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WHAT IS DEVELOPING VERSUS WRITING A BUSINESS PLAN

Updated: Feb 6, 2023


Business Plan Development in Toronto

Business Plan Case Studies


I met with a potential client referred by the local bank who wanted to assess their business plan before submitting it to the bank for a small business loan. They used a company they found online that "wrote" business plans and sent me a copy. The client had already spent over $1K on the business plan and still owed $1K more. The plan was poorly written and did not include the required sections that a bank needed to determine the business's credibility. The numbers in their financial plan did not add up; supposedly, they had an accountant develop them. The company spent more time embedding graphical pictures in the document. This business was a highly sophisticated business model without a marketing, sales, or operations plan. If you think you are getting a good deal on a business plan and the person did not spend the time understanding your business - then you probably overspent for what you received and would not be able to submit this to a lender or investor. There was nothing in the plan that was salvageable for financing.


A second client was sent to us by RBC after being turned down for a $1M loan. A marketing company developed the plan, and the layout and look were terrific, but there was no depth to the content, and the financials were pulled out of the air and did not tie back to any forecast or cost-of-sales. The expenses were made up and did not reflect actual monthly costs to the business. The client was shocked at the level of detail we asked them about their business, saying the other company didn't ask them any of the questions we did. The business plan content and the financials must sync and make sense. This business in the food and beverage industry was a very viable start-up business, and their banker knew this. Still, unfortunately, the underwriters for loans do not know your business or you and make a judgement on the financials and the content provided. We developed their plan, and the business received their financing for the $1M, but it was a costly mistake to not invest in having a plan developed.


Differences in Writing & Developed


The issue that most start-up businesses have is that they have a concept for their business but are not aware of the detail that has to go into a business plan for financing. A business plan is the implementation plan for your strategic plan. In the case of the first case study, I provided the client with a copy of our business plan, which would be similar to a plan we would develop for any client. They showed that to the company that wrote their $1K plan. They told them that was the equivalent of their strategic plan and would cost them $10K. What they "wrote" was a marketing document about the business. There was a misconception on their part on what a lender or investor required and a misunderstanding between a strategy and implementation.


It is crucial if you are hiring someone to develop, not write a business plan that you are using for financing that you know that they have written and had plans approved for funding prior, and that is their focus. An internal business plan does not have the same requirement level, as this is only for the business. To develop a business plan for financing, you have to have some level of knowledge of what lenders and investors require, an understanding of business to ask the right questions of the client, and the ability to tie the plan and the financials together so that they make sense and are credible.


Some businesses have all of the pieces for a plan and are just looking for someone to write it, and then others need a business plan written but are not sure what information is required. In both cases - if you are going to a company that writes business plans and does not have people on staff that are business people to go through it and provide feedback and help, then you are most likely going to spend a couple of thousand dollars and have a mound of paper that you can use for a paperweight.


Something also to make sure of when finding someone to develop your business plan - make sure they know what is required for your type of business. The layout of a business plan for a retail store, a web company, and a manufacturing company are very, very different and if they are providing one size fits all - this will land you in a mound of hurt. You need to be working with someone who understands your business model and what the bank or investor will require.


Even for a company that writes a business plan, if they are going to provide you with adequate service - they should have some questionnaire that they have you fill in about the required sections of a business plan. Suppose, as a business, you cannot provide the information. In that case, they should send you back to someone who can help you develop the areas of your business first, as they are just taking your money without regard for whether you will get financing or not.


Understanding the Cost

Many companies we talk to are looking for a bank or an investor to provide them with $100's thousands of dollars, yet they are looking to scrimp on the one document between them and the funds. This is a different story if you are already an established business and have a record with the bank. If you want to add funds for a particular reason (equipment, renovations ...etc.), we are talking about a business case versus a complete business plan.


If you are a start-up and have never had funding, the bank, lender, or investor is most likely not familiar with your business. If you are looking for over $100K and pay less than $4-7.5K for a business plan for most companies, you will likely not get what you expected. The more complex the business model - the more detailed the plan is required, especially the financials. Example: A retail store has a less complicated business. You also want to ensure that the person helping you develop the financial model is an accountant or has experience in accounting. If the plan does not support the financials - you will not get your funding.


Summary

A good business plan does not ensure funding, as lending and investment rely on other information, including your credit. On the other hand, a poorly written plan will ensure you do not get the funding, even if you have a viable idea. If you cannot portray this in your business plan - you have lost your one shot with that bank or investor and impacted your credit score.

If you are looking to have a business plan developed for financing, find out more about our offering and book a free consultation to speak with one of our partners.


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