Note: We asked several BAC mentors about the single-most effective piece of business wisdom they’ve shared with aspiring entrepreneurs. This is the second of their reflections. This is from Ken Anderson, veteran marketing professional, who offered the memorable experience below in his own words.
Perhaps it goes without saying, but a person starting a new or “greenfield” business needs to have a comprehensive business plan with particular emphasis on identifying the market in terms of size and characteristics (customer profiles, competition, etc.) and the financials (revenues and costs). The former drives the latter. The plan needs to be concise and specific — not general. Most of our clients are seeking funding and they need to put themselves in the shoes of a banker listening to why they should receive a loan. The business plan needs to answer all foreseeable questions the banker would ask.
For those clients who are looking at purchasing an existing business, it is absolutely essential they know and understand the business — pros and cons.
A young woman who came to us for advice was considering purchasing the small bookstore where she worked. She understood the business from a marketing/customer standpoint. Her problem was financial. In determining what the business was worth, we suggested she thoroughly review and understand the business’ financial records followed by the added value she could provide from her ownership. We suggested she purchase only the business, not the building, instead lease it. It turns out that she was able to generate initial funding from family and friends through the Internet. This enabled her to obtain a bank loan, and she’s now on her way to success.