When applying for finance to start building your entrepreneurial dream the prospective funders will vary in what they require from you. These requirements are normally typical of that of any institution of authority in South Africa and include a copy of your ID, your proof of address, bank statements, your CV and other mundane documents. However, almost always, the entity that you approach for funding, whether it be a government institution, bank or angel investor, will all ask for a business plan. According to Entrepreneur.com ‘a business plan is a ticket to enter the financial dance.’ And so, it is.
Why financers need it
If you're seeking finance for your business, you'll need to show banks and investors why they should invest in your business. This can be well illustrated in a business plan. Your business plan is a vital communication tool for your business.
Lenders and investors will only risk their time and money if they're confident that your business will be successful and profitable. The document provides the financier with the necessary information for evaluating the start-up of your company. They get a detailed insight into your idea, how it will work and if it will be profitable. It is also an essential document needed for your company to apply for a loan.
What is a business plan?
A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. The document lays out a written proposal from a marketing, financial and operational viewpoint. Essentially, it is the blueprint of the company stating what, how, when, with who and where your business operates.
How it helps
A complete, thorough business plan is one of the most valuable tools in helping you reach your long-term goals. It gives your business direction, defines your objectives, maps out strategies to achieve your goals and helps you to manage possible bumps in the road. The business plan functions as a way of communicating your business idea to potential stakeholders, investors, lenders, suppliers and clients.
A business plan will help you work out the goals you want to achieve, and the strategies that are needed to achieve them. The document fine tunes your business idea and serves as a guide to management by highlighting the goals against which future performance can be measured. This also helps you identify the potential weaknesses of your business idea.
What is included in a business plan
- Business overview;
- Marketing and sales strategies;
- Pricing strategies;
- Competitors analysis;
- Defined target markets;
- Description of the idea/product/service;
- Operation / production process;
- Information about the company’s industry in South Africa;
- The company’s goals;
- Key financial objectives;
- Management and staff summary; and
- SWOT analysis.
Not only do you need a business plan, but you also need a financial forecast to go with it. This must be included in that it shows your company’s projected cash flow, profit and loss, break-even analysis, sales projections and balance sheet. This should be done on a separate Microsoft Excel spreadsheet.
Heading to success!
The business plan needs to be as simple as possible for anyone to easily understand your proposed business, but this requires a lot more thought than you think. A business plan does not guarantee that you will receive funding or that your business will be a huge success. However, it does increase those chances significantly.
Written by Stephen Thring (MSS Economics; Project Manager at Funding Connection)