Wondering how to raise capital with a business plan? You’re about to find out…
In the first part of this tutorial series, we looked at 5 Powerful Things A Business Plan Will Do For You. I don’t think this tutorial will be complete if I don’t share my personal experience and success story with you.
It’s all about how a business plan helped me to raise $12,600 in capital that I used to start a new business.
From my experience working and interacting with entrepreneurs and business owners, ‘raising capital to start a business’ is the single biggest challenge faced by many entrepreneurs today.
Whether you’re looking to fund a fresh business idea or need capital to expand your existing business, I hope you’ll learn something valuable from my successful experience of raising capital via a business plan.
It all started with an idea…
Sometime in early 2011, I travelled to the countryside for a short holiday. It was a 300-kilometre journey from the city where I live to my village in the deep hinterland. More than halfway into the trip, the bus made a stopover at a petrol (gasoline) station to refill its tank.
There was no petrol available. We tried a few more stations, but still, no luck.
We finally found a station we could buy from but I couldn’t help but notice the high number of stations which were open but didn’t have any petrol. People travel all the time and the demand for fuel along these routes are usually high. So, why aren’t more stations selling?
My curiosity led me to ask more questions.
Before long, I realized what the problem was. Many of these stations were always running out of stock because their suppliers weren’t consistent and they could go for days without any petrol to sell before their stock is replenished.
Why weren’t their suppliers consistent? Well, it appeared that most suppliers preferred to serve customers in the cities than to travel far distances into the country.
I had clearly identified a gap in the market. Even though they had a steady stream of demand, these petrol stations far from the major cities were starved of supplies. What if I could do something to fill this gap?
Fortunately, unlike in many countries, I found out that small companies can trade in refined petroleum products in my country. All I needed was to register a business, get a permit and start.
A light bulb lit up in my head!
A bright idea, but no capital…
As you know, the oil business can be capital intensive. To get started, I realized I would need to hire a tanker truck for transport, buy a minimum of 33,000 litres of petrol per order, and then sell the product to some of those station owners I encountered.
I had already made some contacts and reached some willing buyers. The only problem was, I didn’t have enough capital.
From my calculations, I actually needed $16,600 in capital to start up. Of this amount, I had just about $4,000 in my savings account at that time. I was so optimistic about the business that I didn’t think twice about committing my savings to it!
Like they say: “Charity begins at home.” Any entrepreneur who wants to start a business should be confident to start by investing some of her own capital.
If the business is as viable as you say it is, you shouldn’t have any problem committing some of your own money first before you ask your friends, family, banks or investors. You have to put your money where your mouth is!
Interestingly, using your savings as capital came up as the Number 1 option in a popular article I wrote a while back about 10 Guaranteed Ways to Raise Capital for your business.
Having committed my savings, I started considering other options to raise the additional capital. Like many entrepreneurs, the first option I could think of was…
Off to the bank!
Hmph! Banks can be annoying dream killers!
I still wonder how bank loan officers do it. They tell you a ‘No’ with a wide smile on their face. My case was no different.
After asking me to meet a long list of requirements, it didn’t take time for me to realize that getting the capital I needed from the bank would be a wild goose chase.
According to the loan officer, to qualify for the loan, I had to have operated a business account with the bank for at least six months.
How did they expect me to meet such a requirement when I was asking for money to start the business in the first place?
How can a chicken exist without the egg?
Well, you can hardly win an argument with banks especially when you’re a small startup or an unproven business.
Now that I look back on that experience, it’s hard to imagine the number of business dreams that die every year at the doorsteps of banks. It’s often too difficult to raise capital from banks especially when you’re just starting out.
Maybe it was a determination to succeed that allowed my business dream to endure that harsh experience. When the house that holds all the cash refuses to give you some, what else can you do?
The business plan that saved me!
Rejected by the banks, I would use every opportunity I could find to discuss my business idea with friends and close family. I would passionately share my bright idea and explain why I thought it was such a huge opportunity.
My explanations were all over the place. The more I explained, the clearer it became that I needed to put down my idea, thoughts and plan in writing – in a neat, organized and convincing format.
I had written business plans before; several of them. But these were for other people. This would be the first major business plan I was writing for a business that personally concerned me. I decided to start working on one immediately.
Because of the amount of capital involved, I knew that convincing potential partners wouldn’t be easy. I started putting together a business plan that explained my business idea in detail and told the full story. I explained how the business would be run, the risks involved and most importantly, how it would make money and how much I expected to make.
Above all, I made sure the business plan looked neat, attractive and capable of making a very good impression.
When it was done, I sent out a copy of the business plan to four of my friends who had shown the most interest. I sealed my lips, held my heart and patiently waited for feedback while my business plan did all the talking and convincing.
As expected, my to-be partners had some questions after reading the business plan. Surely, nobody would give you their hard-earned money without making sure you’ve done your homework.
Because I was the originator of the idea and had disciplined myself to write a detailed business plan, I understood where they were coming from and had convincing answers to all their questions.
“When people ask questions and want to know more about something you’re offering, it’s usually a sign that they’re interested and need more information to make up their mind.”
After a couple of back and forth question and answer sessions, they gave me the money I was asking for and my idea became a real life business!
My biggest lessons from this experience…
My first big lesson from this experience is to never give up (too easily) on your dreams.
I think many entrepreneurs often give up too early on their business dreams especially when they meet the first obstacles. The key to success is to always look for an open window whenever you meet with a closed door. Never give up before giving your best!
My second biggest lesson is to never wait or hope for capital. You have to go after it. You have to pursue it! Many entrepreneurs waste time waiting and hoping for capital to fall into their hands.
Most times, it never does.
Above all, the greatest lesson from my experience is this: to attract capital in today’s world, you just have to be convincing and prepared. You cannot be either of these if you haven’t done your homework by writing a business plan.
A business plan is indeed a powerful and effective way to attract the capital you need to start your dream business. If it worked for me, I see no reason why it shouldn’t work for you too!
In the next article in this tutorial, series, I’ll introduce you to my secret tool – the favourite tool I use to write a business plan the smart, fast and easy way!
In all my years of writing business plans, I have tried and used all the options available. I have written business plans from scratch (too tedious), used templates (too stiff and boring) and also ‘copied’ from sample business plans (lacks creativity).
I thought I was on top of the world until I found a tool that took away the hardest aspects of writing a business plan and made it such an easy and enjoyable experience.
I’ll tell you everything about it in the next part of this tutorial. The Secret Tool I Use to Write Business Plans – The Smart and Easy Way…
See you there!