Your executive summary can make or break your business plan

While only 2 pages in length, the executive summary is by far the most  important component of your business plan or proposal. It is designed to  summarize the key elements, capture attention and most importantly, showcase the  financial highlights.

So, if you only have 2 pages to convey a significant amount of information  and summarize the financial upside, how do you decide what to put in and what to  leave out? Which financial features are critical to emphasize?

Depending on the purpose of your document and the intended audience  (investment, sale, partnership, strategic alliance, joint venture etc.), you  will want to tailor your financial disclosure to suit their needs and  expectations. What would they want/need to see in order to make an informed  decision?

At a minimum, you need to clearly state what financial input is required from  them and what they will get in return – i.e. a share, debt instrument, license,  exclusive right etc. Next, highlight the expected net profit and cash flow over  2-3 years. Also, give a clear indication of return on investment (ROI) AND a  realistic, well defined exit strategy.

In an executive summary, it is important to be succinct and focused. It is  not the time to tell your life story, overpromise with unrealistic projections  or overwhelm with too much detail. You will only get one chance to make a good  first impression and capture the attention of the reader. In fact, many  sophisticated investors have told me they rarely read a business plan or  proposal in its entirety. They make their decision on the strength of the  executive summary and their assessment of the owner/manager (in terms of  character, knowledge, skills and tenacity).

Focus on “what’s in it for them”. Show them clearly how they can benefit and  when the result will be crystallized. Give them enough detail to understand the  industry, opportunity and unique solution you provide. And most importantly,  clearly summarize the key financial metrics of profitability, cash flow and  ROI.

In short, make it EASY for them to invest in YOU.

Article Source: http://EzineArticles.com/6107414

Can you apply Warren Buffet’s best advice to your small business?

Discipline and attention to details is more important than ever if you want to succeed in challenging economic times. Take a look around… competitors are closing their doors – which means more potential customers for the businesses that DO survive. And in times like these, it’s going to take more than “thinking outside the box” and goodwill with existing customers to secure the survival of your business.

You may have been lucky over the past few years – you may have found it possible to operate without a detailed, written plan and systems/processes. But the global economic crisis has changed all of that. If you want to thrive, there is only one thing that is for sure – uncertain times call for deliberate decisions and proven practices. So here are my top tactics to recession-proof your business.

1. Begin with the end in mind

If you don’t know exactly where you are going, how will you know when you get there? Now is the second best time to decide on your strategy, set your goals and document tactics and timelines. Keep it simple – write a 2-3 page summary of what you intend to accomplish in 3 months, 6 months and 12 months.

2. Focus on cash flow not profit

You cannot buy a house or a new car with “profit” from your business. Make it your mission this year to develop and maintain a weekly/monthly cash flow forecast for your business. This is not hard to do but it does require discipline and a simple excel spreadsheet. If you need help, I recommend that you consider signing up for Imagineering Profit. With just a few numbers from your Balance Sheet and Profit and Loss statement, Imagineering Profit can calculate your cashflow for you and give you the insight that you need to get your company operating in the black!

3. Collect your debt NOW!

How many days does it take to collect your debts on average? Whatever it is, make it your goals to reduce this by at least 10 days. You may be surprised to know that if your annual revenue is around $500,000, you could save yourself up to $2,500 in interest carrying charges simply by collecting your debts 10 days quicker on average. Pay attention to customers who are taking longer than usual to pay. Now is not the time to be extending too much credit if you are concerned about their ability to pay.

4. Rank your customers

Do you know who your best and worse customers are? Have you ever tried to calculate how much profit you are making from each customer or group of customers? If you don’t know the answers to these questions, today is the best time to start tracking and measuring this.

5. Fire your worst customers

Everyone knows that is cheaper and easier to garner incremental business from existing customers. Some even argue that it is 6 times cheaper and 75% easier to convert a sale from someone who already knows and trusts you. If you have unprofitable customers, get rid of them and focus your attention on your best customers.

6. Trim your product range

Contrary to popular belief, it is better to have money in your back pocket than tied up in stock sitting on your shelves for months on end. The longer it sits and does not turn over, the more it actually costs you in lost opportunities. Spend 2 hours today calculating which of your SKUs or stock lines are your worst performers; make it a priority to sell those quickly to release some much needed cash. Consider reducing your overall investment in stock. Compile a spreadsheet of all the SKUs you carry and then run two separate columns – one for how many units you sell on average of each per month and the other being the total units on hand. If your stock gets delivered quickly, you should never be carrying more than one month’s worth of sales at any given time.

7. Monitor your breakeven and key numbers

The most important day of the month is the day that you break even and start making a profit. If you don’t know which day of the month that is, you need to find out today. Knowing this number allows you to monitor your performance and take measures to correct issues right now. Waiting until the end of the year for your accountant to produce financial statements is not a good idea – if you are behind, you need to know now so that you can correct the situation.

Click on video above to see and hear Rhondalynn in action.

You may be surprised to hear that 95% of your prospects don’t really understand you message.  You have to understand that your potential customer is simply in pain (in some aspect of his life) and he is looking for the solution.  So he has come to you… and what do you do?

Let’s take a look at your last ad, press release, email or even the home page of your website.  If you are being honest, I would bet that more than 60% of the prime real estate here is focused on YOU – your brand, your product/service, what you are doing and why you are doing it.  And if you are using visuals they are probably of your products, your machinery, your location or even YOU.

And if you are like most business owners, the last 40% of your time and space is spent trying to cram as many words as you can into this bottom section to let your prospects know just how much you can do.  In my experience, most of you are spending way too much time trying to impress your audience with fancy words and descriptions.

Here’s the bad news – you’ve already lost your potential customer.  In fact, you put him to sleep about 2 minutes ago.

Your brain accounts for 2-3% of your body’s mass but uses 25% of your body’s energy. This is a very important fact to know if you are trying to influence or persuade others.  Your brain is the 2^nd most energy consumptive organ in your body – if you don’t give it what it needs, it will control your thinking.  For those of you who are hungry right now, you know exactly what I am talking about.

From a survival perspective, the brain doesn’t like to use more energy than it has to.  If you can make it easier for your customer’s brain to grasp your message, process it quickly and decide, you are more likely to get a YES.

Just for fun, I would like to introduce you to one of your customers… well, at least the decision making brain of one of your customers.

The part of your customer’s brain that decides is the same brain that you and I share with this crocodile.  This part of the brain is solely focused on what?  Survival, that’s right.  Does Mr. Crocodile care about your brand, your products, your photo or your features and benefits?  No.  Does it care about win/win? No.  It is solely focused on itself and physical survival. This part of your customer’s brain gets triggered within 30 seconds and is permanently tuned into the WIFM (what’s in it for me) radio station – constantly scanning to protect itself from pain or death.

So what does this mean for you?  To the extent you understand the pain of your customer and are here to help him solve it, he will listen to you or read what you have to say.

Let’s come back to your marketing message for a moment.  How can you use this insight for your next ad, press release, email or your website?

First, you are going to stop wasting your most valuable real estate talking about your products, your background, your brand, your philosophy or who you have been certified by.  Your clients do not care.  If this box represents 100% of the time and space that you have to get your message across right now, you need to spend 80% of it:

–          Showing your customer you understand his pain

–          Recreating his pain

–          And offering THE solution with proof you can deliver

This means that you should never waste it with a lame opening statement like “Introducing our new spring line”, “welcome to our newsletter” or “here are our latest clearance items”.  While important to you, they mean nothing to the part of your customer’s brain that decides.  They are like a bedtime story for your customer.

If you are using photos or video, and I highly suggest you do for reasons that we will cover in a session together very soon, you want to select visuals that support what?  That’s right – recreating or demonstrating you understand your customers pain.  This is not the time or place (if you are an electrician for example) to show a picture of you and your van.  That photo is about you and not your customer’s pain.  Remember your customer is tuned into WIFM radio station.

Also, if you are going to feature your brand or logo, it does not belong up here in this important 80% area.

That leaves only 20% for your call to action and contact details, which is plenty of space if you have captured your prospects attention up top in the 80% zone.

Do you remember when I made the bold claim that 95% of your prospects don’t really understand your message?   As you can see, the reason for that is really very simple – your customer has come to you in pain (in some aspect of his life) and his crocodile brain is solely fixated on finding THE solution.  This part of his brain, which is responsible for decision making does not have the time or patience to sit around reading or listening to information that is all about you.  If you don’t capture his attention in the first 30 seconds with something that is relevant to his pain, you’ve lost him.  He can’t possibly understand your message no matter how clever or funny it is because he’s not even paying attention – his reptilian brain has already moved on to look for the solution that will keep him alive or cure the pain .

I want you to assume for a moment that you are dying of thirst. Would you be willing to sit for an hour while I substantiate my credentials, talk to you about why I started my company and educate you on the value and qualities of my pure spring water?   Or would you simply get up, walk across the street and find the water that you need to survive?

What if you were dirty and itchy?  Would you be any more willing to listen to me focus on my brand or my product for an hour?  How long would it take before you just got up and found something to wash yourself with?

And what if your house were on fire?  Would you kick back and read 3 pages of stuff on my website about how great my water is or would you rather find someone right now who can help you put out the flames?

The bottom line is this – the quickest way to connect with your customer and get the attention of the decision making part of his brain is to let him know immediately that you understand his pain and can cure it.  If you do this well upfront, he will listen to whatever it is that you have to say.

This insight will help you go from boring your prospects to convincing them and that’s good for your business.

What’s the best way to grow your business?

When clients ask how to close more sales and  free up cash in their business, I like to tell the  story of Byron the guns and collectibles dealer. He lives for his business  because it gives him the chance to make a living out of doing what he enjoys  most: collecting.

He was struggling 12 months ago because he was out of cash and unable to buy  new stock. This was a real problem because the strength of his business lay in  constantly having new items to show off. New stock encouraged his customers to  come back often; no new stock meant they would tend to check out his competitors  first.

When I first walked into Byron’s shop, one of the most obvious items was a  beautiful old gun, proudly (and securely) displayed in a glass cabinet. I  couldn’t help but ask how much it was worth. He explained that it he had bought  it for $5,000 dollars, but was looking to sell it for $7,000. Following a hunch  that I had hit on his problem straight away, I asked Byron when he had bought  the gun. He didn’t remember exactly, he said, but thought it was about five  years ago.

I asked Byron how many other, similarly high value items he had in his store.  We went for a walk and in the course of showing me around, he pointed out at  least a dozen items which he had bought for over $5,000 over the last few years.  In each case, he was quick to tell me how much he was intending to sell the item  for, and the margin was always 30 to 40%. But the fact was he hadn’t sold these  items so they were costing him money and, most importantly, causing him to miss  the opportunity of buying new stock.

Byron had spent nearly $100,000 on expensive items over the years. The items  were attractive and valuable, but they weren’t particularly rare, so they  weren’t appreciating in value significantly. In effect, Byron had put $100,000  on the shelf of his office and left it there for all that time. In other words,  while he wasn’t borrowing money from the bank, in effect he was borrowing it  from himself. He had missed the opportunity to invest the money somewhere where  it would give him a solid return, such as in a term deposit or in blue-chip  shares. And he missed the opportunity of using that money to buy smaller, less  expensive items that he knew would sell quickly.  He needed to do something (and fast) if he wanted to close more sales.

Compounding all of this was the fact that the global financial crisis had  caused demand to drop markedly which meant his customers just weren’t coming in  or spending as much as they used to.

By making a few simple adjustments, responding to trends in the industry and  addressing a need that his customers, Byron was able to turn his business around, close more sales  and double his bottom line.

The first thing he did was to free up some cash by actively selling some of  his more expensive and slow moving items. He used online auction sites and his  own network to find buyers, while keeping his marketing costs low. In some cases  he had to sell the items for a little less than he had intended, but the benefit (when he was able to close more sales) was cash in his pocket.

The next thing he did was set up some systems to keep better track of  inventory. He started by recording everything and noting the age of all the  items (i.e. the length of time he had held it in stock). We agreed that in  future, any item that had not sold after 8 months would be reviewed. Byron would  investigate the item’s market value and decide whether or not it was increasing  in value sufficiently to be worth keeping. If not, he would act to move the item  on.

After a few months, Byron was making much smarter purchasing decisions. He  was still enjoying ‘collecting’ for his store, but his focus was different. His  focus was less on attractive, expensive but not-so-rare items, and more on  smaller items he knew he could sell quite quickly. To his pleasant surprise, he  increased cash flow by $100,000 in 3 months and found that by using this  strategy, he was able to do more shopping rather than less, because he had more  cash available to spend.

Lastly, but perhaps most significantly, Byron introduced 2 new complementary  strategies which literally transformed his business. To counteract the soft  demand for firearms and the relatively fixed, low margins, Byron convinced his  customers to purchase 18 months worth of ammunition upfront and he provided  storage (if required) onsite. This allowed him to renegotiate terms and pricing  with his suppliers, plus generate more cash flow in the short term. Since the  margins on bullets was much higher than on the guns themselves, his overall  profitability improved. In addition, Byron incorporated training and  certification into his standard offering and opened up his target range to  paying customers 3 nights a week. This allowed him to create new, highly  lucrative income streams and increase the frequency with which his customers  came into his business.

While Byron’s story on how to close more sales might seem unique and industry specific, there are many ways to take the overarching philosophy of what he did and utilize it to improve  your operating cash position.

How can you identify and start selling silver bullets in your business?  Begin by first examining the big picture…

Identify the items in your inventory that are essentially dead stock – i.e.  haven’t sold in over 8 months. Determine what the total value of the stock is  and devise a plan to convert it quickly into cash using a minimal amount of  advertising.

Focus on the gross profit margin of all of your products and services. Are  some of these more profitable than others? To improve your overall performance,  concentrate on the former, and improve or eliminate the latter. What items or  services could you add which would allow you to service a need, improve your  relationship with your customers and grow your bottom line?

Negotiate better terms and/or prices with your supplier in order to increase  the amount of gross profit you make on each sale. Consider which items you could  sell in bulk upfront to your customers and use this new volume to improve your  buying leverage or cut out the middle man.

Marketing should not be treated as a fixed and sacred cow in your business.  Do not spend another dime on marketing until you ensure that you are maximizing  the amount you retain on each sale to cover fixed costs. Also, only spend money  chasing customers and sales if you can measure the financial return that you  will get. Unless you are a multinational brand, money spent solely on branding  is wasted.

Make it easy for your customers to find you and see what you have to offer on  the internet. The database of potential shoppers that you have earned the right  to speak to, is in fact your greatest asset. What can you do today to add value, enhance their experience and close more sales?

Finally, examine the fixed expenses in your business. Identify whether or not  there is a cheaper, faster or superior alternative that doesn’t compromise  quality or customer service. Is there a way to shift how and what you do so that  fixed expenses can vary (i.e on a pay per use basis) with the level of  production and/or sales? And remember, no one has ever grown their business by  [exclusively] focusing on cost cutting – so use this tactic as your final step  in a comprehensive plan to get your business firing and hitting targets.  Your primary goal is to close more sales and increase the amount of gross profit (or contribution margin) that you make from each sale.