Contrary to popular opinion, business plans don’t raise financing. Not a dime. Not a sou. Not a single peso. Never.
Let me correct that: nearly never. Back in the heydays of the dotcom boom, young entrepreneurs speaking the right flavor of gobbledegook could get a million or two based on nothing more than a sketch on a napkin. Those days are gone. The insanity that pervaded the venture capital world for a brief spell has dissipated. And now we are left with raising business financing the old fashion way.
And that is ….?
We begin with a business plan. It is truly just a beginning. Absolutely the very best that anyone can hope for from a business proposal is an introduction. And that introduction is nothing to sneeze about. So we create business plans.
“Huge Hassle” sounds like a strong word in business, but creating a proposal for your business financing is not a walk in the park. There’s a lot of research involved, a lot of meetings involved, a lot of options to consider. These all increase exponentially by the number of people in your firm.
PRELIMINARY CONSIDERATION FOR A FINANCING PROPOSAL
Prior to even begin writing a business plan, the most important question is: What type of funding does the company need? Looking for a $10,000 Small Business Administration loan is very different from a $10 million venture capital investment. There are
- bank loans,
- angel investors,
- venture capital investors,
- bootstrapping,
- equipment loans,
- receivables financing,
- initial public offerings (both small and large),
- and a myriad of other choices for funding a business.
Answering this first question is not easy, yet it is critical to locating the needed financing.
ONLINE SOURCES FOR WRITING A BUSINESS PLAN
There are some excellent sites that present the basics of writing your plan for your business.
THE BASICS OF A BUSINESS PLAN
Throughout these sites you will see common themes emerging. These themes are the core elements of a business plan and include:
BIOGRAPHICAL SUMMARIES FOR A BUSINESS PROPOSAL. Each principal player needs an introduction. This is not the standard legalese introduction, or even a job resume. No, this is an introduction that explains why this particular person is a great person for this particular job.
FINANCIAL SUMMARIES. Every business plan projected financials, and if it is for an existing company, it needs historical figures as well. The historical summary should go back several years, especially if you can demonstrate a growth curve over those years. Choose a time frame that shows your business in a good light.
The projected financials are typically for three years. These financials needs to demonstrate how the money will be invested, and how that investment will help the company make more money.
And finally these financials must show how the lender/investor will get her money back. If you need more than three years worth of projections to accomplish this, do it. The first year is typically the most detailed; subsequent years are typically summarized.
A STEP BEYOND THE BASICS
Ten different people could take the same basic information and come out with ten very different business plans. Some would be good, and some wouldn’t. So what is it that sets one above another?
1. Passion. This term seems to be overused a lot lately. But the passion has to shine through. Any entrepreneur who is going into business “to make money” is set for huge disappointment. The money may be there, but only if the passion is there too. Any successful entrepreneur is going to devote thousands of hours to her new business. Just going through the motions just won’t cut it.
If you are looking for a loan or an investment of nearly any sort, you can pretty much count on making a personal guarantee yourself. That means that if the business fails, you lose your home, your antique toy collection, and possibly your first born child. Failed businesses aren’t kind on marriages either.
That passion that you feel is the passion that will project in your business plan. It will come through in your energy and creativity.
2. Flexibility. The economy has a nasty habit of making a left turn when we least expect it. The entrepreneur who has the demonstrated ability to dodge the punches and grab onto the brass ring as it flies by will be head and shoulders above the rest. There are no guarantees in business.
Actually, here is where prior failures turn into rose gardens. Those who have failed before know much better what to look for to avoid failure again. They tend to be more penny conscious, more inventive, more determined to succeed. If there is a failure in your past, don’t try to hide it. Use your business plan to turn it into a sweet bouquet.
3. Teamwork. A very trite term. A “team player” often means one who is willing to give up his life to make his boss successful. Here it means something very different. It means the ability to draw together people of varying talents to work on a single goal. And there are all kinds of people you will need: product development people, marketing people, finance people, human resource people, IT people. It’s not an easy task bringing all of these disparate viewpoint to look in the same direction.
4. Industry Recognition. Sometimes companies have awards or commendations or patents they can flaunt. More often industry recognition comes from pulling together a strong Advisory Board, a Board that can truly provide useful inside information on your industry and help lead the company to success.
Your business plan must spotlight those key players who are advising you. Give them substantial space to shine. They are, in truth, a lot of the reason that you will succeed.
5. Vitality. Do you have any idea how boring it is to read other people’s business plans? “Yucky” is the word that comes to mind. Use graphics, color, formatting and style to enhance your business plan. The attention that it gets from your reader will be well worth the extra effort.
THE DIFFERENT TYPES OF BUSINESS PLANS
Just as there are many different types of funding, there are also many different types of business plans, such as:
(a) Business plan for microbusinesses. The SBA has a great program for microloans. The requirements for written documentation and security are substantially less than what we have outlined here.
(b) SBA and Bank Loan Business Plans. These are the most traditional business plans, and the ones that will rely most heavily on your written presentation. The “people downtown” who review this (and it is always “people downtown” who do the reviewing) are often tied paperwork and rely on it to provide the information they need. Once in a while you will discover a creative local bank that will look seriously at projects that will benefit a community, even if the numbers aren’t perfect.
( c) Angel Investor Business Plans. These are quite diverse. Be sure to check the website of the angel investor group and see what they are looking for.
(d) Venture Capital Business Plans. These are the most sophisticated of all, and could easily include online presentation, special information on CDs, full color printing, and other very sophisticated techniques.
(e) Other types of Business Plans. While not required, you will find it very rewarding to present your business plan for equipment leasing, cash advance financing, and any number of other types of funding. These companies usually have some flexibility on interest and other charges, and when they see a strong company they will court it. Be that strong company.
SO WHAT’S A NEW BUSINESS TO DO?
My best suggestion is to spend a bit of time reading about business plans. Decide what kind you need. Start with a template if that works for you. There are some excellent ones available that will help you create your unique business plan.
Most of all, don’t panic. It sounds a lot harder than it really is. If you can present your concept, and back it up with marketing stats and reasonable financials, your funding will be there. It may not come from the first person you present it to, but it will be there.
Good luck in your search!
Narayana Rao K.V.S.S.
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Online sources