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[capitalminute] Business Plan Acumen...
June 09, 2004
brought to you monthly by Mike Elia
Financial & Marketing Consultant, Author
"Business Plan Secrets Revealed!”
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What Every Investor Wants to Know You Understand...
The other day I made a visit to one of our companies with a board member who was a very prominent and successful CEO. I was impressed by how quickly he cut through the complexity of the business to focus on the three basic parts of making money: cash generation, return on assets, and growth.
Like this CEO, investors expect entrepreneurs and business owners to understand each of these measures individually as well as the relationships between them. In his book "What The CEO Wants You To Know", Ram Charan calls this ability to focus on these basics and make money for the company-- business acumen.
Don’t let your detailed knowledge of the business or business plan obscure the simplicity of how you make money. Cut through the details to the heart of what investors want to know. Tell them about cash generation. How much and from what sources you generate your cash. Likewise, tell them how much and for what you’ll use this cash for.
But remember, some cash expenditures are investments. For example: investments in property, facilities or equipment; investments in working capital like inventory and accounts receivable from customers. You make investments because you expect a return on them.
The assets listed on your balance sheet represent your investments. The operating income you generate represents the earnings these assets generate. You calculate the return on these assets by dividing the operating income they generate.
Finally, like a shark that must keep moving to stay alive, your business needs to grow profitably to be sustainable. Things like sales growth, earnings growth, and market share growth are all measures you should know when conversing with potential or existing investors.
Demonstrate to investors that you understand how to make money. Talk in terms of cash generation, return on assets, and growth when communicating how your business or business plan makes money.
To your success,
Did you know you can sign-up for the F R E E Business Plan Secrets Revealed! Four-Part Mini-course and get tips on how to:
- build a case for your business that leads investors to conclude that you are the obvious investment choice
- write a business plan that captures investors’ attention
- find funding sources.
You'll get Part 1 immediately after you register and the remaining three parts over the next three-day period.
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