Business Plans 101: What Investors Really Want to See (And What Can Go Wrong)

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Speaker C: We welcome you into another episode of Screw Scrushy on Business. My name is Dave Green. Richard Scrushy is alongside and Richard, it was a busy week last week. Uh, a lot of travel for you. I know. And a uh, lot of family things going on for both of us. So how have things been going with you?

Speaker D: It's, things have been good. Been really good. Yep. A lot of travel. Uh, you know, children. I, when you have nine children you, you know, you got, you gotta, you have to spend time with, with them as often as you can and really you can't get around all night. I'm. It's really kind of a sad thing. You may go two years and actually not have a chance to spend time with one of your kids. And uh, but anyways we got, my wife and I got out on the road and uh, we made some visits and uh, spent some time with our children. Very precious time and you know, and uh, we really enjoyed that. So uh, you got to do that every time you get a. Get, get time and time is, you know that's really uh, the biggest problem we all have, isn't it Dave? Just finding time to do everything we really want to do in our lives. And I know in business, same thing.

Speaker C: Yeah, no, it's absolutely the case. And our topic this week is, is one of those things that if you don't spend time on it you could find yourself in trouble. Right from the get go. We get a lot of questions around business plans and what is a business plan? And you are someone who has not only obviously produced them, but you've seen many of them from other people that are trying, uh, to either start a, or grow a business. So today we're going to get into sort of, uh, some of the pitfalls that people run into. But, you know, the first thing is, you know, what is it, what is that business plan supposed to be? When you're someone, Richard, who has. We've talked many times about people who have presented to you when you first get someone's business plan. And what are you typically looking for?

Speaker D: Well, that's a heck of a good question. Uh, you know, just kind of. We'll dive into that. But I have to tell you this. Uh, I see business plans constantly that are not very good. I'm just going to be straight up with you. That's why one of the reasons we're doing the show, uh, and then, you know, where are you going to raise the money? Who are you going to be talking to? Um, there are people that just want to help you sometimes and they give you money when you just go sit and talk to them. Okay, I'll give you 50 grand, I'll give you 100 grand. I'll help you. Well, you're going to blow through that money if you don't have a plan, you know, okay, so what are you going to do when you spend that and how are you going to use it and what's the best way to use it and what kind of return are you going to be able to give that person? And so many times people, uh, trying to start up small businesses will just go to friends and family, take their money and not really have any kind of definitive plan. And so I think today that's what we want to talk about. You know, even if it's just a small business, and even if you're just raising 100,000 and our 50,000 or 250 or whatever to get a small business up and going, you still need to have a plan. And, you know, we talked on the show not long ago, and one of the questions that everybody needs to ask herself is, who are my customers? You know, we even said when one of our episodes we talked about, you know, who are your top 10 customers? Well, you know, might not have 10, but you may have five or you may have four for, but who are they and what kind of contribution are they each and individually going to make? And so when you're putting your plan together, these are things that we have to do. We have to know. And I know that uh, uh, if you're going to do something that's really sophisticated and we're going to go say to institutional market, that's a whole different level of a plan. I mean that's a, uh, you know, you're going to have to go microscopic on everything and you're going to have to explain a lot of things. And just in a quick note, some of the things we talked about, you know, you obviously got to introduce the industry you're in and the business you're in, and you've got to know the demographics for that business and that's going to have to be part of your plan and then your market size and your, and your opportunities. And you've got to describe the business to where it's easy to understand. And if you're going to be branding something, you got to explain the brand and how that's going to work. And uh, and, and you know, what makes your business different than somebody else's business? Is it a new product? Is it a new way to do something? And it, does it eliminate pain? Does it, does it add pleasure? Is it fun? Is it, does it take work away? And you know, I mean that's why this whole AI thing is going crazy, you know, because it just absolutely replaces our brain and does everything for us and makes life so much easier. Uh, uh, it just happens. I had someone call me recently and said I'm putting a business plan together. I taken went to AI and you know, AIs drafted it for me. So, you know, those we have to really look at and make sure that AI knows what it's talking about. Right, but your management team really details who's going to run this business and what is their expertise and how do we know that they can do that? You know, I had somebody tell me, uh, uh, it was invested in a business recently. I'm not going to invest in that business unless the leadership convinces me that they know how to do it, they have the people to do it and that they can do it. I mean, this is kind of simple stuff, right? And so we have to talk about that experience and all that's going to be part of your plan. And you know, people get some to hate Dave. You know, sometimes people get mad, you know, when you start saying, well, who, who do you have that knows how to do that? I mean it's a great concept, but have you ever done it? And what Makes us explain to me why I should put money behind you because you're. Now you're going to go out and do something you've never done before. Now, uh, and I'm saying all this stuff on our podcast today because I just want the listeners to really think through how they're going to tangle with all of these different questions. If they're going to people that are fairly sophisticated, they're going to ask some pretty tough questions. And when you're doing your financials and you're doing your assumptions and all of that, you know, I tell people sometimes it's got to be believable, don't you think?

Speaker C: Oh, absolutely. I think more people, you know, put pie in the sky numbers together. You know, projections are hard. We've talked about that before. It is. It is a skill to be able to put projections together and to be able to meet those projections. Right. You know, we've talked before. You're never going to get your projections 100% right. It is. It is 100% never happened in the history of the world. So you're going to be off a little bit. But it's, how far are you off? How far are you dreaming versus, you know, do you really have the facts and figures in front of you? And too many people just throw down numbers, and then once they're asked to sort of dig into those and explain them, they don't have the answers.

Speaker D: They don't. You know, you're exactly right. They. And that's something that can be done. You can put together your numbers in a way that you can explain to the investor. Okay, now this is the first thing we're going to do. And this is what it cost, and this is the kind of revenue we're talking about. And this is how many customers we have to have now once you get them. And so, you know, they buy into that. Okay, well. Okay, I got it. Okay. So that's the expense. This is how many customers. Okay, that's reasonable. And what is your pricing? And your pricing is this. And okay, so all that makes sense. Yeah, I can buy into that. So once they buy into that level, you, you can start talking about things like, well, let me give you the demographics. Demographics are this, uh, ages, you know, 18 to 44, whatever. You know, demographics. And, uh, you know, this college graduate or high school or whatever, you come up with your demographics, uh, making more than 50,000 a year or whatever. Okay? So you, whoever, whatever your target audience is, you've got demographics to support it. And then if it's you're looking for communities, it might just be that you're looking for community has a certain population. Maybe they have to have more than 25,000 people to put that particular business in that city, or more than 100,000 or whatever. So then this, this gets real easy now because then you throw up a map of the United States and it shows every community that meets that demographic. Now you buy. Now they're getting to you. They're getting it, they got. So we're starting to come together, say, okay, now if we can put. And just, we can hit 10% of those markets. They said 10%. That's a reasonable number. I mean, you know, and there's ah, 300 markets just like this right now. If we can hit 30 of those markets, this is the kind of revenue it would generate, you know, so you begin to build a plan that they can tie into. And they say, okay, well that makes sense. I got that. All right, and who's going to do that for you and how many people you got and this and that and the other. I'm gonna give you a trick question though. This is the one they always ask. And the very sophisticated investors, you know, you go to Wall street, you sit in front of institutional investors, smart venture capital guys, they're always going after you tell them all of this stuff. They're gonna say, well, what can go wrong? And they, and I tell you, the way you answer that question is gonna play a major role in whether or not they have interest. You can't say nothing can go wrong. Cause that's a lie, right? So they want you to identify your weak place, you know, where, where could this get off track, what could happen? And you have to be honest with them. And if you tell them something that's not true, they, uh, got you. So you want. And then they're going to say, well, this guy's just a flim climber. He's a con artist. He's coming here and laid all this on us. And he didn't want to tell us because they will find your weak point if you don't admit it. So, you know, you can always tell them the truth. You know, uh, it is possible, it is possible that I may struggle finding people that I can hire that can do this particular thing. Now this is the kind of person I'm looking for. And they're far and few between. But we believe that we can offer them an incentive package. And if we can, you know, we know they're out there, but we've got to work hard to get those people. And if we don't get them, we won't be able to achieve that plan right there. But if we do get, we'll be able to make that happen. So those are things. You find something, you got to give them something so they can say, yeah, that makes sense. That could go wrong. Is there anything else? Well, we've really looked at this really hard and we don't really see anything else that could possibly hurt us. Getting this funding is number one. And if we don't get enough funding, that's going to hurt us. Uh, but I believe the product is solid, we tested it, or the business is solid, and this is how it works. So. Yeah, but that's a trick question. What could go wrong? Have you been in a meeting where you've had to go through that and.

Speaker C: Oh, sure, yeah. I mean, I remember way back when, the first time I pitched a business, uh, one of my points, uh, was that we were going to have lower pricing than our competitors in some key areas of advertising for a media business. And of course, the question came before I could finish the sentence, what are the other people charging? And I had some information, but I didn't have enough. And so that was one. I was fortunate in the sense that I was able to go back and do some more research and it continued to kind of prove my point. But you just, you can't throw out blanket statements, right? You can't throw out, um, you know, I don't know, or, you know, well, you know, or answer a question with a question. You know, there are certain things can happen, like a global pandemic. I don't know that anyone planned, uh, for that one. And of course, you know, it's, it's. I once met, uh, a person who was in the, uh, the haircut business, and he had started a haircut business for men. And it was based around, you know, you would sit down, there were sports pictures on the wall, uh, a little bit like Sport Clips, the national franchise, except this was a little bit more upscale. And I saw him one time and I said, how's business? And he said, it's great. He said, the one thing about the haircut business is it's recession proof. Which was fantastic. I saw him about two years later and I said, how's business? And he said, remember when I told you it was recession proof? I said, yeah. He said, it's not depression proof. And I said, okay, well, explain more to that. And what he said was, in their business during the time when the economy was way down People went from getting their hair cut every four weeks to every six to eight weeks. So your revenue could almost be cut in half in that business just because something that's completely out of your control happens. And obviously, a global pandemic is one thing, but a downturn in economics is certainly something that everybody has to be aware of. Is your product, quote, unquote, recession proof?

Speaker D: That's. That's.

Speaker A: Yeah.

Speaker D: Uh, that is. That is. That was one I used. I've used that one, and I'm telling. Raising money. And the other one I would use is. Which was true. They'd say, what else could go on? I said, well, federal government could change the reimbursement, Medicare, because I was in the healthcare business. Right, That's. But then they would say, well, what are the chances of that? And I'd say, well, I mean, it could happen. I mean, um, I'm being straight up and honest with you. It could make it, and it would lower our margins if it happened. But the bottom line is right now, we don't see anything on the horizon where they're planning to do that. And so I would come with that. And I'd say, I don't. I don't. We don't see it. Uh, there's no legislation right now, and I don't know why they do it, because our products and services that we offer actually reduce health care costs and move the patient off the health care dollar. So I don't know why they would want to cut that. Hey, but I got to tell you a haircut story that you brought it up, this kind of thing. So I was. I was in a little town, okay. And I needed a haircut, and I was going to some meetings, and so I said, well, I'm gonna go in here and get a haircut. And there was a little place, I can't remember the name of it, but that went in. And there were two little old ladies. The sweetest. Could be. I mean, I'm talking about in their 70s and 80s.

Speaker C: Yeah.

Speaker D: Um, probably in the 80s. And they cut hair. And the charge for cutting hair was $15. And that was the deal. So I went in there and, um, to get my hair cut, and so she trimmed me up real nice. And she says it'd be $7. And I said, I thought it was $15. She said, sir, I didn't need to cut anything off the top off the side. So I'm only charging half price because I'm about bald up here, you know, I could not believe that. And I said, Ma', am ain't no way that I'm gonna give you $7 for what you did. And so I went ahead and gave her the full amount and gave her a tip. And, and I'm gonna tell you, I have been trying. That was the best haircut that I have ever had in my life. And I've been trying to get back in there. And the last time I went, I, uh, came through the town on a weekend and they close on Saturday. Two little ladies. So I checked, I talked to somebody and they said, well, they, they retired and they just cut hair for fun. And it's kind of a social place where people come and they talk. And of course, when I went, got mine cut, she asked me a hundred questions, right? Was, and where it was and how many kids you have and all that. But she said, no, I didn't cut any off the top, sir. So it's only $7. But that is a, that's, that was a really acute thing and, uh, it was a lot of fun. But anyways, getting back to what you, what you're talking about. Yeah. Uh, if you say nothing can go wrong, that you, you, you're not going to raise that money because there's always something can go wrong. I'm here to tell you. And they'll ask you sometimes exactly what are you going to do as a CEO, as the chairman or as the, the visionary and the founder? What will you do every day? What will your everyday life be like? So you got to be able to answer those questions and you better have your act together when you go in there. Um, and because they're going to expect you to do some things, you know, you see a lot of, a, uh, lot of startup companies, the CEO has to do pretty much everything and you has to work development, he has to work sales, he has to work operations, he has to work financial stuff, he has to be fundraiser, he has to do all this. So you've got to be able to do a lot of things. It's very hard to start up a small business and say, you know, I'm going to hire somebody that's going to do my fundraising, I'm going to hire somebody to do my financial work and we'll hire somebody to do operations. I'm going to hire somebody to say, well, you, you got to raise a lot of money to hire people that have the talent to do all of those things. So usually in a small business, the person founding the company, building the business usually does everything and then kind of brings people on as they generate Revenue and they begin to grow and begin to sell product. So really, you know, it's a function of what you're, what you're doing. Uh, and it's a lot different than what we talked about the other day, where you're out here doing an AI company and you raised $500 billion, right?

Speaker C: I mean, whole different conversation at that point as we look at a, uh, business plan. Richard, I think most people, people, when they think of a business plan, think of its use for external purposes, right? Raising money, showing other people your business. But the true key to a business plan, right, is it's supposed to be both an external and an internal document, and a living, breathing one at that. It isn't something you should just do one time, send out to people and then never take a look at again.

Speaker D: That's right. And as, and you, and you'll update it annually because you're going to hit some curves in the road, something's going to change. And it might be your reimbursement, it might be a competitor, it might be, um, you thought you were going to be able to go here and go there, and then you found out you couldn't get into that city for some reason or whatever. And so you have to, you know, you got curves in the road and you might not be able to hire a certain person. You might not have to have access to certain things. So you, exactly, you, you, you and you update it. And I'll tell you what, a lot of people try to come with a three year plan. I like a three year plan, but I like a five year plan better. Go ahead and plan for things, uh, and let's look at it, let's project it out there and what, what can we really achieve? You know, if, and, and this is another thing. I, I've looked at businesses and, and, and the margins were so small and the amount of work, Dave, that they had to put in to be able to build business, I actually advised them not to do it. I've said, look, you're going to work so hard to make just a little bit of money. And the other thing that I've run into, and uh, this just happened like two days ago. Okay. Someone was giving me a business plan and I said that business already exists in numerous different forms, different companies. I said, I don't see any way that you're going to be able to get into that business and do that. And you have, and you're competing with all these monster companies that are already doing that nationwide. How, how are you going to Go and offer something better than what they're already doing and see sometimes changing a pattern, a, uh, pattern of practice. And we see this in health care a lot because there will be a new something came up. Somebody tries to open a new imaging center, let's say. And here's a doctor group over here, and they've been sending all their imaging patients for the last 10 years over here to this one. So this new guy comes in and said he opens one over here. And so he's trying to get these guys to change the pattern of practice. Now. Let's go over there. Right. Well, they, they've got this relationship and they're very happy with it. So it's very hard to pull them out of that and to bring them into your new business. And so we actually see that in, in lots of different businesses, restaurants and different other businesses, you know, trying to get. If you go to a certain pizza place and we, you know, my sons had a pizza business and still have some involvement in. There were people every Wednesday night that brought their family into that pizza place and they ordered the same thing every Wednesday night. And to try and get them to change that practice and go to another pizza place is a difficult thing because that was kind of their thing. And you knew they were going to come in there. Right. And so, um, you, you, you, you know, those kind of things, uh, sometimes are hard. And if there's lots of competitors out there, you probably should look for another, another concept or another business. I mean, that makes sense, doesn't it?

Speaker C: Yeah, it absolutely does. And, you know, I like what you said about, you know, kind of revisiting that business plan on an annual basis. Right. I think, you know, I, I don't know about you, but I'm, I'm, um. I was one of those guys. I used to joke that when I was in high school, one of the best ways I could learn was to try and cheat on a test. And let me explain that I wouldn't actually cheat on the test, but the process of, uh, planning to cheat on the test is what helped me learn the materials, because I would write it down. And there is such a thing psychologically, I think about writing a plan down and not only writing it down once, but as you said, going back to it to say, okay, what did we accomplish? What didn't we accomplish? Why didn't we accomplish those things? Where did we overachieve? Where did we underachieve? And now, okay, it's time for next year's plan. Right. To, uh, write that plan down. So that you do have something specific that you can go back to and refer to to see how you did.

Speaker D: Yeah, you know, you just reminded me of something. I was interviewing a lawyer one time and, uh, to hire him and, and I, and I didn't. I mean, he was pretty good old guy. He was kind of a country lawyer kind of fellow. Kind of. I mean, I liked him. He had a good personality. He said, you know, I had a hard time in law school. I says that right? He said, yeah. He said I wasn't very bright and wasn't one of the smartest. But he said, I learned something. And I said, what's that? He said, when in doubt, look about. And he said, that's how I got through. I said, you, you were cheating. And the people on the test, he said, he said, hey, I'm just telling you the truth. That's how I got through. He was a he. I did not hire him, by the way, Dave. But I thought it was really funny. He said, and when in doubt, look about. It reminded me of that when you talk about cheating, but you can't cheat in business. You know, you can't. And let me tell you, you try to, try to, uh, tell a, uh, sophisticated investor you got a business plan that doesn't make any sense, and they start to rip it apart and rip it shreds. Um, yeah, you, you will not be getting your funding, so you better be. It better be solid. Now back to what you said. Annual updates, live in breathing plan that you got to work. Work your plan. You know, I mean, there's situations and I've seen companies where they had a plan, they got funded and. But yet the CEO is over here doing this and over here doing that and this and that and, you know, three or four different things. But he had a plan, said he was going to do this, and he got sideways and went in different directions. I've been on boards of companies, Dave, where I had to ask the CEO, uh, what are you doing?

Speaker E: What.

Speaker D: Why can't we just do this over here? I came on your board because we were doing this, and I like this, and this is a good business, but why are you over here doing that? That does not fit with this. Now I'm going to tell you, if it's a private company and they have intentions of becoming a public company, whatever that other thing is they're doing, it better be vertically or horizontally or somehow connected and make sense. Because if you get Wall street and you're in this business over here and it has nothing to do with your main business, that's gonna hurt you. It's gonna actually bring down the value. You know, look at really successful companies. Airlines for example, they're in the airline business. That's it. You know, they're down in the hotel business. But they are moving people around to different places. But they're not building hotels for them, they're not building restaurants for them to eat at. They're very focused on the airline business and that's why they trade at really good multiples. And the same thing we, uh, see with uh, um, even other companies that are large companies like you know, national healthcare, um, chains, uh, they're in the healthcare business and they didn't go over here and get in the manufacturing business is what I'm trying to say. Yeah, they're using a lot of medical supplies, but they're not out of here making them. They didn't go get in the pharmaceutical business and start producing pharmaceuticals and the pharmaceutical companies didn't go over here and start building healthcare facilities. They kept their focus in their pure place. So they traded higher multiples as public companies. And the, and the smart investor, he's going to look at that, he's going to look at you and say, well you got all this stuff in your plan, you know, so you got to be careful. And if you, if you do decide to add different things, they need to be connected. Like we talked in, in uh, our company I built, you know, we, we were doing the rehab and those patients got injured and they had to have surgery and they had to have diagnostic tests. So we did put all that together. That did make sense because we kept them in our referral network. So we captured those people into our network. So those are things that may did make sense. Um, so you got to be very careful. But you're right. You work your plan, stay focused and you know another reason you need to plan. Dave, you have employees, right?

Speaker C: Mhm.

Speaker D: Don't you want to give them something to say? This is what we're going to be doing. They need a roadmap. You know, hey boss, what do you want me to do today? I hated that somebody ever said that to me. I did not like that. And I would say you really don't know what you're supposed to do today. I have failed you because I have not given you instructions, I had not trained you in your job. I have not giving you a roadmap to where you, I mean if somebody actually says what do you want me to do today? You have really got a problem. They should Know every day when they hit the, as soon as they hit the door, punch the clock. This is what I'm supposed to go do that's so important. And that gets your productivity up because you don't want people standing around, sitting around trying to figure out what they're supposed to do. And if you're not there as a CEO, everybody's standing around the, you know, the water, uh, um, uh, and the coffee maker, you know, and you can't do that. So a good solid plan that you work and that your people are familiar with.

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Speaker D: You know, another thing, um, I do want to share this. Once I started building the companies, we use the people working for us to help us build that plan annually. You know, because they're down there, they see what's going on, they see opportunity, and they might come in and say, you know what? Here's a whole network of customers that we're not getting. And I've been able to penetrate that and I was able to go and get customers from that area. And that was one of the reasons that we were able to expand our customer base and pick up, you know, everything from high schools to colleges to sports teams to, you know, General Motors to Chrysler and, uh, all, you know, the UPS and picked up Delta airlines and all these national companies because we had people that were in the system that knew that we had products that they could use, and I didn't pick. I couldn't go meet with all these CEOs of all these companies. So I had a team of people, and they would say, I've got an. I mean, this is how good it was, Dave. I have to say, this people were so well trained, and they knew that what they could do. They would come into a meeting and they would say, richard, I, uh, made a call to Delta Airlines last week. I got an appointment with their HR person, their risk management person, and we're going to talk to them about handling all their back injuries. I didn't make that call. I had people that were skilled and trained and were given the authority and the, uh, ability to get on the phone and make those calls. And they were told to make. They would go out and build this company, grow this company, expand our customer base. And they went and they had meetings, and they'd come to the next meeting, they'd say, we got a contract. We're going to handle, uh, all 20,000, uh, the airline workers for Delta Airlines. Can you believe that? I mean, that was the kind of thing that we were able to do. Now, uh, Dave, that. That's a culture, too.

Speaker C: Sure.

Speaker D: You create that culture. So you build that into your plan. Now. Now the plan this year comes out and says, we would like to have all the airlines, right? And then you see what I'm saying. All the car manufacturers, all the delivery companies, because we got FedEx, we got UPS, we got the Post, we got the M. US Mail. So you begin to expand. So these are all now. So your new business plan now has expanded. We've added all these things. So now when I go to Wall street and I'm trying to, you know, get, you know, at health care conferences or global, uh, financial conferences where you go and you present your company so that big institutions can make decisions whether or not they want to own your stock. You can sit there and say, we've signed Chrysler, we've signed Delta. We've done this, we've done this. And this is. And they say, well, what has that done for you? Well, it's done this. And now our sales are up to here, and we've had X amount of dollars that came in from these, this company and this company and this company. So now they're sitting there saying, well, wow, this is a global company. These, these people are moving, they're shaking. They've got great product, they're able to sign. So you begin to build your company, but you've got a Culture within your company. And this is the other thing too. Uh, everything did not have to cross my desk. And if everything that goes on in the company has to cross my desk, the company's never going to be that big. It's going to be this big. Right?

Speaker C: Right.

Speaker D: What did we talk about when we first started the show?

Speaker C: Time.

Speaker D: A man, a woman can only, you only have so much time. You got to sleep, you got to eat and you got to be with your family some. And I'm here to tell you that if everything had across my desk, we would have never built a multibillion dollar company. I had to have people skilled under me and I had great team and I had great people. So you have. But how did, what made them great? First of all, they had the talent and they were hired, they were, uh, selectively hired. Number two, they were well educated, they had, they, they, you know, they had the ability, very high cues to learn the business and they had an energy level, they had a desire. We gave them equity in the company, it motivated them. Stock options, we paid them well. We gave them bonuses from be able to achieve things. You make these things happen, you're rewarded financially for making it happen. So you can't be greedy. As a CEO, you gotta, you gotta spread the wealth amongst your people and you gotta give them the, and then you have to, you know, give them the openness to go out and to make these calls and to put these deals together and to close things. And I was very, very careful with the development team. And this is another thing too. When you set up what you're going to do in your business, you're going to have to put some boundaries on every expansion. For example, if you say we're going to open, uh, an operation in San Antonio, you're going to have to say, okay, we're going to spend X amount of dollars and we got to have this return. And if we can't get at least 15, 20, 30% return, we're not going to open it. And so the demographics have to support that return. And you have to make sure. So you go through your checklist, okay, customers, demographics, is that going to work? Can we get the flow? And then once you figure out it will work and then you go do it and then you hold your operations, people that you put in there to run it. This is what we committed to, a 20% return. Okay. On EBITDA. Uh, that's what you've got to achieve. And that's your plan. You see what I'm saying?

Speaker C: Yes.

Speaker D: And that's the plan. And that's what they have to do. And that's what you hold them accountable for. And you tell them if you can't achieve that, you need to tell me, because we need to get somebody else over here that can, because this is why we spent X amount of dollars. And when you say 20% return, you're looking at, you know, what did it cost me to get in here? I want to return on this now when I'm able. When you're able to go and you tell your investors, we're going to be, we're not going to do anything without this much return. Whether it's 10, 15, 20, 30, whatever you return, whatever it is, they then can calculate that. And they can see as you grow, put the trajectory together so it now all begins to make sense to them. And now they can say, okay, I can see why I might want to own this stock or why I might want to invest in this company. But not only that. So just what you said, Dave, uh, because you hit it right on the head. That may be a plan that the investor looks at, but it's also the internal plan. And it's the same plan. You're not going to go out here and tell them you're going to do one thing and your internal plan be something different. Right.

Speaker C: Certainly shouldn't be, uh, important. Very important. And of course, the financial part of it is all very important as well. And I want to go there next. But speaking of financial. Before we do that, want to let everyone know that our episode is brought to you by DraftKings Sportsbook, an official sports betting partner of the NFL, which makes every playoff moment feel bigger. Well, they're not going to get much bigger than what we've got coming up next. And that's, of course, the AFC and NFC championship games. You've got the Patriots, a five and a half point favorite over Denver, who will be going with a backup quarterback in Seattle. Two and a half point favorite over the Rams. I am all over that New England number. Uh, that's going to be where I'm going, that five and a half against Denver. Even though they're, uh, on the road, but playing that backup quarterback in this big of a game, uh, that's the one I love. And of course, DraftKings has your back with early exit protection. If the player in your eligible NFL prop bet goes down at any point in the first half, you still get paid in cash. Try getting that somewhere else. Download the DraftKings sportsbook app and use code scrushy that's code Scrushy. S C R U S H y to turn five bucks into 300 in bonus bets if your bet wins. This is in partnership with DraftKings. The Crown is yours. Gambling problem. Call 1-800-Gambler. New York call 877-8-HOPE NY or text HOPE NY CT. Call 888-7897 7777 or visit ccpg.org on behalf of Boothill Casino in Kansas. Wager tax pass through may apply in Illinois, 21 plus in most states. Void in Ontario. Restrictions apply. Bet must win to receive bonus bets which expire in seven days. Minimum odds required. For additional terms and responsible gaming resources, see DKNG CO Audio limited Time offer. Of course, Richard, as we talk about a business plan, uh, while you have the, uh, external and the internal, we know that at the beginning when you are trying to raise money, the financial part of it is going to be one of the biggest parts that is scrutinized. The first thing is, and you've talked about this before, but remind people who are doing this for the first time, what would you recommend as far as how far people go out to try and project that revenue? How many years?

Speaker D: Well, you have to do a minimum three. And if you don't do three, you cut. You know, you're just making a mistake. But I always ask for five. And it's never, you're never going to. The fourth and fifth year. They're not. It's going to be different than what you put out there. But, you know, what is it? What could it look like in 4th and 5th year? Things are going to change. There's an. I've never seen a business where you didn't. Things didn't change. Something's going to change, okay? And, and usually it's going to change for the better. And that's what we hope for. And what I mean by that, there are things that, if your business is really good, Dave, and you got that first year going, and it's good, let me tell you, doors are going to open, things are going to happen, and you're going to have an opportunity to do more. And you're going to say, oh, my gosh, you're not going to believe this. We didn't know that we'd be able to get business from this company or. But we'd be able to get these, these people to do business with us. And the next thing you know, here's another. You see what I'm saying? And then this happens. And then they say to you, you know, we have a sister company and uh, I want you guys to meet with them or, or uh, have you talked to these people? And next thing you know, that business plan over that three year period has changed a lot to the positive and new opportunities. And then when it gets out there on the web and it gets out in the Internet and, and people start talking about it and you know, I used to say always, um, if you have a positive experience or a negative experience, within 24 hours, you're going to tell five people, right? I'm telling you don't tell five. In those five, they're going to tell at least one or two. So now it's 15 to 20. And then by the time it gets off a week, there may be 30, 40 people, maybe even 100 that know about this bad experience or this positive experience. Now that's marketing. So if you, if it's positive and it's constantly positive, I mean, perfect example. Okay, you, you know, somebody says, y' all be listening to this radio station because, you know, uh, uh, Dave, uh, Green's on there and he's a great guy and he, let me tell you, every week he does this and you tell. And then they go and they hear it and they, oh yeah, this is good. And they tell somebody and their family would tell their wife, tell somebody. Next thing you know, you got. It begins to expand. Same thing with restaurant business, same thing with product companies. Same thing with, you know, it just grows. And if you're doing a great thing and it's a great service, it's eliminating pain, it's providing pleasure, it's eliminating work and making life easier, then you're going to tell more people, more people are going to experience it and, and you know, it's going to be different than what, you know, you possibly may have thought it was going to be. And things are just going to grow and they're going to change. Then you're going to open up and they're going to be. Other things are going to happen and you may even see, you may even come up, come across a, uh, an acquisition opportunity that you can do that would just add so much value to, uh. You won't believe this, but I had a, uh, huge deer just come right to my door. Unbelievable.

Speaker C: He's enjoying the show.

Speaker D: I mean, he's standing right here and looking in my window. This happens, you know, because we live, uh, we work kind of out in the country here, so it's kind of really nice. But anyways, um, yeah, so things are going to Change. So you get out there fourth and fifth year, you may, you may buy another company. Let me tell you something else. Somebody might try to buy you, merge with a similar company and join forces. So, you know, you don't know what's going to happen. But, but I like planning for a longer term period of time. And that was your question. Sorry, took me a long time to answer that.

Speaker C: Oh, that's great. Yeah, you said it. Three years at minimum. And most people are going to want you to take a look at five, but they're not going to want you to project more than that because we know, as you just said, the further you go out, more likely the less it's going to mean in terms of people understanding that a lot of things are going to change in between that time. The one thing that I have seen a lot of people make a mistake on, and it's interesting because I've seen some pretty smart people actually run into this problem, and that's the problem of cash flow and understanding the difference between your business plan on paper and the cash actually coming in. And I wanted to ask you about this specifically because being in healthcare, you're dealing with insurance and sometimes I can imagine, uh, that's not the easiest thing when you're trying to deal with, uh, getting that money and getting things paid for.

Speaker D: That is, that's a huge problem. And especially in startup companies in the health care business trying to get contracts with insurance companies, number one. Um, and if you're doing something that 10 other people are doing, it's very, very hard to get them to give you a contract, especially a decent contract, one that allow you to make the money that you want to make. Now Medicare is different. You know, you can get Medicare, Medicare, uh, if you meet the minimum requirements for Medicare for whatever the service is, Medicare is going to pay you. Um, you know, you just need to follow all the rules and regulations and get the appropriate approvals. But you can get the Medicare and then Medicaid as well and get your Medicaid certification and whatnot, get your provider numbers and go out and do those things. But, uh, even Medicare might put you under review and they just may not pay you. And that review could take six or eight weeks, or it could take six or eight months. So it just depends on what business you're in and what you're doing. So you're exactly right. Uh, we used to carry even in our company, which was a multibillion dollar company, uh, when I was running HealthSouth, we, we ran a billion dollars in Receivables and um, you know a lot of that was Medicare, it was an insurance companies and whatnot. But I mean you know they paid us. And we, back in that day we had what we um, some of our businesses were cost based reimbursement and you had a, um, had to file cost reports and there were settlements at the end of the year and then they would, once you file that you settled all that out, you were able to then get, get paid. Uh, it's really, really something. And uh, you know what people don't understand is we, once you get to be a big company, the IRS literally had a department within our company. We had to provide space. We had an area of our company that was offices and they were all IRS agents. They were in our company, they lived in our company. They got up every morning, came to work and they, they came into our company and into our offices and sat there. We were under companies like that or have IRS agents in there around the clock. I mean they're there. And when you get that big because doing your there, you know what they have to go through, it takes. They're uh, there all the time. They never leave. And they have, you know, they had security card come into our offices and they went into their, and when their office and they had a secure area, they hit their card and then nobody else could get in the IRS area but we, we had to pay their for their space. We paid for their desk. They sit in our offices. It's amazing. And when you get really big people, I don't think many people know that IRS actually comes in and sets up home in your office. We're here, we're here. We're auditing you every day. And they did. And we had a complete tax department. It worked hand in hand with them and we just paid our taxes and they were there and we had to, we had an argument over something. You didn't have to go very far. You just walk down there and knock on their door and go in and sit down with them. They were there. Crazy.

Speaker C: Yeah.

Speaker D: Uh, but cash flow, let's just hit that real quick. Yeah, It's a problem you're going to have is you got a great plan and you don't have any money to execute, what do you do? So when you're raising money and you've got to tie your whatever the amount you're raising with amount you're spending to get to wherever you're trying to get and that has to be pulled together and that, you know that is the number one Problem in small businesses is running out of money. So many young entrepreneurs don't raise enough money up front. They're under capitalized, they don't have money. They have great plans and great dreams, and they won't do great things, but they're under capitalized. And you'll hear them say, if I just had another 100,000 or another 200,000, I could achieve these things. And, uh, but then what happens is they get into a dark place where they have to lay people off or they can't keep going. And, you know, and revenues start to go down and people are not happy. The, um, esprit de corps within the organization is negative now. Not good. So planning, you know, that's what we're talking about today. Putting your plan together, work your plan, make sure it's. You put it all together right before you go down that road of trying to build it, make sure you've got proper funding, you've got what you need to be able to build it or cut back on what it is you're trying to do. And this is, you know, trying to outscale the amount of money you got. You want to scale your company, but you don't have the funding to do it. You've got the opportunity to grow it, but you don't have the funding. You can't go do it. So that holds up. You don't get to do these things that you were going to do here because you don't have the money to fund it. You don't have the people, you don't have the resources, you don't have whatever it takes. So you got to balance that.

Speaker C: We got some questions, as I mentioned, uh, around this topic, which is why we addressed it, and I want to ask you some of the specific ones that came in. I have a feeling I know your answer on this one, but Will from Baton Rouge wrote in and said, richard, should I hire someone to write the business plan for me? What do you say?

Speaker D: No, I, um, mean, I mean, why and how. Who would know? I don't know anybody out there that. I mean, I've had people send me their business plan and ask me to give them my input. And I would then mark up things. Just don't put this in there. Explain this and do this and do that. Now that's a good thing. But you need to write your business plan. You, if you're the visionary, you're gonna have to put that on paper. And today you've got AI to back you up and help you. You can feed all Your information to AI. Uh, and it'll organize it for you. Um, and then. But you know what's really interesting, Dave? We see things, uh, and my wife is the best. She is the absolute best. She'll see something. She'll say, he didn't write that. That's AI. You know, it's too perfect.

Speaker C: Yes.

Speaker D: Well, no, they recognize AI. Uh, and, you know, I'm going to tell you, I truly believe that the venture capital market will eat your lunch if you come in with an AI business, um, plan. And they've got things in there that you didn't write and you're not committed to, or you don't understand or you can't do, or you don't. And they start asking you questions about this and this and this. But think about it. They're not stupid either, because before they meet with you, they're going to load in the information and see if you did get it from AI. Uh, yeah.

Speaker C: You really have to be careful with that. I mean, I think the. The obvious answer is, can you have people help you? Of course, yeah. If you're the person who is going to stand up there and make that presentation, ask for the money, run the company, do all the things as, uh, you said you have to write. It has to be your words, your vision on paper, and then. And then take it from there. But simply asking somebody else to write your business plan would virtually be impossible. Unless you're just going to dictate the whole thing to them and have them, you know, kind of put it on paper. But at that point, you might as well do it yourself.

Speaker D: I would do it myself. I always would do it myself. And, uh, let me tell you, if you can't. If you can't get it on paper yourself, you probably shouldn't do it.

Speaker C: Yeah. Chris from Indianapolis wrote an interesting question. How long should it take to write a business plan? And I picked this question because I wanted to ask you, when you were putting everything together for Health south all those years ago, do you recall, how long did it take you to put the plan together on paper? The initial one.

Speaker D: Well, and, you know, here's. That's a great question. And I had. I had input. I had four people who I surrounded myself with that I thought were very smart people and that had an insight into what it was that I was trying to do. And one of them, uh, did the numbers. He was an accountant. He was cpa. So he laid out all of the projections. Okay. And then, uh, others want another one. He was a clinician. So he was my science guy. He was my clinician. Of course I had a clinical background, but I think he's probably a lot smarter than I was. And another guy that was kind of a business guy, but he had a clinical background. And then I had a guy that was a kind of an administrative type, and he actually had an mha. And, you know, he was smart fella, and he had run major medical centers and whatnot. So I had this team of people. So as we met and we would then talk and, you know, this and that, and can we do this now? Now, I will tell you that the guy that had the MHA was always arguing with us, and he didn't agree that with anything. So we finally quit listening to him. Uh, he had some ideas. We took what we thought was a value, and the rest of it, we told it. We didn't even invite him to all the meetings because we got tired of listening to him.

Speaker C: And.

Speaker D: But the other guys, they continued to work as a team with us. So the financial guy, uh, he would. Then he would. We would tell him, put this in and put this in, and he would extrapolate all that out. He would come in and he'd say, okay, so this is. If you do this and you're able to do this many, you're going to generate this much revenue and this much profit. And we would say, well, we got to do more because that's not enough, so how many more do we have to do? And he'd say, well, every time you do one of this size, it's going to generate this much money. We said, well, okay, so that means we got to do five more of those and maybe two more of these. And we did what we call A, B and C entities. So we had one, uh, A was going to, you know, be this much and B was going to be this much, and C was really going to be the big ones, right? So we said, well, we'll be. So we'll build so many A, so many B, so many Cs now. So we put that plan together. Now, it did take us a month. It did. That was a question you asked me. And I'll tell you why. Because every time he would extrapolate and we'd look at the numbers and we didn't have the returns that were necessary to be able to raise the capital. It wasn't quite where we wanted it to be. Um, and then we would argue about that. And then another thing, too, is that when you build it, you know, what all are you going to do? In each one of those. So that was the other thing. Can we do this? And then, and then how much money does it take to build an A, how much money take to build a C, how much they build? And so all of that and how many people each one I'm going to have. So we had to figure all of that out and we had to price all that out. So it was not something you could do overnight, Dave. It took some time and it took some energy. But we had the time and energy because we were all working in other jobs and we were working at a place, um, we were working at Lifemark Corporation. We all worked together there out in Houston, Texas at the time. And that was a New York Stock Exchange company. And we knew that we were going to be pulling out of there and then building our own company. As a matter of fact, it was no secret. I went and talked to the CEO and the chairman of the board and told him and asked him, I said, we want to build this company. Do you want to invest in it and us work with you or uh, uh, are, uh, we going to pull out, we're going to go raise capital and we're going to make it happen. He actually gave me the references I needed to be able to raise the venture capital. So it was a friendly thing that we did. And um, so we spent a lot of time on it. And so I think it depends on what you're doing. Our situation was fairly complex and it did take time to build it. So but we, and then, and let me tell you, when we built, we, we achieved, uh, uh, you know, what we said we were going to do over that three year period, uh, everything we had there, we actually exceeded it because we took the company public two years from the day we started it. Uh, and we did not have that in the plan, but we were able to grow, uh, faster. So then, then, um, then what we had in that original plan. But it was good enough to raise venture capital.

Speaker C: Yeah. That's amazing. Uh, that is great. And you know, obviously our goal today was to hope, you know, provide a little clarity into what that business plan needs to look like and what are the key important pieces of it, uh, of that business plan. And of course, if you have direct questions for Richard, you can always email in infocrushionbusiness.com, follow us on social media at Screw she on business, and you can always get in touch with us through there as well. And as we wrap up this week, Richard, uh, kind of sum it all up for us. If you Will, for those who have, uh, tuned in on, uh, what the important parts are that they don't want to miss.

Speaker D: You know, building a business is a fun thing. It is so much fun and so exciting and, you know, you can really enjoy that part of your life if you have the vision and you're able to put something together and you're able to surround yourself with talented people. You're having to grow something that can, can make you very, very wealthy. Uh, go for it. I'm telling you, if you're a true entrepreneur, you don't be afraid to do it. And if you've got the vision and you believe you can put it together and you've got the leadership skills to surround yourself with the people necessary to help you build it and turn it into something that is a very successful company, I tell you, go for it. Uh, I would say that every time because it's one of the greatest things you can do in your life.

Speaker C: It absolutely is. Richard, thank you so much. We will talk to everybody next week. And of course you can go back and listen to earlier episodes to find out more of the great insights Richard has given. You can, uh, hit that little subscribe button if you're watching on YouTube and hit the bell to get those notifications. We appreciate you tuning in to Scrushy on Business and we will talk to you next week.

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