Page 40 - Business Plans that Work A Guide for Small Business

Before You Start Planning, Ask the Right Questions • 31

III. Value Creation and Realization Issues
Higher Lower
Potential Potential Comments
Profit after tax 10–15% or more <5%; fragile With strong execution and operating
and durable systems, Lazybones is consistently
profitable.
Time to <2 years > 3 years Quicker if Lazybones gets university
Break-even endorsements.
Time to positive <2 years > 3 years Again, dependent on endorsement.
cash flow
ROI potential 40–70% +, durable <20%, fragile Predict ~35% Return on equity by
year five.
Value High strategic Low strategic If Lazybones growth plan succeeds, it
value value will be an attractive acquisition.
Capitalization Low-moderate; very high; Using franchising for growth greatly
requirements Fundable difficult to fund reduces the needs for outside
investment.
Exit mechanism IPO (initial undefined; illiquid The IPO market has struggled since
public offering), investment the dot-com meltdown and has
acquisition been hurt again by the 2008 reces-
sion. An acquisition is a stronger
possibility, especially if they grow
the number of locations, proving
that the model works in multiple
locations and develop a national
brand.
Overall Value Creation Potential Professionalizing a fragmented
market could create lots of value.
1. Timing Higher ______avg __X___ lower
2. Profit/free Higher __X__avg_______lower Lazybones has a strong platform
on which to pursue this avenue.
cash flow
3. Exit/liquidity Higher __X__avg_______lower

IV. Overall Potential
Go No Go Go, if . . . Comments
1. Margins and X Professionalizing this market is
Markets promising.
2. Competitive X Refined unit operations are replicable
Advantages in franchise model
3. Value creation X Several inquiries from potential
and realization franchisees

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