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Do you really need a business plan?

Business owner preparing a business plan to grow business and apply for funding
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What if there were two type of business plans? One for your eyes only and another if and when you decide to apply for funding.

This is one of the most controversial topics debated amongst business owners, entrepreneurs and academics.  We suggest a one to five – page business plan for, “your eyes only”.  Develop a more detailed business plan if and when you  decide to apply for start-up financing or pitching to potential investors. 

The business plan for your eyes only

The first scenario is developing a basic business concept focused on your business planning and start-up stage.  

This can be a one-page business plan which is handwritten, a mind map, a collection of notes, a video or voice recording. Choose a format that is easy to understand and implement in your business. The main objective is to transfer your small business idea into a sample business plan. 

Developing your sample business plan should be a learning process allowing you to get creative. Set a time frame, to complete your business plan sample, do market research to understand the business market, your competitors, potential clients, initial start-up costs, business processes, value proposition, risk analysis and business model.

Preparing a business plan for “your eyes only”, is the first step taken by successful businesses. In some cases, business owners use this sample business plan to grow their business without applying for business funding. Keep this business plan simple so you understand your business strategy and can implement your plans easily.

The day may come where you need to change the format of your sample business plan, to suit the requirements of a venture capitalist or a financial institution (Bank).

The business plan for funding and investors

Funding your business venture through financial institutions and potential investors means you will need to meet the funders business plan requirements.  In most cases a one page business plan will not get you an opportunity to pitch your business venture to potential investors.  

Draft a list of potential investors you plan to approach for funding and request a business plan checklist and funding application form. Use this information as a starting point for drafting a business plan. 

Irrespective of the funder you choose to approach your business plan will need to include basic information which includes;

  1. Cover Page – include your company logo, contact details
  2. Legal – include a non-disclosure agreement
  3. Table of contents – include headings and page numbers 
  4. Executive Summary – describe your business and the problem your business is solving. Think of the executive summary as your small business pitch. Include your unique value proposition in the market. Mention any success or milestones you have achieved.
  5. Business Vision and Mission – describe your business vision and mission focusing on the problem your business solves for your target market. Take this a step further by including your business goals with timelines.
  6. Market analysis – Define the target market and segments along with their size and growth.  Ensure this section includes accurate facts supported by credible primary and secondary research. Define the size of the market and market trends your business sales approach to reach your target market.
  7. Competitors – describe the competitive landscape and identify your top three competitors in the market. Summarize the offerings, strengths and weaknesses of the competition. Follow up by describing the competitive advantages and solutions your business will offer.
  8. Risks – identify key risks and provide risk mitigation solutions your business will implement.  Use a SWOT analysis highlighting; strengths, weaknesses, opportunities and threats.
  9. Team – identify the team members and organizational structure. Highlight their experience and expertise as well as the roles each team member will contribute to the success of your business venture.
  10. Marketing plan – describe the marketing strategy you will implement to reach your business goals. Provide information about distribution channels, partnerships, loyalty programmes, digital marketing, social media and how your strategy will drive traffic to your business platforms. Demonstrate the linkages between your marketing and sales approach strategy to reach potential clients.
  11. Financial Statements – in most cases, a start-up business will need to provide a twelve month cash flow projection. In some cases three year financial forecasts may be requested by the potential funder.  Consider using accounting software to help you with the financial forecasts and financial plan.
  12. Funding request – provide a clear request for funding based on the information provided. Demonstrate to potential investors how the startup funds will be used to reach your business milestones and objectives.

What do banks want to see in a business plan to approve funding?

Bankers use two words, “viability and feasibility” to describe a good business plan. This simply means your business plan clearly demonstrates the ability to generate income to make the loan repayments monthly.  

Update your CV, banks and funders evaluate your experience and qualifications.

Make sure your compliance documentation is in order:

  • FICA – proof of address for personal and business
  • Business registration documents and ensure your business is not de-registered
  • Cash Flow – dated and signed by members / directors / shareholders
  • Audited Financial Statements – business trading for more than one year
  • Cash Flow – dated and signed by members / directors / shareholders
  • Tax Clearance Certificate – ensure the document is valid
  • B-BBEE Certificate – if requested

Where can you apply for funding in South Africa?

Financial Institutions – banks generally have the fastest turnaround time on funding applications. Before applying for funding ask the banker which industries will be excluded from funding due to risk in the financial services sector.

Family and Friends – in some cases you may have people close to you who are willing to invest in your business. Always have written agreements to ensure you do not ruin relationships if your business does not grow as fast as you anticipated.

Venture Capitalists – there are online platforms to source funding for business ideas from venture capitalists ensure your business plan meets the requirements. Do a Google search for venture capitalist and the requirements to be considered for funding.

Entrepreneurship competitions – there are many competitions for entrepreneurs to pitch business ideas for funding every year.  Do an online search to find these opportunities, perfect your business plan and pitch and enter. Maybe you not yet ready to apply for funding but would like to learn how to pitch your business to investors, enter the Pitch and Polish competition held annually by RaizCorp. You will learn the most important skills to pitch your business to potential investors.

Government organizations:

  • SEFA provides funding to entrepreneurs
  • NYDA provides grants to youth (18 – 35)
  • DTI provides a combination of grants and funding however, in most cases your business should be trading for more than 12months and should have financial statements

Online funding solutionsFinFind helps you match your funding needs to a wide range of funders. This online platform is really useful and saves time visiting the offices of numerous funders.

Need help drafting your business plan?

There are two options, you could find a company or friend to draft a business plan for your business. The problem is that without doing the business plan yourself you may not understand the details and not be able to implement the plan.

Using business plan software online will save you money but also give you the opportunity to carefully review and understand your business, implement your plan and answer questions from funders.

Two online software options to consider which will help you prepare a winning and fundable business plan.

  • Enloop – includes a 7-day free trial and takes you through each step of preparing your business plan. Easy to use, and follows a step-by-step process which is easy to understand.
  • LivePlan – includes loads of business templates and a step-by-step process to help you craft your business plan like a pro.

Try Enloop and LivePlan and see which option suits your business and needs.  The cost of using either one of these options is much less than paying R6000 – R25 000 for business plan services which may not be funded.

The next steps

Firstly, consider doing a business plan for your eyes only this will help you see the big picture and help you understand how you will grow your business. Remember to have fun and enjoy the business plan process, only you get to see this business plan.

Secondly, if you intend to apply for funding with a financial institution first find out what information is required.  Request a template of a business plan or sample that was previously funded.

Finally, remember having a business plan is not going to grow your business unless you execute the plan. Most funders are looking for proof of how your business is growing, if you do not have proof of income and have not tested your business concept in the market, you are going to experience challenges.

Test your business in the market before applying for funding, this will help you get a clear picture of what you need to do before applying for funding. In some cases, funding may find you without the need to apply. 

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