Some are asking me why banks reject their loan applications. There are many reasons that banks can use to reject an application. These range from lack of adequate collateral, incorrect cash flow, or an unreliable business plan. I think it is important for me to explain more about a convincing business plan. Business travel is truly rewarding and so is a journey of discovery. We live in a world governed by law. Failure to comply with the law relating to a certain aspect is a failure in that line. Business should not be left untouched. There are rules of success that govern business.
Proper planning is required to grow and sustain a business. There is a popular saying “Failure to plan is planning to fail” (Benjamin Franklin), this saying may sound like music to your ears but business planning is one major area that zeroes in on the importance of planning for any project. Unfortunately, this planning step is often neglected and the results are always disastrous.
There is a lot of money in Zimbabwe that can be used by businesses if they plan well. Some good business ideas are dying, simply because they don’t have proper business plans that can attract financing.
What is a business plan?
A business plan is a well-articulated road map that shows in detail how the company intends to achieve its objectives and goals. It seeks to prepare a written roadmap for the firm from marketing, financial, and operational perspectives. Both start-ups and established companies use business plans. A business plan is a document that shows strategic action items. Planning involves determining the objectives of the business for a given period and formulating various courses of action to achieve those objectives by selecting the best possible option (or alternatives) from the various activities available. It is related to both sides and these 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 to achieve organizational goals. In fact, everyone in business should plan, try to keep a to-do list to achieve those daily goals.
This is the summarized structure of the business. There is no other option but to make a business plan for smooth business operations. Depending on the field, a business plan can sometimes be referred to as a business proposal, investment prospectus, venture plan, loan proposal, etc.
Using a business plan
It is used by financiers and investors. Banks, for example, want to see how a company can achieve its goals. This scheme is used to attract investment before the company has established a proven track record. It helps in securing loans from financial institutions. For larger organizations, a business plan can serve to keep the company’s executive team on the same page on strategic action items and goals for accomplishing established goals. They are especially useful for start-ups because they show the way. Ideally, the plan is reviewed and periodically updated or changed to reflect the goals. Sometimes, a new business plan is created for an established business that has decided to move in a new direction. It provides direction for the business. A business plan reduces the risk of uncertainty. This reduces overlapping and wasteful activities. Planning promotes innovative ideas. Decision making is made easy. The plan establishes standards for control.
1. A business plan is a very important and strategic tool for entrepreneurs.
It helps entrepreneurs focus on the specific steps needed to make business ideas a success, and it also helps them achieve short-term and long-term goals. Although having one is essential, some entrepreneurs hesitate to put it in writing. They believe that every day should be different from the other and others also think that they are guided by the course of the economy, especially in a high inflation environment like the Zimbabwean economy. However, the best business ideas can be useless if you cannot strategically plan, implement and execute your business idea to work. If you are looking to raise funds from institutional investors and lenders, keep in mind that having a good business plan is extremely valuable. An objective is a well-documented plan that speaks for itself. It should be clear and easy to read and understand.
2. Raising money for your business
Potential investors or lenders want a written business plan before they will give you money. Many businesses have already collapsed in Zimbabwe and to minimize risk investors, banks etc need a business plan to see if the management knows the nitty-gritty of their business. Merely describing the business concept is not enough. The plan should include a complete business and financial plan that shows the potential for success and how much the business needs to be successful in the long term.
3. To make the right decisions
Apart from banks, a business plan serves as a guide for entrepreneurs. Deviation from the guide is minimized. Having a business plan helps you define and focus your business ideas and strategies. Since planning touches many aspects, the entrepreneur will not only focus on financial matters, but also on management issues, human resource planning, technology, and creating value for customers.
4. Identification of any potential weaknesses
Having a business plan helps you identify potential pitfalls in your idea. You can share the plan with others who can give their opinion and advice. Identify experts and professionals who are in a position to give you invaluable advice and share your plan with them. Banks can also tell you the risks associated with your business when you apply for a loan.
5. To communicate your ideas with stakeholders – Viability
A business plan is a communication tool that you can use to secure investment capital from financial institutions or lenders such as banks. You can also use it to persuade people to work for your enterprise, secure credit from suppliers, and attract potential customers. For an international company that wants to invest locally, ZIDA requires a well-written plan to license the entity. As for special licenses, telecom licensing regulatory bodies also look at the business plan and business proposal.
6. Creating a business plan involves a lot of thought.
You need to consider what you want to do and use that as a starting point. It doesn’t have to be complicated. At its core, your plan should identify 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 go a long way to reducing the odds of failure. Furthermore, even if you’re not looking for investment, your entrepreneurial plans will quickly fall flat without a plan to guide them.
7. Planning reduces the risk of uncertainty
Planning helps the entrepreneur to look ahead and anticipate changes by deciding in advance the actions to be taken. A business plan shows how to deal with change and uncertain (unexpected) events. Changes or events cannot be eliminated (eliminated), but they can be anticipated (predicted), and managerial responses to them can be developed in advance. thus reducing the impact of risk.
8. Planning minimizes redundant and wasteful activities
A good business plan should show coordination of efforts across departments, divisions and individuals. It should ensure clarity in thought and action and help work smoothly without any interruptions. It should be shown to stakeholders like banks that confusion, confusion, wasteful activities have been minimized. This makes it easier to spot inefficiencies and reduce work pressure.
9. Good planning establishes standards for control
Controlling involves the comparison of actual performance with pre-determined standards. In case of any deviation, the management can take measures to improve the result. All this is shown in a business plan. In the absence of a business plan, the manager will have no criteria for controlling actual performance.
10. This industry analysis should include:
A good business plan includes a background and overview of the industry and important trends, key success factors, as well as a vision for the future. This gives the financier an open overview. It shows the attractiveness of the business.
Important elements of a business plan
1. Executive Summary- This part includes the management structure of the business and it revises the company’s mission statement.
2. Products and Services- This section seeks to detail the services or products that the business offers or intends to offer in the market.
3. Market Analysis – The business must demonstrate a thorough understanding of its market. Remember that the Bible says there is nothing new under the sun- (Ecclesiastes 1:9) so business is not unique in that trends affecting business have already been experienced by others.
4. Marketing Strategy- The business should show how it intends to retain its customers and reach new customers.
5. Cash Flow – This should include historical financial projections for start-up or existing businesses.
6. Budget – A budget is essential to show investors or banks how the business intends to use the funds.
It takes a lot of quality time to create a good business plan that speaks to your business. It is always better to engage experts to draft a talking business plan. A failure to plan is a plan to fail. There is no other option but to have a business plan to run a smooth business. A business plan should be followed to make a business successful, not just stick to it. I encourage business leaders to hire professionals like this author to do their business plans.
There are many investors in Zimbabwe who are looking for where to put their money but they sometimes fail to find businesses to put their money. I have been approached by many potential investors who are hungry to invest in this country and my encouragement to businesses is to have proper business plans, cash flow, books of accounts and systems. Banks and investors also want to invest their funds in a company that has an efficient and effective business plan that clearly shows its financial projections and projected business success prospects.
Francis Chitambira is the founder of Smartfiscal Consultants – a business advisory firm. He is a business consultant, entrepreneur, business educator, tax consultant and business developer. He is interested in marketing along with agriculture. Cell/whatsapp him: +263775844941 or Email: [email protected]; can be contacted at Website: www.smartfiscal.co.zw