Last week I shared Part 1 of a conversation I had recently with Pat Newcomb of the Ohio SBDC. She shared her take on several questions people commonly ask me about creating a business plan. This is Part 2 with a few more questions and answers. Thanks, Pat, for sharing your expertise. Readers can share comments or follow-up questions via email here.
How do I know that people I talk to about my business plan aren't going to steal my ideas?
Trust and confidence in the sharing of new ideas is very important. Take advantage of local services such as Small Business Development Centers and SCORE who operate under an Executive Order to not disclose any information without your prior permission. Take advantage of resources such as the US Patent and Trademark Office (and Dayton’s Patent and Trademark Resource Center at Wright State University) to learn about the different types of intellectual property that are created at the start of a business and how best to claim your right to it and protect it.
Lots of people have already told me they will support my business. Isn't that enough?
If you are fortunate enough to hear that from other businesses or individuals, you still need to “dig deeper” to find out exactly what kind of support they are willing to provide. Do you wish to sell a portion of your ownership to get this support? Would they be willing to lend you money? –if so under what terms? Would they be willing to buy from you? – If so, how many units? Over what amount of time? How many such customers will you need to 1) cover the costs of delivering your product/service; and 2) help recover the costs and investment that has gone into the development of the product or software or restaurant concept – Are there enough of these “first customers” to assure financial viability?
I've already prepared a spreadsheet that shows how much profit I can make in a year? Isn't that enough to get me a loan?
The profit and loss spreadsheet is a great start. What is even more important is the “story” behind the spreadsheet. How well have you captured the assumptions that you have used to build your financial model?
For many businesses the “P&L” and “Cash Flow” statements are quite similar – However – you might find yourself in a business (government contracting, for example) where you must perform the work, send the invoice for the work, then wait at least 30 days for the invoice to be paid. You can be profitable on paper but still go out of business because you have run out of cash!
Why does a banker care about my personal credit? Why do I need to talk about my finances in my business plan?
Like you, bankers, equipment lessors, and others with whom you will do business, need to manage their risks of not getting paid for the work they do. Like it or not, there is now over 20 years of support for a direct link between the success or failure of a business investment AND the personal credit score of the principal owner. Those who invest their money in your business want to know that you will not disappear at the first sign of trouble or difficulty. In this case, they look to see how you have handled difficult situations in the past as a measure of how you’ll handle an unplanned difficulty in the future.
Ohio Business Portal
Starting a Business in Ohio
Dayton Minority Business Assit. Center
The US Small Business Administration
Dayton Area Chamber of Commerce
Dayton Chamber Events"
Ohio Small Business Development Centers
- At The Entrepreneurs Center
- At Wright State University
Try our Business Databases