Monday, 19 March 2018

Information and commentary for the small business banking industry

Don’t be fooled – you need a business plan

05 Sep

By Tim Grey

Barely a month goes by without someone declaring the business plan dead. They normally have roughly three months of sustained cash flow on record, a host of connections that mean they’ve never had to go to a bank in their entire life, and a friend in the media who needs to fill a space really quickly.

Like clockwork, they appear in the media noise as regularly as double-dip recession warnings, touting the fact their start-up was (allegedly) founded on nothing more than a slick concept and a post-it note.

But what they’re saying is actually about as substantial and durable as the machined rips and artificially faded color in their over-priced denim.

They propose a world where businesses are pitched in a few sentences like the plot of a Jerry Bruckheimer movie. (“It’s a bakery, but here’s the kicker – we actually bake snakes. On a plane.”)

A world in which lenders are so reckless, all they need for a sign-off is a mission statement on the back of a napkin.

It’s not hard to envision that world. You know why? Because it actually existed. It’s called 2006 and it led to the global financial crisis.

Now more than ever, small businesses need to inspire confidence to get off the ground, and well-written, diligently researched business plans are still the best tool for the job.

The bottom line is that if you want to go into business for yourself, you have to at least prove you’ve done your homework on cash flow.

Something like up to 80% of once-profitable businesses go under because of insufficient cash flow – and lenders and seasoned investors know this. This is why a five-page brief containing a sales estimate and an executive summary ain’t going to cut it, let alone a document that’s shorter than the average CV.

Nope, the business plan is here to stay. Styles and formats may change, but the detailed business plan showing due diligence and accurate research is not going to go away.

It may be a bit “20th Century”, a bit “old-hat” and it’s not short enough to fit into a Facebook status, but given current trading conditions, I’d rather walk into a bank with a chunky business plan under my arm than anything else.

And somehow, I think that’s still going to be true in a year, a decade or a century from now.

So dust off your inkwell and quill – or, even better, find a credible business plan template like this one – and get started. It’ll take you more time to complete than writing a few words on the back of the napkin, but the results will far outweigh the effort.

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