Business Plan Basics
This is the third in a continuing series, co-authored
by Ron Sturgeon and Greg Morse, founder and president of Worthington
Give your banker what they want.
Ron: I always tell entrepreneurs that they
have to be prepared to lift the kimono a bit. This means letting
the banker look in. They need to be prepared to explain to [the
banker] what’s under there.
Greg: Entrepreneurs get concerned about doing
that, but banks have rules that prohibit them from telling others
what they have seen under your kimono. Bankers can be fired very
easily for having loose lips.
Ron: The banker doesn’t want to hear SWAGs
or WAGs. A SWAG is a Scientific Wild-Ass Guess and a WAG is a
The banker doesn’t want to hear that someone
needs a loan because the economy is bad or they’re getting a
divorce or the weather’s been bad. The banker needs to hear legitimate
reasons why business is down or off – along with solutions.
In a declining market, the businessperson
has to figure out how to work harder or smarter to keep the business
going. Most business owners keep doing what they’ve been doing,
so they keep getting what they’ve been getting or worse.
Greg: That’s a good point. Do not go into
a bank whining about the economy. A banker should know if the
economy is bad; but when a customer comes in and is all gloom
and doom, the banker doesn’t want to hear it. If there’s a problem,
I want to know about it, but don’t come in just to tell me how
bad the economy is.
I also want to know that customers are beating
the street. I want them to have an air of confidence about their
plans. That’s going to go a long way. And don’t confuse confidence
Ron: You want them to come in with solutions,
not problems! My old boss at Ford Motor Co., Dixon Thayer, liked
to say he was positively dissatisfied with results. He was all
about positive energy, but knew we could do more.
Greg: Exactly. Show me the baby, not the
labor pains. That’s what I want to see.
Ron: The banker also likes to see business
owners who surround themselves with people who are smarter or
better than the business owner is. The smart people on your team
are there to do things that you can’t, won’t or shouldn’t be
doing. If you aren’t good at financials, get help from someone
that is. It’s important to show that there are good people on
your team. I cannot emphasize the importance of this enough!
For example, there was a time when I realized
(after much hand wringing, as I was so frugal) I should quit
paying a bookkeeper and spend the extra money to hire a controller.
I went from paying a bookkeeper $40,000 a year to paying a controller
$75,000 a year, but our company made the entire $35,000 back
in less than 60 days because he isolated and identified expenses
we could cut.
Every good business plan should include:
- Name of business
- Executive summary
- Ownership information/brief history of the
- Information on the product/services
- Financial summary for three years and the
- Budgets or pro formas
- Metrics highlights
- Information on the owners and operators,
including their track records
What’s a pro forma financial statement?
It’s a hypothetical or projected, or recast
financial statement based on forecasted or estimated numbers.
Forecasting can be so hard.
Ron says that if you figure in twice as much
time and twice as much money as you think you will need, you
might be safe. But entrepreneurs seem to always “breathe their
own exhaust,” and they become infatuated with their own ideas.
That’s why it’s so important to have someone
else that is capable and objective to review your plans. You
need someone who is willing to tell you how it is (and not what
you want to hear).
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Remember, only you can make BUSINESS
Ron Sturgeon is past owner of AAA
Small Car World. In 1999, he sold his six Texas locations, with
140 employees, to Greenleaf. In 2001, he founded North Texas
Insurance Auction, which he sold to Copart in 2002. In 2002,
his book “Salvaging Millions” was published to help
small business owners achieve significant success, and was recently
reprinted. In June 2003, he joined the new ownership and management
team of GreenLeaf. He also manages his real estate holdings and
investments. You can learn more about him at WWW.autosalvageconsultant.com
He can be reached at 5940 Eden, Haltom City, TX 76117, firstname.lastname@example.org or
817-834-3625 ext 6#.