Being more successful than you anticipated is a great feeling. Coming up short when you didn’t expect to isn’t as enjoyable. Both are warning signs to potential financing and investment partners. You shouldn’t be expected to predict the future but you should have a strong plan and be ready to back it up.
At the peak of oil prices and a hot economy, we learned again that what goes up must come down. Unlike previous downturns, the road to recovery has been longer and the rules have changed. Waiting for prices to rise and activity to increase isn’t enough. Businesses will need a plan to succeed and those with the capital are demanding it. In 2014, you could walk into any bank and get a million dollars without much asked. Today all lenders are asking for much more regardless of business performance and credit worthiness.
Ultimately, a lender wants to be confident that the money they put into a business will be returned with a healthy margin, it’s on the business to create that confidence. Creating the confidence of capital is done by having a plan and delivering on it.
The key elements of a plan are:
- Goal – As entrepreneurs, the goal is to get the business up and running. To make enough money to get paid. Once the business grows beyond survival and a one man operation then what? Have a goal. What is it that you want the business to achieve? What do you as the owner want out of it?
- Business Plan – If you have a goal then you need a way of achieving it. A business plan will lay out the overall strategy and tactics to be employed in achieving the goal. The size and complexity of the business plan will depend on the size and complexity of your business.
- Financial Plan – Sooner or later you have to talk about the numbers. The business plan has to be turned into dollars and cents. What will all that new business generate in revenue? How much will it cost? Make it a living plan that can adjust as things change; like prices and expectations. This is the make or break of your goal and maybe the business.
- Budget and Forecast – This should align with your business and financial plan with a scope of a year or so out. A budget shows that you have some controls in place and are turning your plan into something actionable and measurable. The forecast demonstrates how well you know your business, market, and customers. This is just good practice.
- Performance Reporting – Beyond interim and year-end financial statements what do you look at on a regular basis to make sure things are going as expected? Performance reporting takes a few key metrics and measures them against your budget and targets. It is here that you create your own confidence in the business as to what is going on and what to expect.
Access to capital is a competitive advantage.
Those businesses that can obtain operating or investment capital quickly, affordably and in sufficient amounts will rise above the rest. Just as you would invest in operations, equipment and people be sure to also invest in having access to the capital, even if you don’t need it now.
Work with Patron West on the five elements to creating confidence in capital and you will go a long way to ensuring access.
Patron West has over 20 years of experience providing financing solutions to small and medium-sized businesses like yours. We’ve helped thousands of businesses get the capital they need. We haven’t seen or heard it all yet so call or connect with us, we’d like to hear your story. Our success comes from your business achieving its own.