Sample Business Plans – A Capital Raising Failure Trap

Success or FailureI recently conducted an analysis of the reasons that had prompted visitors to our website. Several of the results were typical such as statements like: “I need to develop a business plan” and “I’m looking for capital for my business” were the high scorers. Another result, however, appeared way too often is one that nearly unequivocally results in the failure of capital raising efforts:

“I’m looking for a sample ________ business plan.”

The blanks were filled-in with business types ranging from fish farm, furniture manufacturing, food processing, event centres, daycare centres, table water manufacturing, fast food restaurant, laundry and dry-cleaning services, industrial cleaning, car wash – and everything in between. Were W-HBS to give a sample business plan to all of these companies, it could be great – since it would effectively weed those companies out and give the rest of us less competition in the capital raising game.

Simply put… Sample business plans do much more harm than good to businesses seeking capital and/or to grow.

Many of you are probably wondering: “Why are sample business plans that bad? “Why do they play such a negative role in fundraising efforts?

To explain, lets look at the core business plan principles: Business Strategy and Communications Strategy.

Let’s start with Business Strategy: This is the part of the plan where you gain a comprehensive understanding of customers and customer needs, current (and potential) competitors, and market trends. This positions you to develop a sound business model, justifiable financial assumptions, winning products and services, milestones, and an operational plan that will yield success. Will a sample plan help your business with these things? Probably not-even if the business is in the same industry as yours.

Let’s say you need a business plan for an Event Centre. That sample plan will steer you in the wrong direction UNLESS it has the same:

  • Location
  • Competitors
  • Management team
  • Short and long-term objections
  • Marketing Strategy
  • Goals

…and the list goes on!

What works for one Event Centre in Lagos just isn’t going to work for an Event Centre in Abuja. In fact, at W-HBS, we’ve written business plans for two clients looking to set up an Event Centre in Lagos and those plans were completely different. Your business is NOT an exact clone of some other business.

Then we have Communications Strategy: This is the part where you expertly convey the key selling points about the business opportunity to investors quickly and concisely. If you’re emulating a sample plan, you have to keep one thing in mind: Most likely, that sample business plan failed to raise capital and/or be successful, because few successful businesses that I know enjoy releasing their business plans to the world.

So…you are most likely replicating a failure.

Once you get the attention of potential investors, these people will be considering investing in your business… not a generic one. As such, they’ll need to know:

  • How big is your current addressable market?
  • Why is your organization different from and better than your competitors?
  • Why will your customers be more satisfied with you than with competitors, and why will they continue to give you their business?
  • How does your operational plan ensure superior results, quality control, and oversized profits versus competitors?
  • What experiences do you and/or your management team have that add value to your organization?
  • What are your current revenues and what do you project them to be in the future?
  • Why should they entrust their money in your hands, and how will you make them money?

To sum up Communications Strategy – your business will fail if you don’t answer this one question:

“Why are you and your business uniquely qualified to succeed?”

Answering this question is not just difficult – it’s impossible without conceptualizing the business plan from scratch.

A few of you might still be holding on to excuses for relying on sample business plans. The first of which is: “I am seeking a sample business plan just as a guide to write my own.

There’s a couple of reasons why I don’t like this excuse. First off, like I mentioned earlier, the most likely scenario is that the sample plan in your hand is a failure. As you can imagine, following a failure is never a good business practice. Secondly, while there is a case to be made for guidance, the main guidance you need is to understand what the key sections of a business plan are and what needs to be included in each section (and why).  For those of you who haven’t checked it out yet, I’ve answered these questions for you in W-HBS Business Plan Guide, which has been used by thousands of businesses.

The other big excuse for the sample plan is, “I am seeking a business plan to learn how to start an XYZ business.”

Hopefully you understand by now that a business plan does not explain how to start a certain type of business. Rather, the business plan already assumes that you have an expertise in the business and documents why the business will succeed, the business, marketing, operations, and human resource strategies that will be employed, and proves – with solid market research – that the industry, customers, and competitive situations support the need and potential growth of your business.

Finally, I know it is very easy to take a sample business plan, make some changes to it, and call it your own. If you do that, you must unfortunately prepare yourself for failure. There’s no way around it – from conducting market research to devising unique business and communications strategies, developing a winning business plan requires time and hard work.

To your success!

Olanrewaju Oniyitan

 






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