Why Business Plans Are Not Funded
Failure is guaranteed if a man does not understand the formula for success and does not apply it correctly. I say this without hesitation and I speak from experience in this area. He can be sure that there is a formula for success in all of life’s endeavors and ignorance of the law is no excuse. The fact that some of us are wise in areas of our success and fools in other areas where we experience failure shows that we all have something to offer each other. The same principle applies when it comes to fundraising. If you don’t know the secrets to successful fundraising, you’ll need an expert to help you learn and master the techniques to gain well-grounded knowledge for future success. One thing is certain, you don’t want to become like the masses who are unconsciously incompetent on this subject, often going to banks and investors with poorly prepared business plans only to face 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 successfully raise funds and do it very quickly. The key to successful fundraising is that your business must be ‘invest-ready’. Unless you have green lights in all of these areas that I will cover soon in this article, you will be faced with numerous challenges and will not be able to raise funds.
The secret to successful fundraising for business growth was revealed to me while working for many years with financial institutions that funded businesses, in my role as Financial Advisor and Evaluation Manager, spending 50% of my time reviewing and analyzing business plans to obtain financing. and the remaining 50% manage post-financing customer relationships to ensure they meet financial covenants. I can honestly tell you that many of the companies that were constantly fundraising were using the same tried and tested systems. Those who were challenged frequently used a multitude of different systems and barely understood why they were unsuccessful, often using meaningless claims to back up their ignorance. You are warned not to fall into the category of the latter group and by reading this article you will put yourself one step ahead of the rest.
Here are the top five reasons a business plan will be turned down for funding:
1. The marketing strategy shows that the company lacks a competitive advantage in its industry or that the company lacks a strong marketing strategy and is likely to fail.
2. The management team is inadequate and in some cases lacks the necessary skills for business success.
3. The business strategy is not clear with the risk of exposing the funder’s capital to losses.
4. Financial projections are based on fairly optimistic assumptions, which when stress tested show that the business will fail if the most likely outcomes materialize in the market.
Unless your business has a plan in place to address all of the above issues, if they arise in your business, you are guaranteed to fail your fundraising effort. The reason is simple; The business plan is a management tool that funders use to perform their due diligence on businesses that need their hard-earned money. Sponsors have a variety of tools they use to assess a business’s viability for financing, and unfortunately, many small businesses are clueless to these evaluation techniques for financing decisions. This means that many companies are not investment ready when they approach a funder and are surprised that their time and money was wasted in producing the business plan. Unless small businesses understand how they are assessed for funding, the risk that businesses will be unable to raise funds for growth, even with the proliferation of government-backed loans, will continue to rise.
In conclusion, before you as a business owner or manager approach lenders or investors for financing, you are advised to make sure you take the points I have shared with you in this article very seriously. If you’re having trouble with the technical details of business planning, seek professional help from experts, as you’re more likely to get the financing you need with the right business support solution than trying to go it alone and running into trouble. rejections
I wish you much success in your business financing process and keep reading my articles on this subject and on management issues in general.