3 Questions Your Business Plan Must Answer for Investors
You will do a lot of things in preparation of raising capital for your business, but the most important task will be creating your business plan.
Whether you hope to raise money from angel investors and venture capitalists or private equity loans, your business plan will either entice or turn-off potential investors.
One of the very first things an investor will ask for is your business plan. They may just skim this at first, but if they are seriously interested in your business they will read it from start to finish at least one time. If they don’t like what they see, they will not consider you a profitable investment option. If they do like what they see, then they will remain open to investing in your company.
So, what are these investors looking for when they read your business plan and how can you give them the information they want to see? They are initially looking for signs that your business is going to grow, or you at least have a plan in action to help it grow. They are also looking for signs that the growth will lead to a profitable exit where they get their money back plus more.
In order to prove that you intend to grow and provide a smooth exit plan for your investors, your business plan will need to include all of the following:
This can feel overwhelming when you first start to put it together, but if you take it one step at a time you will see it come together rather painlessly. Just make sure to put full effort into every section and to fill your investors in on proprietary technology and statistics through valuable information in the appendix.
While you put it together keep the following three questions in mind. You will need to answer all of these questions if you want investors to take you seriously.
1. What market need can your company fill?
Identify your customers and then determine what their biggest needs are at this moment. What services and products are these customers demanding right now? How can your business fulfill those needs? If you can prove that there is a demand and you have the ability to meet that demand, then you can prove that your company has a very high chance of growing in the near future.
2. Why are you and your management team perfectly suited to this business?
You may have a great business idea and there may be tremendous demand for your products or services, but if your team doesn’t have proven success in the past, then chances are you don’t have what it takes to pull of this business venture. Introduce your management team in detail and let your investors see their past successes, as well as yours.
3. Do you have realistic pro forma financial statements based on data that can be verified?
Take your pro forma financial statements seriously, because your investors certainly will. Everything has to be completely realistic and backed up by evidence or it won’t fly.