The preparation of a business plan is often an important attribute in helping a new company secure external finance.
Not only does it focus the thoughts of those seeking the funding, it is also provides a means for them to communicate both their visionary and practical concepts to the potential donors.
Preparing a business plan will require varying levels of research depending on the areas of business and the types of commodities which the new company will be engaged in.
Larger items of expenditure and those which might have to be custom built may require extensive investigation in order to firm-up the costs of their acquisition and enable meaningful figures to be placed in the financial sections of the business plan.
Preparation of Financial Budgets
Before a financial budget can have credibility and be viewed as a serious document, the thought should be given as to how the budget will be viewed when it is presented to persons who are being asked to provide funding.
The following points might give some guidance as to the areas which should be explored and where necessary, revisited to ensure that sufficient work has been undertaken.
Evidence of knowledge of the market
Financiers will want to bet on the winning horse or at the very least, one which has a chance of finishing.
Demonstration of a good knowledge and understanding of the market, its products and the competition is a must. Relevant information about each of these aspects should be detailed in the business plan in terms of both descriptions and numerical analysis of volumes and values.
Putting Together a Realistic Proposition
Typically, provider of funding will have some knowledge and experience of business and might be able to sense an unrealistic budget proposal. At the very least, they will be able to ask questions about specific areas of it and in the absence of convincing responses, they are likely to see the proposition as unrealistic.
It is perhaps better to request more money and risk surprising your funders than it is to attempt to impress them with a best case scenario based budget.
Best, worst and expected case budgets will provide financiers with some information on the risk of their investment and also demonstrate that you are considering all options, both good and bad.