If your hope is to receive funding from a venture capital or private equity firm, take the following five keys into account as you create your business plan:
Show Them Your Track Record Of Success
There is one factor which investors will always evaluate as an indicator of whether a company is likely to succeed and that is the track record of the company and/or its management team in the pass. If you have received funding before, demonstrate how you put this capital to work to grow the business, reach goals, stake out a position in your market and just as importantly, provide a return to your investors. If this is a new venture, then emphasize the past successes of your management team in growing startups.
Demonstrate your knowledge of the market
There is a great emphasis on niche markets these days. If your company is in the healthcare field (a $1 trillion industry), you need to demonstrate a focus on a specific segment of this sector, for instance, practice management software targeted towards New England hospitals. This means that youΓÇÖre competing in the software, healthcare and business services sectors ΓÇô this is a focus which allows you to maximize your marketing efforts; investors always like to see that you understand your niche and how to compete in it.
Demonstrate an understanding of what your market wants and how to meet this need
One way that investors look at companies is in their relationship to their customers. Your business plan has to lay out your case for why your company can meet an unmet need in your target market. This needs to include how and when you will be able to supply product to your customers. If you canΓÇÖt do this, your business wonΓÇÖt make any money and there wonΓÇÖt be anything in it for a potential investor.
Show how youΓÇÖll solidify market share and shut out competitors
One example of how companies lock in customers and lock out the competition is the way that telecommunications companies sell their services in bundles. For instance, a customer who purchases one service will be offered a bundle of services at a discounted rate; and current customers will not have to pay installation fees unless they switch to another service provider. Naturally, a superior product and superior customer service are also good ways to lock in customers. Investors want to see you answer the question of how youΓÇÖll retain your customers and the revenue stream that they represent.
Provide realistic financial projections
Realistic financial projections which are based on reliable data demonstrate an understanding of your industry and lend added credibility to your business plan. In many cases, investors look only at the financials, so your pro forma statements have to be realistic and well thought out. Your figures for market penetration, margins and revenue per employee must be realistic and consistent; this will make investors see your plan as credible and your company as a viable investment opportunity.