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Wealthy & Wise: Business Plans for Success!

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June 2, 2023
Author: NCH

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About the Video: Wealthy & Wise: Business Plans for Success!

Developing a business plan is crucial for businesses as it serves as a roadmap for success. A well-crafted business plan provides a clear and comprehensive outline of the company’s objectives, strategies, and financial projections. It allows business owners to assess the feasibility of their ideas, identify potential challenges, and develop appropriate solutions. A business plan also helps attract investors, secure funding, and establish credibility with stakeholders. Moreover, it serves as a valuable reference document that guides decision-making, tracks progress, and facilitates adjustments as the business evolves. By creating a solid business plan, organizations can effectively navigate uncertainties, set realistic goals, and increase their chances of long-term viability and growth.

Prefer to read? A full transcript is provided below.

Adam:

So, welcome to another edition of Wealthy and Wise. I’m your host, Adam Kintigh, executive corporate analyst, here at NCH. And we started talking about forming a business and what are the pieces that we need to have. And one of the most important things a person can do is put a business plan together. So, I brought in the master of business plans. I think, James, you’ve probably done thousands of business plans for just about every type of business imaginable. So, take a second, just share with our audience kind of your background and your experience with business class.

James:

Sure. So, I’ve been doing business plan design now a little over 20 years. Actually when we start, you know, in our industry, we work with a lot of different types of business and business owners. And what we came to find throughout my career is that just a lot of business owners don’t really know what direction they’re going, how they’re going to get there. They know what they want and they kind of see the end game, but they don’t really understand everything in between that’s going to kind of guide them down that right path. And, you know, are they making the right decisions both from a structural standpoint, financial standpoint? And this is where, you know, growing through my career, I started to realize that the most intricate step of being successful in business is taking the time to really look at all of the real minimal details. You know, every decision that you make kind of has this ripple effect in the business. We just want to make sure that we’re helping our clients down the right path. And what the business plan allows us to do is it allows us to take the entire business, lay it out on paper. You know, this is where we get the red pen out. We’re just scratching things and adding things and constantly making adjustments. And so, what we have in front of us kind of makes sense. And then we can, at the next point, restructure it to go, okay, what’s, you know, step one and what step two? And it just gives the business owner and it gives us as advisors the ability to know that we’re all on the right track. We’re on the same page, that we’re going to be bringing the right people in, and that the teams are correct. There are just so many elements that are involved in the business planning process. A lot of people, they think of a business plan, they go, well it’s for a bank. But they don’t realize, you know, yeah, it can help with funding, but another part of it is really helping them understand their own business model. You know, what kind of people do they need? At what level do they need them? What is their cost involved in bringing that on? So, that when they do go to a bank, that they’re going to the bank prepared. Right? A bank’s pretty smart. They know these industries very well. They’re going to start asking a bunch of questions. And the first time that you give them an um, ahh,  I don’t know, you know, it really makes it look like you’re not prepared. And I think the business planning process allows us to help our clients overcome that.

Adam:

So, I know over the years that you kind of start with the framework and saying, all right, what type of business is it? What is the industry? What is their market? How much business or how much money does this business need to generate? And then from there, your team really can go in and say, okay, we’re going to do three years of projections, proformas, balance sheets, marketing plan, marketing, budget, and really a full analysis to figure out. If we’re going to open a restaurant, we’ve got to know. We walk in the door and that sign up there, how much does that cost? Not only to put it up, but to have it made. And you go in and there’s all these tables and chairs. Well, they all cost money and to put silverware, forks, knives and spoons, three meals per breakfast, dinner or noon. So, all of those things are things that get detailed out in that business plan, whether you’re an operating business like a restaurant or a real estate investor, these are some tools that can be helpful for you. So, as a business owner, you talked about bringing the right team in and attracting the right team and being able to communicate what those things are. And one of the things that always amazes me is the weakness. So, as you go through your SWOT analysis, you share with us how that SWOT analysis really helps you as a business owner when you’re starting the business.

James:

Yeah, absolutely. So, you know, when you look at a SWOT analysis, you’re looking at, you know, what are the strengths, the weaknesses, the opportunities, the threats. What it does, at least for the clients that I work with, it really forces you to kind of look in the mirror and kind of take ownership of what is it you’re good at? What is it you’re not good at, right? What are the weaknesses that are kind of coming, especially if it’s a new business for example. We don’t have a lot of support. So, one that recently happened is if someone who has a really great business idea but really doesn’t understand the marketing and what marketing is about or the best way to approach marketing it. And you know, this is someone who is going to do their own website, going to do their own marketing, and then just after a conversation, they go, you know, I’m not the person for that job. But it took us kind of having this look in the mirror to go, look, what are you saying? What are you really, really good at? What are you not good at? And now let’s kind of figure out how do we plug those weak areas? How do we take advantage of the opportunities and not run from threats, where like people say, you know, a lot of people end up not starting their business because they run into this obstacle that they don’t think they can get over. But if they just took a moment and went into it and understood the obstacle and said, I may not be able to or I’m not the marketing professor, but what I’m really good at, managing teams. I’m really good at raising capital like everybody kind of has what they’re good at, what they’re not good at. And the SWOT just allows us to lay it out. And it’s part of the defining factor of what that team would ultimately look like, right? And then if I go a little deeper, we could say that, okay, well, a lot of times new business owners go, well, I’m brand new. I can’t afford to hire a team right now. But what I think a lot of them don’t realize, there’s so many resources out there where you can bring on freelancers, people that are way better than you at the job for pennies on the dollar. So, it also allows you to become more strategic to go, if you are not this person, how can you bring that person into your business successfully and financially feasible for what you’re looking to do? And then that drives back into the funding. And how much capital do we have to raise? One of the things that I always try to tell new business owners, you don’t want to think of starting the business in the way of funding or cash. Right? Cash is very, very expensive. Most people don’t even really need a lot of cash to start a business. Most of it now in our world today is trade lines, credit lines, where they’re much easier to obtain. They’re reusable. So even people that don’t have a lot of money set aside, that are brand new to this, can put that to their advantage. Just knowing, hey, it doesn’t take a lot to start building up your business. We’re just here to let you know this is what you got to target, and then you can start putting those pieces in place.

Adam:

That’s awesome. So, years ago, I remember my wife and I, we had our child number five, I had my little Michael, and I had this great idea that we were going to make the powder. Because we figured out that if you put cornstarch on a baby’s behind, it really helps out rashes. And I was so excited and I hired our business plan team. Started with, okay, let me get this business plan put together. This is a miracle of God. This is an organic solution to diaper rashes, I was so excited. And then I did the business plan and I figured out, not as easy as I thought.

James:

No.

Adam:

Not as much… It would have been a ridiculously expensive venture. And I think, thank goodness I did the business plan before anything else because that was my number one step. First, got the business plan done. When I got done with that business plan, I realized this is not the business that I thought it was and I shifted gears really quick. So, I appreciate that about our business plan team is being able to come in and get those numbers put together, because the goal that you have and the reality sometimes are completely not going to work. So, I love that idea of getting it started in the beginning. Now, in your experience, so if investors, for example, if they are looking for hard money lenders, private money lenders or even bank funding and financing, how is that business plan going to help those people that do need that bank loan?

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James:

So, I think when we get into the real estate, real estate’s kind of a unique animal all together because, one, there’s a lot of different places that you can go to get funding. Not all of them require a business plan, And I get that said a lot. Like I’m just saying that I went here and they didn’t really need a plan, but then they proceed to tell me all the questions that were being asked and that they ended up not getting the loan because the lender didn’t feel they were ready for it. And so what I always try to tell investors, especially if you’re a new investor and you’re just trying to break into that world. You’re going up against very seasoned professionals, right? If you’ve been in this 15 or 20 years, you’ve got resources, people that trust you because you’ve got this kind of portfolio that people can look at and see what your success rate is. If you’re brand new, you don’t have anything, right? So, you have to kind of, you know, create this perception of who you are as an investor, what your knowledge base is. So, I always find that the plan, when we’re dealing with the investors, is more for the investor. Because now they can look at it, they see their three years broken out. As you know, we do a lot of market research. They know what these homes cost, what the average is. So, all these numbers and when they’re going to talk to a lender, the lender says, you know, what market are you going to be in? How much do you think you’re going to need to buy the house? You know, I always tell them they’re not asking because they want to know. They already know the answer. They’re trying to see, do you know? And so, I find that what the plan really does well, it’s really a good self-educator to be able to sit down, look at all the ideas you put. And what we do typically is take, most of the ideas we get are not cohesive. So, one should keep that in mind. Most investors say, I want to do this and I want to do this and I want to do this. And some of them are completely different, right. So, for example, somebody wants to do rentals versus flipping. They’re just completely different worlds. And so, we have to kind of listen and then figure out, OK how can we take all of this and make it into something that we, as the advisory team understand, to help them understand to get educated. So, I think that they need to look at the plan to go, am I ready? Can I go sit down with my uncle or with a banker, with a lender and really come across as somebody who’s been doing this ten years, even though I’ve never flipped or held a rental in my life?

Adam:

Well, and you’re your team that you have. You have different people that specialize in different parts of those business plans.

James:

Right.

Adam:

So, what do you think is the average time it would take a person to do a good, solid business plan? How many hours are involved with that?

James:

So, overall, I would say there’s about 200 hours involved in it. Our clients probably invest about 2 hours, maybe an hour to 2 hours. That’s new phone calls through email communications, just us having to kind of go through everything so that they’re on pace with us, right? Because they’re going to give us information. We’ve got the information. They’ve got to review the information. So, a lot of back and forth, but most of the work is done by our team. I would say that our average client made a lot more behind the scenes, takes about five people to create a really cohesive business plan. When you look at the writers and the researchers and consultants and people that are kind of on the front end talking to the client. What we’ve learned to do, because if you’re brand new to a business talking to five different people, it doesn’t work. So, what’s nice is we have an advisory team that the client gets to work with where they can, they work with the team. So they can, you know, provide the right information to the team. They’re not dragging it out where somebody who’s never done that before, you know, there’s a lot of time gets wasted in that. So, what we do, I think officially is just kind of streamline the process to say, look, you’ve got one point of contact. It’s that person until it’s finished and then everybody else that’s got to do the writing, they’re going to come to that advisor just like the client will until we kind of have this plan that makes sense. So, that’s kind of, you know, our roles as well as to make sure we’re leading them down and that our teams are providing those services adequately.

Adam:

Well, that’s great. Well, Jim, I really appreciate you being here. For those of you that are starting your business or you have a business, getting that business plan put together to be able to collapse that time, work through and with the NCH business plan team. And as Jim said, we take about 200 hours worth of work, put that into just a couple hours out of your time to help you put together a good, solid plan for your business for now and the future. So, thank you so much, Jim. Appreciate having you.  Have a fantastic rest of your night. And everyone, have a great rest your evening. Thanks so much!

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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