By K.C. Soares, Contributor 
Soares
AS A follow-up to my article entitled "How to start your own business", I would like to provide readers with guidelines on how to structure your business and how to approach a financial institution for funding.
Now that you have decided on the type of business and the specific goods and services you plan to sell, it's time to lay the foundation for the success of the business.
First, you have to make sure that there is a need for your products and that the business will be able to satisfy that need at a cost that will leave you with a profit. To ensure this, you should seek the assistance of qualified persons who can prepare for you cashflows and other relevant documents that can guide you on a day-to-day or month-to-month basis. This is essentially what is termed a business plan.
The three main functions of the business plan are: to convince lenders or investors to provide you with the money for the start up of the business (or in other cases for the operation or expansion of an existing business); to set out a clear and definite management plan and to identify areas where changes are needed to achieve specific objectives.
Different financial institutions will have different requirements that have to be satisfied before loans are granted. In general, however, there is some basic information that a financial institution should be looking for in a business plan. Some managers (those that are not properly trained) tend to by-pass the business plan and engage in what is termed "collateral lending," lending based on the collateral offered.
The well-trained managers will look at four basic aspects of the business plan. Firstly, the manager will look at the amount of personal money you have or will be investing in the business (known as equity). The manager will then look at the chances of recovering the bank's money in a reasonable time and with a fair profit to the bank. He/she will, from the business plan, determine whether or not the supply of raw materials and the demand for the finished product will outlast the repayment period of the loan. Having satisfied himself/herself with the above, the good manager would then assess the personal integrity of the person or persons applying for the loan. All of the above should be covered in a business plan and such a plan prepared by a qualified person will ensure a faster processing of a loan application as well as provide guidelines for day-to-day operations. There are times when businesses fail even though the products are good and there is great market potential. One may ask why is this so? The answer is that there may be a lack of effective advertising (marketing) and/or disharmonious public relations. Potential customers need to know that you are selling and feel good about buying the product from you. Therefore, you should advertise your product. Advertising may take different forms (radio, television, newspapers, flyers, etc.) but the aim is to reach your market and have your market respond by buying your product. There are a few companies, such as the one with which I am associated, that has never spent as much as a cent on an advertising programme. How do they get by? Their advertising is done by satisfied customers/clients. This is the cheapest way of advertising and is among the most effective.
To be effective an advertisement must at first get the attention of prospective customers and then stimulate interest in the product/services offered. It must create a desire to get the product/services and at the same time motivate the person to take the necessary action to obtain the product/services. Who or what can better encourage and motivate a potential customer/client than a person who has tried the product/service and is completely satisfied? Nothing can be more convincing. For the businessman to stay in business, his products/services must not only be satisfactory but he must reach his target market. In addition to advertising (whether by word of mouth or paid advertising) the businessman should have good public relations.
K. C. Soares is a former banker and is now a business consultant with Soledad Financial Services Limited. E-mail: soledad@netcomm-jm.com
