Making Your Business Plan a Success

Although a business plan is an essential document when applying for bank loans, just because you have a plan does not ensure you will get your loan.

To realise your dream of starting and managing your own business you'll need to ensure that the idea you have stacks up and your financial plans are realistic and detailed so any questions you can answer straight away.

Assessing the Risk

Banks are assessing the risk of lending to you and your business and there are just a few things they concentrate on when looking through your plan. Mainly it's about *you* and your team, their experience and if the bank will receive all their loan back with interest. That means not only does your business need to succeed but your business plan needs to show the path to realistic profitability.

Banks see thousands of plans each year so yours needs to be good and here are the top five reasons why new businesses get rejected for loans, mainly because of their business plan but also because of the idea and the people behind it.

Mistakes Successful Plans Avoid

You can avoid all errors of judgement if you know what to look for when developing your plan. The top five areas where things go wrong are as follows:

  • The format of the plan is not in the correct order.
  • Your financial forecasts are unrealistic.
  • Some key sections are missing.
  • The product or service idea is critically flawed.
  • The management team lack the right experience.

Here are those areas in more detail.

The Plan is Not Formatted Correctly

Bank loan staff must have to read hundreds of business plans in any year so they are used to a particular format, and they know what they are looking for (see below). It's no use going to meet your bank armed with a 200-page document that no one is ever going to read as it's a waste of your time and theirs.

Additionally if you only have a couple of pages with you, they may think you're not serious about your business idea and of course, it won't cover the essentials. Overall around 20 pages will suffice. You can download a template from the Teneric site that includes all the essential areas and is the formats banks want to see.

The Financial Plans Are Unrealistic

The most important part of creating a business and a business plan are the numbers and financial plans. If you've ever seen the BBC programme Dragons' Den, then you'll know what financial numbers investors want to look at and banks are no different.

If you can reel off the top of your head your revenues, profits and margins for the next three years, then you may be halfway there.

But most new entrepreneurs think their business is going to take over the world and be generating millions in just 18 months or so with a high percentage profit. Of course, only 1 in maybe 10,000 businesses will be successful this way, so be realistic.

The Plan Doesn't Contain Everything Required

Like the format section mentioned above, you need to cover off everything a loan clerk is looking for to analyse your proposal. They mainly want information about your products and services, information about you and your team and reliable financial forecasts that explain your business idea and why you need the loan.

It's best if you call in advance to find out what the bank is looking for in your plan so you can add in the required sections. One other way to ensure you have everything is to use a ready-made business plan previously developed for banks.

The Business Idea is Flawed

Of course, not every business idea is going to make a profit and banks know what type of businesses are the least risk and those that are the highest. You will know by writing your business plan if your idea is going to take off.

Starting a new company is hard work, and money and cash flow could be stressful in the initial months. Ensure your financial forecasts are realistic and present your ideas and numbers to family and friends for feedback - they will undoubtedly provide you with insight into your venture.

The people behind the business Are Inexperienced

Most new companies are successful purely because of the people behind them. In fact, most businesses *are* people businesses and if you and your team don't have the relevant experience, it's unlikely you'll get the loan, and it's questionable the venture will succeed.

There are ways of overcoming this by gaining the expertise or getting people on board that have the skills you require. These are all areas you can overcome. By spending time writing your business plan and developing sound financial plans you too can be starting your business and be successful.

Translating Your Idea Into Profit

There is no excuse for delivering a business plan that's not successful. So long as your idea is realistic, you can use business plan templates to guide you through the process of completing your document.