Some of them asked me why banks often reject their loan applications. There are many reasons banks can use to reject an application. These include a lack of adequate collateral, incorrect cash flows, or an unconvincing business plan. I think it is really important for me to explain more about a solid business plan. The business trip is well worth it and it is also a trip of discovery. We live in a world governed by laws. Failure to observe the law relating to a certain aspect means failure in that line. Business should not be saved either. There are laws of success that govern business.
For the business venture to grow and be sustainable, proper planning is necessary. There is a popular adage “If you don’t plan you plan to fail” (Benjamin Franklin), this adage may sound like music to your ears but business planning is a key area that does not take into account the importance of planning for any project. Unfortunately, this planning step is often overlooked and the result is always disastrous.
There is a lot of money in Zimbabwe that businesses can take advantage of if they plan well. Some good business ideas are dying, simply because they lack proper business plans that can attract funding.
What is a business plan?
A business plan is a well-illustrated roadmap that shows in detail how a company plans to achieve its objectives and goals. It seeks to set out 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 setting out the objectives of the business for a given period and devising various measures to achieve those objectives by selecting the best options (or alternatives) from the various activities available . It concerns both ends and these are: what is to be done and how it is to be done. It closes the gap between where we are and where we want to be. It is a rational approach, in which all members of the organization must work to achieve organizational goals. In fact, everyone in the business should plan, try to keep a to-do list to achieve those daily goals.
It is a summary structure of the business. To run a smooth business there is no other option than making a business plan. Depending on the sector, a business plan can sometimes be referred to as a business proposal, investment prospectus, venture plan, loan proposal etc.
Uses of a business plan
It is used by financiers and investors. Banks, for example, want to see how the company can achieve its goals. The plan is used to attract investment before a company has a proven track record. It thus helps in getting loans from financial institutions. For large organizations, a business plan can keep a company’s executive team on the same page about strategic and goal-oriented action items to achieve established goals. They are especially useful for start-ups because they show the way. Ideally, the plan is reviewed and updated periodically to reflect goals that have been achieved or changed. Sometimes, a new business plan is created for an established business that decides to move in a new direction. It provides guidance to the business. A business plan reduces the risk of uncertainty. It reduces overlapping activities and waste. Planning fosters innovative ideas. Decision making is made easier. Planning establishes control standards.
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 also helps them achieve short-term and long-term objectives. Although it is essential to have one, some entrepreneurs are reluctant to put this in writing. They believe that every day must be different from the other and others also think that they are focused on the course of the economy, especially in a hyper-inflationary environment like the Zimbabwean economy. Great business ideas can be useless, however, if you can’t devise, implement and implement a strategic plan to make your business idea work. If you are trying to raise money from institutional investors and lenders, keep in mind that a good business plan is invaluable. The aim is to have a well-documented plan that speaks for itself. It must be clear and easy to read and understand.
2. Raising money for your business
Potential investors or lenders require a written business plan before they will give you money. In Zimbabwe so many businesses have collapsed before and to mitigate risk Investors, Banks, etc need a business plan. to see if the Management knows what their business is or not. A description of the business concept is not enough. The plan must include a thorough business and financial plan that shows the likelihood of success and how much the business needs to succeed in the long term.
3. Make sound decisions
Apart from the banks, a business plan acts as a guide for the entrepreneur. The deviation from the guide is minimized. A business plan helps you define and focus your business ideas and strategies. Because a plan involves many aspects, the entrepreneur will not focus only on financial matters, but also on management issues, human resource planning, technology, and creating value for the customers.
4. Identify 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 can give you invaluable advice and share your plan with them. Even banks can tell you the risk of your business when you apply for a loan.
5. Communicate your ideas to stakeholders-Viability
A business plan is a communication tool that you can use to obtain investment capital from financial institutions or lenders such as Banks. You can also use it to convince people to work for your business, get credit from suppliers, and attract potential customers. In the case of an International company that wants to invest locally, ZIDA needs a well-written plan to license the entity. Regarding special licenses e.g. telecommunications license regulatory bodies also look at the Business Plan and the business proposal.
6. Creating a business plan requires a lot of thought.
You need to think about what you want to do and use that as a starting point. It doesn’t have to be complicated. At the heart of the plan, 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 reduce the chances of failure. Moreover, even if you are not looking for investment, your entrepreneurial plans will fall flat quickly without a plan to guide them.
7. Planning reduces the risks associated with uncertainty
Planning helps the entrepreneur to look ahead and anticipate changes by deciding in advance the tasks to be done. The business plan shows the way to deal with the uncertain (unexpected) changes and events. Changes or events cannot be eliminated (removed), but they can be anticipated (predicted), and management responses to them can be developed in advance. Thus mitigating the impact of risk.
8. Planning reduces overlapping activities and waste
A good business plan must reflect the coordination of efforts in the various departments, divisions and individuals. It must also ensure clarity of thought and action and helps work smoothly without interruption. It must demonstrate to interested parties such as the Bank that confusion, misunderstanding and useless activities have been minimised. It makes it easier to detect inefficiencies and minimize work pressure.
9. A good plan sets control standards
Controlling involves comparing actual performance with predetermined standards. In case of any event, the management can take remedies to improve results. All this is reflected in a business plan. In the absence of a business plan, a manager will have no standards to control actual performance.
10. Industry Analysis must include:
A good business plan consists of a background and overview of the industry and, together with the significant trends, key success factors, as well as an outlook for the future. This gives the cashier an open overview. It shows the profitability of the business.
Important aspects of a business plan
1. Executive Summary – This section includes the management structure of the business plus issues 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 to the market.
3. Market Analysis- The business must show that it fully understands its market. Remember that the Bible says that there is nothing new under the Sun- (Ecclesiastes 1:9) so the business is not unique and other people have already experienced the trends that affect the business.
4. Marketing Strategy – the business must show how it intends to retain its customers and reach new customers.
5. Cash Flows – Must include financial projections for start-ups or historical for existing businesses.
6. Budget – A budget is essential to show the investors or the bank how the business plans to use the funds.
It takes a lot of quality time to make a good business plan that speaks to your Business. It is always good to hire experts to draft a Talking Business Plan. FAIL TO PLAN IS TO PLAN. To run a smooth business there is no other option than making a business plan. A Business Plan must be followed for the business to succeed, it must be put on the shelf. I recommend business leaders to contact professionals like this writer to make their Business plans.
There are so many investors in Zimbabwe who are looking for where to put their money but sometimes they don’t find businesses to put their money. I have been approached by a number of potential investors who are hungry to invest in this country and my encouragement to businesses is to have Proper Business Plans, Cash Flows, keep books of accounts and systems in place. Banks and Investors also like to invest their funds in a company that has an effective and efficient business plan that clearly shows their financial projections and their chances of success in the projected business.
Francis Chitambira is the founder of Smartfiscal Consultants – a business advisory firm. He is a business consultant, entrepreneur, business tutor, tax consultant and business developer. He has interests in agriculture as well as marketing. He can be reached by cell/WhatsApp: +263775844941 or email: [email protected]; website: www.smartfiscal.co.zw