Bank finance articles and tips

When starting a new business, it is essential to have a viable business plan for your new venture. A good business plan helps you gain the requisite financial support from your creditors and bankers, garner support from your customer base and focus your efforts on what is important.

It also helps in clearly defining your long term objectives and in ensuring smooth operation for your business. Therefore, it is important to understand what information you should include in your business plan and how to portray your financial predictions.

The target audience for your plan
Creating and managing a realistic business plan has many benefits, even if you plan to use it within the company. It can:

1. Help you identify potential pitfalls and risks before they happen, thus giving you the opportunity to avoid them
   
2. Enable you to structure the financial side of your business efficiently
   
3. Focus your efforts on what is important to your business
   
4. Be used as a measure of your success and can help you track your progress
   

The majority of people view a business plan as a document used merely to secure external financing. This is of course very important since potential investors, such as banks, may invest in your business idea and work with you or lend you money as a result of the quality and strength of the business case presented in your plan.

A number of people or institutions may request to review your business plan at some stage of the business cycle:

1. Banks
   
2. External investors such as friends, venture capitalists or business angels
   
3. Grant providers
   
4. Potential business partners
   

Irrespective of the objectives of your business plan and who is likely to use it, it should still take an unbiased look at your business. Failure to do so may result in loss of confidence in your business idea or projection forecasts.

Please remember that a business plan is a living document that will require regular reviewing, updating and changing as your business evolves.

Your Plan

The following are to be included:

The Executive Summary:
The executive summary is the most important section of any plan. It is usually placed at the start of the plan. It is the first to be read and the last to be written.

Based on this part alone, interested parties such as banks and venture capitalists make their decision whether a business plan is worth further consideration considering for funding or not.

It represents a brief outline of your whole business proposal and should avoid all the technical jargons so that people unfamiliar with your business can understand it.

1. Your executive summary must highlight these five areas:
   
2. It must talk about your products/services and its advantages.
   
3. Your prospects in the market.
   
4. The management team responsible for your business.
   
5. Your performance record to date.
   
6. Financial predictions, funding requirements and your expected returns.
   
7. Creditors and bankers, when deciding whether or not to finance your business usually make judgments based on the executive summary.
   

Your business

You must include a detailed background of your business such as the length of time involved in the development of the idea, your relevant experiences and the planned ownership structure of the business.

1. Elucidate clearly what your product/service is all about:
   
2. Make it clear how it is different from other products/services.
   
3. Explain what or how your potential customer base will gain through your product/service.
   
4. Point towards the dynamic nature of the business to suit future customer needs.
   
5. Cover a few weaknesses of your business; this is important in building confidence. Detail the current key features of the industry such as major changes in technology or effective cartels etc.
   

When describing your products and/or services, make sure you cover the following:

1. what makes your products and services different
   
2. what benefits they offer
   
3. why customers should consider buying them
   
4. how you plan to develop, produce and deliver your products or services
   
5. state if you have any patents, trademarks or design rights
   

The full version of the "How to Develop a Business Plan" ebook, available from most book stores, helps you learn how to:

1. identify your target audience for your business plan
   
2. write a good plan
   
3. appreciate the importance on an Executive Summary
   
4. present your business plan
   

Dr Jim Porter is a chartered engineer by profession, qualified to a PhD level from London University, with more the 25 years business experience. He has worked for several multinational companies in Europe and the USA. His experience stretches from new products development, project management, new business building, profit and loss responsibility, to the creation of several successful joint ventures and acquisitions.

Currently, he is a senior executive, responsible for strategy development and growth initiatives, including partnerships and new businesses building. Dr Porter is particularly interested in business incubation, helping entrepreneurs and start up business owners to achieve their personal and business objectives.

Dr Porter is the author of several publications and the creator of "Entrepreneurs Brief Guides" series. Dr Porter is a Fellow Member of several professional organizations and institutions in Europe and the USA. He can be contacted on his email [email protected].

By Dr Jim Porter