Attracting Investors: What Investors Look for in a Business Plan
Entrepreneurs, businesses and projects rely on investment capital to hit the ground running. The groundwork and roadmap must be laid out within a solid investor-ready business plan. The activation of the best business plan starts out with catching the investor’s interest.
Therefore, a strategic business plan is essential in getting the funding you are looking for from VCs, accelerator, angel investors or other types of funders. First impressions are the most lasting.
Cutting to the chase
Venture capitalists, accelerators and angel investors are extremely busy and expect entrepreneur to do the required homework before approaching them. They only choose to take projects to the next level that have a solid business plan. (Read our blog on “ Are You Investment Ready” ).
A business plan shows investors how well you know your market, product, strategy and exit plan. Unless your investors are strictly family and friends, a third party’s main concern is how your product or service will achieve traction in the marketplace, profitability and what are the possible exit strategies.
Why is a business plan needed?
Many ask whether they need a business plan. The answer is “yes”.
A business plan is the answer to the question, “What do you aim to accomplish?” It is the blueprint and brainwork for the entrepreneur, management and the investor. It conveys vision and strategy to investors, laying out the path to success – where your business will have greater profitability and increased assets.
What is an investment ready business plan?
It is the aforementioned potential profitability, which is demonstrated through financial projections – usually within a 3 to 5 year period – that attract investors. A business plan answers unique concerns of an investor when it:
• concisely details the business, customer profile, company management, market strategy, and financial projections
• creatively presents business ideas tailored for the investor audience
• clearly demonstrates acceptable risk, investor reward, and value creation
What do investors look for when reading a business plan?
It is important to understand what the investor will look for before outing forward your pitch:
• The business plan will map out the products or services offered, how they will gain traction and the speed at which they will do so.
• Secondly, investors will think of is the exit – how much, how long and how will the investors earn their return?
• Thirdly, how much investment capital is required to grow a company to the point where they can earn a return on their investment and also many more rounds of investment might be needed for the following milestones to be reached?
Having these answers ready, will ensure you are prepared.
In addition investors are looking at a variety of factors including a solid management team or advisors with a proven record of success. They must be convinced that the product offering has a clear competitive advantage with a shot at increasing and substaining the value of the company, i.e., this could include different markets that can be tapped into with the same product or service for future growth.
Approaching investors – what do you need?
Approaching investors is best done through intermediaries who have ties and relationship to VCs, accelerators, angel investors and other types of funders. Generally, business plans are not sent as a first communication tool to investors but is kept for later when the investor is interested in hearing more about your business or business idea.
The 3 tools that are a necessity to pitch a solid business proposal are:
1. An elevator pitch. A brief description of what your value proposition is, that will clearly show the investor what the traction of your idea is and ignite that spark of interest to carry on reading.
2. A high-concept pitch. This would be a single sentence within the elevator pitch, which highlights the startup’s vision.
3. A ten-slide deck in the form of a Power Point presentation to tell your company’s compelling story. Click here to see what the ten-slide deck should contain.
The elevator pitch is an incentive for investors to look at the ten-slide deck. The deck provides the impetus to set up a meeting and/or ask for the business plan.
Your takeaway is…
Always remember what are foremost in the minds of investors:
• Traction: Is your product going to be a great addition to the marketplace with or without their investment.
• Investment: How much funding is required and the terms offer.
• The Exit: Investors put money in private companies hoping they might cash out through an IPO some time in the future. They will consider and look closely at your exit strategy to understand potential return, timeframe to exit and different options.
Do you need to write a business plan? update an old one? or is your business plan investor ready?
Knowing how to craft a solid, investor ready business plan and how to approach investors lays the foundation for attracting investors. Equally important is knowing the investor’s perspective, which is, above all, return on their investment. It is best to let a business plan expert help you write, complete or update your business plan. This is an investment which will improve your chances of funding success.
When considering your business plan needs take a look at how www.Maximpact.com can help. We have hundreds of highly qualified experts and consultants able to satisfy the needs of any entrepreneur or business. Whether you require them to have specialized skills or expertise in specific sectors we have them all.
We cater to all budgets and help your business evolve and meet its full potential. Our business experts will steer you in the right direction and make sure you have what you need to become investor ready.