Some have asked me why banks often reject their loan applications. There are many reasons banks can use to refuse an application. These range from a lack of adequate security, incorrect cash flow or an unconvincing business plan. I feel it is extremely important for me to explain more about a persuasive business plan. The business trip is indeed rewarding and also a journey of discovery. We live in a world governed by laws. Failure to comply with the law in relation to a certain aspect means failure in that line. Business is also not to be missed. There are laws of success that govern business.
In order for the business to grow and be sustainable, there is a need for proper planning. There is a popular proverb “To fail, plan to fail” (Benjamin Franklin), this proverb may sound like music to your ears, but business planning is a key area that considers the importance of planning for any project. Unfortunately, this planning step is often overlooked and the result is always devastating.
There is a lot of money in Zimbabwe that can be exploited by businesses if they plan well. Some good business ideas die, just 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 a company intends to achieve its goals and objectives. It seeks to lay out a written road map for the firm from marketing, financial and operational points of view. Both startups and established companies use business plans. A business plan is a document that shows strategic action items. Planning involves setting out the objectives of the enterprise for a given period of time and formulating various actions to achieve those objectives by selecting the best possible options (or alternatives) from the various activities available. It is about both goals and that is: what should be done and how it should be done. It bridges the gap between where we are and where we want to be. It is a rational approach, in which all the members of the organization must 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 a summarized structure of the business. For running a smooth business there is no other alternative than making a business plan. Depending on the sector, a business plan can sometimes be referred to as a business proposal, investment prospectus, business plan, loan proposal, etc.
Uses of a business plan
It is used by financiers and investors. For example, banks want to see how the company can achieve its goals. The plan is used to attract investment before a company has established a proven track record. Thus, it helps in securing loans from financial institutions. For large organizations, a business plan can serve to keep a company’s executive team on the same page about strategic action items and on target to achieve established goals. They are so useful especially for beginners because they show the way. Ideally, the plan is periodically reviewed and updated to reflect goals that have been achieved or changed. Sometimes a new business plan is created for an established business that has decided to move in a new direction. It gives direction to the business. A business plan reduces the risk of uncertainty. This reduces overlapping and wasteful activities. Planning promotes innovative ideas. Decision making is made easier. Planning 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 necessary for them to make business ideas succeed, and it also helps them achieve short-term and long-term goals. Even though it is essential to have one, some entrepreneurs are reluctant to put it in writing. They believe that every day should be different from the others and others also think that they are guided by the course of the economy, especially in a hyperinflationary environment like the Zimbabwean economy. However, excellent business ideas can be useless if you cannot formulate, execute and implement a strategic plan to make your business idea work. If you are looking for funds from institutional investors and lenders, keep in mind that a good business plan is extremely valuable. The goal is to have a well-documented plan that speaks for itself. It should be clear and easy to read and understand.
2. To raise money for your business
Potential investors or lenders want a written business plan before they give you money. In Zimbabwe, so many businesses have collapsed before and to reduce risk, investors, banks, etc. a business plan to see if the Management knows the core of their business. A mere description of the business concept is not enough. The plan must have a thorough business and financial plan that demonstrates the likelihood of success and how much the business needs to be successful in the long term.
3. To make healthy decisions
In addition to the banks, a business plan serves as a guide for the entrepreneur. Deviation from the guide is kept to a minimum. Having a business plan helps you define and focus on your business ideas and strategies. Because a plan touches many facets, the entrepreneur will not only concentrate on financial matters, but also on management issues, human resource planning, technology and creating value for the customers.
4. Identifying any potential weaknesses
Having a business plan helps you identify potential pitfalls in your idea. You can also share the plan with others who can give you their opinions and advice. Identify experts and professionals who are in a position to give you valuable advice and share your plan with them. Even banks can tell you about the risk associated with your business when you apply for a loan.
5. Communicating 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 convince people to work for your company, obtain credit from suppliers and attract potential customers. For an international company that wants to invest locally, ZIDA requires a well-written plan for them to license the entity. For special licenses, e.g. Telecom licensing regulatory bodies also look at the business plan and the business proposal.
6. Creating a business plan involves a lot of thought.
You should 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 in reducing the chance of failure. Plus, 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 risks of uncertainty
Planning helps the entrepreneur to look ahead and anticipate changes by deciding in advance what tasks need to be carried out. The business plan shows the way to deal with the changes and uncertain (Unexpected) events. Changes or events cannot be eliminated (removed), but they can be expected (predicted), and management responses to them can be developed in advance. So mitigate the impact of the risk.
8. Planning reduces overlapping and wasteful activities
A good business plan should show a coordination of efforts in the various divisions, departments and individuals. It should also ensure clarity in thinking and action and help to work smoothly without interruptions. It should show stakeholders like the Bank that confusion, misunderstandings, useless activities are minimized. This makes it easier to detect inefficiencies and reduce workload.
9. A good plan establishes standards for control
Control involves a comparison of actual performance with predetermined standards. In case of any deviation, the management can take remedies to improve results. This is all shown in a business plan. In the absence of a business plan, a manager will have no standards to control actual performance.
10. It should consist of Business Analysis:
A good business plan consists of a background and overview of the industry and, along with the significant trends, key success factors, as well as an outlook for the future. This gives an open overview to the financier. It shows the profitability of the business.
Important elements of a business plan
1. Executive Summary- This part includes the management structure of the business plus it invests the Mission Statement of the Company.
2. Products and Services- This section seeks to expand the services or products that the business offers or intends to offer to the market.
3. Market analysis- The business must show that it fully understands its market. Remember the Bible says there is nothing new under the Sun – (Ecclesiastes 1:9) therefore the business is not unique, the trends that affect the business have already been experienced by others.
4. Marketing strategy- the business must show how it intends to retain its customers and to reach new customers.
5. Cash Flow- This should include financial projections for startups or historical for existing businesses.
6. Budget- A budget is essential to show the investors or the bank how the business intends to utilize the funds.
It takes a lot of quality time to make a good business plan that addresses your business. It is always good to involve experts to prepare a Talking Business Plan. FAILURE TO PLAN IS TO FAIL. For running a smooth business there is no other way than making a business plan. A business plan must be followed to make the business succeed, it must not just be scrapped. I encourage business leaders to approach professionals like this writer to do their business plans.
There are so 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 several prospective investors who are hungry to invest in this country and my encouragement to businesses is to have proper business plans, cash flows, books of accounts and systems in place. Banks and investors also like to invest their funds in a company that has an efficient and effective business plan that clearly shows its financial projections and its chances of getting success in the projected business.
Francis Chitambira is the founder of Smartfiscal Consultants – a business advisory firm. He is a business consultant, entrepreneur, business teacher, tax consultant and business developer. He has interests in agriculture as well as marketing. He can be reached at cell/WhatsApp: +263775844941 or email: [email protected]; website: www.smartfiscal.co.zw