How A Business Plan Helped Me Raise Capital of $12,600 to Start a New Business

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!
What’s next?
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 pla n 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.