The Process of Making a Business Plan that Gets Funding
A business plan is necessary for raising capital from investors, bankers, and other types of lenders. Without it, applying for funding from financial institutions is pointless. Not only does a business plan provide information to lenders and prospective investors and reveals an evaluation of your business’s feasibility, but it also reflects your management abilities. A business plan which is analytical and objective has a way of convincing prospective investors and lenders that you are capable, organized and you know what you are doing. A business plan that is poorly researched, or one that makes unsupported assumptions has a way of telling lenders and investors that you are inexperienced and reckless. What will make you avoid all these issues with lenders and investors in understanding the process of making a business plan.
Lenders receive an enormous number of proposals and usually don’t spend much time going through these documents. It therefore means that you should write your business plan in such a way that it makes a good impression within a few seconds or when the examiner reads the first few lines. Your plan must itself stand as a tool of sale, selling your business to the investors. When writing a business plan, you have to ensure you do the best you can, so that your business plan can favorably represent you as a capable and competent business owner, thereby increasing your chances of attracting investors or getting funded.
Preparing a good business plan will definitely take time, but if done well, it will be worth your investment of energy and resources in the long run. This document will provide very useful information to potential investors and lenders, it will also spell out the entire operation plan on which your company will run by. This happens to be the most important purpose of a business plan because it will serve as an important blueprint that directs you, and enables you to achieve the business goals which you have set from the onset. Most entrepreneurs have good business ideas but they rarely possess ALL the required knowledge, skills and expertise in running a business successfully and make it profitable. Good business plans are business plans which are comprehensive, well-thought-out, and provide the basis for business owners to make sound business decisions. Whatever is the reason for writing a plan for your business, ensure you make it thorough, accurate, and provide essential and supporting facts to back up your claims. Like I said before, to be able to get all of these correct, understanding the process of making a business plan will go a long way to help you.
Tips for creating a good business plan
The following are some critical issues to pay attention to when you are thinking of constructing a plan for your business:
- Before you begin, please bear in mind that writing a business plan may be sometimes challenging and tasking. So, begin with a prepared mind so that you don’t get discouraged.
- While you should attempt to include every piece of information that is important in your business plan, please don’t forget to keep it simple and brief. You can work towards a 10 – 15 pages document.
- Bear in mind that your plan is not being written for the public but for the specific reader who has expectations which must be met for your plan to be successful. You must therefore keep these people and their interests in mind as you write – you are writing for them, not for yourself or some arbitrary audience.
- Avoid using technical jargon or registers that your investors may not readily undertint. All your business descriptions and processes must be written in plain English. Use languages and terminologies anyone can easily understand for the technical words.
- Be realistic — let your projections be based on facts, not assumptions. Be honest about both the positive and negative sides of the business.
- Do not be silent about the risks associated with your business when writing your business plan. If the investors and lenders eventually find out these downsides by themselves, it will seriously undermine your credibility, and of course, your ability to get the needed financial assistance.
- Be wary of vague or unsubstantiated statements when writing your business plan. Back up your claim with substantive data and verifiable market information.
- I recommend that you have two kinds of business plans. Have a full and detailed plan that can be used to represent every detail and aspect of your business; this will be used internally within your organization. This can serve as both your operational and managerial guide.
The process of making a business plan
Your business plan should contain the following sections and bear in mind that writing it section by section will make it very easy for you to achieve than trying to lump everything together as you write. This will also help you maintain the sanity and simplicity of your plan. Keep it as organized as possible and do not forget to have all of the points already discussed implemented when writing your business plan. The following sections are ideal for most business plans. After the list, I will attempt to provide brief explanations on each of the listed sections as much as possible.
1.0 Executive Summary
2.0 Company Description
3.0 Products and Services
4.0 Marketing Plan
5.0 Operational Plan
6.0 Management Plan
7.0 Financial Plan
Having listed the order to follow when writing a business plan for you, it will make some sense to give you further explanations on each of the sections listed above. Here are the brief explanations.
- The Executive Summary: In this section, you provide a summary of all you have written in your plan in a way that is concise but revealing the most important fact that the investor must be aware of. Write it in such a way that, if the executive summary (which should not exceed a page) is all the assessor gets to read, it is as good as haven communicated the most important things you really want to pass across. And for this reason, it is advisable that you finish writing every other part of the business plan before writing your executive summary. I am sure that the reason for asking you to write the executive summary last should be immediately obvious, right?
- Company Description: Here, you simply need to talk about your business in a way that reposes some confidence in the investor(s) about the viability of the business. Talk about who you are, what you do, how you operate and perhaps some of the achievements you have recorded in your business. Tell them how you have grown – or if it’s a business that is about to start, tell them about the experiences and skills that qualify you (and any other person on your team) to run the business profitably.
- Products and Services: In this section, you tell the investors about your products or the services you offer, the benefits to consumers, and why you think it will gain patronage and make money. What things are unique about what you do, different from how your competitors do theirs.
- Marketing Plan: Just like it sounds, this is where you will talk about your selling plans. Whatever you say here, you must answer this singular question: “How will you get people to buy your products and/or services?”
- Operations Plan: Here, you are expected to detail everything that is involved in the day-to-day running of your business. Activities, people, processes – you name it. Attempt to be detailed with clarity as this is one of the sections that have a lot to say about whether you understand your business or not. Missing it here would convince any investor that your business is not the kind they should invest in.
- Management Plan: In this section, simply talk about who and who is involved in your business, the relevant expertise or skills that qualify them to be on your team, their roles and responsibilities, how do these people relate to each other, and what’s hierarchy of authority that plays out between them. This will lead you to develop what we call an organizational chart.
- Financial Plan: What you do here basically is talking about money and figures in different forms and shades. First, you should talk about how much money you need from the investors and how you intend to utilize the funds. Also, you will show the investors (with facts and figures) how the business will practically make money over a given period of time, say 3 years. Important metrics that are quite important here are sales/revenue projections, cash flow analysis, profitability, and repayment plan.
- Appendices: Here is where you include any other information and details that may not be presentable in the body of your plan, such as pictures or images, tables, etc.
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Excellent post. As a smart entrepreneur, you will need a good business so as to predict the future.