288 CHAPTER 12 GETTING IT APPROVED
Table 12.1 The easiest countries in which to do business in 2010
THE BEST RANK
Singapore 1
Hong Kong SAR 2
New Zealand 3
United Kingdom 4
United States 5
Denmark 6
Canada 7
Norway 8
Ireland 9
Australia 10
Saudi Arabia 11
Georgia 12
… and the worst
Central African Republic 182
Chad 183
A high rank means that the regulatory environment is conducive to business operation. A
rank of 1 is best.
Note that China ranked 79th and India came in at 134.
Source: © 2011 The World Bank
What readers of the plan will look for
Assuming that you know who is going to receive your plan, your first challenge is ensuring
that it is read. This is why the presentation and executive summary have to be good. It is
highly unlikely that anyone will read the plan from cover to cover between you giving it to
them and the next time that you meet – no matter how much time separates the two events.
WHAT READERS OF THE PLAN WILL LOOK FOR 289
INTERNAL PLANS
You can be reasonably confident that plans for use within a closed organisation will be
given some attention. You can also be fairly certain that they will not be read in their
entirety. The best that you can hope for is that readers will grasp some good points from
the plan before the next meeting in the boardroom or in the chief executive’s office. You
do not want casual readers to find things that they can readily pick on and criticise. Think
about the people who will be sitting around that highly polished table – see page 290.
Ten business plan reviewers – and what they think about when they
read your plan
1 Board of directors. Have you correctly identified the corporate objectives and
developed a winning competitive strategy? Will it enhance the board’s prestige?
2 The CEO or other internal managers. Is the strategy good and the
operational plan feasible? Is it in line with their style of management? Will they
see it as a threat to their empire or alternatively as an opportunity to increase
their prestige?
3 Government agencies. Are you meeting their objectives; providing education
and training, creating jobs, helping revitalise depressed areas, boosting
exports? If you are, make sure you say so. Will it help them look good in the
media? Can they and you gain good publicity?
4 Bankers. Do you have the security and cash flow to repay your loans? Does the
plan minimise the risks for the approving officer?
5 Business partners. Do your skills and resources complement theirs? How
will you add value to their business? Have you displayed your reliability and
dependability?
6 Friends, angels. Will they get their money back?
7 Venture capital providers. Is the management up to it? Is the business
proposition unique? Will you follow through effectively?
8 Investment companies. What makes this business special? How will the
business grow?
9 Institutional investors. Is this a solid business? Will it outperform the market
in the longer term?
10 Investment advisers. Have you met the formal requirements for listing or
private placement?
290 CHAPTER 12 GETTING IT APPROVED
You might think that I am getting ahead of myself. We haven’t even finalised the plan
yet and I am already talking about the first meeting. However, I want you to try to see
your plan from every perspective. Obviously, you want a sensible review when the time
comes and your plan will benefit from valid input. But you do not want to be shot down
by pointless sniper fire.
With the personalities in your organisation in mind, read your plan again and try
to see where your opponents, the point-scorers and the vetoers might find ammuni-
tion. Consider if you have mistakenly overemphasised a weakness or an uncertainty, or
whether you have made assumptions that can be torn apart. If possible, discuss the plan
with your mentor to see where he or she finds weaknesses and where you can look for
support. You might want to rewrite these parts, removing or defending weaknesses and
emphasising strengths.
If you are fighting in a tough political atmosphere, do not let your plan be discussed
too freely in advance. Too much idle chatter gives your opponents time to formulate strat-
egies. Do not show everyone your hand or your best ideas will turn up on the boss’s desk
in some else’s memo two days before you can present your brilliant business plan.
Seven groups at the conference table
1 The decision-maker. Even if the chairman or chief executive makes the
decision, it might be based wholly or partly on feedback or recommendations
from others. Do not focus on the head of the table to the exclusion of all others.
2 The influencer. Frequently, there is a wise sage or muse who exerts strong
influence on the decision-maker. Win the influencer’s support and you might
win the battle.
3 Your mentor/coach. If you are younger, or new to a situation, you might find
that an older, longer-serving, generally respected executive becomes your
mentor and coach. You can usually expect a constructive attitude from this
person and you are strong if he or she is the key influencer.
4 One of the ‘Big Five’ with power of veto. Sometimes one person has the ability
to kill a proposal, regardless of how well it is received overall. The spoilsport
might be the bean counter who says that your figures are unworkable, the
lawyer who questions the legality, or the boffin who doubts the feasibility. (The
term comes from the five nations with power of veto in the UN Security Council.)
5 Your opponents. It is likely that you will have some opponents. They might be
motivated by personal grudges against you, personality disorders, ambition, or
maybe their divorce is making them grouchy. Whatever the cause, they will pick
up on anything negative in the business plan.
WHAT READERS OF THE PLAN WILL LOOK FOR 291
EXTERNAL FUNDING
Business plans going outside your enterprise are even less likely to be read. Around six
out of ten plans are junked before the recipients have read even the first page fully. If
your mail contained ten business plans a day or a week, you could not read them all. How
would you discriminate between them?
I have already mentioned the case where a plan produced by a top-grade bank was
binned by a top-rank finance house because the executive summary contained one
almost irrelevant factual error.
Ten reasons given by investors for discarding business plans are listed on page 292.
Obviously, these do not apply to all readers and all plans. I know of capital providers who
have backed a brilliant idea that was presented in possibly the world’s scruffiest plan. And
there are certainly instances where professional advisers have produced plans that have
been financed. But there are some useful – and obvious – warning lights in the illustra-
tions. I regularly hear the following comments.
If the management has not taken trouble in producing a decent plan, how can we
expect them to run the business properly?
If a key fact is missing – such as market size, selling skills, capital required – we
have to assume that the managers don’t know this important information or do
not have required skills in areas that are glossed over.
I know that you are not going to make such basic errors, because if you were you would
not have taken the trouble to read this book. So assuming that you make it past this
broad level of discrimination, what are the next stumbling blocks?
‘Everything that can be invented has been invented.’
CHARLES H. DUELL, COMMISSIONER, US OFFICE OF PATENTS, 1899
6 The nasty point-scorers. There are invariably a few people knocking around
your enterprise who spend their time looking for an opportunity to look good
in front of the boss or otherwise score points – even if this means wrecking a
perfectly reasonable plan just because it was not invented here.
7 Your supporters. Finally, fellow contributors, executives likely to gain from the plan,
and (if the plan is sound) your boardroom chums are likely to be generally positive.
But watch out for unexpected point-scorers and those with hidden agendas. Do not
rely on goodwill or friendship for votes, prefer facts and good arguments.
292 CHAPTER 12 GETTING IT APPROVED
Every reader will want to see that you are presenting an attractive business. For an
existing organisation, the track record is of overwhelming importance. For a new busi-
ness proposal, the perceived quality of the management weighs heavily. At one extreme,
banks are very unlikely to lend to a brand new venture. They are less impressed with new
ideas and are more enthusiastic about established businesses. At the other limit, equity
investors usually want to see something unique – more so in a start-up situation.
With specific regard to the finance, bankers are more concerned with security and cash
flow. As you know, they lend to you only if you can prove that you do not really need the
money and you can definitely afford to pay it back. Equity stakeholders are more inter-
ested in the size of the return that they might make. The bigger the better. But do not
make the mistake of thinking that just because shareholders’ funds are sometimes called
risk capital, shareholders enjoy risk. As a crowd, they are every bit as conservative as bank-
ers. We need to look in more detail at how readers will assess your financials.
The key questions that potential financiers are going to ask as they work
through your business plan are listed in Figure 12.1. They are trying to measure:
the validity of business ideas;
the quality of the management team;
the commercial viability of the business;
how much money you need, what you need it for, and how you are going to pay
it back.
Ten reasons business plans fail at rst glance
1 The presentation is too scruffy or too slick – it feels amateur or false.
2 The text is too long, with too many generalisations, too much waffle.
3 The text is too short, too weak and vague.
4 Whatever the length, there are not enough hard facts and details.
5 There are errors of fact (a major sin).
6 Specific omissions suggest that vital skills, resources or knowledge are lacking.
7 There is not enough what-if analysis? (What if sales drop 10%? Increase 10%? If
interest rates rise one percentage point?)
8 The financial projections are unreasonably optimistic, especially if sales or
cash flow improve unrealistically smoothly – without seasonal variation or
downward blips.
9 The plans are obviously produced to raise finance, not for running the business.
10 The plan was produced by professional consultants, raising doubt about the
management’s own skills.
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