The business plan your banker wants to see must bring your aspirations to life and show how you will turn them into a winning business proposition, but a ‘smoke and mirrors’ approach will not do the trick. Hard facts and accurate figures, underpinned by a healthy dose of realism, are far more likely to achieve results.
Many people dread the task of preparing a business plan, because they think that it is beyond their capabilities. They seek the services of a professional business plan writer, but this is not the best way to do it. Compiling the business plan yourself will not just save you money, but there are also far more important considerations at stake. Working on your business plan will open your eyes to potential flaws in the concept when it is still easy to implement corrective measures.
There is something else you need to consider. The professional business plan writer may well write a literary masterpiece complete with bells and whistles in the form of charts and graphics. Although this may dazzle the reader at a superficial level, it is not a winning proposition. Here is why:
- The people who will screen your business plan have seen it all before. They are unlikely to be impressed by a few moving pictures.
- Writing skills and graphic wizardry cannot make up for the one ingredient that is needed to bring your business plan to life, namely your DNA.
- Because you didn’t write the plan yourself, it wouldn’t be your plan and you wouldn’t be able to present it with passion. When you come face to face with the banker, you will read it out parrot style and the banker will be less than impressed.
- Contrary to a widely held belief, convincing the banker to grant you a loan isn’t the only reason why you need a business plan. Once your business is up and running, the business plan will become your road map guiding you towards business success. Unless you have drafted it yourself, you won’t feel the necessary commitment to convert figures on paper into cash in the bank.
Remain factual throughout
There is a widely held belief that business plans must be substantial documents, often commencing with a review of the early life of the brand’s founder. This is overkill and may even undermine the plan’s impact. Because salient information is buried under a mountain of irrelevancies, it could easily be overlooked. Let your passion shine through, but don’t waffle.
The franchisor will have a great deal of useful information on customer demographics, site selection criteria and operations. You can use this information, subject to two provisos:
- Make sure that the data you receive is relevant to your situation. The data should originate from a business of similar size that is located in an area with similar demographics and competitor activity.
- Don’t accept information at face value. You will be investing your own money and it will be your responsibility to make a success of the business. It is only reasonable for you to verify everything. No responsible franchisor would want it any other way.
Bankers are busy people and routinely have to look at several business plans a day. What they do want to see is a document of approximately six pages that tells them precisely what they need to know, nothing more and nothing less. Detailed projections and other supporting documents, including your CV and copies of the franchise agreement and other important documentation, can be included as appendices.
Arrange the actual text as follows:
- Title sheet (which should include contact details).
- (1) Executive summary.
- (2) Introduction to the franchise brand and its standing in the marketplace.
- (3) Introduction to the new outlet, its management and proposed staff complement.
- (4) Details of the product and/or service and its target market.
- (5) Details regarding product sourcing, marketing, sales and distribution.
- (6) Financing requirements and proposed deal structure.
- (7) Key financial data and projections.
- (8) Summary.
When you write the summary, don’t be shy to reiterate that, although you cannot guarantee that you will achieve identical results:
- the financial projections you provide are realistic because they are based on the actual performance of similar outlets within the network you are about to join; and
- the combination of your passion for the business and the franchisor’s initial and ongoing support will go a long way towards achieving its success.
Templates for the creation of a business plan and cashflow projections can be downloaded free of charge from the Nedbank website. All financial projections should extend three years into the future.
To find out more about the services Nedbank Franchising offers contact the business manager at the area office nearest to you. For contact details visit www.nedbank.co.za or your nearest Nedbank branch.
Written by Mark Rose of Nedbank and Eric Parker of Franchising Plus. Copyright rests with the authors.