Creating a Plan B?
While it’s not fun to think about what could go wrong, it helps to have a Plan B. As you consider the possibilities, here are some items to keep in mind:
- What can you cut? Look at your budget. While you don’t necessarily need to trim the fat right now, it’s a good idea to consider what you can do if you need to start pinching pennies later. Identify the first items that need to be cut from your budget, so you know what has to go when you run into trouble.
- How big is your emergency fund? Consider your emergency fund. Is it large enough to support you as you try to make your business venture work, or as you look for a new job? Can your emergency fund help you meet your deductible payments in the event of a medical catastrophe?
- What skills do you have? Complete a skills inventory. Look at your skills and knowledge, and think about how you can apply it to different career settings. In many cases, it makes sense to look at how your skills would translate to a different career field. Don’t assume that you have to keep doing the same thing over and over again.
- How divorced is your income? Don’t forget about your income diversity. Consider developing other sources of revenue so that you aren’t in complete trouble if one revenue stream is significantly reduced.
You need to know that you have options to fall back on if something goes wrong. It makes sense to think about what’s next, and whether you have the resources to meet it.
More on Troubles
Do You Have a Plan B?
While attending Rochas Foundation College, I listened as one of my instructors talked about the importance of reading on thursday morning.” He explained that preparing for an alternative future was vital if we wanted to maintain true life integrity.
My instructor Dr Ken Ketas was talking about picking up your pieces irrespective of failing the exams.He was indirectly talking of plan B. However, the concept also applies to creating a Plan B that you can call on in your financial life.
You Don’t Know What’s Next
Friends life can sometime be unpredictable. You don’t actually know what’s coming. Now pick up a newspaper or turn on the television and you will find what passes for news is usually bad news, real bad news like a monster bombing a gathering center. Don’t mind me, that’s my way of saying terrorist. They are one of the most popular bad news. People want to hear bad news. They want to hear that you were sacked or out of business. They want to hear that Billy Bates is down crashing and you know the most annoying thing? They are happy or showing false remorse.
My point is you need a plan B. So as an entrepreneur or a worker or even a babysitter, you need plan B because even babies could be weird at times. Mothers you know what am talking about, like arming yourself with fifteen diapers and twenty feeding bottles. That to tell you how important plan B is for even your business plan
You don’t know what’s coming. No matter how well you plan, or what promises have been made, things can change just like that. And you need to be ready for it. Every business plan ought to have plan B. What will you hang on if the business doesn’t go well? Do you have other businesses to rest on? Are you going to acquire extra skills in case the fire goes out? Are you going to cut expense to increase profit when competition is high? What is actually your plan B? Do you have an alternative plan? If you lose some of your income, or if an opportunity you were sure about fails to materialize, would you be in financial trouble? In order to avoid or reduce mockery or even going bankrupted, Do you know that you need disciple to set your PLAN B.
I will write next on creating a PLAN B……. Bye and don’t forget to like our Facebook page or follow me on twitter.
“We are all faced with a series of great opportunities
brilliantly disguised as impossible situations.”
~ Charles R. Swindoll
I wish I could just say that if you do X, Y & Z, you’ll magically raise millions of dollars for your venture. But unfortunately, that’s not how raising capital works.
One key reason for this is that most sources of money, like banks and institutional equity investors (defined as institutions like venture capital firms, private equity firms and corporations that invest), are essentially professional risk managers. That is, they successfully invest or lend money by managing the risk that the money will be repaid or not.
So, your job as the entrepreneur seeking capital is to reduce your investor or lender’s risk.
For example, let’s say that two entrepreneurs want to open a new restaurant.
Which is the riskier investment?
Entrepreneur A has put together a business plan for the new restaurant.
Entrepreneur B has also put together a business plan for the restaurant…and he has also put together the menu, secured a deal for leasing space, received a detailed contract with a design/build firm, signed an employment agreement with the head chef, etc.
Clearly investing in Entrepreneur B is less risky, because Entrepreneur B has already has already accomplished some of his “risk mitigating milestones.”
Establishing Your Risk Mitigating Milestones
A “risk mitigating milestone” is an event that when completed, makes your company more likely to succeed. For example, for a restaurant, some of the “risk mitigating milestones” would include:
Finding the location
Getting the permits and licenses
Building out the restaurant
Hiring and training the staff
Opening the restaurant
Reaching $20,000 in monthly sales
Reaching $50,000 in monthly sales
As you can see, each time the restaurant achieves a milestone, the risk to the investor or lender decreases significantly. There are fewer things that can go wrong. And by the time the business reaches its last milestone, it has virtually no risk of failure.
To give you another example, for a new software company the risk mitigating milestones might be:
Designing a prototype
Getting successful beta testing results
Getting the product to a point where it is market-ready
Getting customers to purchase the product
Securing distribution partnerships
Reaching monthly revenue milestones
The key point when it comes to raising money is this: you generally do NOT raise ALL the money you need for your venture upfront. You merely raise enough money to achieve your initial milestones. Then, you raise more money later to accomplish more milestones.
Yes, you are always raising money to get your company to the next level. Even Fortune 100 companies do this – they raise money by issuing more stock in order to launch new initiatives. It’s an ongoing process-not something you do just once.
Creating Your Milestone Chart & Funding Requirements
The key is to first create your detailed risk mitigating milestone chart. Not only is this helpful for funding, but it will serve as a great “To Do” list for you and make sure you continue to achieve goals each day, week and month that progress your business.
Shoot for listing approximately six big milestones to achieve in the next year, five milestones to achieve next year, and so on for up to 5 years (so include two milestones to achieve in year 5). And alongside the milestones, include the time (expected completion date) and the amount of funding you will need to attain them.
Example: Launch billboard marketing campaign over 6 months, spending $18,000
After you create your milestone chart, you need to prioritize. Determine the milestones that youabsolutely must accomplish with the initial funding. Ideally, these milestones will get you to point where you are generating revenues. This is because the ability to generate revenues significantly reduces the risk of your venture; as it proves to lenders and investors that customers want what you are offering.
By setting up your milestones, you will figure out what you can accomplish for less money. And the fact is, the less money you need to raise, the easier it generally is to raise it (mainly because the easiest to raise money sources offer lower dollar amounts).
The other good news is that if you raise less money now, you will give up less equity and incur less debt, which will eventually lead to more dollars in your pocket.
Finally, when you eventually raise more money later (in a future funding round), because you have already achieved numerous milestones, you will raise it easier and secure better terms (e.g., higher valuation, lower interest rate, etc.).
It might surprise you what you can accomplish with less money! So write up your list of risk mitigating milestones and determine which must be done now and which can wait for later, focusing first on what is most likely to generate revenues.