10 Jun How a professional business plan can grow your small business
Growing a small business requires capital, and that capital usually comes from either a bank loan or outside investment. Securing the financing necessary for growth can be tricky and depends heavily on a carefully devised growth plan supported by well-researched numbers and financial modeling. A clear and professionally-written business plan is the perfect tool for small business owners to use when seeking growth funding.
Expanding a small business requires hard work, dedication and money. In order to capture new customers or increase per-customer revenue generation, small business owners first must understand their market through intense research. This is true whether an owner wants to diversify their product offerings, expand into new geographical regions, or understand their clientele better to sell more to existing customers.
And proper market research is not cheap. While the exact price of market research varies depending on an owner’s need, finding and analyzing credible and detailed market information to identify market needs requires considerable time and effort, explains Marianella Manzur, commercial vice president of Joorney Business Plans.
With a growth plan underpinned by up-to-date and reliable market research, business owners looking for financing often face a choice between taking out a loan or bringing in outside investors. There is no right or wrong way to pursue financing, but different audiences will expect different things from a business owner looking for capital.
Applying for a bank loan is typically a straight-forward process says Gerald Padilla, Joorney’s vice president of sales and marketing. “Lenders will go through a checklist with set criteria when choosing whether or not to approve a loan. Things like having a good credit history and collateral, if the owner is looking to borrow a large amount, are important,” he says.
Seeking investment can be tricker because it is hard to know what might inspire an investor to back a company. “Some investors are simply looking for a great idea, others care most about the company’s financial projections, while others might just want to invest because they think the team is strong even if the business currently seems a little weak,” Padilla explains.
One thing that will help any business owner secure financing is a solid understanding of how much capital they need and why. Whether preparing a loan application or an investor pitch, is it important for a business owners to consider an itemized list of how the money will be spent. Normally, the first question investors will ask is how the money will be spent and why.
With a proper feasibility analysis, it is easier for entrepreneurs to understand how much they need and how they will spend it, which will strengthen their case to investors for why they need a capital infusion. And there is no better way for an owner to lay out their case than through a business plan. It is important to note, however, that not all business plans are created equal. Often, when owners try to write plans themselves, they use templates and attempt to conduct market research online using sometimes questionable sources.
“When looking for financing, owners need an updated business plan with the most recent market research and industry analysis available,” Padilla says. “With a professional business plan, an entrepreneur has a guarantee that their projections make sense, based on a working financial model and solid research, thus adding credibility to their proposed project.”