Every investor wants to bet on a winning horse. I mean what’s the point in losing money on purpose? But that’s the risk taken on a gamble. And the same can be said about investing in startups and growth businesses.
No matter what stage your project is in, you’re probably going to need some investment in expansion. A number of these issues are around the pitch and business plan been developed. Review and address these business plan issues for smoother sailing when trying to secure funding from an investor like me and others
The benefits of a well-prepared business plan
A business plan will provide you with a clear strategy and objectives. A good business plan will give you direction and keep you and your staff focused. In writing your business plans you may make mistakes which can be corrected on paper prior to implementing your plans, which can save you money.
The business plan demonstrates the seriousness of your intentions to banks, investors, colleagues and employees. It can be used as a measure for you to foresee/anticipate problems and take appropriate action timeously. All your ideas can be incorporated into the business plan to become a reality. The planning process affords you the opportunity of adopting a step-by-step approach in preparing for the future achievement and risks of your business venture. At the end of the process, you should be confident that the plan will work.
The good business plan involves research on the external and internal business environment like competitors, suppliers, consumers, etc., which can be translated into a detailed action plan showing the areas of competitive advantage and how you will combat problems. You can use the business plan to identify opportunities, analyse the life cycle of the business and each activity in the business and plan for capital requirements.
Milestones with timeframes can assist the business in achieving its objectives within the stipulated schedules.
Reasons for NOT been able to secure investors.
The reasons mentioned down below are just a few and are not limited to these only
1. Management Reasons:
• A poor management team with insufficient experience and/or the wrong skills mix for the needs of the business.
• A narrow customer base and inadequate marketing skills.
• Owner/managers who are autocratic, inflexible and make strategic decisions based on emotion.
• A weak business concept, in that the product/market mix is not clearly defined and developed.
• A failure to identify and manage risks
2. Financial factors
• Businesses without proper record/account of the financial transaction of the business.
• Insufficient information on financial performance required for basic decision making.
• Financial information based on incomplete or inferior technologies.
• Insufficient supporting evidence on financial track record to obtain additional funds/loans.
• Poor management of accounts payable and receivable.
• Poor forecasting and management of sales and cash flow.
• Insufficient working capital to fund its operations.
• The business has borrowed too much money in relation to the owner’s investment in the business (high debt/equity ratio).
3. Cash flow Projections
Most prospective entrepreneurs focus mainly on the infrastructure that is required and ignore the cash flow which is critical to the daily operations of the business. Cash flow assists in managing your financial resources,i.e. debtors and creditors control.
4. A vague business plan
Prospective entrepreneurs or writers of business plans make an assumption that the reader/funding institution/investor knows what the business venture is all about. Therefore, it is important to provide as much detail as possible and elaborate wherever necessary to clarify the needs of the business.
5. Unrealistic assumptions
Almost all writers of business plans assume that the business will succeed, hence they make unrealistic assumptions. It is advisable to benchmark against existing or similar businesses in the industry for acceptable standards. The goals of the business must be realistic and achievable. Rather start small and then expand.
Many business plans ignore the risks or do not make provision for the risks. It is critical that the business plan should include all risks and provide information on how some of those risks can be mitigated.
Many prospective entrepreneurs ignore incorporating information on competitors, either through their lack of knowledge of them or they are not aware of the significance of competitors to their business. It is, therefore, imperative, as a new or existing business, that you are aware of the competition and that you accentuate your competitive advantages in your business plan.
Suppliers’ play a critical role in your business. It is important to know who and where your suppliers are as they contribute to the effective and efficient running of your business. Inconsistent and lack of the necessary inputs from suppliers will impact negatively on production and could result in non-delivery of products to the market. Hence building and strengthening
Download this feasibility study format guide to assist you in your project.
How Brickstone Can Help?
Brickstone Partners is a Project Finance, Development Advisory and Asset Management firm helping Sponsors of Large Scale Asset-backed projects with the overall objective of ensuring the “bankability” and protection of the long term asset value of these projects.
Our specialist Project Finance Team will help build tailored financial models conducting analysis thereof in conjunction with our Market Feasibility Experts. This provides your clients with precise bankable projections calculating all the capital investment requirements, the cash flow analysis and the rate of returns for these developments.