How Financial Modeling Plays a Vital Role in the Creation of the Information Memorandum

You can almost think of an Information Memorandum as a business plan. Although it is a marketing document used specifically in mergers & acquisitions, it is quite comparable and will have many of the same sections. Much like in the business plan, one of the sections people will be most interest in is the financial projections, which will be created through the use of financial modeling.

Understanding Financial Modeling vs. Financial Projections

First thing in understanding the role of Financial Modeling when it comes to the information memorandum is to ensure you understand what it is. People often confuse financial modeling with financial projections. However, financial modeling is the process by which you arrive at your financial projections. Projections, once established, do not change.

Financial modeling on the other hand is a dynamic, interactive tool. Financial models are typically set up in a spreadsheet, template format most commonly in Microsoft Excel. They are meant to allow you to explore various scenarios and potential inputs to see the impact it will have on final outputs.

How Financial Modeling Impacts the Information Memorandum

In the information memorandum, the financial projections play a large role in drumming up interest. However, they must be reasonable as potential buyers and investors will quickly spot those that are not. So, how do you make sure they are realistic? It all starts with financial modeling.

First, you will want to present and take into account your historical financial performance. Next, you should plug in justifiable assumptions on future performance based on market research. Market research informs many aspects of business plans and information memorandums and the financial projections are no exception.

Your Market Research will impact financial modeling in two key ways. It will give you an indication of whether sales are likely to go up or down and be your guidepost to determine how much of a change in either direction to expect. Now, you may very likely have an idea of a number you want to put forward. You should not just alter numbers to fit your narrative but, there is some flexibility when it comes to the assumptions that will go into the financial modeling.

What your market research is really going to do is give you a realistic range of numbers you could apply. You may choose to play with these numbers to see how different – yet reasonable and justifiable – assumptions about opportunities and changes will impact the final number. You will then arrive at a final number you can support but, are comfortable presenting as your final financial projections.

Bringing it All Together

Like Financial Projections in any business document, the projections in the information memorandum are created through financial modeling. However, you can’t simply make up numbers to apply to the model to get the number you want or think looks good. Financial modeling allows you to break down “real” numbers – in this case your actual prior performance – and combine that with reasonable assumptions based on market research and industry knowledge. Together, these allow you to put forward a number you can defend and is attractive to potential buyers or investors.

How to Decide if You Should Hire Professional Business Plan Writers for Your Bank Business Plan

Creating a bank business plan can be intimidating. That is why many people choose to hire Professional Business Plan Writers. It is not the right decision for everyone though. There are a number of questions you should ask yourself to help determine if hiring a professional writer for you bank business plan is the right decision to you.

Am I familiar with bankers and lenders?

Banks and loan officers have very exacting standards and high requirements. Not just for the information contained within your bank business plan but to how it’s presented. When considering whether or not to hire professional business plan writers the first thing is to ask yourself if you are clear on what bankers – or possibly the SBA depending on the type of bank loan you are applying for – expect. Not just what is required, but how they expect a business plan to look and sound.

If you’ve spent time in the banking industry, or already have an established relationship with the bank and have attended several meetings, the answer to this question might be yes. If this is the case, you may be able to craft a Bank Business Plan that speaks their language. If not, you should consider professional business plan writers.

Are you able to be objective?

Often, when working on building a business, you become emotionally attached to it. Are you the type of person who can look at creating your bank business plan from the perspective of a banker? Not just do you understand how they think but, can you consider what information is most important to them and what details are actually pertinent from their perspective? One thing professional business plan writers are particularly good at is seeing a business plan through the lens of the audience. This is a skill that is imperative and you should make sure you have and, if not, find someone outside.

Have I written a business plan before?

It is possible you’ve been to business school. Or maybe you’ve written a business plan before or at least been part of the process to create one. This experience is highly valuable and may put you in a position to tackle this very important task on your own. If you’re confident in your abilities, have the skills you need, and have familiarity with bankers (as discussed above), then tackling the business plan on your own could be the right choice for you.

Do you have the time?

You cannot sit down and write a formal bank business plan in one sitting. Or, at least, you shouldn’t. It takes time to do Market Research to perfectly support your strongest points. It takes time to format and reformat and likely reformat again until its just right. If you don’t have several days – at a minimum – to devote to the art and practice of putting the bank business plan together it is definitely better to go with professional business plan writers.

What’s my budget?

Most experienced, proven, and professional business plan writers will usually charge around $1,000 or more for a standard bank business plan. That can feel like a big sum, especially if you’re just starting out. However, if your budget is too low, it may be a waste entirely to hire an inexperienced business plan writer. What they may produce may not meet your expectations (or the loan officers) and you will likely scramble to put it together yourself or amend it on your own to make it suitable. If you are able to budget $1,000 or more, professional business plan writers are likely the path for you.

Going through this series of questioning will help you identify your own strengths and weaknesses as it comes to preparing your bank business plan. While it is hard to tell whether or not you may be able to craft a winning plan before it is actually reviewed by bankers, hiring professional Business Plan Writers can allow you to apply with additional confidence.

Translating Financial Projections from the Business Plan to the Pitch Deck

 

If you’ve ever written or reviewed a business plan you know the document is quite lengthy. You’ve got a lot of ground to cover when thoroughly detailing all the ins and outs and key aspects of a business. One of the meatier sections is the financial projections of the business plan. The trickier part comes when you try to translate all these – often expansive - areas to a single slide each in a Pitch Deck.

One of the sections people struggle with the most is how to convert the financial projections in the business plan to apply to the pitch deck. The financials are arguably one of the areas that investors will be most interested in. Yet you are still expected to cover the main highlights in one slide, two at most.

There are many ways to consolidate the key components of the Financial Projections Business Plan into a single slide of the pitch deck. Here is one suggestion.

Take your Profit &Loss Statement. First, only show the following lines/rows:

• Volume (in quantity)

• Revenue (may want to also express % growth from period-to-period underneath figure)

• Cost of Sales

• Gross Profit (in $)

• Gross Profit (as a %)

• Operating Expenses

• EBITDA (in $)

• EBITDA (in %)

Another key concern for investors will be cash flow, so you should also show the expected cash at the end of the period below EBIDTA.

If you are planning on growing rapidly, you may also want to include a quick snapshot of headcount and average revenue/employee on an annual basis as well.

You will also need to determine what time frames you are going to show. If your business is brand new or yet to launch, you may want to consider breaking the projections into 9 columns:

• Month 1

• Month 2

• Month 3

• Quarter 2 (Q2)

• Quarter 3 (Q3)

• Quarter 4 (Q4)

• Year 1 (in total)

• Year 2

• Year 3

Although heavily consolidated, this is still a great deal of information crammed into one slide. If the pitch deck is being sent to an investor, this will be highly readable. However, if you are going to present this information in a presentation, be cognizant of the size of the screen you are working with.

Make sure you display the information as large as possible and consider breaking it up if necessary. It will also help if you make sure that your audience has printed copies. That way, in case they can’t make out all the details on the screen, they’ll still be able to refer to their printed version of the pitch deck.

Also, don’t forget the purpose of the pitch deck. It is supposed to show very top line information and is only an introduction to your business. If you are able to entice them, they will thoroughly review all of the detailed Financial Projections in the business plan.

When you review your pitch deck before sending or presenting, make sure to consider it from the side of the investor. Are you giving them enough information to gather your overall concept and see the potential?

Knowing that one of the areas they are most interested in is the financial projections for the Business Plan, it is tempting to give them too much information. So always keep in the back of your mind that the purpose is to get them to want to read the full plan. If you give them too much information, they may feel that is unnecessary or you could lose interest altogether, so keep it brief and topline only.

6 Ways Your Market Research Will Apply to Your Business Plan

 

Those unfamiliar with Market Research may not realize its full potential and importance, especially in the business plan. At the most basic level, it tells you about the overall size of the industry in which you hope to operate. However, market research goes much deeper than that and informs the business plan in many ways and sections.

1. Company Description

Part of the company description is discussing the demand your product or service is meeting. It should also touch on your target customers. Both of these aspects of this section of the Business Plan are identified – or at least supported – through market research. In fact, many other aspects may not be as directly tied to it but, will still be impacted by what your market research reveals.

2. Products & Services

When discussing your products and services, one of the things you should cover is how it compares – and has advantages over – similar products and services of competitors. Market research is when you will identify these competitors and competing products. It is only by finding ways to differentiate from your competitors you are likely to be successful.

3. Market Analysis

Although this may be the most obvious section of the business plan where Market Research applies, it is no less important. The market analysis goes into an overview of the industry as well as diving deeper into your target market. Informed by both qualitative and quantitative market research, this section creates part of the backbone of your overall business plan.

4. Marketing Strategy

The most successful marketing plans meet their clients where they are and speaks to what matters most to them. Guess how you determine this? If you guessed market research, you’re right! It is only through understanding your market, as discussed in market analysis above, that you can truly plan a successful marketing strategy.

5. Financials

Everything from the price you charge for your product to the full market potential will play a role in your Financial Projections. This includes sales projections as well as full financial statements. Even the cost of rent and other goods and services that price varies based on location will be determined by market research.

6. Executive Summary

The executive summary will be the first section of your business plan but, its mentioned here last for a reason. The executive summary should be written last. It is a brief overview and introduction to your entire plan. Since it includes info on the overall plan, it will be underscored by market research throughout.

These are far from the only sections of the business plan that market research informs, they are just some of the most obvious. In reality, market research underpins your entire business plan, or at least it should. In many cases, you may be performing market research without even realizing it. However, intentional market research is needed to answer all the most pressing and pertinent questions of the business. It should also be approached intentionally to make sure it is thorough and accurate.

It is important to note that market research comes in both qualitative and quantitative forms. On the one side, quantitative deals with numbers while qualitative deals with more descriptive factors. Both are important and serve their place. If you have any hesitation or concern over how to conduct market research, it may be in your best interest to hire a professional researcher. Given the nature of what it will impact in the Business Plan – as seen above – it will be well worth it to ensure it is done right.

3 Reasons Not to Skimp on the Market Research for your Information Memorandum

Anyone who has ever created a business plan understands the role that Market Research plays in its creation. The business plan isn’t the only place where market research matters. It is a vital part to many business documents, including an information memorandum.

An information memorandum, sometimes referred to as a Confidential Information Memorandum (CIM) is a document used in mergers and acquisitions when preparing a business for sale. It is a lengthy, thorough document, similar to a business plan, that outlines all the pertinent information about a business so potential buyers can make a decision whether or not to purchase or invest. Thorough market research can play a very helpful an important role in the creation of this document.

1. It Informs Multiple Sections

If you have owned or been in a business for any length of time, you may think you have a full handle on the industry and market in which it operates. However, things are changing all the time and markets and trends are evolving at a more rapid rate than ever before. It is especially easy to miss cues from the outside world when you are busy working in your business. Therefore, market research often becomes even more important the closer to the busines you are.

The reason it is so important in the Information Memorandum? It doesn’t just inform the industry and market overview but, can have implications and tie-ins to several other aspects of the plan, most notably financial projections. While the financials are based on actual performance of the company to-date, market research will help solidify the assumptions about the future which become the financial projections. This isn’t the only area that will be impacted by this information either.

2. It Reinforces Strengths & Opportunities

One of the more important reasons for conducting current market research to include in the information memorandum is that it can reveal or reinforce strengths and opportunities of the business. It is often through the process of market research that new opportunities become apparent. When trying to sell a business, this can make a huge difference in how attractive the business is to others. Market research not only helps quantify and qualify the current position of the business in the larger market or industry but, also what might be on the horizon or ways a potential buyer may capitalize on opportunities identified.

3. It Can Maximizes Selling Price

At the end of the day, one of the main purposes of the information memorandum is to maximize the selling price of the business. As explained above, market research may do that in a number of ways. Although this is not the only reason market research matters for the information memorandum, it may ultimately be the most important one. It also makes buyers more comfortable because it shows you have done your due diligence and that the information you are providing is accurate and sound.

When it comes to any type of business transaction, Market Research always has a role to play. Specifically, it informs a lot of the external factors under which businesses must operate. Although most commonly thought of in terms of a business plan, it is actually crucial for all types of business documents, including the confidential information memorandum.

What’s More Important - the Pitch Deck or the Business Plan?

 

When appealing to an investor, your two most useful tools are the Pitch Deck and the business plan. Each serve their own unique purpose and have a very valuable role in presenting and “selling” your business. However, there is some debate over which is more useful or important. Is one truly more powerful than the other?

The Pitch Deck: First Impressions Matter

First Impressions Matter

It has long been repeated that first impressions are lasting impressions. In many instances, the pitch deck is the very first introduction to your business that a potential investor will have. With the sheer number of pitch decks and proposals that come across an investor’s desk, this first impression is absolutely vital. You get one chance, sometimes only a few pages, to make an impression and convey your business concept.

Getting Your Foot in the Door

Another argument towards the prominence of the pitch deck is that it gets your foot in the door. An investor will never look at your business plan without first being compelled by the pitch deck. Without a strong pitch deck, your business plan could be completely irrelevant. In other words, without your pitch deck to open the door, your Business Plan doesn’t really matter, therefor the pitch deck is more important.

The Business Plan: Closing the Deal

The Main Attraction

Those that argue that the business plan is more important point to the fact that no one goes to the movies just for the previews. Sure, the previews get you excited but, you buy a ticket to see the main attraction. In this metaphor, buying a ticket to the movie is the equivalent of an investor taking a full meeting. Investors invest based on the full business plan, not the pitch deck, and without an investment it’s all for naught.

Closing the Deal

The entire purpose of a pitch deck and a business plan is to “close a deal” by securing an investment. The business plan does that, not the Pitch Deck. In sales, it’s one thing to have a lead, it’s another thing entirely to actually make the sale. In this perspective, it points to the business plan as the actual substance of the sales process that allows you to finish what you set out to do. Without it, it’s impossible to advance your business by securing funding.

Combined, They Make a Strong Business Case

So, which one is more important? That’s ultimately up to you to decide. Whether or not one is more important than the other, the one certainty is that they both matter. In the end, you won’t be able to secure an investor if both aren’t strong. Investors see dozens if not hundreds of pitch decks and business plans every day. They expect a certain level of quality, a certain level of professionalism.

If you are planning on pursuing an investment for your business make sure both documents are in order and of the highest quality. You may even want to consider hiring a Professional Business Plan Writer, specifically with experience preparing documents for investors. This can help ensure your pitch deck makes a strong first impression and the business plan drives your concept home.

Professional Business Plan Writers Share Their Best Bank Business Plan Advice

 

Writing a bank business plan is different than an investor or other type of business plans. The priorities and backgrounds of bankers and loan officers differ significantly from other types of people you may approach with a business plan. Professional Business Plan Writers are familiar with the expectations and requirements of bankers and know how to tailor a plan to their exact needs. They share their best advice below.

Keep it Formal – There is a trend in business plan writing to create less formal, more modern business documents that capture attentions. Professional busines plan writers know to keep their bank business plans formal and “old school”. You are being reviewed by bankers, not investors or potential partners. They don’t have to be excited by your wording, they need you to get to the point of your business idea and convince them it is viable.

Keep it Simple – While you want to keep the Bank Business Plan formal, that doesn’t mean it needs to be complicated. Professional business plan writers advise getting to the point and using straight-forward language. Adding extra descriptors, or unnecessary details can actually weaken your plan. It makes it unnecessarily complicated and can actually create confusion.

Don’t Oversell It – You’re not talking to investors who are hoping for a huge return. Professional business plan writers know how to talk to their audience. When it comes to bankers, they will be weary if it feels like your plan is overselling your business potential. They want to see a reasonable bank business plan with stable cashflow that will result in you being able to repay your loan.

Reiterate Your Personal Financials – Unlike other business plans, when applying for a bank Business Plan, you will have to submit information about your personal credit and financials. This is because, in most cases, you will be personally on the hook for the loan even if the business fails or you can’t make the payment. Although you will provide this information separately from your plan, your bank business plan is still a great place to tie it back in to your plan, especially if it is a selling point. Professional business plan writers may, for instance, point to your ability to manage your own finances well as evidence you will be responsible with business finances.

Tie it All Together – You have to make sure your bank business plan makes sense throughout. One section must support and help justify others. After you have prepared your plan, it is wise to have professional business plan writers or another outside, objective party review it to ensure it makes complete sense and there are no contradictions or loose ends.

If you need to write a bank business plan and are unable to consider professional Business Plan Writers, you can at least learn from their advice. If you do decide to make the investment – which can pay off quite significantly in the long run – start your search with Joorney Business Plans. They offer affordable, reasonable rates and top-quality business plans that have led to many successful loan applications.

 

Why Investors are Obsessed with Financial Modeling and Financial Projections in the Busines Plan

 

When it comes to Financial Modeling and financial projections in business plans, investors seem sharply focused. If you’ve ever pitched to an investor or heard stories from those that have, the common takeaway might be that investors are obsessed with the numbers. It certainly may feel that way but, this shouldn’t be perceived as an annoyance or a bad sign.

It’s actually a good sign…

First and foremost, if a potential investor or other potential funder or lender is focused on asking questions about the financial projections in a business plan, it means they’re likely sold on the overall business concept. That’s a huge step in the right direction! Those considering a business plan will not focus in on the numbers until they know they matter. If the don’t think the business idea has traction, simply put, reviewing the financial modeling or financial projections is a waste of their time. So, if they’re focusing on the numbers, you’re making progress.

Digging deeper…

If they’ve moved from asking questions about the Financial Projections Business Plan and have started asking questions more based on your financial modeling, that’s an even better sign. The deeper the questioning, the more interested they likely are in investing. They have moved from believing in your business concept, to ensuring a good return is likely, to wanting to confirm the numbers are accurate.

If when they first view the financial projections in the business plan, they don’t appear to provide a return they’d find favorable, they might stop there. So, if they are asking about the assumptions behind them that would have been built into your financial modeling, it’s their version of peeling back additional layers on an onion.

It does boil down to numbers…

You’ve likely become quite attached to your business concept and to the entire business plan. After all, running an existing business or going through the tedious process of planning to launch one often becomes a labor of love. It can almost feel discouraging when questions begin to revolve solely around the Financial Projections of the business plan, or the financial modeling used to arrive there.

However, you have to remember an investor’s purpose. Their role is to spend money to make money. It will take them far less time to believe an idea in general has merit than to believe it is the right kind of business for them to invest in. They look at business ideas all the time and if they’re still investing, it’s because they are probably pretty good at discerning the good ideas from the bad.

What can take some time to figure out is how much potential upside is in an investment for them. Is it enough? How risky is it? The way they determine this all comes down to the numbers. Hence the focus on the financial projections of the business plan and then deeper into the Financial Modeling that led you to your numbers. They will even likely conduct financial modeling on the spot or after the meeting themselves for further clarification and analysis.

So, if you are presenting to an investor and all they care about is the numbers, rest assured that you are on the right track!