As promised, here are the questions asked during the “The Lies You’ve Been Told About Business Planning” webinar that we did not have time to address.
Q: Hello. We are a small manufacturing company in business for 3 years producing a few products for 2 separate companies. We are currently branding two of our own products, both entering very different markets: One for hardware store sales, another for precision rifle sales. For the hardware sales we are wondering how best to market. Try the Tommy Boy face to face, use distributors, or sell outright to a large brand manufacturer? I would like to keep control of the product; my partner is more for outright sales to a large brand manufacturer. If it is a good, useful, inexpensive addition to commonly-used tools, how do you decide? This is our first attempt for our own branded products.
Tim Berry: I’m sorry, but this is a serious question, requiring a serious answer. It depends on who you are, your strategy, your resources, strengths and weaknesses, and a lot of other considerations. No way to generalize or conjecture from the basic situation description here.
Q: What is the impact a business would make when applying for a business loan?
Tim Berry: Assuming you meant “business plan” and not just “business,” then start with realizing that regardless of what the bank has to say, you don’t want to apply for any kind of a loan without a business plan to help you evaluate what you’re using the money for, what you need it for, your returns, the risks, the interest and repayment expenses, and so on. Never borrow money without looking at projected results and risks and so on first. Aside from that, although some banks will make a loan based on collateral alone, good banks want to see your business plan because they don’t want to make a bad loan. Even if they are protected, they want the plan to make sense for you as well as for them. Relatively few banks will even review a loan application without a business plan to go with it.
Q: How do you know when you have reached the point of diminishing returns with respect to research and ferreting out data? What are indices?
Tim Berry: Yes, that’s one of those critical questions that everybody tries to answer. We’ve all seen people with analysis paralysis, and we’ve all seen people who just wing it without trying to get decent information, and neither extreme is very attractive. Somewhere in the middle there’s a judgment call on what’s enough information to guide decisions.
One thing that helps is realizing that you’re dealing with uncertainty about the future, and no amount of research and data is going to eliminate uncertainty. The past doesn’t predict the future, at least not always, and not very well. Get enough information to guard against just making a wild guess.
Some people will never have enough information. Some people will have enough information immediately, even though they have none. Be somewhere in between.
Q: When you have a great business plan for a high-end service, how do you find investors?
Tim Berry: “Service” is a bad word for investors. Although there are exceptions, services are harder to scale up to the kind of volume that gives investors reasonable hope of exits with money. Services can be great businesses for the owners, but without a good shot at a lucrative exit to liquidity, they aren’t so great for investors. Investors like products. And yes, you might have the exception to the rule. It happens.
I had some friends who took a high-end service and productized it by building installation and customization into the price, which made it into a service that looked like an expensive product, both to its customers, and to the investors. They made money with it.
Finding investors is a huge topic, book length, in fact. If you search the categories “angel investment” and “venture capital” on my timberry.bplans.com blog, and those two categories plus “startup financing” on my upandrunning.entrepreneur.com blog, you’ll get more of my input than you’ll ever want.
Q: When you sell your service, do you advertise the service you have or the perception you want your client to see?
Tim Berry: Not sure. Do you want the client to see something different than what you’re actually delivering? Would it help to understand the perception you want your client to see and then make sure you deliver that, so you get delivery and marketing messages in alignment? I don’t think I understand the question.
Q: What is your opinion of Ronstadt’s Financials?
Tim Berry: I don’t feel comfortable sharing my evaluations of products that compete with my own. When I developed Business Plan Pro back in the middle 90s, Ronstadt’s had a lot of market awareness, but I haven’t seen it in 15 years or even heard of it in 10. In the meantime, we’ve done 12 new versions of Business Plan Pro during that same timeframe. If I didn’t think Business Plan Pro were the best tool available, I wouldn’t go into the office every morning
Q: I need a bank loan for my startup business. Is it essential to have a business plan to do this?
Tim Berry: Very similar question answered above. To elaborate, while it is possible to get a bank loan without a business plan, it’s a lot harder. Banks that do that tend to be less professional, and it’s not a good idea for you either, because there should be a plan to make sure you need it, want it, can repay it, and will put it to good use. The misunderstanding, though, is that the business plan you do for the bank has to be the huge,formal, scary business plan. That’s not so. Keep it short, summarized, concise, and easier to do. Do just what you need, not the whole thing.
Q: Can you repeat the last statement? The plan is useless, but the planning ….
Tim Berry: It’s from Dwight D. Eisenhower, former president, leader of the allied forces in the invasion of Europe that ended World War II: “The plan is useless, but planning is essential.”
Did you miss the webinar? Check the video out here!