THOSE FINANCIALS AGAIN 293
Those financials again
Remember how you looked out of the window and compared yourself with other compa-
nies in your industry (see Chapter 5). Recall how you valued capital projects and assessed
your rate of return (see Chapter 11). This is exactly how others – bosses, bankers and
backers – will crawl over the financials in your business plan. You know how you did the
analysis so it should not be too hard to visualise how others will do it to you. They will:
review your break even position to ensure you have comfortable safety margins;
look at the state of your profit and loss account and compare costs and revenues;
analyse your balance sheet, checking for liquidity and valuable assets;
examine your cash flow to ensure that it is healthy;
compare you against other companies in similar industries.
None of this should hold any terrors for you – you have already worked through these
details. However, as promised earlier, now is a good time to run through the measure-
ments that are taken during your health check.
Why plans fail after passing the first glance
If business plans are rejected after passing the first glance, it is usually because they
do not answer the questions in Figures 12.1 and 12.3. The most common omission
is failing to reassure the reader that marketing and sales will bring home the
silver. The second most frequent problem is lack of operational detail – how it will
happen. Both of these boil down to a weakness in (explaining) the strategy. Beyond
these factual details, the major hurdle for new ventures is conveying your vision –
as shown by the quotations scattered throughout this chapter.
If you go to a doctor for a medical check-up, you will be measured
exhaustively. A nurse will check your age, height, weight, blood pressure,
pulse, take a blood sample and so on. Interesting stuff, but so what if your
red blood count is 4 million/ml? This is meaningless unless explained and compared
against some measure. You do not want to be in good shape for a 60-year-old if you
are only 32. This is exactly how it is with many of your financials.