According to Sibongiseni Ngundze, Managing Executive of Nedbank Small Business Services, applicants looking for bank funding must demonstrate a good understanding of the business they wish to embark and importantly, their plan has to be realistic and achievable.
Applicants should use clear and simple language in their applications and business plans. Included therein should be a brief CV of the entrepreneur or applicant. The key factors that a bank would typically looks for in a successful plan includes: A comprehensive breakdown of what needs to be financed
The entrepreneur’s own contribution
Evidence that the applicant has conducted extensive homework on the business he wishes to start
- Who and where the target market (clients) is and have they been accurately identified?
- Who the competitors are and the applicant’s key differentiating factors
- Suppliers and/or alternate suppliers. Do they offer reasonable terms?
- Are there substitute products?
A SWOT analysis
- What are the entry barriers in the industry, if any? (e.g. regulation, high capital requirements, too specialised, etc)
- Is business subject to seasonal fluctuations?
- How is the business affected by the current or future state of the economy?
- Location. Are the premises leased or owned and is there room for expansion?
Dealing with Investors
What do venture capitalists investors expect of business plans they receive?
Venture Capital companies typically seek out high growth potential early-phase companies and often place more importance on the management team, entrepreneurial concept and potential for aggressive growth than the quality of the physical business plan itself.
Great emphasis is placed on the entrepreneurs’ ability to clearly communicate a unique business concept and growth strategies in a polished pitch to give the funder confidence that they can easily sell this concept to their market.
That said, obviously a good quality business plan can greatly assist in communicating the relevant points in order to obtain successful funding.
Take note of the following advice offered by venture capital expert Keet van Zyl of HBD Venture Capital:
- Spend significant time on the business plan
- Business plan must be clear, well arranged and not too long. Supporting info can be presented in the appendix
- Write a good one-page executive summary. There is a good chance that the potential funder won’t even read any further if this is not compelling
- Ultimately view the business plan as a motivation for you to continue. You need to convince yourself that this will work and a business plan is one way to do this
- Write your business plan yourself. No-one knows your business better than you. There are various business plan templates available on the internet. However, the areas where you need help – make sure you get it. Use consultants and experts where necessary but don’t outsource the whole process
- Clearly identify your target market
- Clearly identify the need for this product/ service
- Use facts and figures where possible, specifically in the Industry Analysis
- Don’t over-emphasise the technical aspects of the current product or concept. Make it easy to understand and focus on the future growth strategies and implementation
- Polish your oral pitch to dovetail with your business plan
- Never make false claims or misrepresentations
- Do a ‘due diligence’ on your funder and tailor-make specific elements of your business plan to their needs. Go to their website; study their investment criteria; understand their investment process; look at their investment portfolio; read some press releases and articles; ask around if anyone you know has dealt with them before
- Contact the potential funder before just sending off a business plan to someone’s inbox. A personal referral is even better
- Update your business plan regularly as your thoughts, business activities and market insights evolve
- Have a clear ‘shopping list’ of what you want to do with the funding, and the timelines involved
- Let someone who you trust read through the business plan for feedback and advice
Regardless of the quality of the physical business plan it is only the first step in the process. The entrepreneur will have to pass a number investigative stages before an investment is made.
Confidentiality agreements, or non-disclosure documents as they are also known, protect sensitive technical or commercial information from disclosure to others.
If after a non-disclosure agreement has been signed, the information is revealed to another individual or company, the injured party has cause to claim a breach of contract. The type of information that can be included is virtually unlimited – data, know-how, prototypes, engineering drawings, computer software, test results, tools, systems, and specifications.
“The purpose of a confidentiality agreement is it to protect the idea so the entrepreneur can patent it later so the agreement should be catered towards that. Typical things to include in the confidentiality agreement would be the duration – in other words when it expires – also spell out what a breach of the agreement would be and then what the consequences are and don’t forget to define the parties carefully,” Fourie advises.
Where to get a confidentiality agreement?
Gaffney’s specialises in providing bundles of ready-to-use legal documents for business, including confidentiality agreements. Costs range from approximately R225 per bundle to R2 125 for a complete set of 269 business documents in a loose leaf binder or on CD. Visit www.gaffney.co.za or call +27 11 268 5804