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If you were reviewing a Business Plan, what aspect will kill the deal?

We've all read Business Plans (or written them). What, in your opinion is a deal killer. One of my favorites is perusing the financials and seeing the Owners compensation plan in the short-term robbing the company of working capital. What's yours?

Answers

Timothy Ogden
Title: President/CFO
Company: Joseph Elon, LLC
(President/CFO, Joseph Elon, LLC) |

In general, if someone:
1) Used a BS version of some overly-elaborate program to construct the plan;
2) In an existing business included as their financial statements anything that represents Quickbook's standard rendition of said financial statements (or any other standard reports for that matter coming from QB in particular as a program of choice);
3) Fills the pages with all kinds of 'impressive' (to others) terminology that is basically unnecessary;
4) Refers to things such as 'webinars' and other generally-accepted gibberish word amalgamations;
5) Cannot quickly, effectively and efficiently map out where we're going from the get-go...

...then I'm generally done wasting my time reviewing that plan.

Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |

1) Team: regardless of how good or bad the plan is, the team will need to execute. Experience and breadth of skills are good. Bad would be "three guys from the same school / degree". Not having done it before is a red flag, but not necessarily a deal killer.
2) Market: it needs to be big enough and needy-of-change enough to merit outside participation. The "a better mousetrap" is a red flag here...there are already mousetraps. Note the market doesn't need to exist. I just spoke with someone about butterfly.com; they believe demand exists but there is *no market yet*. This is probably the most compelling green-light possible. Conversely, and this is a quote, "we know how to defeat Microsoft on the desktop." Wow...how fast can I run?
3) Differentiation: it could be skills on the team (know-how), IP or similar. There needs to be a reason that it won't turn into VHS or similar not-for-profit markets where the margins are sacrificed to competition (Beta, proprietary, made money. VHS didn't).
4) Team comp: Disagreeing with you on this (sort of), Wayne. Comp for the owners, etc., should be adequate to keep their own lights on and kids fed. That need should be built into the plan, as it is realistic. Agreeing, if the plan doesn't take that into account (explicitly or implicitly), then I need to ask them what *is* the plan for comp until cashflow positive?
5) Assumption of accuracy. Agreeing somewhat with Tim, if you tell me that 3 years out the answer will be "X", I'll take that bet with a decent spread for you. Founders need to know that they don't know as much as they think they know. If they are that deluded, they need to have parental guidance on the team, as you need to plan for uncertainty.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Kieth,

We are (sort of) in agreement. I didn't say "no comp", I say comp that robs the company of working capital. Big difference (and I've seen both in companies that are running, those who rob working capital will ultimately make less money over time, if they survive.

Ken Mason
Title: Controller
Company: Pascua Yaqui Tribe
LinkedIn Profile
(Controller, Pascua Yaqui Tribe) |

The #1 deal killer for me is lack of market analysis to support revenue assumptions. I have reviewed too many plans that fail to identify who the customers will be and the differentiating factors in the products or services that will attract those customers. A "build it and they will come" approach does not inspire confidence and leads me to recommend further inquiries (at best) or rejection of the proposal.

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