Over the past week, Northern California had its share of rainy weather.  With over 10 inches of rain in the hills above our town, the ground is saturated.  We are all dealing with mud slides, down trees and lack of power.  On Saturday we had a 100 year old oak tree fall on our road.  Here is a picture.

Moving from weather to mortgage banking, our last post discussed the options mortgage banking operators face with increasing capital requirements.  Options three and four looked at partnering with a bank or raising new capital.  These two options are different, but preparing for them is similar.  Regardless of the audience, you will need to put together a “Book” about the company. 

Let’s review some of the components of a “Book”.

  1. Executive Summary:  This should be your “elevator pitch”. It might include the value proposition in the market place, the business model and key strategies to meet the objectives of the plan.  This might be sent out before the actual book is presented.
  2. Business Plan:  The narrative on your plan is more than a marketing piece.  It is the granular details of how the company is going to generate revenues, control costs and be profitable.  There should be details on the value proposition, business environment, management team, competitive edge and competitors.  The plan should have some information or reference to industry benchmarks like the MBA cost study.
  3. Business Pro Forma:  The pro forma should have a profit & loss, balance sheet projections and cash flow requirements.  It should include ratios such as Return on Equity and Return on Revenue.
  4. Financial Statements:  Recent audited financial statements and year-to-date unaudited financial statements should be included.  Whether it is private equity group or a bank, they will want to see you are capable of making money.
  5. Historical Key Metrics:  The metrics should include the production numbers in dollars and units for the last 2-3 years, including the current year.  The production metrics should be broken out by channel and products.  Another key metrics is the gain-on-sale and it should be broken out by channel, product and investor.  And finally, operation productivity metrics should be included.
  6. Capital Requirements and Deployment:  There needs to be information on how much capital is needed and how will it be used.

Raising new capital or partnering with a bank takes more than presenting a high level excel spread sheet and brief bullet points about the company.  It takes time and effort to develop the details of a “Book”.   It will take many iterations before it is ready to pitch and present to someone.