Scott Shepherd, president and CEO of Northstar Trade Finance Inc., in Vancouver, British Columbia, had manually prepared many business plans in his former life as chief financial officer of a high-tech company. But he still found value in the BizPlan Builder templates. "The program doesn't write the plan for you, but it disciplines you and helps you organize and distill your thoughts," says Shepherd, who used the software to raise $30 million to provide export financing to small and midsize Canadian companies.
Other packages -- among them Automate Your Business Plan (AYBP), from Out of Your Mind . . . and Into the Marketplace, of Tustin, Calif. -- have integrated word processors and spreadsheets that could pass for popular programs like Microsoft Word and Excel. Autumn and Kirk Zamzow, owners of Lookers! Inc., in Westminster, Calif., recently used AYBP to raise $200,000 to open a second restaurant. Autumn says the program's financial sections are particularly powerful: "Most small-business people don't have an M.B.A. and don't know how to calculate things like debt ratios or net-income projections. But the software walks you through that, and having those numbers really impresses lenders."
The Money Store's Nancy Russell, who approved the Lookers! loan, agrees. She says many manually produced plans contain only simple, unsubstantiated financial projections. "I tend to trust the numbers more," she says, "if it looks like the owners have put effort into the plan."
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Computer as Consultant
Not all business-plan software, however, produces credible financials. According to Mark S. Deion, a business-planning and -strategy consultant in Warwick, R.I., "Some software packages generate the same payroll numbers each month, even though the number of days in each month varies." He says that one way bankers look for sloppy plans is by checking month-by-month financials.
Also, most bankers and investors are suspicious of the hockey-stick growth curves that start-ups often predict for themselves. As Brett Silvers, chairman and president of First National Bank of New England, headquartered in Hartford, observes, "It's always a home run at the end of five years."
There's no question that business plans are used to "sell" a business and its management. But there are serious drawbacks to hawking a company's financial prospects too hard. If your loan is approved, many banks will make the plan part of the loan document. "If you don't make the ratios you promised, the bank can put you in technical default," says Deion, who prepares SBA loan packages. He notes that banks in the Northeast have used the default process to get out of entire markets in a downturn.
Unfortunately, evaluating the realism of your financial projections or revising the narrative is beyond the ken of the current crop of business-plan software. Although developers like Palo Alto like to refer to their product as "content-rich software," none of the packages offers anything close to artificial intelligence or expert-system technology.
Palo Alto's Business Plan Pro does "interview" the user before it sets up a template, to determine the type of business (service, retail, distribution, manufacturing, or a mix), the age of the business (start-up or an ongoing operation), and the form sales take (cash or credit). Depending on the user's answers, the software brings up different screens for inputting text or numbers.
Other packages rely on the user to customize the plan. Autumn Zamzow reports that she had to tailor AYBP's output for the restaurant business. She discarded the module on distribution and had to beef up some standardized financial sections to better address such industry-specific issues as food and liquor costs.
There are, however, at least two expert-system products available for handling certain aspects of the standard business plan. One company, Business Resource Software Inc., in Austin, Tex., markets Business Insight and Quick Insight, both designed to analyze marketing strategies. But BRS cofounder Kent Ochel is uncertain whether his company will bring similar expert technology to PlanWrite, its business-plan package. "I've been working on creating the required knowledge base for more than four years, and I still haven't captured all the information necessary," says Ochel. And he doubts that his competitors will bring out an expert-system business-plan product anytime soon, either.
Besides higher costs, a major problem with expert-system-based products is that although they're powerful, they're also more difficult to use. Business Insight, for example, asks users to answer 500 questions about their marketing strategy before it can begin an analysis. Randy Ziegenhorn, president of Ziegenhorn Seeds, a seed wholesaler in New Boston, Ill., says it took him an eight-hour day just to complete the Business Insight questionnaire. The time and financial investment paid for themselves, though. Says Ziegenhorn, "I credit the program with helping me come up with a strategy for differentiating my company in what is basically a commodity business."
Still, Ochel reports that BRS had to simplify Business Insight to entice more people to buy it; Quick Insight is the "dumbed-down" result.
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Planning to Succeed
Even when they do help a company get financing, most business-plan packages fall down in helping users turn plans into reality. Indeed, they seem to treat planning as a hoop entrepreneurs have to jump through to get money -- as though being successful at raising capital were the key to being successful in business. In fact, a good business plan can guide a company's ongoing operations, communicate objectives and milestones to managers and employees, and help track progress toward the company's goals. "You can write a plan that makes your business look fabulous and gets you money," says Holmes, of Stowe Canoe, "but you can still go broke." He ought to know. Shortly after building his new factory, Holmes lost his largest customer to bankruptcy. Now he's scrambling to keep his own creditors at bay while he tries to recover the lost revenue. "I realize now I was undercapitalized. I probably should have borrowed twice what I thought I needed," he says.
