Businesses get capital using business plans but have to run on business plans of operations. When we ask someone for a copy of their business plan as part of the default risk due diligence review process, 9 times out of 10 they will send us a copy of their current capital financing proposal and not the document that describes how the business will be managed for the purposes of reducing management execution risk to a level INVIZEN IT Business Plan Sample where a reasonable person would conclude that a materially-significant investment loss is likely to occur due to management not knowing what their operations execution management obligations are going to be. The business plan of operations is the document that demonstrates these issues as being potentially manageable. Bankable business plans address this issue at their core.
If you are a sponsor or promoter seeking capital financing for your business from the capital markets (especially commercial real estate developments), the business plan of operations is your tool that demonstrates you can manage and/or mitigate investment loss severity risk exposure that may result from the commission and/or omission of management decisions that create the critical execution potential for loss risk. The fact you are a good person, an experienced manager, a wealthy individual, a person of upstanding character or any other positive attribute of this kind doesn’t matter. What matters is what may happen if you leave the business, die or can no longer function in your capacity for any reason. When (and if) that scenario comes to pass there has to be a plan of action available to the next person who takes the job so they can pick up the ball and continue operations and not have to spend time and resources trying to figure out what they should be doing. The business plan of operations is the document that provides proof this outcome has the opportunity of happening for the benefit of the investors and/or lender(s) who would be providing capital funding and do not seek to have their monies wasted. If you don’t have an updated business plan of operations, then you run the risk of being rejected for funding approval because now the investor(s) and/or lender(s) must make a subjective decision whether or not they believe the business will be managed to their advantage. Obviously, that decision becomes a 50-50 proposition at best. More than 4 out of 5 businesses seeking capital fail to obtain that capital investment and the potential for investment loss due to execution risk exposure plays a huge role in this process.
The business planning due diligence review process that is intrinsic to default risk underwriting also includes the regulatory risk management plan, enterprise risk management plan, employee management plan and management reporting plan documents that necessarily attend the business plan of operations and demonstrate the sponsor’s or promoter’s intent to proactively manage ongoing execution risk exposure that could lead to investment loss. This requires a systemic solution such as the INVIZEN IT RTS Program (see diagram below).
If we look at this issue in terms of your ongoing operations, the updated business plan of operations provides proactive guidance on department budget spending, employee task responsibilities, reporting requirements and meeting goals and expectations, so this is not an issue you should be ignoring as it is an easy way to help dashboard your enterprise for continual success. If you don’t have a business plan of operations, you can turn to INVIZEN to have one created. If you have questions on this issue, please feel free to contact INVIZEN at 832.663.9634 to have your issues discussed and questions answered. To order one for your firm, click here.