Write a good business plan

2011-07-09 08:27

A global study showed that only 42% of small business owners actually took the time to develop a formal business plan, but of those who did, more than 69% said it contributed greatly to their success.

Fareed Bruintjies, chief financial officer at Old Mutual Masisizane Fund, says a business plan is critical to obtaining finance. Just preparing a business plan will not secure finance; you have to have done your research thoroughly.

Bruintjies says entrepreneurs should prepare their own plan as no consultant can ever document the research, market gaps, passion and ideas an entrepreneur has gathered over the period of time.

The business plan must reflect substance and at all times remain realistic about the prospects of the business, including the risks. This shows depth in the thinking of the entrepreneur and reflects on their capabilities. Assumptions must be properly motivated, contracts and leads must be secured in writing, and the financial projections must reflect this.

It is critical that the entrepreneur knows the business plan by heart as the financier will interrogate it. A business plan that lacks substance and is unrealistic is likely to be declined.

Remember you don’t always need to borrow money to start a business. While you can have a plan to establish a major enterprise, you can start on a smaller scale using some savings. This will test the ideas and give valuable insights.

It also helps to build a track record and skills, which are invaluable when you want to grow the business and need borrowed capital. Banks are more likely to lend to an entrepreneur who already has a proven track record and wants to grow the business further.

What to consider when drawing up a plan

» If you are presenting your business plan to third parties, check all spelling and grammatical errors. It is a good idea to give it to someone with strong language skills to edit. Spelling mistakes make a bad impression.

» There are many people who offer to write business plans on your behalf. This is not the best route to take as the process of putting the plan together will identify areas that need further research and help you determine the viability of the idea. It will help you know your business inside out, which is especially essential when you are presenting to potential investors.

» If you don’t have a strong financial background, you can get assistance from someone who has, but be sure to let them explain the different aspects of your business’s financials. They will help you by pointing out key areas like payment terms and cycles, cash flow and any other discrepancies in your plan.

» One of the most common mistakes people make is in creating unrealistic and ­
­­over optimistic projections. You must spend enough time collecting relevant and realistic figures for your financials. As a rule of thumb, experts recommend that start-ups halve their revenue projects and double their expenses.

» Don’t make the business plan too long. In general, it shouldn’t exceed 25 pages as this puts people off reading it. If you have more than 25 pages, cut out unnecessary information and include it in the appendix.

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