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In today’s competitive world of business, a good idea alone is not enough to attract funding or sustain a company. Whether you are approaching a bank, microfinance institution, angel investor or government development programme, one thing is certain: Funders will ask for a business plan. At the same time, business aspirants must understand that starting and running a business carries risks that require preparation, discipline and resilience. A business plan is more than a document; it is a roadmap. It shows funders where you are now, where you want to go and how you intend to get there. Funders need this information for several reasons:
1. Proof of seriousness and commitment
A well-prepared business plan signals to funders that the entrepreneur is serious. Writing down goals, strategies and financial projections takes time and effort. Investors are more likely to support someone who demonstrates commitment rather than relying on vague ideas.
2. Clarity of vision and strategy
Funders want to see that you understand your market, competitor and target customers. A business plan forces the entrepreneur to define their value proposition clearly – why people should buy from them and not from someone else. Without this clarity, investors may doubt whether the business can survive in the real world.
3. Financial forecast and accountability
No one will part with money without knowing how it will be used. A business plan includes financial statements, start-up costs and revenue projections. This helps funders measure the feasibility of the business and anticipate when they can expect returns. It also provides a benchmark to hold the entrepreneur accountable for performance.
4. Risk management tool
Business plans identify potential risks – from competition to price fluctuations – and explain how the entrepreneur intends to manage them. For funders, this reduces uncertainty and shows that the applicant has thought through challenges rather than assuming smooth sailing.
From the funder’s perspective, every loan or investment carries risk. If the business fails, the funder may lose money. By examining a business plan, they assess whether the entrepreneur has what it takes to succeed. The plan also becomes a guide for monitoring progress, ensuring the borrowed or invested funds are put to good use.
In fact, many banks and investors will not even consider an application without a plan. To them, lending money without one is like navigating without a map – dangerous and costly.
For aspiring entrepreneurs, it is equally important to appreciate that every business involves risks. Some of the most common include:
- Financial risk: Borrowing money or investing savings into a business means the possibility of losing it. Without proper planning, the entrepreneur may be left in debt.
- Market risk: Consumer preferences can change, new competitors may enter the market or economic downturns may reduce demand.
- Operational risk: Poor management, unreliable suppliers or lack of skilled staff can disrupt business operations.
- Regulatory risk: Changes in government policies, taxes or licensing requirements may increase costs or limit business activities.
These risks are real, but they are not meant to discourage entrepreneurs. Instead, they emphasise the importance of preparation, flexibility, and continuous learning.
In today’s competitive world of business, a good idea alone is not enough to attract funding or sustain a company. (Pics: Courtesy)
