There are thousands upon thousands of small businesses that have failed, for the simple reason that they have lacked the ability and or discipline to lay out the strong foundation of a successful business enterprise; that is a well thought out and laid out business plan.
Having a brilliant business idea on its own and having the courage to go after it are tragically not enough determinants of success in business.
What are the key elements in a bankable business plan document?
A bankable business plan should read like a very good and compelling story and should answer a few basic but fundamental questions.
- It must capture the imagination of an investor or lender by addressing the what? for who? why? how? when? and by whom? questions about your business.
- What do you want to do and what do you want to achieve? -What is the product or service that you are bringing onto the market? What is your business case?
- To who are those products or services going to appeal? Describe clearly your target market? Define your competition accurately if there is competition?
- Why are you deciding to get into business? What is your motivation? Why do you think the product will be successful? What is your unique value proposition?
- How do you want to do it? Through what structures and mechanisms and channels will you deliver the product or service to your chosen market? What resources will be required to achieve all of the above? These will be mostly financial resources, but will also include equipment, people and other resources that you will need to execute the plan.
- When will you act on and do certain things to see your business idea through? You must give specific details on the timelines for achieving each of the various elements of the business plan.
- By whom? Specify the people who will execute various elements of the business plan so that the laid-out objectives are achieved and there is clear accountability in your plan.
What, therefore, are the key pillars of a bankable business plan?
From the above it is clear that while there is no single rule about how and in what exact order the above questions should be answered, the general rule is that a business plan should cover three main elements or pillars.
The business plan should be very precise about what the value proposition of the business is. It must outline an understandable business model and the first two pillars lead to a detailed financial plan that is consistent with both the value proposition and the business model.
The value proposition — The business plan must outline a very clear value proposition. What is the product or service that you are bringing into the market and what are the unique selling points that you have to make it a success?
This will tell the readers of your plan and also convince yourself as the entrepreneur that this thing will work for sure.
The value proposition tells the banker or investor, why you believe that the business will actually make money?
The business model — How will your product service, etc., be delivered? How do you envisage the business to work functionally? This is the nuts and bolts of your business.
You must demonstrate that you understand your business model because it is the business model will tell the banker how you will make money?
The financial plan — This is the picture that shows the colour of your money. How much money will be required for setting up? How will this money be sourced and acquired? Who will provide what resources? At what cost, will these resources be obtained? What assets the business will purchase and use to generate sales. How much revenue or cash flows will be generated? What will be the profitability of the business over various time periods? Amongst a host of other pertinent questions.
Author: Gesture Chidhanguro