Most businesses fail because of poor financial management or a lack of planning. Often companies prepare business plans with the sole objective of raising funds or becoming eligible for any one of the start-up funding options in India. More often than not, the business plan that was used to help raise finance is put aside, and instead of walking the path, different objectives start getting precedence. The business plan ends up becoming just another document gathering dust.
When it comes to addressing business success, developing and implementing sound financial and management systems internally, or using the right professional support to enable the same for you, is vital.
To move forward in this direction, the first task would be to start updating the original business plan. This gives the company a chance to revisit all the objectives that were initially set and do a quick SWEAT analysis.
While reviewing the financial structure of start-up firms one must consider the following:
This is the balance of all of the money flowing in and out of the business. Make sure that the forecast is regularly reviewed and updated.
Have the requirements changed? If so, explain the reasons for any movement. Compare this to the industry norm. If necessary, take steps to source additional capital.
Keep the costs under constant review. Make sure that the costs are covered in your selling price – but don’t expect customers to pay for any business inefficiencies. If required, conduct a zero-based budget to address any aspects that have been missed.
What is the position of any lines of credit or loans? Are there more appropriate or cheaper forms of finance that the business could use?
Do you have plans in place to alter the financing to accommodate the changing needs and growth of the business? Understand the equity fundraising process in order to assess if this is a possible option.
Growth Business Plan
Once the above has been completed, companies should proceed to draw up a Growth Business Plan.