Investor's want to see fast growth and profits in return for their cash
A Business Plan For Investors - Vital Questions Your Plan Should Answer
Try to fill out a business plan proforma or template, and chances are you'll end up stumped. There's no such thing as a standard business plan. Precisely because every new business idea is different. Better to approach your business plan by answering the questions that will be top of an investor's mind...
I've looked at a string of business plans lately. Early drafts mostly. I know what painstaking work goes into them and how much their authors have struggled to capture the information they think will convince an investor to come onboard.
Sadly though, most business plans fall short. Because the start-up owner is coming at their new business idea from the wrong angle. They're thinking too much about the product or service itself, and not enough about the business opportunity.
To raise any kind of money to fund your new business, you've got to start thinking like an investor...and that means asking, and answering, the kinds of questions uppermost in an investor's mind...
- What's the opportunity in the marketplace for this, and what's changing in the market that opens this opportunity? Is there a clear driver for demand?
- What's compellingly different about this idea?
- Who's behind this idea, and what experience or story has led them to this? Is their motivation more than just the good idea and more than just making money? Have they a track record in this field? What signs are there of their personal commitment to making it work?
- Do they look like they know what they're doing in business?
- How big is the market for this, realistically? How many potential buyers are there out there?
- How do production and ongoing costs stack up against the proposed price of the product - is there enough margin, at a glance?
- What investment is being sought now, and what's the deal for me?
- How much investment is needed altogether, to really make this fly? And do these sums make the idea look too risky?
- How will the investment being asked for be used?
- Is this a business that could scale and get big quickly?
- Beyond the immediate business proposed, are there other, maybe bigger business opportunities for this idea?
- Where's the credible proof that the market is ready for this? Why now?
- Has the business made any sales yet, and if so, for how much? How were the sales won?
- What are the main challenges and issues for this kind of business, and do I [the investor] understand them and this sector enough?
- What statutory regulations and standards govern this area, and has the business taken account of them?
- Are there any hidden bugs in the plan, or anything the plan isn't 100% upfront about?
- What's going to stop competition moving in? Does the business own any intellectual property worth having?
- What's the planned route(s) to market? Will the business license rights or handle manufacturing and sales itself? What sales channels will it use?
- What's the main approach to marketing, and does this take account of up-to-the-minute, low-cost marketing techniques?
- What is the business being valued at currently, and is this realistic?
- What are the projected sales and profits for the business, and where's the spreadsheet listing these figures?
- What's the business opportunity on offer here, and how will I benefit as an investor?
- What's the exit strategy for the business - what kind of players might buy the business if it's successful?
- Who owns what in the business now, and what is their interest and investment in the business?
Every potential investor will have their own angle on questions, too. But their focus will always be around the business opportunity your idea represents, not on the detail of what your idea is and how it works.
At most, just a short explanation of your new product or service is needed, focusing on what it DOES for the customer, why it's compellingly different, and less on how it works. Then the main emphasis of your plan should be around the numbers, using them to make a convincing case for a profitable business that will grow big quickly.
Focus on answering the questions around the BUSINESS OPPORTUNITY in your idea, and'll you stand a chance of winning investors' minds AND their cash.