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 How a business plan can make or break a start-up seeking finance

 

 wedding planning start-up nets R400 000 on & SharkTank

Funding for  early-stage start-ups is notoriously hard to find as not many financiers are  prepared to invest, given the inherent high risks involved in backing a  business with no proven track record. This, coupled with statistics revealing  that one in five start-ups fail within the first five years, makes it even more  of a challenge for a first-time entrepreneur to convince a financier to approve  funding

Christo Botes, executive director at Business Partners Limited (BUSINESS/PARTNERS) says that while a concise business plan is often the deciding factor for a financier when approving business finance applications, more established entrepreneurs have the added benefit of industry and work experience that a start-up entrepreneur may not possess. “When considering whether or not to grant funding for their start-up venture, this decision is often based solely on the business plan and the research put into this, thereby highlighting the importance of this document.”

He points to start-up entrepreneurs Chelsea Evans and Jason Newmark as proof of how the strength of a business plan and concept can impact a financier’s decision of whether to grant funding. “Recent participants in the venture-capital television show, Shark Tank SA, the duo have managed to raise R400 000 based purely on the business plan for their internet start-up business, PlanMyWedding.com – a complete project-management tool that allows couples to get quotes from service providers, draw up a budget and manage an interactive gift registry, among many other functions involved in planning a wedding – which is still in the development stage. During the episode, which recently aired on M-Net, the start-up entrepreneurs pitched their business concept and succeeded in convincing two of the ‘sharks’ to invest R200 000 each, in return for 25% each in the business.”

Newmark says that while it may seem a stroke a luck, their success on Shark Tank SA is testament to the strength of their business concept which is based on many years of hard work and research, as well as actively networking and seeking business support.

In September 2015, Evans and Newmark attended a day-long business-planning workshop offered by BUSINESS/PARTNERS in Cape Town as part of their SME Toolkit/ BUSINESS/PARTNERS business plan competition for young aspiring entrepreneurs which is geared at enabling hundreds of young entrepreneurs from across the country with the tools required for starting a business.

Evans says that the interactive workshop put them through several business-planning exercises, after which they had to present their plan to the group of about 30 fellow participants. “It was especially helpful for refining our financial plan.”

Late last year, when they stumbled upon an advertisement calling on entrepreneurs to apply to appear on Shark Tank SA, their concept was developed as far as it could be without funding, so they decided to take the leap to enter the show.

Following their entry submission, they were short-listed before being notified they’d been chosen for the programme, but then received another notification to say that it had been cancelled. Finally, Evans and Newmark received a sudden call to say they could participate after all, but that they only had a few hours to catch a flight to Johannesburg.

With little time to rehearse their pitch, the entrepreneurs attribute all the hard work on their business concept to what prepared them for the grilling on Shark Tank SA, and subsequently what secured them the funding.

Apart from securing funding – which is being used for the continuous refinement of their website – Newmark says that another invaluable advantage of having outside investors, is the new energy and momentum that has been injected into the venture.

Botes says that while many financiers are cautious to fund start-ups, a well-researched business concept, backed by a solid business plan is crucial for minimising doubt in the eyes of potential investors. “An investor needs to be reassured that the entrepreneur behind the start-up concept has the necessary skills and resources to take a specific business idea and turn it into a successful start-up business that has the potential for growth.

“We encourage all entrepreneurs who are considering starting a new business to use the resources at their disposable. For instance, the SME Toolkit website (http://southafrica.smetoolkit.org/sa/en) has various comprehensive guides on how to start and build a successful business,” Botes concludes.

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