Page 141 - Business Plans that Work A Guide for Small Business

132 • Business Plans that Work

Available capital risk. • Lazybones plans to borrow money to support its rapid
Assumes that they can get growth.
debt at a reasonable rate.
The fact that the business We assume we can borrow this money from a
has operated for 15 years
and has existing bank rela- combination of friends and family, Continental-Girbau, and
tionships makes this more
likely. Most new businesses other lenders for an interest rate of 9 percent or less with
won’t have much success payback in five years. If this assumption proves wrong, we
with banks due to a lack of
collateral and would rely on may need to seek out equity investors, pay a higher interest
equity investments. rate, or, worst case, slow Lazybones’s growth to a rate that
can be supported via the cash flow from our existing
Contingency planning
to replace debt with equity company stores.
ameliorates interest rate
risk; and slowing growth is • We assume that the state of the U.S. economy will not
not fatal to the venture.
adversely affect Lazybones.
Macroeconomic risk Specifically we believe that we will still be able to sign up
customers at roughly the same rate we have sustained over
Here, the team uses the last 15 years. While the current recession promises to
history to suggest things
will be okay, but they might be larger than any economic slowdown experienced over
also put in a contingency this period, our experience has shown that the company’s
if the recession hits their
business harder than growth is not correlated to the state of the economy.
expected.

Critical Risk Summary
As you review the Lazybones critical risk section, note that Dan raises
the risk and then discusses how the company is managing the risk. What
other risks do you think Dan has overlooked? Do you believe he has ade-
quately countered those risks? What other contingencies might improve
his chances of success if some of these risks come into play? The key is to
anticipate what might happen and prepare to manage those risks if they
do arise. Role playing with your mentors and friends can be a valuable
exercise in preparing this section.

Offering Plan: How Much Do You Need?

As we stated in Chapter 1, one of the main reasons to write a business plan
is to seek and secure financing. It is important for entrepreneurs to identify
not only how much capital they are seeking, but also how they will use
that funding to achieve milestones. A “sources and uses” table effectively
articulates your needs. The sources section details how much capital the
entrepreneur needs and the types of financing such as equity investment
and debt infusions. The uses section details how the money will be spent.
Typically, the entrepreneur should secure enough financing to last 12 to 18