Business Plan Evaluation


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Business Plan Evaluation

  1. 1. Business Plan Evaluation Guide
  2. 2. The following areas are of interest to lenders and investors: <ul><li>The purpose of the loan (expansion or startup business) </li></ul><ul><li>Sources and uses of the funds </li></ul><ul><li>Management of the business </li></ul><ul><li>Industry information </li></ul><ul><li>Financial analysis </li></ul><ul><li>Collateral (secured) </li></ul><ul><li>Personal debt/credit history of borrower </li></ul>
  3. 3. Technical Business Plans may be evaluated on the following: <ul><li>Viability </li></ul><ul><li>Management background </li></ul><ul><li>Market advantage </li></ul><ul><li>Technology </li></ul>
  4. 4. <ul><li>This evaluation guide scores business plan elements on a scale from 1 to 10, with 10 being the best possible rating. </li></ul><ul><li>Scores are subjective. The reader determines a value based on his or her perception of the quality and content of the business plan. </li></ul>
  5. 5. My organization and management plan depicts a level of skill and experience for a successful operation. <ul><li>Management has never owned nor operated their own business and employees are inexperienced ( 1 ) </li></ul><ul><ul><li>Mission Statement </li></ul></ul><ul><ul><li>Legal structure of the entity </li></ul></ul><ul><ul><li>Organizational chart </li></ul></ul><ul><ul><li>Job descriptions, duties and responsibilities </li></ul></ul><ul><ul><li>Compensation methods </li></ul></ul><ul><ul><li>Background and experiences </li></ul></ul><ul><ul><ul><li>operational experience </li></ul></ul></ul><ul><ul><ul><li>managerial experience </li></ul></ul></ul><ul><ul><li>Support services (external advisors and specialists) </li></ul></ul>
  6. 6. <ul><li>All managers and employees </li></ul><ul><li>have experience in this business (10) </li></ul>
  7. 7. My plan shows that the company has the ability to control the delivery and quality of the product or service. <ul><li>We depend solely on outside contractors ( 1 ) </li></ul><ul><ul><li>Suppliers are established </li></ul></ul><ul><ul><ul><li>source of needed materials </li></ul></ul></ul><ul><ul><ul><li>reliable delivery </li></ul></ul></ul><ul><ul><ul><li>best price/quality </li></ul></ul></ul><ul><ul><li>Understand the production process in detail </li></ul></ul><ul><ul><ul><li>production capacity </li></ul></ul></ul><ul><ul><ul><li>Packaging </li></ul></ul></ul><ul><li>Facility requirements are met </li></ul><ul><ul><ul><li>land </li></ul></ul></ul><ul><ul><ul><li>building </li></ul></ul></ul><ul><ul><ul><li>equipment </li></ul></ul></ul><ul><ul><ul><li>labor </li></ul></ul></ul>
  8. 8. <ul><li>We have the resources we need in-house that are needed for distribution (10) </li></ul>
  9. 9. My plan describes a potential market <ul><li>Customers exist only on paper (1) </li></ul><ul><ul><li>There is tangible evidence of market demand </li></ul></ul><ul><ul><ul><li>Surveys conducted </li></ul></ul></ul><ul><ul><ul><li>Market tests </li></ul></ul></ul><ul><ul><li>Demographic research </li></ul></ul><ul><ul><ul><li>Target market </li></ul></ul></ul><ul><ul><ul><ul><li>Size Education </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Location Gender </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Age Buying habits </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Income Lifestyle </li></ul></ul></ul></ul>
  10. 10. <ul><li>I know my market and have firm commitments from customers (10) </li></ul>
  11. 11. My plan clearly shows a competitive edge over my rival’s <ul><li>My product is no better than my competitor’s ( 1 ) </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Service and guarantees </li></ul></ul><ul><ul><li>Appearance </li></ul></ul><ul><ul><li>Ease of purchase (location, parking, online, credit) </li></ul></ul><ul><ul><li>Customers understand the benefit of product or service </li></ul></ul><ul><ul><li>Long-term benefits (not a fad) </li></ul></ul>
  12. 12. <ul><li>My product or service is unique and there is market demand (10) </li></ul>
  13. 13. My plan contains realistic financial projections <ul><li>Financial statements indicate an annual rate of return of 1% ( 1 ) </li></ul><ul><ul><li>Reasonable assumptions </li></ul></ul><ul><ul><li>Ratio analysis </li></ul></ul><ul><ul><li>Personal investment </li></ul></ul><ul><ul><ul><li>Personal financial statements included </li></ul></ul></ul><ul><ul><ul><li>Credit worthy </li></ul></ul></ul><ul><ul><li>Most likely, pessimistic and optimistic scenarios </li></ul></ul><ul><ul><ul><li>Seasonal fluctuations </li></ul></ul></ul>
  14. 14. <ul><li>My plan offers a high rate of return in a short period of time (10) </li></ul>
  15. 15. My plan lays out a clear, well-conceived, workable strategy for getting the business up and running <ul><li>No real strategy exists--except in my head ( 1 ) </li></ul><ul><ul><li>The business plan lays out a workable business strategy </li></ul></ul><ul><ul><li>The business plan is polished and professional </li></ul></ul><ul><ul><li>My oral presentation is polished and professional </li></ul></ul><ul><ul><li>Resumes are included for managers </li></ul></ul><ul><li>Business documentation </li></ul><ul><ul><li>Employer identification number </li></ul></ul><ul><ul><li>Fictitious name registered </li></ul></ul><ul><ul><li>Partnership agreement </li></ul></ul><ul><ul><li>Articles of incorporation </li></ul></ul><ul><ul><li>Contracts and leases </li></ul></ul><ul><ul><li>Permits and licenses </li></ul></ul>
  16. 16. <ul><li>My plan communicates my vision for the business and why it will succeed to potential lenders and investors in a clear, concise fashion (10) </li></ul>
  17. 17. Grading the Business Plan <ul><li>There are six questions each worth 10 points. </li></ul><ul><li>50 - 60 High potential for success </li></ul><ul><li>40 - 50 Needs work, but loan is probable </li></ul><ul><li>30 - 40 Review deficiencies, workable </li></ul><ul><li>Under 30 Keep your day job </li></ul>
  18. 18. Evaluate the plan web site <ul><li>Business Plan Evaluation Scale </li></ul><ul><li> </li></ul>