There is a popularly-held misconception that all you need to get funding is a good business plan.
Entrepreneurs with even only a few months’ experience will agree that flogging that business plan around to potential funders has probably resulted more in disappointment than money to pursue their business dreams.
Miemsie Rautenbach, the Mpumalanga hub manager for Anglo American’s Zimele enterprise development programme provides some insight. Zimele provides funding and support to entrepreneurs, especially those that feed into the group’s supply chain, job creation and sustainability.
Q: What are the most important things you look at when evaluating a business plan?
A: The financial projections and we also interview the entrepreneur to make sure the necessary homework has been done on the business they want to start.
Q: How important is the maturity (track record) of the business or business owner?
A: This is very important that the owner must be part of the business at all time. If the entrepreneur is not passionate, the business is bound to fall.
Q: What are the red flags that show the business may not be viable?
A: Most importantly, unrealistic figures show that the business plan and concept are not based on reality of the market and the business’s ability to enter that market. The business location is another important consideration because it has been close enough to its market to service it sufficiently.
Q: How much detail do you expect in business plans used as motivation for funding?
A: The financial projections and operational plan need the most detail as these will show up any pitfalls or that the entrepreneur has not given the necessary thought to these critical elements of any business.
Q: What advice do you have for preparing a business plan to motivate for funding?
A: Do your research and know the industry you are going into. Be realistic about the potential to enter into the market, and especially about the income you will generate - especially when the business is only starting out.
Key take-away: Your business plan, and especially the financial projections have to be based on reality. Simply showing big numbers does not mean they are achievable or that people will feel compelled to give you funding.