out? Which financial features are critical to emphasize?

Depending on the purpose of your document and the intended audience  (investment, sale, partnership, strategic alliance, joint venture etc.), you  will want to tailor your financial disclosure to suit their needs and  expectations. What would they want/need to see in order to make an informed  decision?

At a minimum, you need to clearly state what financial input is required from  them and what they will get in return – i.e. a share, debt instrument, license,  exclusive right etc. Next, highlight the expected net profit and cash flow over  2-3 years. Also, give a clear indication of return on investment (ROI) AND a  realistic, well defined exit strategy.

In an executive summary, it is important to be succinct and focused. It is  not the time to tell your life story, overpromise with unrealistic projections  or overwhelm with too much detail. You will only get one chance to make a good  first impression and capture the attention of the reader. In fact, many  sophisticated investors have told me they rarely read a business plan or  proposal in its entirety. They make their decision on the strength of the  executive summary and their assessment of the owner/manager (in terms of  character, knowledge, skills and tenacity).

Focus on “what’s in it for them”. Show them clearly how they can benefit and  when the result will be crystallized. Give them enough detail to understand the  industry, opportunity and unique solution you provide. And most importantly,  clearly summarize the key financial metrics of profitability, cash flow and  ROI.

In short, make it EASY for them to invest in YOU.

Article Source: http://EzineArticles.com/6107414

Can you apply Warren Buffet’s best advice to your small business?

Discipline and attention to details is more important than ever if you want to succeed in challenging economic times. Take a look around… competitors are closing their doors – which means more potential customers for the businesses that DO survive. And in times like these, it’s going to take more than “thinking outside the box” and goodwill with existing customers to secure the survival of your business.

You may have been lucky over the past few years – you may have found it possible to operate without a detailed, written plan and systems/processes. But the global economic crisis has changed all of that. If you want to thrive, there is only one thing that is for sure – uncertain times call for deliberate decisions and proven practices. So here are my top tactics to recession-proof your business.

1. Begin with the end in mind

If you don’t know exactly where you are going, how will you know when you get there? Now is the second best time to decide on your strategy, set your goals and document tactics and timelines. Keep it simple – write a 2-3 page summary of what you intend to accomplish in 3 months, 6 months and 12 months.

2. Focus on cash flow not profit

You cannot buy a house or a new car with “profit” from your business. Make it your mission this year to develop and maintain a weekly/monthly cash flow forecast for your business. This is not hard to do but it does require discipline and a simple excel spreadsheet. If you need help, I recommend that you consider signing up for Imagineering Profit. With just a few numbers from your Balance Sheet and Profit and Loss statement, Imagineering Profit can calculate your cashflow for you and give you the insight that you need to get your company operating in the black!

3. Collect your debt NOW!

How many days does it take to collect your debts on average? Whatever it is, make it your goals to reduce this by at least 10 days. You may be surprised to know that if your annual revenue is around $500,000, you could save yourself up to $2,500 in interest carrying charges simply by collecting your debts 10 days quicker on average. Pay attention to customers who are taking longer than usual to pay. Now is not the time to be extending too much credit if you are concerned about their ability to pay.

4. Rank your customers

Do you know who your best and worse customers are? Have you ever tried to calculate how much profit you are making from each customer or group of customers? If you don’t know the answers to these questions, today is the best time to start tracking and measuring this.

5. Fire your worst customers

Everyone knows that is cheaper and easier to garner incremental business from existing customers. Some even argue that it is 6 times cheaper and 75% easier to convert a sale from someone who already knows and trusts you. If you have unprofitable customers, get rid of them and focus your attention on your best customers.

6. Trim your product range

Contrary to popular belief, it is better to have money in your back pocket than tied up in stock sitting on your shelves for months on end. The longer it sits and does not turn over, the more it actually costs you in lost opportunities. Spend 2 hours today calculating which of your SKUs or stock lines are your worst performers; make it a priority to sell those quickly to release some much needed cash. Consider reducing your overall investment in stock. Compile a spreadsheet of all the SKUs you carry and then run two separate columns – one for how many units you sell on average of each per month and the other being the total units on hand. If your stock gets delivered quickly, you should never be carrying more than one month’s worth of sales at any given time.

7. Monitor your breakeven and key numbers

The most important day of the month is the day that you break even and start making a profit. If you don’t know which day of the month that is, you need to find out today. Knowing this number allows you to monitor your performance and take measures to correct issues right now. Waiting until the end of the year for your accountant to produce financial statements is not a good idea – if you are behind, you need to know now so that you can correct the situation.

What’s the best way to grow your business?

When clients ask how to close more sales and  free up cash in their business, I like to tell the  story of Byron the guns and collectibles dealer. He lives for his business  because it gives him the chance to make a living out of doing what he enjoys  most: collecting.

He was struggling 12 months ago because he was out of cash and unable to buy  new stock. This was a real problem because the strength of his business lay in  constantly having new items to show off. New stock encouraged his customers to  come back often; no new stock meant they would tend to check out his competitors  first.

When I first walked into Byron’s shop, one of the most obvious items was a  beautiful old gun, proudly (and securely) displayed in a glass cabinet. I  couldn’t help but ask how much it was worth. He explained that it he had bought  it for $5,000 dollars, but was looking to sell it for $7,000. Following a hunch  that I had hit on his problem straight away, I asked Byron when he had bought  the gun. He didn’t remember exactly, he said, but thought it was about five  years ago.

I asked Byron how many other, similarly high value items he had in his store.  We went for a walk and in the course of showing me around, he pointed out at  least a dozen items which he had bought for over $5,000 over the last few years.  In each case, he was quick to tell me how much he was intending to sell the item  for, and the margin was always 30 to 40%. But the fact was he hadn’t sold these  items so they were costing him money and, most importantly, causing him to miss  the opportunity of buying new stock.

Byron had spent nearly $100,000 on expensive items over the years. The items  were attractive and valuable, but they weren’t particularly rare, so they  weren’t appreciating in value significantly. In effect, Byron had put $100,000  on the shelf of his office and left it there for all that time. In other words,  while he wasn’t borrowing money from the bank, in effect he was borrowing it  from himself. He had missed the opportunity to invest the money somewhere where  it would give him a solid return, such as in a term deposit or in blue-chip  shares. And he missed the opportunity of using that money to buy smaller, less  expensive items that he knew would sell quickly.  He needed to do something (and fast) if he wanted to close more sales.

Compounding all of this was the fact that the global financial crisis had  caused demand to drop markedly which meant his customers just weren’t coming in  or spending as much as they used to.

By making a few simple adjustments, responding to trends in the industry and  addressing a need that his customers, Byron was able to turn his business around, close more sales  and double his bottom line.

The first thing he did was to free up some cash by actively selling some of  his more expensive and slow moving items. He used online auction sites and his  own network to find buyers, while keeping his marketing costs low. In some cases  he had to sell the items for a little less than he had intended, but the benefit (when he was able to close more sales) was cash in his pocket.

The next thing he did was set up some systems to keep better track of  inventory. He started by recording everything and noting the age of all the  items (i.e. the length of time he had held it in stock). We agreed that in  future, any item that had not sold after 8 months would be reviewed. Byron would  investigate the item’s market value and decide whether or not it was increasing  in value sufficiently to be worth keeping. If not, he would act to move the item  on.

After a few months, Byron was making much smarter purchasing decisions. He  was still enjoying ‘collecting’ for his store, but his focus was different. His  focus was less on attractive, expensive but not-so-rare items, and more on  smaller items he knew he could sell quite quickly. To his pleasant surprise, he  increased cash flow by $100,000 in 3 months and found that by using this  strategy, he was able to do more shopping rather than less, because he had more  cash available to spend.

Lastly, but perhaps most significantly, Byron introduced 2 new complementary  strategies which literally transformed his business. To counteract the soft  demand for firearms and the relatively fixed, low margins, Byron convinced his  customers to purchase 18 months worth of ammunition upfront and he provided  storage (if required) onsite. This allowed him to renegotiate terms and pricing  with his suppliers, plus generate more cash flow in the short term. Since the  margins on bullets was much higher than on the guns themselves, his overall  profitability improved. In addition, Byron incorporated training and  certification into his standard offering and opened up his target range to  paying customers 3 nights a week. This allowed him to create new, highly  lucrative income streams and increase the frequency with which his customers  came into his business.

While Byron’s story on how to close more sales might seem unique and industry specific, there are many ways to take the overarching philosophy of what he did and utilize it to improve  your operating cash position.

How can you identify and start selling silver bullets in your business?  Begin by first examining the big picture…

Identify the items in your inventory that are essentially dead stock – i.e.  haven’t sold in over 8 months. Determine what the total value of the stock is  and devise a plan to convert it quickly into cash using a minimal amount of  advertising.

Focus on the gross profit margin of all of your products and services. Are  some of these more profitable than others? To improve your overall performance,  concentrate on the former, and improve or eliminate the latter. What items or  services could you add which would allow you to service a need, improve your  relationship with your customers and grow your bottom line?

Negotiate better terms and/or prices with your supplier in order to increase  the amount of gross profit you make on each sale. Consider which items you could  sell in bulk upfront to your customers and use this new volume to improve your  buying leverage or cut out the middle man.

Marketing should not be treated as a fixed and sacred cow in your business.  Do not spend another dime on marketing until you ensure that you are maximizing  the amount you retain on each sale to cover fixed costs. Also, only spend money  chasing customers and sales if you can measure the financial return that you  will get. Unless you are a multinational brand, money spent solely on branding  is wasted.

Make it easy for your customers to find you and see what you have to offer on  the internet. The database of potential shoppers that you have earned the right  to speak to, is in fact your greatest asset. What can you do today to add value, enhance their experience and close more sales?

Finally, examine the fixed expenses in your business. Identify whether or not  there is a cheaper, faster or superior alternative that doesn’t compromise  quality or customer service. Is there a way to shift how and what you do so that  fixed expenses can vary (i.e on a pay per use basis) with the level of  production and/or sales? And remember, no one has ever grown their business by  [exclusively] focusing on cost cutting – so use this tactic as your final step  in a comprehensive plan to get your business firing and hitting targets.  Your primary goal is to close more sales and increase the amount of gross profit (or contribution margin) that you make from each sale.

How often do you shoot yourself in the foot in business?

As a business owner, I’ll bet you’re incredibly busy and find that there  never seems to be enough hours in the day to complete all your work.

Have you ever noticed that some of your everyday activities are just deeply  ingrained habits – driving your car, putting on your watch, brushing your teeth  or taking a shower? You wouldn’t dream of not doing them, they are part of your  routine and they just seem to happen automatically. In your business you also  have habits such as checking your website, opening the mail, reading emails,  grabbing a coffee and glancing at your diary. You do them without conscious  “thought” and they seem to fill up hours in your day…

But what about all the actions you need to take in order to build a more  profitable and efficient business? Like following up with your best customers,  asking for referrals, strategic planning and goal setting to grow your business?  When do you do these activities? Do they often get relegated to “tomorrow” or  “sometime soon”?

If you’ve ever spent your day stuck in back to back meetings, answering  routine questions from your team, responding to emails, helping other people,  doing paperwork or tidying your office – you already know that these are “make  busy” activities, and they will keep you trapped where you already are – just  simply maintaining, not growing your business. By filling your days with these  tasks, you are in effect avoiding the very activities that you know will really  move your business forward and produce tangible results.

Your “make busy” work or habits create the magnificent illusion that you are  hard at work, simply because you feel “flat out” and your day is full of tasks.  Let’s be honest, you would actually rather do anything than face the activities  you know would radically accelerate your business success NOW! In fact, you  often get to the end of the day and say to yourself “It’s OK, I was really busy,  I’ll just get to that marketing plan tomorrow.” Or “I just couldn’t find the  time today to make that seminar on leadership or customer loyalty.”

If you are waiting for the right or best time to do these critical activities  in your business, it will simply never come! There will always be other “busy  work” to fill all of your available time. You need to find a way to make your  business building activities an ingrained habit too, if you want to grow your  bottom line and live the lifestyle of your dreams.

Do you relate to or identify with any of these common sabotage habits?

1. Perfectionism – this tactic is insidious. It often immobilizes us from  making a decision, starting a project or activity and signing off on a piece of  important work. Most tasks don’t have to be 100% perfect, they just need to be  good enough. The other way that this can show up is when you deceive yourself  into believing that no-one else can do the job (even simple routine tasks) to  your exacting standard, so you must do it ALL yourself. Follow the 80/20 rule,  delegate what you do not have to do yourself and give yourself permission to be  human!

2. Refusing to Let Go of The Past – Have you ever heard yourself say “last  time I tried that, it didn’t work”? Or have you ever simply avoided doing  something that you know you should or need to do but were afraid to do because  “last time it didn’t work out the way you wanted it to”? Even though it’s a good  idea to stop doing what clearly doesn’t work, it’s important to remember that  the past does not necessarily equal the future. If you catch yourself finding  reasons from the past to justify why you are not moving ahead toward your  compelling future, stop NOW and take a good hard look at whether these are just  cleverly disguised forms of self-sabotage.

3. Lack of Accountability – who is holding you accountable to the decisions  you make and the actions you take in your own company? Isn’t that why you went  into business for yourself in the first place – so that you could be the boss  and do things your way? Find someone outside your business – a coach, mentor or  trusted advisor that can act as a sounding board and hold you accountable to  staying on track.

4. Lack of vision, planning and specificity – if you don’t know where you are  going, how will you know when you get there? Enough said. If you don’t have a 90  day, 1 year and 3 year business plan, you need to make this your number one  priority in your business. Set a weekend aside and find a place where you will  not be disturbed by anyone or anything. Set down your goals clearly and  succinctly – get clear about the specifics (who, what, where, when and why) and  set realistic deadlines for completion. Goals need to be written down in detail  to allow your mind – which is a goal seeking mechanism – to do its magic.

5. Lack of focus – stay focused on the important task you are currently  working on and only allow yourself to be diverted by real emergencies.

6. Fear of Financials – you cannot have a truly successful business if you  don’t know your numbers. Not knowing your numbers has already cost you time and  money. Find someone who can explain your financials to you in plain English -  learn the key drivers and indexes in your business (such as break even,  productivity ratios, inventory turns, gross profit margins etc.) and track them  daily.

7. No USP – the greatest product or service in the world will not sell if you  have not clearly defined why someone should buy from you instead of your  competitors. “Build it and they will come is a fallacy.” If you have not yet  figured out what is unique about your product or service and found a compelling  and cost effective way to communicate it in everything you do, you are literally  flushing your marketing budget down the toilette.

8. No Testing and Measuring – this is the most-often overlooked activity by  small business owners. The simple act of testing and measuring everything in  your business…and I mean everything…will save you thousands of dollars this  year. No matter what “it” is, if you haven’t tested and measured “it”, you don’t  really know if “it” works. And until you know if it works, you don’t have a  reliable, predictable business that will run without out.

Unfortunately, there are no quick fixes. As you already know or suspect, some  of the most common forms of self-sabotage are habits because they are deeply  ingrained behaviours that take time to establish or eliminate. In the 1960′s a  highly regarded plastic surgeon, Dr. Maxwell Maltz discovered that it took 21  days for amputees to cease feeling phantom sensations in their amputated limb.  From further observations and significant research he established that it takes  21 days to create a new habit.

Brain circuits take engrams (which are essentially “memory traces”) and  produce neuroconnections and neuropathways only if they are bombarded for 21  days in a row. This means that our brain does not accept new data or information  for a change of habit unless it is repeated each day (without fail) for at  least 21 days. Changing habits (whether positive or negative) can be done but it  takes time and consistent effort.

Do yourself a favour and identify today which form of self-sabotage is the  primary one that is holding you back from having the business and lifestyle of  your dreams. Make a plan on paper – specific decisions and actions that you can  take to move forward in this aspect every single day for the next month. It is  imperative to track your progress each day and I highly recommend finding an  objective person outside of your business to hold you accountable to your plan,  actions and results.