The role of a business plan is to help you secure valuable finance for your business ventures, but the face of business has changed and plans have evolved with them. If you have used a business plan to secure finance in the last few years and are planning to do so again, you may want to revisit what you think goes into a plan.
The Changing Face of Business Plans
Undeniably, the face of business is a completely different beast from what it was twenty years ago. Factors such as a succession of global economic meltdowns has woken people up to the sheer fragility of the business world and made investors much more cautious. Before the crash, financial intuitions – primarily high street banks – were happy to hand out money, provided that the business could demonstrate liquidity and had a good and sound idea. Much less emphasis was placed on market research and provided that the business was in sufficiently good shape to repay a loan, then the funds were usually forthcoming.
But the turmoil of the late 1990’s caused by high interest rates, and the global meltdown of 2008 left banks unwilling to expose themselves to adverse risk. Lending and acceptance for borrowing became harder for businesses, and proof of liquidity more stringent. Investors demanded that business plans were far more comprehensive in their structure and content.
But this need was also driven by the changing face of finance. Venture capitalists and Angel Investors saw the potential to make money from good investments, but being intelligent business people, they wanted to be certain that the risk was minimised. While venture capitalists had operated in business for decades, they were often only concerned with multi-million-pound businesses, since the returns were potentially enormous. However, as the market for smaller entrepreneurs grew, so Angel Investors became interested.
Evolve to be Relevant
Regardless of the fact that smaller projects may require less investment, private investors are probably even more cautious than Highstreet lenders. It’s their own money and not only do they want to see a return, they want to see a healthy one. This means that when they ask for a business plan, it had better show everything.
Business plans have had to evolve because of this. Take SWOT analysis. The study of Strengths, Weaknesses, Opportunities and Threats has always been a part of a good business plan, but have perhaps been a bit of a flimsy whitewash in the past. Modern private investors don’t just want to see your SWOT analysis, but they also want detailed reasoning behind your approach. Fail to show how you arrived at your findings and you risk losing valuable investment.
Similarly, your marketing strategy is another area that has evolved, driven by the myriad means of connecting with customers. Marketing used to consist of newspaper or magazine adverts, or maybe TV and radio if you had sufficient budget. Today, advertising and marketing can be carried out on social media and by direct email campaigns. It’s easier and cheaper now but, conversely, getting it right needs an expert touch.
Twenty years ago, a plan might stand for months, but now, almost constant revision is essential. In todays fast-paced world, you need to keep your plan relevant and updated as factors change and new information becomes available.
These factors mean that it is imperative to have a well-developed business plan, which sets out exactly how a new product or service will fit in the market, and its advertising strategy.
