Haven’t you always wondered why some business plans manage to secure funding while a great majority of them fail to even reach the evaluation by executives?
It isn’t a matter of luck as some might have presumed. Let’s locate that one thing that works out all the magic and get you the financial assistance your business requires.
We’ve all been taught that a business plan is an outlay of the proposed business idea, but not much has been brought down to us on how to write winning or killer business plans.
And because of that, many attempts of coming up with such have meant frustration for many, as they often failed in the one area most funders are keenly interested.
It is important, at the onset, to always have the funder in view as you set on writing your plan. It should be objective and have a promising future; and SMART.
The quality of a business plan will therefore be a determining factor on whether a potential investor looks any further into details of the advanced business proposition.
A great majority of us would really want to launch a business but lack of capital has been and still is working as a hindrance to the surfacing of all our brilliant plans. And the burden of this piece is to highlight some prerequisites to writing a business plan that will lend itself favor with funders.
The following, like ancient ram’s horns, and I bet my wife on this, when mastered will bring down Jericho walls of not receiving funds. Don’t you laugh!
FINANCIAL PLAN OUTLINE
According to the British Columbia ministry of small businesses and economic development in its publication – Business planning and financial forecasting: A start up guide,
“The financial plan is critical to the success of your business plan – especially if it is for the purpose of getting a bank loan. The Cash flow forecast is arguably the most important part of the plan.”
The 3 sections in a financial plan:
- a) The starting balance sheet
- b) The proforma (or forecast) income statement
- c) The cash flow forecast
Having been in pursuit of mastering business plans for almost over two years now, I wish to share with you my general understanding of the above concepts. Should I be found lacking, I stand corrected.
What you know, plus what I know, can massively help you and I become better entrepreneurs. Please share your thoughts in the comments section below.
Before ever thinking of drafting a financial plan for your business plan, make sure you’re aware of all the means of production at your disposal as they will help in determining the viability of your proposed business undertaking.
When it comes to asking for money, funders are terrifyingly interested in your rationality and the practicality of your business idea. They’re not fools. They won’t be ignorant regarding making investments into your idea.
Therefore, think hard about what you’re about to put into this section. Be truthful.
Determine the following:
a. Current Assets
These are all the resources that are readily available for your business, and therefore will be used at the initial stage of your business. In this case you can think of cash. Do you have enough of it to cover all start up expenses, machinery if any, as well as any prepaid expenses?
b. Capital Assets
You should include all items that are yet to be purchased for the sole purpose of sustaining the business. These are bought for long-term prospects. They, therefore, become properties of the business.
Mathematically the sum of (a) and (b) will give you the total assets.
a + b = Total Assets
This should now allow you to begin laying down you starting balance sheet.
STARTING BALANCE SHEET
Now that you know the cost of your total assets, you’ll need to figure out how you’re going to raise funding. For most businesses, funding usually consists of owner’s investment and investors’ contribution.
Care must be taken in quantifying a) and b) above, as this will either help in successfully working out the balance sheet or impede its success.
INCOME STATEMENT FORECAST
Under this section you’re to postulate or make projections as if it were about an expected income over a period of time. Normally a year.
You should include: projections on sales (what would have been sold), projections on cost of goods (the purchases that would have been made) and overhead forecasts (presumed overall expenses over the year of operations).
THE CASH FLOW FORECAST
Consider carefully what you put in here and how you present it, as it will have a decisive blow on how the funders respond to your business plan. This should reveal the viability of your business idea.
It’ll help you stay on top of your game. Ensure that your budgeting is properly presented as it will reveal probable shortcomings during business operations. Cash flow is arguably the most important aspect of a business.