BUSINESS PLAN

The Modern Business Plan – How Business Plans Have Changed

Kurt GraverBusiness Funding, Business Plan

The last economic crisis profoundly impacted how entrepreneurs and business owners finance their businesses and write business plans.  Higher interest rates mean it will be harder to secure a business loan.

Banks have been reluctant to lend money to start-ups without offering significant collateral against the loan. Despite all the publicity that they are lending more money than ever, banks are still assessing loans based on the CAMPARI model used for the past 200 years. This rules out 95% of entrepreneurs.

The government has created several new start loans and hundreds of grant opportunities. The criteria for the loans and grants are usually restrictive, and most grant funding has to be matched by the business. Applications for some of these schemes can also take up to a year.

Due to the difficulty in obtaining capital from institutions, Angel Investors & Crowdfunding have emerged as the most likely sources of external funding for entrepreneurs.  Venture Capital and Corporate Venturing are still options limited to a small percentage of high-growth technology companies.

The financing of new businesses has shifted from institutional capital to personal capital. Angel Investors and crowdfunders invest their own money into businesses. They do this because they are either interested in the business or believe in the entrepreneur.

The mindset of an angel is different from that of a bank, which wants to know if they will get their money back. Angels do it for the fun and potential return they may get back. This means you require a different type of business plan, one that is engaging, presents an attractive proposition for the investor and a plan that you can highlight your ability to make the business a success.

What is different in modern business plans

Gone are the days when you need a 60-page plan; nowadays, a business plan should be no more than 30 pages. However, the quality required is much higher. Your plan has to be slick, concise, well-researched and tailored to the specific requirements of your audience.

What is essential for a modern plan is the entrepreneurs and management team have to show their personalities.  Business angels and crowdfunders are just as likely to base their investment decisions on the people who will run the business just as much as they would base their decisions on the business itself.

Graphs, infographics and images capture the potential investor‘s imagination. While still having to be practical and prudent, good business plans give the potential investor a glimpse of what could be possible in the business.

The useful life of the modern business plan is shorter. Most plans change within a few weeks. A business plan is a live document that needs to be changed throughout your investment journey.

What is the same in modern business plans?

A business plan is about results; a well-formatted and presented plan that is not executed is worth nothing. A poorly formatted plan that is well-executed creates business value.

A business plan helps you focus your business; anything that helps you to analyse and review your business and its performance is beneficial. Updating a business plan should be part of an ongoing business process.

Planning isn’t accounting. Even though the projections look like accounting statements, the context is completely different. No one expects you to hit the exact numbers in the plan. The important part is that the numbers can be substantiated, and you understand what is required to achieve those numbers. In essence, the financials are an educated guess.

Overall, the modern business plan should reflect the current business environment.  It should be concise, complete with relevant information, accessible anywhere, and highlight your ability to run the business and make it a success.  

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