In yesterday’s blog about government-funded measures to promote lending, I promised you some tips on how to create a great strategic business plan to attract lenders. To start with, I’m going to suggest what to include in your strategic business plan, and how to set it out.
The overall goal you should be aiming for is to generate high levels of enthusiasm in potential lenders or investors, in just a few minutes of reading. So, ideally, you should develop a five-year strategic business plan that includes pro forma income statements, balance sheets and cash flow statements – all on a monthly basis, as annual projections will not show seasonality and working capital fluctuations.
Then, regardless of the type of lender you are approaching, follow these six tips:
- Use clear and understandable language that explains the business in terms of its underlying processes.
- Explain why the business is unique and specialised by breaking the business into its functional process components (FPCs) and highlighting the degree of difficulty of each FPC.
- Make your projections quantifiable and measurable by using a sound financial metric foundation, based on historical financial performance, to back up your specialisation and underlying processes.
- Tie the numbers and the narrative together – the financial metrics and the narrative description in your plan should support each other and be easily connected.
- Describe a simple growth story that is tied into an overall strategic plan, so that your target lender can see how the business will get from point A to point C.
- Spell out how you will use the capital – for example, you may want it to accelerate your company’s organic growth, support an acquisition, or fund a shareholder buyout.
As well as these universal guidelines, there are other tips that will vary according to the type of lender you wish to impress – a bank, a mezzanine lender or a venture capitalist. In addition, the information that lenders require from an early-stage company will differ from what they require from a more well-established company. See my next blog for more details.
Alternatively, please email me or call me on 020 7099 2621 if you would like further advice about business plans.