A Well-Written And Organized Business Plan Is Imperative

By Mark Borkowski

Michael Kavanagh of Ariem received a business plan from a business that was in the Greater Toronto Area (GTA). The company was looking for funding to open two new sites in various parts of the world as well as substantial funds to cover operating costs at these 2 sites as well working capital for their existing operation. The plan was forwarded originally to a major mergers and acquisition firm but was subsequently transmitted to Kavanagh as it was a funding request rather than a purchase or sale of a business. Prior to receipt, they did forward to several lenders, as a favor to the client, but the response was negative!

The plan was a prepopulated form from a government lending company ironically touting itself as a bank for entrepreneurs. The form was completed by the firm’s outside accountants and was over 60 pages with color graphs and very nice pictures. Near the end of this lengthy plan, the financing program was outlined with very little detail.

Kavanagh and Shamit Khosla of Ariem, jointly reviewed the plan. It was evident there was not much thought put into the program and little interaction between the company and the outside accountants in putting the plan together. The request for financing was scattered and, quite frankly, made no sense.

The prepopulated nature of the form also made it difficult for a proper layout. Sections were scattered so that personal net worth’s were followed by business forecasts etc. The forecasts were not realistic having no actual basis to historical results. It was not surprising that the response from the lenders was negative.

Kavanagh noted that this is hardly unique. We have seen other business plans that have been prepared that are not cohesive. The commonality to all is that they did not achieve the goal of acquiring the needed funds.

Banks and lending institutions have accelerated cost reductions to maintain or increase profitability. This drive to increase profitability is driven partly by the increased costs of regulation and scrutiny. The cost reductions are across the board staff reductions. The remaining staff are then tasked with increased portfolios to manage as well as carry out the other duties including business development. Time, which was in short supply previously, is in even shorter supply now!!

Why is this important? Account managers time, as noted above, is very limited. They do not have time to read a disjointed, poorly organized business plan. In addition, sending a disjointed proposal to the risk management department seriously erodes the account manager’s credibility for future deals. Account managers who have poor credibility will be on the chopping list when the next rounds of cuts are planned. Therefore, there will be little or no consideration or review of a poorly prepared business plan.

Khosla advised that a clear, concise, well organized business plan greatly increases the chances of the funding requests being approved. It is also important to take the time to prepare the report – including a clear outline and why the program is being presented. Before forwarding to the lenders, take the time to revisit. In addition to the basic items, care should also be taken with respect to spelling, punctuation, making sure there are no inconsistencies especially the numbers and, of course, proper layout.

Firms, such as Ariem, that specialize in assisting businesses and preparing plans are your best bets for your projects. These firms can provide an independent look. They can also help in covering areas that are not readily noticeable to the owners who are usually too busy running their business.

These firms typically employ experienced people who have worked at banks or financial institutions for many years. They know what is needed to satisfy the risk management department and secure the needed funds.

Businesses need money to meet day to day obligations and to fund growth. Given the importance of this critical aspect, it is surprising that businesses do not treat the request with more concern and urgency as evidenced by half thought out business plan presentations. While there is considerable pressure to lower or keep costs constant, saving money on the preparation of a poorly prepared business plan will end up costing more than any cost to write up a plan.

It should be noted that any plan doesn’t need to have glossy paper, multiple pages of color photographs etc. The facts laid out in a logical order with the storey of the business and the program will be sufficient.

With almost everyone carrying smartphones, anyone can take a picture. However, it takes a professional photographer, with the right lighting, positioning and equipment, to present the best picture. With such a critical component for your business, seek experienced professionals that can properly present your business’s crucial request.
Remember, you don’t get a second chance to make a good first impression.

Mark Borkowski is president of Mercantile Mergers & Acquisitions Corp. Mercantile is a mid-market M&A brokerage focused on selling mid-market companies.