Among lenders there is a common complaint regarding entrepreneurs and small-business owners saying many of them have a hard time articulating a few important things about their new business, such as:
- What their business does
- Why they are seeking funding
- What they intend to do with the loan proceeds
- Who benefits from their gain
- How they plan on repaying the loan
Lenders and equity financers want to see entrepreneurs succeed. Entrepreneurs’ success also means that they succeed but they have to make sound, rational decisions about who they invest in. Entrepreneurs and small-business owners must give them something upon which to base their decision. A well thought out business plan is the ticket to impressing lenders and investors.
BUSINESS PLANS ARE LIKE RESUMES
It is unreasonable to just ask for cash and expect to get it. Those with the cash want to know it is going to a good place. Writing a business plan is like the resume of a new business. Lenders will look at thousands of business plans, not to mention they are busy people. Entrepreneurs need to impress them early with this document through a solid executive summary and complete financial statements (which are often ignored).
Thinking deeply about your business to write a solid business plan is not an easy task. Entrepreneurs are excited about their ideas and want to get going on many different things to get that idea rolling. But unfortunately, not all businesses take off and start making money right away. This does happen on occasion but a majority of the time some sort of strategic planning is required in order to make a business really take off. There is a significant difference in the success of entrepreneurs who deeply think about their business and those who do not.
In reality, the business plan is not a document created just once to appease lenders and gain necessary funding. It is a powerful tool and exercise for business owners to really understand their business and to recognize the gaps in their business model and themselves. And recognition leads to filling these gaps before they even become an issue as business begins to grow. The business plan is a teaching tool for all entrepreneurs and really leads to future success because those who do it truly understand the ins and outs of their business and know how to find resources to fill the necessary gaps.
There is no doubt that a business plan is beneficial to all business owners. And as we have talked about, not just from a financing stand point. Like all good things, the business plan requires time to complete. Templates exist to help expedite this process a bit but time is still required. As you begin to write your business plan, take the time to think deeply about your business. There is true value to be found in focusing on the process of writing your plan as well as the intended results.