While visiting a friend, he asked a favor of me. He whipped out this humongous business plan consisting of two full 3-inch loose-leaf binders. Someone he knew had paid a whopping $250,000 to have this business plan prepared and my friend was interested in my opinion of it.
At first I considered telling him I had something else to do and couldn't spend the next ten hours reading a "Gone-With-The-Wind" business plan. Had I been an actual potential investor presented with this monster, I would have simply dumped it in the trash and told the entrepreneur, "Thank you for considering me as a potential investor, but it doesn't fit my current criteria."
Nevertheless, I relented and agreed to look it over. My thought was, "OK, give it to me and I'll look it over as soon as I can." No such luck. He sat down at the table next to me with a child-like grin of anticipation on his face. He wanted me to look it over and give my opinion now! I thought, how can he expect me to digest this while he is looking at me like a puppy waiting for me to toss him a ball?
So, I dug in. Little did I know that this would turn out to be one of the fastest appraisals I would ever make.
Just like an investor, I turned to the financials in the back. (Note--investors typically don't read a business plan from the front to the back. They start by looking at the financials in the back!)
On the first page of the financials section, I saw a summary showing two graphs represented by the following tables (the actual numbers and dates have been changed to protect the guilty):
Year 1 Projected Revenues
Month Revenue
----- -----------
1 $ 7,457
2 11,185
3 16,778
4 25,167
5 37,750
6 56,626
7 84,938
8 127,407
9 191,111
10 286,667
11 430,000
12 645,000
----- -----------
Total $ 1,920,086
Annual Projected RevenuesThis summary proudly boasted a projected growth rate of 25% annually.
Year Revenue
---- -----------
1 $ 1,920,086
2 2,400,000
3 3,000,000
4 3,750,000
5 4,688,000