Why Business Plans Don’t Get Funded
Failure is guaranteed if a man does not understand the formula for success and apply them correctly. I say this without any hesitation and I speak from experience in this area. You can be assured that there is a formula for success in all endeavours of life and ignorance of the law is no excuse. The fact that some of us are wise in areas of our success and foolish in other areas where we experience failure goes to show that we all have something to offer each other. The same principle applies when it comes down to raising securing funding. If you do not know what the secrets are for raising finance successfully, then you will need to get an expert to help you learn and master the techniques to obtain a well-grounded knowledge for future success. One thing is certain, you do not wish to become like the masses that are unconsciously incompetent in this subject, often running to the banks and investors with poorly prepared business plans only to be faced with failure. In this article, I will now provide you with an insight into the world of writing an effective business plan for funding to help you raise finance successfully and to do so very quickly. The key to raising finance successfully is your business needs to be ‘Investment Ready’. Unless you have green traffic lights on all these areas I will soon be covering in this article, you will be met with numerous challenges and not be able to raise funding.
The secret for raising finance successfully for business growth was revealed to me whilst working for many years with financial institutions awarding funding to businesses, in my role as a Financial Advisor & Appraisal Manager, spending 50% of my time reviewing and analysing business plans for funding and the remaining 50% managing clients’ relationships post funding to ensure they comply with financial covenants. I can honestly tell you that many of the businesses that were consistently raising funding, used the same tried and tested systems. Those who frequently had challenges were using a multitude of different systems and hardly understood why they were unsuccessful often using petty claims to support their ignorance. You are being warned not to fall into the category of the latter group and, reading this article will put you one step ahead of the pack.
These are the five top reasons why a business plan will be rejected for funding:
1. The marketing strategy shows the business lacks competitive edge in its industry or the business lacks a robust marketing strategy and is likely to fail.
2. The management team is inadequate and in some cases lack the competencies required for business success.
3. The business strategy is unclear with the risk of exposing the funder’s capital to losses.
4. Financial projections are based on a rather optimistic assumptions, which when stress-tested show that the business will fail if the most likely outcomes in the marketplace materialised.
Unless your business has a plan to address all the above problems if they emerge in your business you are guaranteed to fail in your bid to raise funds. The reason is simple; the business plan is a management tool that funders use to carry out their due diligence on businesses that need their hard earn cash. Funders have a range of tools that they use to assess the viability of a business for funding and sadly many small businesses are clue-less about these evaluation techniques for funding decisions. This means that many businesses are not investment ready when they approach a funder and are shocked that their time and money producing the business plan has been wasted. Unless small businesses understand how they are evaluated for funding, the risk of businesses being unable to raise finance for growth even with the proliferation of government backed loans will continue to increase.
In conclusion, before you as a business owner or manager approaches lenders or investors for funding, you are advised to ensure you take on board the points I have shared in this article with you, very seriously. If you are challenged with the technical details of business planning, by all means, seek professional help from experts, as you are more likely to obtain the funding you need, with the right business support solution than attempting to go it alone and be faced with rejections.
I wish you great success with your business funding journey and do keep reading my articles in this subject area and management issues in general.