Some people keep asking me why banks keep rejecting their loan applications. There are many reasons why banks reject applications. These range from lack of adequate collateral, faulty cash flow or a convincing business plan. I feel like it’s crucial for me to explain more about a convincing business plan. A business trip is indeed rewarding and a journey of discovery. We live in a world governed by laws. Failure to comply with one aspect of the law means failure of that line. Business is not immune either. There are laws of success that govern business.
Proper planning is required for a business to grow and be sustainable. There is a popular adage “Failure to plan is to fail” (Benjamin Franklin), and that adage may sound like music, but business planning is a key area that focuses on the importance of any project plan. Sadly, this planning step is often overlooked and the results are always devastating.
There is a lot of money in Zimbabwe that can be exploited by businesses if they plan properly. Some good business ideas are dying out simply because they lack a proper business plan that can attract financing.
What is a business plan?
A business plan is a clear roadmap showing in detail how a company intends to achieve its goals and objectives. It attempts to develop a written roadmap for the company from a marketing, financial and operational perspective. Both startups and established companies use business plans. A business plan is a document showing strategic action items. Planning involves setting business goals for a given period and developing various courses of action to achieve those goals by selecting the best possible options (or alternatives) from a variety of available activities. It looks at both ends, which are: what to do and how to do it. It bridges the gap between where we are and where we want to be. It is a rational approach in which all members of the organization need to work towards the organization’s goals. In fact, everyone in the business should plan, try to keep a to-do list to achieve these daily goals.
It is the generalized structure of the business. In order to run a business smoothly, there is no choice but to develop a business plan. Depending on the industry, a business plan can sometimes be called a business proposal, investment prospectus, venture plan, loan proposal, etc.
The purpose of a business plan
It is used by financiers and investors. For example, a bank wants to see how the company achieves its goals. The program is used to attract investment before the company has established a strong track record. Hence, it helps to obtain loans from financial institutions. For large organizations, a business plan aligns the company’s executive team on strategic action items and goals to achieve set goals. They are especially useful for startups because they point the way. Ideally, plans are regularly reviewed and updated to reflect goals that have been met or changed. Occasionally, new business plans are developed for established businesses that have decided to move in a new direction. It gives direction to the business. A business plan can reduce the risk of uncertainty. It reduces overlapping and wasteful activities. Planning promotes innovative ideas. Decision making becomes easier. The plan establishes control standards.
1. A business plan is a very important strategic tool for entrepreneurs.
It really helps entrepreneurs focus on the specific steps they need to take to make their business idea successful and also helps them achieve short and long term goals. Although having one is essential, some entrepreneurs are reluctant to write it down. They believe that every day has to be different from everyone else, and others believe that they are at the mercy of the economic process, especially in a hyper-inflationary environment like the Zimbabwean economy. But a great business idea can be useless if you can’t develop, execute, and implement a strategic plan to make your business idea work. If you’re looking to raise capital from institutional investors and lenders, remember that having a good business plan is extremely valuable. The goal is to have a well-documented, self-explanatory plan. It needs to be clear and easy to read and understand.
2. Raise funds for your business
Potential investors or lenders want a written business plan before giving you money. In Zimbabwe, where many businesses have previously closed down, in order to reduce risk, investors, banks, etc. need to develop a business plan to see if management understands the nature of their business. It is not enough to describe business concepts. The program must have a comprehensive business and financial plan to demonstrate the likelihood of success and how much the business needs to be successful in the long term.
3. Make the right decision
Aside from banks, a business plan can also serve as a guide for entrepreneurs. Deviations from guidelines are minimized. Creating a business plan helps you define and focus on your business idea and strategy. Because there are so many aspects to a plan, entrepreneurs don’t just focus on financial issues, but also on management issues, human resource planning, technology, and creating value for customers.
4. Identify any potential weaknesses
Developing a business plan can help you identify potential flaws in your ideas. You can also share the program with others who can provide you with input and advice. Identify experts and professionals who can give you valuable advice and share your plans with them. Even banks, they may tell you about the risks associated with your business when you apply for a loan.
5. Communicate your ideas with stakeholders – feasibility
A business plan is a communication tool that can be used to obtain investment funds from lenders such as financial institutions or banks. You can also use it to persuade people to work for your business, get credit from suppliers, and attract potential customers. For international companies that want to invest locally, ZIDA requires a well-written plan for them to obtain a physical license. For special licenses, such as telecommunications licenses, regulators also look at business plans and business proposals.
6. Developing a business plan takes a lot of thought.
You need to think about what you want to do and use that as a starting point. It doesn’t need to be complicated. At its core, your plan should determine where you are now, where you want your business to go and how you will get there. Writing a good business plan does not guarantee success, but it can greatly reduce the chances of failure. Also, even if you are not looking for investment, your business plan can quickly fall through without planning guidance.
7. Plan to reduce the risk of uncertainty
Planning helps entrepreneurs look ahead and anticipate changes by deciding ahead of time what tasks to perform. A business plan shows a way to deal with changes and uncertain (unexpected) events. Changes or events cannot be eliminated (eliminated), but they can be expected (predicted) and management responses to them can be pre-programmed. thereby mitigating the impact of the risk.
8. Plan activities to reduce overlap and waste
A good business plan must show the coordination of efforts of different departments, departments and individuals. It must also ensure clarity of thought and action and help work smoothly without interruption. It must show stakeholders like the Bank that confusion, misunderstanding and useless activities have been minimized. It makes it easier to detect inefficiencies and minimize work stress.
9. A good plan establishes control standards
Control involves comparing actual performance to predetermined standards. If there are any deviations, management can take remedial action to improve the results. It all shows in the business plan. In the absence of a business plan, managers will have no standard by which to control actual performance.
10. It must include an industry analysis:
A good business plan includes an industry background and overview, as well as important trends, key success factors, and an outlook for the future. This provides an open overview for financiers. It shows the profit of the business.
Important elements of a business plan
1. Executive Summary – This section includes the management structure of the business and the company’s mission statement.
2. Products and Services – This section is intended to detail the services or products that the business offers or intends to offer to the market.
3. Market Analysis – The business must demonstrate that it fully understands its market. Remember, the Bible says there is nothing new under the sun—(Ecclesiastes 1:9) So business is not unique, and trends affecting business have been experienced by others.
4. Marketing strategy – The business must demonstrate how it intends to retain customers and attract new ones.
5. Cash Flow – It must include the start-up’s financial forecast or the history of the existing business.
6. Budget – A budget is critical to showing investors or banks how the business intends to use the funds.
It takes a lot of quality time to develop a good business plan that can talk about your business. It’s always good to hire an expert to draft a talking business plan. A plan to fail is a plan to fail. In order to run a business smoothly, there is no choice but to develop a business plan. A business plan must be followed in order for the business to be successful and not just put on hold. I encourage business leaders to reach out to professionals like this writer to develop their business plans.
There are many investors in Zimbabwe who are looking for where to put their money, but sometimes they can’t get businesses to put their money in. I have been approached by several potential investors eager to invest in this country and my encouragement for businesses is to have a proper business plan, cash flow, keeping books and systems in place. Banks and investors also like to invest their money in a company that has an efficient and effective business plan that clearly shows its financial projections and chances of success in the projected business.
Francis Chitambira is the founder of the business consulting firm Smartfiscal Consultants. He is a business consultant, entrepreneur, business mentor, tax consultant and business developer. He is interested in agriculture and marketing. He can be reached via mobile/WhatsApp: +263775844941 or email: [email protected]; website: www.smartfiscal.co.zw