As you seek the backing of venture capitalists, private equity firms, angel investors or traditional debt capital for your new venture, there is one thing which every potential investor or lender will look at: your business plan. An investor who wants to learn more about your company will invariably ask you for your business plan. If you can get their interest, they will read the whole thing ΓÇô and how well you make the case for your company will have a great deal to do with whether they ultimately decide to invest in your venture.
Venture capitalists and private equity firms will want to know a lot of specifics about your company before they agree to put their money behind it. In particular, theyΓÇÖll want to know that yours is a company which will grow quickly and allow them to earn a return via a buyout or IPO in a reasonable time frame.
There are some elements which are contained in all successful business plans: an executive summary, company analysis, industry analysis, customer analysis, competitive analysis, marketing plan, operations plan, a description of the management team, financial plan; and an appendix with supporting materials. There is a lot of ground which you have to cover here, but in essence, your business plan has to answer these three questions:
1. Will my company fill a need in the market?
Is there a need that your business will fill? What is it and who is your target market? Your business plan has to show to investors that your business is exactly the right one to meet this need and that the product or service you provide is something that the market is eager for.
2. Does my management team have a track record of success?
As great as your idea may be, youΓÇÖll need to provide investors with more than this to convince them. YouΓÇÖll need to show potential backers that your management team (or you) has what it takes to succeed ΓÇô preferably by showing them a solid track record. If you have management who have been successful at shepherding companies through the same stage of growth that your company is in, highlight this in your business plan.
3. Are my pro forma financial statements realistic, complete and based on reliable data?
Pro forma statements are the best way to show prospective investors that your business plan is a viable one, since they provide a forecast of its financial prospects.