The dream of most business owners in Nigeria is to raise enough or even more than enough money to expand their business. Even startup businesses are not left out either, almost everyone needs to raise money from a business plan.
In this article we would like to address the issue of what and why making the right funding request will positively affect your chances of getting funded with your business plan submission. If you are looking to get funded and don’t want to make some avoidable mistakes, we shall answer these questions together.
Are
Business Plans compulsory for Successful Business Funding?
There is no guarantee that writing and submitting a business
plan will lead to successful funding. Even if you are the world’s best business
plan writer and you have achieved many successes in the past.
Meaning that no matter how brilliant and great your business
plan is, you may not get the money you want but the lack of or absence of a
business plan is far worse. You are not likely to get funded without one either.
How much
money is the right amount to ask for in a Business Plan?
That said, let’s assume you now prefer writing a business
plan as a step towards attracting funding for your business, how much do you
think is reasonable amount to ask for besides your initial projection?
Take it from me, ask for an amount that will ensure the
business can start successfully and still has a few more thousands or hundreds
of thousands of naira to spare. In the event of failing working capital, every
little change you can squeeze out is worth it and they can be sorted with the
extra money you asked for.
There is also the risk that the exact amount of money you ask
for is insufficient because of unexpected changes in prices or even terms of
contracts you may have with contractors and suppliers involved in your business
set up. Therefore ask for 10 to 20% more of the total startup amount as
contingency cost.
Don’t be
greedy and dishonest when making your funding request
But in as much as you need to ask for more than you actually
need, don’t fall for the greedy, dishonest and self-destructive tendency by
some business owners to ask for far more than they really need because the investors
or banks may embarrass you with tough questions about why you need a particular
amount. When you fail to justify it, you could lose your credibility for it.
Therefore your funding request should be very realistic and
not too much for the financiers to foot. If you ask for more than they
(financiers) can afford, you may not get funded. That means you should wisely
ask for more than you need but not too much and never ask for less than you
need.
3 Good Examples of Successful Business Startup funding requests made
through Business Plans
I will use the following examples from some of my clients who
made funding requests with their business plans and eventually got funded;
First
client initially wanted to raise 10 million to set up her crèche but after
going over the business requirements, we reviewed it upwards to 13.7 million
and she got the amount she requested for. She included more items she could
justify and made a contingency request of 1.3 million naira.
Second client
initially proposed 3 million naira for a pharmacy. I suggested an increase of 2
million naira based on other expenses I forecasted and the client got funded
because he could justify the additional costs plus the financial projections
could not have been realized if the business was underfunded
Third client
presented his plan to a group of investors. Initially he proposed 50 million naira
for his hospital. After looking at his business goals and target market, we realized
he would have been underfunded and therefore needed more equipment, costing and
larger space for his hospital. The amount was reviewed upwards to 75 million
naira and as at the time of this writing, the investors had agreed to fund it.
In all cases I insisted on the client asking for more than
they initially requested for since we realized failing to do so will make them
underfunded.
Final
thoughts on making the right funding request
So I will like to conclude by saying, if you make a very
small request because you are hoping to not drive away interest in your
business or because you are not sure if you would be asking for too much, let
me say this “if you prove that your business opportunity can work, then funding
is not the main challenge”. If on the other hand you ask for too much whether
the business opportunity is profitable or not, you will not get funded. The way
out is to adequately gauge who you are pitching your business to. Can they
afford the base amount you need? If yes, then add 10 to 30% additional costing
to your base startup capital to cover unexpected and emergency expenses.
If you are
looking to get funded for your new business and need a detailed and
professionally written business plan that will guide you in making adequate
funding request, then you should get in touch with me via email: paulonwueme@gmail.com or call: 0803 206
4106
