Unformatted text preview: quire the borrower to provide
adequate security. Bear the above in mind in presenting the plan
to your chosen financiers.
The cash flow forecast is a vital part of the
business plan. It will identify the amount of
cash required on a day-to-day basis and,
therefore, highlight the operating needs of the
business for additional finance. It will help
identification of how much should be:
equity - to finance the risk element
medium to long-term debt - for core
borrowing and fixed assets
short-term - for working capital. To help you prepare cash flows, you should
seek help from your professional adviser.
Be realistic rather than optimistic especially
with the figures in the business plan. An
enthusiastic, positive approach is important by all means present the strong points but
don't ignore the weaknesses. Sensitivity
analysis is essential in evaluating key
assumptions in the business plan, for
example by testing the effect on profits of
varying the rate of interest payable.
Your financial requirements are obviously an
important part of your business plan.
However, resist the temptation to give too
much detail in the plan. You should indicate
the amount you require and its intended uses
along with any other relevant pieces of
information. Anticipate the questions that the
financier is likely to ask:
Why has no-one else thought of it?
Why will it sell?
Who will it sell to?
What price will it sell at?
How much will it cost to produce? The business plan must be yours, not your
professional adviser's. You must be fully
familiar with its contents and although your
financial adviser will be closely involved in
its preparation the business plan should not
be bought 'off the shelf'. It is probably true that people have to be
trained to be good managers. An
entrepreneur tends to be a dealer rather than a
manager. Most financiers will be looking for
a good management team combining both
entrepreneurial and good management skills.
It is also true that the easiest time to raise
finance is when it is least needed. A wellmanaged business always thinks ahead. How Should You Present
Once you have done all the preliminary work
and prepared your business plan it is time to
present your case to financiers. It is best to
approach a limited number of providers of
finance in the first instance, say about three
bankers or venture capitalists. This gives you
the opportunity to revise the plan in the light
of their comments and have another attempt
if it is poorly received.
You could harm your chances by distributing
a poor plan widely among financiers. Follow
four basic steps:
Sell the idea on paper. Convey what it
is that makes the project exciting in
the minimum number of words and
ensure it is "eye catching"
Consult professional advisers with
knowledge of the financiers. Good
contacts and working relationships are
Follow up with a telephone call and
arrange a meeting at which you, the
management, can sell the idea and
prove your ability
After the meeting, the detailed plan
can be amended to take account of the
financier's comments, particularly in
respect of changes to financial
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This note was uploaded on 02/27/2013 for the course GBMT 300 taught by Professor Javierwujie during the Summer '12 term at University of Wisconsin.
- Summer '12