Some have been asking me why banks often reject their loan applications. There are many reasons that banks may use to reject an application. These range from lack of adequate collateral, wrong cash flows, or an unconvincing business plan. I feel it is of paramount importance for me to explain more on a convincing business plan. The business journey is indeed rewarding and also a voyage of discovery. We live in a world that is governed by laws. Failure to observe the law pertaining to a certain aspect means failure in that line. Business is not to be spared as well. There are laws of success that govern business.
In order for the business venture to grow and be sustainable there is a need for proper planning. There is a popular adage “Failing to plan is planning to fail” (Benjamin Franklin), this adage may sound like music to your ears but business planning is a key area which zeroes in on the importance of planning for any project. Sadly, this planning step is often overlooked and the result is always devastating.
There are many opportunities and ideas that are not seeing the light of day because they have not been planned properly. A business plan is a prerequisite to anywhere worth going in terms of business idea.
A business plan is a well-defined road map that details how a business will achieve its objectives and goals, whether it’s a start up or an existing business that is planning for the following periods. It has to be clear on its strategic intent and the action plan thereof. The plan has to have a summary of what if key intention is and then detail how key aspects such as structure, operational plan, marketing, financial. Having a 3-to-5-year horizon is always better as we all want to build generational businesses.
Many people only draw up a business plan because they want to get funding from a bank, and they end up using some so-called consultants to come up with such a key document, they usually pluck if off some similar documents or off the internet that may not have a fit with your own idea. I encourage entrepreneurs to come up with their own business plan as this forces them to think through the major aspects of how the business is going to evolve. This usually helps to fine tune some key assumptions that might mislead the entrepreneur to think the idea works in a certain way , whereas, sitting down to put it all together will give clarity on the best way forward.
Therefore, a business plan, whether for funding or not, is the key guide to a implementing for success.