Why Market Research is More Important in the Bank Business Plan for a New Business

Market research is the process of learning about the overall industry down to target markets. It includes identifying the real needs, desires, and preferences of your consumers. Or, in other words, making sure a customer exists for your product or service. Market Research is a key part of any business plan but, is especially important in a bank busines plan for a new business.

Generally speaking, bank business plans will place a greater emphasis on your financials than most other types of business plans. The reason for this is that a bank’s motivation is different than an investor or a potential partner. They are less concerned with the overall trajectory and potential of your business and more concerned with whether or not you will be able to make your monthly loan payment.

For this reason, the financials in the Bank Business Plan become the focus. Banks rely on prior actual performance, in conjunction with financial projections, to make their decision. However, if your business is yet to launch or is just starting out, you won’t have meaningful actual numbers. So, how do you lay a strong enough foundation that makes a bank or other lender feel confident your business will generate enough revenue to pay the bills? The answer: market research.

If your bank business plan doesn’t have actuals to rely on, it will be based almost solely on projections. Anyone can pull random numbers from the air to create financial projections but, they must be able to be substantiated. Market Research is the best way to convince the bank that the sales, and therefor cash flow, projections are realistic and likely to be achieved.

Market research validates that your assumptions can be achieved by providing important information like the total size of the market and that there is room in the market (in relation to competitors) for your business. It should also show that there is a real appetite from real consumers. This may be demonstrated by early adopters, or feedback from focus groups or surveys.

It’s important to note that a loan officer won’t just consider market research, financial projections, or any other aspect of the bank business plan when making their decision. It will also rely on your personal financials and credit. Again, this goes back to ensuring that the loan will be repaid. In many cases, you will be personally responsible for repaying the loan even if the business is unable to or it closes.

Given the importance that market research plays in the bank business plan, you may want to consider hiring a professional. Professional business plan writing firms tend to offer many related business planning services in addition to the writing plans themselves. This includes things like market research and Financial Modeling. Depending on your comfort level with finances, market research, or writing you may want to consider having them do your entire plan from start to finish.

However you prepare your plan, especially if you are a new business, make sure your market research is top notch. This will put your Bank Business Plan on the right track and increase your chances of approval.

How Financial Modeling and Financial Projections in a Business Plan are Different

 

People sometimes use the terms Financial Projections and financial modeling interchangeably. This is especially true when it comes to the business plan. However, there is actually a very distinct difference between financial modeling and financial projections in a business plan and in general.

Understanding the difference between financial projections and financial modeling begins by defining the two.

Financial projections – According to Entrepreneur the definition is “estimates of the future financial performance of a business.

Financial modeling – Investopedia defines Financial Modeling as “the process of creating a summary…in the form of a spreadsheet that can be used to calculate the impact of a future event or decision.”

Although the Investopedia definition doesn’t specifically apply to the business plan, the same principle applies.

The definition may not provide enough context to fully understand the difference. Here’s a basic example to illustrate:

You need to figure out your salary expenses for Year 1.

You know what positions you plan to have, you want them all to start on day 1, and you have an idea of what you’d like to pay each person.

You will lay all this information out into a spreadsheet, like Excel or Google Sheets. A common setup would list the names of the positions in column A and the salaries in column B. In the first empty row after the salaries, you will add a total. This total will become part of the projections in the business plan.

This is a very simplistic example, as financial modeling can be quite intricate, detailed, and complex. But, it helps to illustrate the difference so you begin to understand how financial modeling and Financial Projections Business Plan tie together but are distinct parts of the same equation.

In other words, your Financial Model, populated based on research or assumptions, produces an output. This output becomes (part of) your financial projections.

Financial modeling is not left out from the business plan, despite financial projections taking center stage. You may include a static view of a financial model in the appendix. Alternatively, you will give a brief overview about your research and assumptions the financial projection in your business plan but, you will not include views of the financial model.

Part of the reason people so often confuse financial modeling and financial projections, especially when it comes to business plans, is because they are so intimately connected. They both play an important role in creating and presenting your business in numerical terms and the numbers create the foundation of your business.

Creating financial models is not a skill in everyone’s wheelhouse. If this is the case for you, consider hiring a professional. You may be able to use financial modeling on your own or figure it out if you put in a great deal of time but, this may just be one of the tasks to outsource to an expert. Inaccurate financial modeling leads to bad financial projections for your Business Plan. If you get the model wrong, everything could be wrong so, it’s important to treat your financial modeling with the care it warrants. If you do that, you will have a business plan that not only impresses potential investors or loan officers but, actually steers your business in the right direction.

Why Professional Business Plan Writers are the Best People to Alleviate the Information Memorandum Bottleneck

When considering selling a business – whether you are the business owner, an M&A firm, or other professional handling the sale – creating the information memorandum stands between you and making a sale. Professional business plan writers are well equipped to turn around stunning, engaging Information Memorandums that help you sell your business for a great price quickly.

There are many reasons that professional business plan writers are so well-equipped to write the information memorandum.

Requires the same expertise – The information memorandum may go by a different name and serve a slightly different purpose but, it is essentially a business plan. It has many of the same components, tells the story of your business, showcases its potential, and is made with the purpose of eliciting an action/reaction from a particular type of person. Professional Business Plan Writers address all of these issues on a daily basis and have done it successfully time and time again. That expertise transfers effortlessly to the information memorandum.

Used to writing with audience in mind – When writing a business plan, professional business plan writers are always writing with audience in mind. They tailor certain elements of the plan and make sure they are emphasizing the most important points. This translates nicely to the information memorandum. It not just an overview of the business, it’s a sales pitch. Often times, you are appealing to investors, an audience that professional business plan writers will already know a great deal about. They know how much information is just enough and they know how to persuade them that this business is a great business opportunity for them.

Professional output – The main purpose of the information memorandum is, at the end of the day, to sell the business for the best price possible. This means making the strongest case possible. The first impression of a business for sale comes from the information memorandum and we all know first impressions matter! The best way to make a good impression is with an information memorandum written by professional Business Plan writers. Professional is in their name for a reason. Not only will the written content be compelling but, it will look good too and visual appeal can make a big difference.

They’re fast – Professional business plan writers, if solo, tend to have a network of other professional business plan writers. Many have created firms and now mentor and oversee other professional business plan writers. Why does this matter? Because it means they have the resources to turn around your information memorandum quickly, likely much quicker than handling it yourself.

There are many advantages to hiring professional Business Plan Writers. If you’re attempting to sell a business on your own, it’s one less thing to worry about, allows you to get ready to sell much quicker, and ensures you will have a buyer-ready, professional plan that makes a great first impression. As an M&A firm, you are freed up to focus on landing more clients and closing more deals. Either way, professional business plan writers will bring tremendous benefit to your sale(s).

5 Tips to Improve Any Business Plan or Pitch Deck

 

When you are creating a business plan or Pitch Deck for an outside audience, there are many things to consider. At the forefront, of course, is making sure you have a sound business idea. Whether you can convince an outside party such as a loan officer, potential investor, or sought-after partner of this will rely almost entirely on your business plan or pitch deck. It is important that these documents be the best representation of your business possible. The following tips will help you take your business document to the next level.

1. Visual Appeal Matters

It’s probably obvious that visuals matter in the pitch deck but, they are important in the business plan too. In your pitch deck, it’s all about keeping eyes on the presentation. In the business plan, visuals should be used more sparingly but, they should be used. They help illustrate important aspects such as key financials, product images, and you should always include company brand colors, style and logo throughout.

2. Be Creative Yet Predictable

You want to have visual appeal and for your Business Plan to be creative. After all, it should be a unique representation of your business concept. However, you shouldn’t reinvent the wheel. You will cover the same main aspects in roughly the same order as millions of other business plans or pitch decks. Let the business idea itself - paired with relevant visuals - be the creative and special features of your business plan. Beyond that, it should be fairly predictable.

3. Remember Your Purpose

People have a tendency to make business plans and pitch decks too long. Don’t get caught up in every detail. Rather, you should ask yourself what the intended audience of your pitch deck or business plan really wants and needs to know. Only elaborate where it is truly necessary and remember who you are presenting to and why.

4. Hire a Professional

Depending on your audience, you may want to have a professional handle creating your business plan and/or pitch deck. If you’re satisfied with your writing and organization skills, hire a graphic designer to finalize the pitch deck or business plan. If you’re great with design but need some help with the formal language of a business plan, hire a professional business plan writer. Professional Business Plan Writers, like Joorney, can handle the entire process for you if you prefer.

5. Make Additional Information Accessible

Few things kill the excitement over an idea faster than letting time elapse. You want to “strike while the iron is hot” so to speak. As that applies to your pitch deck or business plan, it means having as much information as possible at the ready and well organized so you can answer their questions while you are still in their presence or within hours of a meeting.

There is a lot that goes into a good Pitch Deck or business plan. After you build the foundation, you should polish it with the tips above. It can be the difference between your business plan achieving your desired goal and having to go back to the drawing board.

The Role of Market Research in the Information Memorandum

 

When planning to sell a business you will need to prepare an Information Memorandum. This document is similar to a business plan. It is meant to provide an overview of the business and insight into the company’s value in order to entice prospective buyers. A lot of what buyers are looking for is potential. The section that helps inform a great deal of this potential is the market overview, which should be based on current market research.

Market research is the process of identifying consumer needs and preferences. It also involves identifying the total size of the industry and the customer base. When it comes to your information memorandum, the more thorough the Market Research the more you’ll be able to justify other sections of the plan.

Thorough market research will allow you to:

 

Demonstrate market share

You can’t demonstrate your company’s place in the market without describing the overall market. If you’ve been busy working in your business, things around you may have changed without you realizing it. When you do market research, you get to see the real picture. You will also be able to identify what percent of the total market you are capturing. This is of particular interest to competitors who may buy your business simply to expand their market share.

Justify financial projections

In the financial section of the information memorandum, you will report historic information as well as projections for the future. When creating the projections, this should not only be based on your company’s financial trends but, overall market trends as well. It gives more validity to your numbers.

Show future potential.

As already mentioned, one of the most important parts of the business plan is the market overview. Even if your business is under-performing now, market research shows the future potential, making it far more appealing to buyers. Plenty of companies will purchase failing businesses if they know there is an upside. Market Research is where this can become evident.

Receive top dollar.

Ultimately, the reason it is so important to use market research in the information memorandum is because your goal is most likely to sell the business for as much money as possible. It doesn’t matter if your business is succeeding right now or not, if there is a reasonable potential for it to perform well you can receive top dollar. Business values are subjective and acquisition prices can come down to the highest bidder. The more people you have interested in your business, the higher the final offer.

Since information memorandums are so similar to business plans, business planning professionals can help you. They will be able to complete the information memorandum with buyers in mind. Business plan writers and other similar professionals are accustomed to creating documents that “sell” the business. Ideally, you’ll be using a mergers & acquisitions (M&A) firm to handle your business sale. Even they often outsource the creation of the information memorandum - or at the very least market research - to streamline their businesses. Regardless your situation, hiring professionals can ensure you get the market research and the Information Memorandum that best represents your business.

 

Why Your Approach to Financial Modeling Matters in the Bank Business Plan

 

When creating your Bank Business Plan, every section and aspect of your plan matters.  It all needs to tie together to create one cohesive and convincing representation of your business.  However, potential lenders are more interested in some sections than others.  One of the sections that will matter most is your financials.  You will (or should) use financial modeling to arrive at your financial projections.

How you approach your financial modeling will determine how your bank business plan is perceived by the loan officer or other bank officials.

What is Financial Modeling?

Understanding how Financial Modeling will impact your bank business plan begins with understanding financial models.  According to Corporate Finance Institute, “A financial model is the summary of a company’s performance, based on certain variables, that helps the business forecast future financial performance. In other words, it helps a company see the likely financial results of a decision in quantitative terms. The measurements and skills used to construct the model include knowledge of the company’s operations, accounting, corporate finance, and Excel spreadsheets.”

To summarize this definition, financial modeling is the process of plugging in variables to a spreadsheet to see how it will impact financial outcomes or, in the case of the bank business plan, financial projections.

Financial Modeling Approach

Since financial modeling is based on variables that you plug in, your approach comes down to how you determine what variables to use.  If your business has already been in existence, you will rely on actual financial results.  The more actual financial history you have, the more reliable – and provable – the assumptions (aka variables).  A couple months of financials is not enough to justify assumptions.  They should also be supported with Market Research and other types of research such as getting price quotes for certain supplies or services you will need to run your business.

Further, when it comes to your financial modeling, you need to be able to show your work to an extent.  It’s not enough to show the final financial projections, you must explain how you arrived at them.  Think back to math class, you couldn’t simply write down the answer, you had to show your work.  In the bank business plan, you show your work in an appendix.

Financial modeling often results in lengthy, complicated spreadsheets which are not suitable to be printed.  In most cases, you won’t show the entire model but, rather explain how you chose the key assumptions or variables that fed the model.

Here’s an example:

You estimate payroll costs for the first year at $250,000.  In your Financial Modeling work, you will have arrived at that by taking into account your hiring plan.  You’ll have listed each position and it’s expected salary for the year.  Then, you will research average benefit costs.  This may be a simple % based on industry standards or, if you have already started pricing out health plans, retirement plans, etc. it will be based on real figures.  You want to use whatever figures most accurately reflect reality, the more accurate and “real” the numbers and assumptions, the better.

In a bank Business Plan, your financial projections, and therefor financial modeling, will likely be scrutinized more closely than in any other type of business plan.  Why?  Because a loan officer’s main concern is whether or not you can repay the loan.  They need to know you have a realistic expectation for revenue and expenses and have a solid cash flow management plan.  Sound financial modeling and financial projections is the best way to demonstrate this.

9 Reasons to Use Professional Business Plan Writers for Your Pitch Deck

If you’re seeking an investment in your business, you will need to prepare a pitch deck to get potential investors to read your business plan.  You can prepare a pitch deck on your own but given the importance, unless you have experience, this may be better suited for a professional.  There are exclusive pitch deck writers out there but, there are many reasons why Professional Business Plan Writers are well suited to prepare your pitch deck.

1.       Keeping Audience in Mind – Professional business plan writers are accustomed to writing with appropriate structure, tone, and level of detail to appeal to the correct audience.

2.       Knowing What Matters to Investors – Beyond just writing for the right audience, professional business plan writers really understand investors since the majority of business plans are created to pursue investments or a bank loan.  This understanding of how investors think and what matters to them most translates well to preparing the Pitch Deck.

3.       Having a Sales Mentality – When it comes down to it, your pitch deck is a sales pitch.  You want investors to buy in to your business plan, usually in a big way, and that starts with getting them to read it.  Professional business plan writers know how to entice them both through the pitch deck and the business plan.

4.       Making it Look Good – Business plans aren’t just words.  You also have to worry about the look and feel.  The business plan isn’t heavy on visuals like the pitch deck may be, but professional business plan writers are accustomed to knowing how to use a good visual to enhance a specific point.

5.       Appropriate Level of Detail – The business plan may be in-depth but, professional Business Plan Writers know how to make it concise.  This same ability translates well into the even more condensed version of your business plan presented in the pitch deck.

6.       Complete Understanding of Your Business – If you utilize professional business plan writers to write your business plan, they will already have an intimate understanding of your business and your goals.  Perhaps more importantly, they will have gotten to know you a little bit.  This understanding allows them to make sure your passion and vision truly shines through.

7.       Business Expertise – All the experience professional Business Plan writers have means they have seen the best and worst of business concepts and plans.  They know what works and what doesn’t.  They will be able to make suggestions based on this experience that will help improve not only your business plan but your pitch deck as well.

8.       Support of a Team – There are independent professional business plan writers but, many work for a firm that allows them to tap into other professionals such as graphic designers and finance experts.  Even those that do work alone often know other types of professionals they will rely on for advice when needed.

9.       Exuding Professionalism – Investors see dozens or more pitch decks per week.  You need yours to stand out.  Professional Business Plan Writers create professional documents, and that includes the pitch deck.  This can give it an edge and get it noticed over the countless others that will come across investors’ desks.

A Brief Overview of 5 Types of Financial Projections in Your Business Plan

 

The Financial Projections Business Plan are arguably one of the most important aspects of the business planning process.  Businesses serve many purposes, but they all run on money.  Assets and expenses are essentially the gears of your business.  As such, it is imperative to understand how they work.  That is what creating financial projections for your business plan allow you to do.

Most of the financial projections, as well as other aspects of the business plan, will be presented with both short- and long-term goals.  Short-term projections account for the next year and will be broken down by month.  Long-term financial projections on the other hand, are typically for three or five years, broken down into year.

Sales Forecast

When coming up with a business idea and creating a business plan, your very first consideration is your product or services.  What is your business going to sell?  This question leads to determining how much you can – and need to - sell.  This becomes your sales forecast which is one of the first financial projections in your business plan.  As your company begins, this will be based off market research and assumptions.  After you have been in business, this will also be based on your actual performance.  It will also be impacted by your expense budget.

Expense Budget

Your expense budget helps in determining your sales forecast by informing you how much you need to sell.  The expense budget will be a detailed breakdown of how much it will cost you to run your business.  Expenses add up quickly and is that is why it is so important to get them down on paper so you can manage them.  It is only once you understand your expense budget and sales forecast that you can dig into the other financials of your business plan.

Income (Profit & Loss) Statement

Businesses like to understand their margins and other key business ratios to make informed decisions.  One of the financial projections the sales forecast and expense budget facilitate is the profit and loss (p&l) statement, also commonly referred to as the income statement.  This is one of the key financial statements of the business and how you will likely synthesize your actual financial performance on a monthly basis.  Creating this projection also creates the benchmarks for how your business should ultimately run.

Statement of Cash Flow

It is just as important to consider when you will generate revenue and incur expenses as it is to know how much you’re going to make or spend.  This allows you to manage your cash appropriately.  The way you will understand this is through creating the statement of cash flow.  Outside of the Business Plan, in day-to-day operations, you may even have a daily cash flow projection.  It is arguably one of the more useful financial projections in the business plan, though they all play their part and provide different insights.

Balance Sheet

Last by not least of the financial projections in your business plan is the balance sheet.  The balance sheet is like the report card for your business.  It allows you to understand where your assets and liabilities are, which gives you all sorts of vital information such as how liquid your business is.  It is a brief overview of your total financial health.

You may find other financial projections in a business plan but, these are the main ones.  They all give a different view and understanding of how your business is performing.  Combined, they give you a complete picture.