What You Need to Know About Business Intelligence

Every business wants to be successful. That success always comes from growth. With most businesses, growth comes from customer retention and gaining new customers. "Business Intelligence" can help a company gain new customers and retain old customers. Business intelligence can be abbreviated BI. A formal definition of business intelligence is that it is a process of collecting information in the area of business. In BI, data collected is enhanced into information and then into knowledge. Business Intelligence can give any business an accurate idea of its customers' needs. Businesses that have large amounts of information about their customers can act upon that information. Businesses utilizing BI gain knowledge and understanding of a customer's needs, customer's decision-making process, and economic, cultural, and technological trends. When using businesses intelligence, businesses select either short term or long goals. BI helps a company reach those goals.

Business Intelligence History

The idea of business intelligence goes back to Sun Tzu's "Art of War." Tzu believed that in order to win a war, you must have complete knowledge of your own strengths and weaknesses, as well as the strengths and weaknesses of your the enemy. This is the central idea in present-day business intelligence. Companies must know themselves better than their competitors, and they must know their competitors better. War and business are a lot alike considering that with BI, one must sift through heaps of data (both external and internal) for management to then make strategies for where to take the business and marketing. Warfare involves strategic plans as well. BI is the process of gaining information about every element of your market. Simply understanding the customer is not enough; a business must understand its competitors, and itself.

KPI, Key Performance Indicators

The present state of business is assed by the use of Key Performance Indicators (KPI) in business intelligence. As more companies implement KPI, data is becoming available to business faster and more efficiently. Data used to be available for business only after one or two months. This untimely availability did not help business adjust their strategies. More recently, banks have tried to make data available sooner and with shorter intervals. Banks do this especially for businesses that have higher credit/operational risk loading. This allows many companies to get new data weekly, and adjust their strategies faster than ever before, leading to increased customer satisfaction and retention.

BI Tools

When using business intelligence, a company has to collect a vast amount of information. BI tools can help businesses store, organize, and even collect business data. Some data tools are data warehouses, data modeling, and data mining. Using data tools helps to improve the efficiency of business intelligence. While data tools are used for organization, Online Analytical Processing (OLAP) is used in the analyzing process. OLAP is commonly referred to as simple Analytics, which is based on the hypercube or "cube" dimensional analysis.

There are also vendors who help business with business intelligence. A vendor provides a company with the business intelligence tools and support needed for the successful implementation of a business process. Siebel Systems, Microsoft, Altius Consulting, Business-Soft, and SAS Institute are just a few of the companies offering business intelligence tools and support.

Conclusion

The better a business understands its market (everything from the customer to its competitors), the more effective that business can be. Businesses that have as complete, 360-degree understanding of what their customers need and want will be better able to devise successful strategies and implement successful processes to make their business thrive. Business intelligence is the path that businesses can take to achieve their goals, which can be either short-term or long-term. Some may wonder about the ROI of business intelligence. No doubt, if a company ends up gaining many customers, and retaining current customers as a result of business intelligence, then it will be a positive ROI. Business intelligence, if implemented correctly, and efficiently, can only help a company.

David McKeegin writes about a variety of business topics. He writes for a business intelligence blog entitled Business Intelligence Lowdown (http://www.businessintelligencelowdown.com).

What a Billionaire Taught Me About Successful Businesses

What a Billionaire Taught Me About Successful Businesses:

10 Lessons to Think & Act Like a Business Superstar

What you will find in this report

The sections that this paper is divided into are based on the questions my billionaire investor used to ask during various phases of our company's growth. Each question is itself based our investors experience in thousands of investments.

1. How to select the ultimate business partners

2. How to tell good ideas from bad ideas

3. How to make sure your ego doesn't destroy your business

4. How to attract and manage your financial partners

5. How to hire super stars that won't cost you an arm and a leg

6. How to raise money for your venture

7. How to build a business that generates cash without increasing costs

8. How to make sure you never confuse passion with productivity

9. How to make tough decisions and feel good about it

10. How to create a lucrative exit strategy

____________________________________________________________

Important Notes:

If you received this report from a friend or a colleague you would not have received

your free copy of "8 Keys to a Successful Start-Up". If you would like your copy

please go to the Fresh Tilled Soil website and sign up for your own report and you

will receive you bonus report.

Also, if you like what you read in the reports you are going to enjoy reading Drawing

Horses: How to Set Your Business Up For Success our popular ebook. The ebook is

available for download at http://www.freshtilledsoil.com

____________________________________________________________

How to make the most of this report

I encourage you read and absorb these ten points. Once you have read these points

I suggest you ask yourself these questions as often as possible. Also, ask yourself

these questions when you are meeting other business founders and CEO's. Evaluate

all businesses and develop a habit of asking these questions all the time.

How this story began

If you are lucky you will have mentors that have done well in their own business and

can help you navigate the path to success. If you are really lucky these people will

be in your industry and will add more than just anecdotal support for your

decisions. Then there are the extraordinarily lucky few who will have a mentor that

will change the way they think about business forever. Several years ago I came

across such a mentor. In a series of chance connections I came face-to-face with a

billionaire that was ready to share his wealth of experience. In less than 2 hours this

person was able to change almost everything I knew about business. Even the most

fundamental ideas about how I thought businesses work would be set on their head.

My partner and I had been working together in an online ad sales company that was

over capitalized and growing mostly because of the hype surrounding the Internet.

He was my boss and I was selling ad space. We quickly realized that we would be

having more fun and making loads more cash if we were running our own business

outside of the corporate clutches we were in. Once we made the decision to leave,

our education began. In a frenzied period of deal making and late nights over our

laptops we were able to attract the attention of a very wealthy investor. He invited

us to meet him and some of his lieutenants in his hotel suite with instructions to

"leave behind any business plans and bring just your heads".

Although the first meeting was no more than a couple of hours the time seemed to

accelerate past us. The meeting was basically a series of well-considered questions

aimed at my partner and me. What was surprising though was that these questions

were very simple and quite basic in nature. We had been expecting some tough

questions about corporate financing and international arbitrage; instead we were

answering questions about who we were and what we thought we did to help the

company better. Over the next few months the relationship became financial and we

struck a deal with this investor. The deal was done but the questions kept coming.

The most interesting and benign question was asked of us almost once a week on

the phone and at every face-to-face meeting. Without fail I would get a call from

our new investor that would start with the question "What do you do?" At first I

thought this was a joke and played along by describing the company and what we

did for our clients. As time drew on it occurred to me that the question was a loaded

one and that my answers were not getting to the heart of the matter. Eventually I

came around and asked our billionaire investor "You keep asking that question and I

know you are not stupid so it can't be that you don't know the answer. What's the

point of asking the question?" He chuckled as he explained, "I ask it all the time

because it's the best question to get a sense of how focused people in the business

are." My silence prompted him to continue, "You see, if someone can't answer that

question confidently and in fewer than ten words they probably don't understand

what the real value of their service or product is."

To test how true this might be trying asking yourself that question and giving the

answer in ten words or less. Do you feel clear about your response or do you feel

confused? The next time you get the opportunity to ask the question of someone

else watch carefully how he or she answers the question. Do you need to sit down

and take a break after their long-winded explanation or do you get it immediately?

It's obvious to me now that if you need a whiteboard, a PowerPoint presentation and

forty-five minutes to sell your product you're in deep trouble.

Over the period that we were in contact there were many more questions. Each

question has the ability to cut directly to the problem and make sense of complex

situations. Here is a list of the questions that kept on coming up.

1. Who will be involved?

How to decide who will be involved in your business.

There is an old Moorish adage that says you should choose your companions before

you choose your journey. Before you embark on any business journey you have to

be sure your companions are the best you can possibly choose for the path ahead.

My billionaire mentor would remind us every time we needed to recruit another

member of the team, "Ask yourself what are the reputations, integrity and potential

of the people involved? Will these people set the company up for success or failure?"

The key here is to make sure that you not only get bright people with lots of energy

and passion but also be sure to get a group that together is ten times the sum of its

parts. You might have the smartest people on your team but if there is no chemistry

between them nothing will get done correctly. I once founded a technology company

that had the best of the best from the top engineering schools in the country. Even

though we had the ultimate brain power we could find there was no passion

amongst the group to drive that brain power forward towards our goals.

2. Is this a people thing or an idea thing?

How to tell good ideas from bad ideas

Ideas are the fuel of any business. Good ideas can create empires and bad ideas can

ruin them just as fast. Knowing the difference between good ideas and bad ideas is

what allows people to move towards success. The advice we received was simple, "If

you run into problems evaluate whether they are caused by people or by the idea

that they are working towards. Good people can turn a bad idea into a good idea

but bad people almost never change bad ideas into good ideas."

Even the most well considered business ideas might turn out to be flawed but it's

easier to manage the obstacles when you have good people. Develop a sixth sense

for evaluating ideas by constantly reading and learning how good businesses

continue to remain on top. Find out from successful leaders how they "smell" the rot

in a bad idea. Very often this is something that comes with practice but you can

begin making a difference now by filtering ideas through your best people, whether

they be partner, employees or advisors.

3. Are the founders the same people that will run the company?

How to make sure your ego doesn't destroy your business

Starting a business and running a business for the long-term can be compared to

sprinters and long-distance runners. Not everybody can be an entrepreneur and a

long haul expert. Don't believe that everybody that starts a business can be a

Michael Dell or Jeff Bezos. It's very rare that the founder of a business will have the

skills to both create the business and run it once it is a mature business. If you start

a company be prepared to step down or move positions when the time is right.

It's common knowledge amongst investors and venture capitalists that most start-

ups never mature beyond the first few years because the original leadership gets in

their own way. In a recent report by Ernst & Young it was discovered that only about

57% of founders remain in the CEO position. Unfortunately many entrepreneurs are

convinced that they can do everything and are reluctant to let the reins of the

business go to someone else. In my own experience I would say that this is the

number one reason why new businesses never mature or develop beyond the first

energetic tears. "In all the years that I've been starting and funding businesses only

two founders voluntarily stood down to make way for someone who would do a

better job" was what we heard from our billionaire mentor.

4. How much money will you need before you make a profit? Oh, and you can cut

the forecast bullshit.

How to attract and manage your financial partners

If you plan to finance your company with other peoples money you had better be

very honest with them. Expectation management is the key to all successful

relationships and it's never truer than between a business owner and the investors

they bring on board. Giving your investors accurate information about finances and

important decisions is so important it might make or break your business. From the

moment you meet with your investors you will be asked questions about what you

and your future business are capable of. If you exaggerate the truth or give your

investors false information it will come back to hurt you.

Part of the communication you will have with your investors, or potential investors,

is to develop financial forecast for your business. Beware, forecasts are nothing

more than a really good guesses so be cautious when you present your plans to the

people who will finance your company. Whatever you think it will cost, double that

and you might just make it before the money runs out. Plans are good guidance but

be prepared to make changes to them and be quick to update your investors as to

those changes. When my partner and I met with our investor for the first time we

wanted desperately to impress him with our predictions of how much money we

thought we could make. He stopped us short and reminded us that "Forecasts are

nothing more than your best guess guys. Don't waste my time with guesses, let's

figure out how much money we can make right now and avoid disappointing both

sides".

5. Do you really need a chief financial officer or can you get away with a good

accountant?

How to hire super stars that won't cost you an arm and a leg

Generally, the biggest expense in a new company is the payroll. People cost money,

and without doubt, good people cost the most money. Although it is essential to

have good people don't be fooled by advanced degrees or fancy titles on your

recruit's resume. In the beginning do you really need to have the big guns doing

basic work? Wait as long as possible before adding anyone to your team.

I made this mistake on my first start-up. In an attempt to get some momentum

going in the early months I hired some heavy hitters to join the team. Our investor

was the one to bring our mistake to my attention, "These new guys are smart.

Maybe the smartest people I've met for a while but do you really need a CFO to

make 100-odd journal entries a month? Can't this wait a bit longer?" If you can

outsource non-strategic roles until there is enough justification and cash to do so

you will save yourself good money.

6. Can you raise your capital from somewhere other than venture capitalists?

How to raise money for your venture

Investors can be very important to get going but you need them like a hole in the

head. Our investor asked us early on, "Can you raise your capital from somewhere

other than venture capitalists?" This might be a paradoxical question coming from

an investor but our billionaire was sensitive to the difficulties that these

relationships cause. Investor's desire to get returns from their investment and their

blindness to subtleties can cause great tension in the company. In his words,

"Investors are driven by one thing and one thing only. Don't ever convince yourself

otherwise." If you can raise the money from friends or family, or better yet from

yourself, you will avoid having to deal with venture capitalists.

Money is a huge temptation and can make you a little crazy when you are desperate

to close a deal. Entrepreneurs that are up to their ears in debt make quick decisions

that they later regret. Ideally founders need to consider where the money will come

from before starting their business. Entrepreneurs can develop connections to

investors well before or in parallel to their start-up activities. Successful businesses

don't wait until time has run out and they are desperate.

7. How can this business be scaled?

How to build a business that generates cash without increasing costs

This is my favorite question because I'm inherently lazy. Businesses that require me

to work more as they get bigger scare me. I'm excited when I can see a company

grow without having to increase the amount of resources needed to run it. I've

heard it said that the best measure of a company's success is its ability to grow

regardless of your day-to-day presence.

E-Bay is probably the best model of a scalable business in the marketplace today.

More buyers and sellers gather every day under the same technology platform. Their

business has evolved to the point that a million more visitors won't require

significant additions to the technology. More customers and more transactions do

not necessarily mean increasing staff or infrastructure. "Build a business that

operates to generate revenues even when you are sleeping", that's pretty good

advice when you consider that you will be asleep for an average of one third of your

life.

8. What's the difference between a hobby and a business?

How to make sure you never confuse passion with productivity

The answer is simple, "A business should have more money at the end of each

month than it had at the beginning but with a hobby it's just the opposite". If you

are doing something just because you like doing it even if it's a terrible business

then eventually it'll make you miserable. The best case is to find something you are

passionate about then make sure it's a good business model too.

Too many self-help books tell us to follow our heart and our passions.

Unfortunately that confuses us into believing that our hobby can also be our

business. A good friend of mine left college with a degree in finance but was not

excited by the idea of working in the world of financial transactions. His favorite

past-time was to take overland trips in his Land Rover across African's heartland.

He decided to create a safari business and follow his heart. It turned out to be a

really tough business to run. The vehicles frequently broke down and you can't do

much marketing to wealthy overseas prospects when you are in the deepest darkest

part of the African continent. He eventually closed shop and joined an investment

firm that had a special interest in the travel industry. It was a match made in heaven

and he made a mint doing what he loves.

9. Are you wetting your bed and or are you facing facts?

How to make tough decisions and feel good about it

Business leaders and entrepreneurs have to make tough decisions. What stops

business leaders from making tough decisions is they don't want to be perceived as

nasty bosses. Tough decisions are just that - tough. Get over your ego and get used

to the idea that not every step of the way is going to be paved with roses.

In one instance, after a particularly bad month we had to come to terms with the

fact we had too many people and not enough work to justify their presence. Even

though we had delayed the decision for months we would have to let some people

go. "Ignoring these tough decisions is the same as wetting your bed and not telling

anyone" our investor said. Our delay nearly cost us the company.

10. Do you have an exit strategy?

How to create a lucrative exit strategy

Have you given enough thought as to how you will ultimately profit from your

venture? Businesses make the best returns when they are sold or go public but there

are other ways to create liquidity events. Remember too that in this day and age it's

rare for a founder or company leader to hold their lofty positions for more than a

decade. Give some consideration for yourself and for the company.

This doesn't mean you have to write yourself out of the script before you start. It

does mean that you have to plan for your future once the company is a mature

entity that can live beyond your influence.

Thank you for reading this report. These ten points have given me a great

advantage in starting and building businesses. I hope that you too will absorb these

ideas and make them your own.

Good luck with your ventures!

About the Author

Richard Banfield lives in Boston, MA with his wife and two boys. Richard is a business development specialist with a focus on growing profits for early to mid stage global technology companies. He has delivered high-level business strategy, global marketing campaigns and materials to clients in the US, UK, Europe and Africa. He has lectured on the subjects of marketing and online advertising and has authored guides to sales, account management, global business development and marketing strategy.

Contact details:
richard@freshtilledsoil.com
+1 862 221 1805
http://www.freshtilledsoil.com

Serious About Writing A Business Plan... Start A Business Plan Library

Tap these treasures of ideas. The best money you can spend

is money invested in your business plan education. Don't

shortchange yourself when it comes to investing in your

dream. Start gathering samples of business plans and collect

business plan books and get a business plan library started,

it can change your future. Here's what your library needs to

show: that you're a serious student of business strategy and

planning, finance and economics, selling, and writing.

Sample Business Plans

Start by gathering sample business plans. Look at the annual

reports and S-1s, S-4s, 10ks, or 10Qs filed with the

Securities and Exchange Commission (SEC) of companies in

your industry. See how they present their case, explain

their business, and discuss their industry and competition.

What exactly are these forms and how do you get them? Good

question.

These are forms that public companies must file with the SEC

in order to register their securities or to maintain the registration

of previously registered securities with the SEC. You can find

these forms by going to http://www.sec.gov, clicking on the Edgar

database, and searching for a public company in your industry.

The key is to find the most helpful filings. These are the ones

labeled S-1, S-4, 10K, and 10Q. They usually contain

descriptions of the business, its products, industry, competitors

and strategies. Sections that should sound familiar to you if you

are planning to write a business plan.

Go to these sections and read how the company presents their

business and its products. Look at how they describe the industry

and their competitors. I encourage you to read as many filings in

your industry as possible. See what the "big guys" are saying, the

issues, challenges, and trends they see in the industry and how

they're attacking them.

Be careful though about mimicking what they write. Many of these

documents are written in legalese despite the SEC's protestations

and push for plain English. Just remember, you're doing this

exercise to see how other companies have built their case to

business investors.

Another approach is to gather and read professionally

written business plans of companies in your industry and use

them as guides to prepare your plan. Try to avoid generic

business plan templates. They're too general and often not

worth the investment. Either way. Start filling your

business plan library with business plans and registration

statements. Keep them close by and refer to them often as

you write your business plan.

Strategy

Now, here's a good book to start your business plan library

with. It's called: Competitive Strategy by Michael Porter.

In this landmark book, Competitive Strategy, Porter shows

you how to identify the forces that drive competition in

your industry. Learn what moves your competitors are likely

to make within it. Competitive Strategy provides a framework

for evaluating the competitive alternatives you must

consider and for thinking about how to change the rules of

the marketplace in your favor. Competitive Strategy is the

bible venture capitalist, investment bankers, and business

development executives use when analyzing an industry or

business venture. I use this book as the centerpiece of my

business plan library. So I'm just asking you to take a look

at Competitive Strategy by Michael Porter. If it suits you

fine, if it doesn't suit you, keep looking till you find

something that helps you understand strategy.

Opening your mind to strategic alternatives is a creative

process. You can never have too many books on strategy in

your business plan library. Read as much as you can to learn

why some companies can sell their products more cheaply than

others. Why others provide the best products...products that

are just far superior to their competition. And, why some

companies just always seem to provide unmatched service.

Fill your business plan library with business books that

inspire, challenge and answer these questions. Read. Read.

Read. And, study too. Find out how some companies are

reinventing competition in their markets and obtaining

funding while others are seemingly oblivious to the changing

world around them.

Michael Treacy and Fred Wiersema set out to find answers to

these types of questions in their book The Discipline of

Market Leaders. Although the authors won't appreciate this

comment, I found the underlying fundamentals in The

Discipline of Market Leaders to closely parallel those laid

out by Porter in Competitive Strategy. Perhaps that's why I

like it so much. The difference, however, is that they

present their material in a less academic, more engaging

way. And, they provide excellent case studies that are sure

to generate many aha's! The Discipline of Market Leaders

will make you think about what it is your company or new

venture does better than anyone else; what unique value do

you provide to your customers? How will you continually

increase that value? If you can't easily answer these

questions about your business, The Discipline of Market

Leaders is required reading and a must for your business

plan library. The business owners and entrepreneurs that can

answer these questions are not only raising the value bar in

their industries, they're raising capital for their

businesses!

Finance and Economics

Be sure to keep your business plan library well balanced...

Let me give you a sense of that balance. First is finance

and economics. We all have got to have a sense of how to

make money...the universal laws of business success, no

matter whether you are selling fruit from a stand or running

a Fortune 500 company. Finance and economics are the basic

building blocks of business. Your business plan library

needs a few books on the numbers. When you understand the

basics of finance and economics its possible to bringing the

most complex business down to the fundamentals. You become

empowered to focus on the basics and make money from your

venture.

Here's a good book to help you in this area: What the CEO

Wants You to Know by Ram Charan. What the CEO Wants You to

Know captures the basics of finance and economics and

explains in clear, simple language how to do what great

business owners and entrepreneurs do instinctively and

persistently. Charan explains the basic building blocks of

business and how to use them to figure out how your company

can, does, or will make money and operate as a total

business. Learn how to use these building blocks to cut

through the clutter of day-to-day business and the

complexity of the real world. What the CEO Wants You to Know

by Ram Charan. This little book is only a 137 pages: but I'm

telling you, it's so well written you'll be as intrigued as

I was. What the CEO Wants You to Know by Ram Charan. Get it

for your business plan library.

Writing

Next is writing. You have to be able to get your thoughts

down on paper. Businessese, academese, legalese - all appear

too often in business plans. Often preventing a

knowledgeable writer with good intensions to fail at getting

the message across to an intelligent, interested reader. For

some reason, when people write business plans they are

compelled to write "commence" and "prior to" instead of

"begin" and "before." If you want to write an effective

business plan, your business plan library must have books on

how to be an effective writer.

Start with Edward Baily; he wrote a surprisingly

straightforward book called The Plain English Approach to

Business Writing. This book, The Plain English Approach to

Business Writing, is about writing as you would talk, which

not only makes your writing easier to read, it's also makes

it easier to write. In a brief, entertaining 124 pages Baily

clearly lays out the dos and don'ts of plan English,

illustrating them with examples drawn from business

documents, technical manuals, trade publications, and the

works of writers like Russell Baker and John D. MacDonald.

The Plain English Approach to Business Writing offers

practical advice on clarity, precision, organization,

layout, and many other topics. Best of all, you can read it

an hour...and use it for the rest of your life.

But writing well is only a part of writing. A good business

plan must be persuasive. Listen carefully to what I just

said: persuasive. Not misleading or untruthful, but

persuasive.

Here's a book you need to look at Persuading on Paper. How's

that for a title? Persuading on Paper by Marcia Yudkin.

Yudkin is a writing consultant who coaches small-business

owners and professionals on improving their marketing

materials. In a witty and vivid style, Persuading on Paper

shows you how to use the written word to convert strangers

to prospects to paying customers (or in our case,

investors). What I like about this book is that Yudkin takes

you step-by-step through the process of creating marketing

materials that sell. Don't underestimate the power of

marketing copy in your business plan. You'll be surprised

how her methods and strategies can help create a more

powerful business plan. Persuading on Paper is a must-have

for anyone who wants to attract more clients, customers, or

investors.

Raising Capital

Next is an understanding of the process of obtaining

capital. No business plan library would be complete without

a book on the process of raising capital. Without capital

your venture is destined for failure. You need to learn how

to select the right venture capital firm, make

presentations, and negotiate your deal.

Try this book: The Venture Capital Handbook by David

Gladstone. As an executive officer at Allied Capital

Corporation, a large publicly-owned, venture capital firm in

the United States, David has reviewed many proposals for

venture capital financing. The Venture Capital Handbook

takes you through the entire process from presentation

through negotiations, commitment letters, legal closings,

due diligence, the exit by the venture capital company, to

when the entrepreneur is left to own it all. As a result,

The Venture Capital Handbook provides anyone who wants to

spend the time and money with an insight into what venture

capitalists really want. Prepare for the process of raising

venture capital with The Venture Capital Handbook.

Selling

Finally, study the art of selling. Like it or not, when you

are trying to start a business venture or raise money for

your business you have to sell investors on why they should

invest with you. It's like a rite of passage. But fast

talking salesmanship won't raise the money you need for your

business. You need an approach that respects the power of

the investor...one that builds a relationship with investors.

So, fill your business plan library with books on selling

and presenting.

Here's a book to try: Socratic Selling by Kevin Daley with

Emmett Wolfe. Socratic Selling as the title implies, uses

the Socratic Method: "A method of teaching or discussion, as

used by Socrates, in which one asks a series of easily

answered questions which inevitably lead the answerer to a

logical conclusion" (Webster's Unabridged). Dalely's

concise, easy-to-follow chapters explain how to open a sales

dialogue and go right to the heart of the matter. Socratic

Selling is a fun and informative 162 pages for those of us

who believe selling means talking with, not at, investors.

Study these techniques; they can make you more effective

with potential investors.

If you are serious about writing your business plan...show it.

Start a business plan library that shows you are a serious

student of business plans. Fill it with business plans,

public filings and annual reports of businesses in your

industry. Stay away from those generic business plan

templates. They are too general. And, Read, read, read and

study too about strategy, finance, economics, writing, selling,

and how to raise capital. Spend the money. Buy the books. The

reward can be great...a funded business plan.

Mike Elia is a chief financial officer and an advisor to venture capitalists and leverage buyout specialists. To learn more about writing business plans and raising capital or to tap into the world's largest business plan library with over 900 industry specific business plans, visit http://www.business-plan-secrets-revealed.com - Business Plan Secrets Revealed.

Business Plan Financial Projections: Stop Worrying About Being Right...

Business plan financial projections seem daunting because

they are so uncertain. This very uncertainty, however, is

what makes preparing them easy because you can't possibly be

right. You can't predict the future. None of us can. All you

can be is competent in the way you prepare your business plan

projections.

Before you finalize your business plan this year, consider

these six caveats to preparing your business plan financial

projections:

1. Don't offer pull-out-of-the-air, "conservative"

guesstimates about getting some percentage of the overall

market demand or year-over-year growth.

It is a mistake to assume that business investors will

appreciate your being conservative with your business plan

financial projections in the early years of your business.

Don't think for a Wall Street minute that presenting

"conservative" business plan financial projections indicates

"realism" to prospective business investors. Business investors

invest for one reason: to earn a return on their money. How

long the money is invested influences the amount of the return

earned. Let's say a business investor wants to triple an

investment. Well, if that investment triples in 3 years, the

return is 44%. If it triples in five years, the return is

25%. Adding just two years to the investment period nearly

halves the return! Now do you see why time is so important

to a business investor? Here are a few other examples: let's

say a business investor wants to:

Make 5 times an investment in 3 years = 71% return

Make 5 times an investment in 5 years = 38% return

Make 7 times an investment in 3 years = 91% return

Make 7 times an investment in 5 years = 48% return

Make 10 times an investment in 3 years = 115% return

Make 10 times an investment in 5 years = 59% return

So, while you may find it attractive to figure out how to

make "just a living" until the business venture proves

itself, you now understand why business investors want sales

and earnings to grow absolutely as fast as possible, without

being deceived, in your business plan financial projections.

On the whole, business investors are risk averse only to the

extent that they don't want to lose their money or tie it up

in a low return investment. Typically when you make the claim

that your business plan financial projections are "conservative",

it usually just means that you have no idea how and why you'll

achieve a certain level of sales within a certain time frame.

Interesting, these kinds of estimates, provided that you've

done some good thinking about market segments and overall

demand, often turn out to be too low. Remember, it's just as

bad to underestimate your sales, as it is to overestimate

them.

2. Avoid calculating costs as a straight percentage of

revenues.

Sure it's easier to do things this way, especially with

Excel and other business plan financial projection software.

Costs are real, however. You need to know what they are very

specifically. If you've done your homework in developing

your business plan, then you should already have this information,

or at least the basis of it. Just estimate and calculate your

costs on a product-by-product basis.

With these warnings in mind, use the following steps to

develop your business plan financial projections:

Think about what percentage of the overall market share your

competitors already own. Assume that they will continue

their present trends in growth. (Note: some competitors may

already be trending down and losing market share.) Temper

your market share estimates with some discussion of how your

entry into the market will affect these trends. Then,

estimate the percent of total, potential demand that remains

available to you.

Now, based on the limitations of your operations plans,

calculate how much of this remaining available demand you

can achieve. This is a very simple calculation. Start with

your overall productive unit capacity and factor it by the

expected yield of sellable product, then multiply these unit

sales by their respective selling prices and voila, you have

the revenue numbers for your business plan financial projections.

Let's take an example.

Your research indicates that 2 out of every 10 females age

23 to 55 will under go some type of non-invasive cosmetic

treatment in your area. Your research also shows that this

number is expected to grow 20% each year over the next 5

years. There are 40,000 females in your target market. You

identified four competitors in your target market. These

four competitors currently handle on average 6 procedures a

day. You plan to start a non-invasive cosmetic treatment

center that uses the most advanced technology and is thus

capable of performing an average of 7 procedures a day.

Using this data you calculate the following statistics

about your market and market potential:

Total market 40,000 females x 20% = 8,000 procedures per

year

4 competitors x 6 procedures x 250 days = 6,000 procedures

per year

Available procedures: 8,000 less 6,000 = 2,000 per year

Your productive capacity: 7 procedures a day x 250 days =

1,750 or 21.875% of the total market. The average selling

price for a procedure is $400. Thus, the revenue for the first

year in your business plan financial projection would be 1,750

procedures times $400 or $700,000.

Now, let's say you're were projecting 2,200 procedures per

year. This would mean that you would have to alter your

operating plan to be able to perform 2,200 procedures. You

would also have to demonstrate how you would capture an

additional 200 procedures from your competitors.

Granted this is an over simplified example, but it should

give you a feel for how this process works.

Regarding price, in most cases you should have a clear idea

of how to price your product or service. There are usually

other, similar products or services out on the market.

Unless your competitive advantage is a cost reduction and/or

unless price is a critical basis of competition, just

estimate the value of your improvement and add it on to the

average price currently offered in the marketplace. In order

to make this estimate, you'll have to be talking to

potential users. Find out what they pay now. Find out how

they feel about the current price. Ask them if they'd be

willing to pay more and how much more. If you ask enough

people, you'll get a general idea.

3. Never determine price on the basis of a margin you think

is attractive.

The market will pay you only for the value you deliver,

which is determined by the consumer paying the final price.

It's easy to make the mistake of thinking that a 20%, 40% or

even a 60% margin is great. Never considering that if the

product or service you're offering provides a real

advantage. If you do this, you may be grossly

underestimating the price you can get in the marketplace and

underestimating your business plan financial projections.

Consumers don't think in terms of margins. They could care

less about what you ought, "reasonably", to get for your

product. That's why you must find out the most that they'll

pay. This is the value of your product or service. Come up

with some reasonable basis for determining this real value.

Keep in mind the obvious: If the consumer's value on the

final product or service is less than your cost plus a

reasonable profit to keep your business growing, you're in

trouble. Your business model will not be sustainable and your

business plan financial projections useless.

Now calculate the costs of manufacturing and distributing

your product. These costs flow directly from your revenues

estimates and operations plan. How much will it cost to

purchase what equipment and materials, hire what personnel,

engage in what selling efforts, pay what accountants and

lawyers, rent what kind of space and so forth, to achieve

the revenues you're showing in your business plan financial

projections. You must be very specific. Project your costs

over time. Keep them tied to the units you need to sell to

achieve the revenues in your business plan financial

projections.

Obviously, costs and revenues work hand in hand.

4. Keep your fixed cost low.

Keep in mind that none of these revenues and the cost

estimates are going to be perfectly accurate, which means

the amount of profit or cash available to pay "fixed" cost

isn't going to be accurate either. As a result, you can lose

your shirt trying to pay for equipment, a receptionist, or

other activities that don't contribute to the sole objective

of making sales. Wherever possible, rent space, rent time on

equipment, answer your own phones, etc. To the extent that

you keep costs variable in your business plan financial

projections, you can cut back when sales are slower than

expected. It's the worst situation to have a big,

well-furnished office with an expensive secretary who

needs the job, when the money isn't coming in. High fixed

costs in your business plan financial projections also send

the wrong message to investors that you know more about the

"form" of doing business than about actually making money.

Now pull all your numbers together to prepare the financial

statements that summarize your business plan financial

projections. You need three basic statements: cash flow

analysis, income statements, and balance sheets. All of

these come directly from the above calculations. Your cash

flow analysis indicates when and what amounts of capital

infusion you'll need to start and sustain your business plan.

Make your income and balance sheet projections on the

assumption that you'll get the capital. For the first year

or two of your business plan financial projections, present

each of these statements on at least a quarterly basis.

Monthly is best. I suggest doing a 24- or 36-month projection

depending on your growth plans and changes in the industry that

you foresee. Follow these monthly or quarterly projections with

annual projections till you cover a span of 5 years.

Finally, run through some "what-if" scenarios or sensitivity

analysis. Though you business plan financial projections should

be based on your best, and best-supported estimates of costs

and revenues, you know you can't be 100% right. That's why it's

important to identify those elements or assumptions of your

business plan financial projections that you feel are most

uncertain. Write out the nature of the uncertainty and the range

you think the estimates will fluctuate up or down. Then change

the estimates accordingly and re-run all your statements.

Pay close attention to how your business plan financial

projections, especially cash flows, change when you change

each assumption. This will help you determine how much

"cushion" you have available and, if business isn't going

according to plan, at what point cash will become an issue.

5. Do not simply assume that costs and revenues may be

"off", up or down, by some percentage.

Again, I know that Excel makes it easy to do this. For all

the same reasoning as above, stay focused on the assumptions

and details that make up your business plan financial projections.

It's the details you need to examine for their sensitivity and

their impact on the bottom line. You only need to alter those

specific items that you're most uncertain about. If it's revenues

that you're worried about, is it the price, the volume, or

both that concerns you most? How big a swing in the estimate

are you worried about, in what direction and why? If it's

your cost projections that are keeping you awake at night,

which cost elements and why? Things like rents and labor

costs can be determined fairly accurately. But maybe you're

unsure about materials or labor availability or how

efficiently you can produce your products or provide your

services. Maybe you'll have to pay extra to ensure their

availability. This kind of thinking forms the basis for running

"what-if" or sensitivity analysis on your business plan financial

projections.

6.Do not include every possible business

plan financial projection scenario in your business plan.

Both you and your investors need to know what aspects of the

business plan financial projections are most uncertain,

represent the most risk, in what direction, why, and how

they affect the bottom line. Having hundreds of alternative

scenarios to sort through is like a man with two watches

showing two different times... he never knows what time it is.

Lots of alternative business plan financial projections also

indicate that you're not too sure about anything. This is an

impossible way to communicate with business investors, manage

your business, or make important decisions. It's much more

effective to identify the risky areas of your plan, tell why

and how they impact the bottom line and what actions you

plan to take if they occur. This helps you and your business

investors stay focused on the high impact areas and to think

clearly about whether other factors should be considered as

well. It also lends more credibility to your talents and

increases the likelihood of your plan's success.

Finish this discussion with a summary of the critical

aspects of your plan and related contingency plans. If

you've followed all these steps, then you can figure out

what you'll do if your actual performance turns out to be

different than your business plan financial projections.

Remember, you're purpose is to demonstrate to business investors

that you're competent; worrying about protecting their investment

and running a business, not just flying by the seat of your pants.

Mike Elia is a chief financial officer and an advisor to venture capitalists and leverage buyout specialists. For more information about business plans and raising capital for your business or to review his business plan manual, visit Business Plan Secrets Revealed.

Why Businesses Fail - And What You Can Do About It!

Have you unintentionally set your business up for failure?

No one sets out to fail! Most business owners read all the statistics (maybe more than once) before they open their doors. Many know the reasons why businesses fail. But some businesses operate under this paradigm: "failure can never happen to me because I know better." Is that you?

What most business owners miss is looking at the reasons for business failure and turning them into action steps to help overcome the odds of failure. How do I know? I once thought I knew better, too!

Bear in mind that even "adolescent" businesses fail. According to the SBA statistics, 90% of small businesses fail within the first five years. Many businesses aren't producing enough income because the business owners aren't "business wise." They may be excellent at a specific task -consulting, programming, massage therapy, web site design, copywriting, etc. Or they have a great product. But wise about the "business" of business, they are not!

In the past five years of my business, not one client (including those who have been in business for more than 10 years) provided me with a business plan to review. Not one! Two of 100 clients have had marketing plans, but marketing plans don't work without a business plan and other focus type tools, too. The other common (95%!) mistake I see (and help my clients correct) is pricing their services very low as a way to gain market share and new clients. So low, in fact, that a potential buyer will perceive the service or product as being cheap and of low quality, even when the provider offers years of expertise. NO ONE wants to hire a business that is cheap! Inexpensive - yes; affordable - yes; cheap - no, no, no!

The most common problems business owners experience stem from simple functions like streamlining, organizing, information resourcing, marketing, planning, visioning, languaging, communication, technology and ecommerce. Example: If you know that most businesses fail because they don't have a usable business plan, develop your own business and marketing plans and use them daily; don't create one that gathers dust on a shelf. I use the One Page Business Plan Book or Interactive CD by Jim Horan. It helps business owners create very realistic, focused, and well thought-out business and marketing plans, including scorecards to help you anticipate and avoid business problems.

Example 1: Recently, a client turned down an opportunity to teach computer classes on a subject she could easily teach. Using teaching to market her business is on her marketing plan. So why not? Well, the proposed classes weren't going to help her get business for her primary business, they weren't going to attract her ideal client, and the pay was much lower than her usual hourly rate. She felt confident about declining the offer. Of course, that same week, other new business - the type she really wanted - came her way!

Example 2: New client knows she wants to create a business plan. She also has a strategy of increasing her income by joining four organizations with networking opportunities for her to meet her ideal clients. She joins the first two groups - total cost: $400.

As she starts her business foundation work, which includes the One Page Business Plan, she realizes that her ideal client isn't whom she originally thought it was! Some clients might be found in the two groups she's already joined, but not her ideal clients. As a new business owner, she wants to spend her time around her ideal clients, first and foremost. Planning just a little more for her business would have saved her $400 in membership fees.

What other simple things can you do to build a solid business foundation?

? Use a one-page plan daily to create your to-do list and monitor your business.

? Create an Ideal Client Profile and Elevator Speech and define a niche for your business.

? Read one of the "E-myth Revisited" books by Michael Gerber.

? Go with your strengths. Hire individuals whose strengths ARE your weaknesses to "fill in the gaps."

? Remember that there is no need to repeat the SAME mistakes others have made.

? Know what your business exit strategy will be.

Most business owners don't know what they don't know. Get assistance by hiring non-biased professionals who help you realign with your vision, create plans and financial scorecards to monitor your business. Look for someone who can suggest resources to help you and your business grow. Someone who's been in your shoes and succeeded. Start looking at how having a partner - a business consultant, coach, counselor, strategist, organizer or planner - can help you grow your business.

Ready to learn more about business success? Take a look at the articles I found on business failure that are posted below, ( http://www.coachmaria.com/articles/succeed.html ). Learn to overcome the costly (both in money and your time) errors that other business owners have already made. Give your business a fighting chance to continue to succeed.

? 2004 Maria Marsala, is a business builder who helps women-owned service businesses increase their bottom line in less time. A former Wall Street trader and manager, she used her business expertise to create 6 S.I.M.P.L.E. Business Steps, a program developed to help her clients succeed in less time. Learn more at http://www.ElevatingYourBusiness.com