A business plan is a comprehensive document that outlines a company’s mission, goals, finances and revenue, and market data.It summarizes all areas of the business and details how those areas (marketing, operations) impact growth.
If you want funding from an investor, especially if you’re just starting your business or have an existing business, you need a business plan.
The potential investor will want to see a detailed business plan and will conduct due diligence to ensure you’re a worthy investment. Here is what investors are looking for in your business plan:
A Strong Executive Summary
This is the first page of your business plan and should be captivating enough to give a solid first impression.It should introduce the company and explain what you do and what makes you unique. It gives investors a complete overview of your business and should summarize key details included in other sections of your business plan.
Think of your executive summary as your website landing page. If a visitor comes to your website and can’t find what they’re looking for, they’ll move on to the next best thing.
Complete Financial Forecast
Every investor will scrutinize your financial plan to accurately determine financial feasibility. This section of your plan needs to be fully fleshed out and leave no grey area or room for further questions.
Your financial forecast should include:
Projected profit and loss statement on how much revenue you’ll generate and the profit you’ll make on those sales
A detailed view at how many products you need to sell to cover fixed and variable production costs
Projected balance sheet
Estimate of total assets and liabilities
Cash flow statement
Details all cash inflows and outflows
Calculations that illustrate the relationship between items (i.e, total sales and number of employees).
Customer Acquisition Costs
Investors want to know how much it will cost you to acquire new customers. When you understand your customer acquisition costs (CAC)it helps you grow in a healthy, scalable way, and shows investors that you know exactly what it takes to get a customer on board.
Your CAC can also help simplify your decision-making process, optimize your marketing strategies to focus on customer lifetime value, and paint a complete picture of your payback period (the amount of time it takes to recover the cost of an investment).
Your business plan reveals a lot about who you are as a business owner. Let’s say that you have strong sales and an optimistic financial forecast. Is your business plan missing important documentation and data points that support this?
Execution is telling. The way you communicate your business is just as important as the details within the plan.
The Financial Ask & Answer
The financial ask and answer address two important questions: How much money are you asking for and what will you do with it?
The investment you’re seeking should be clear in your business plan (typically mentioned in the executive summary and expounded upon in the financial plan). How you intend to use the money should also be clear and logical.
Investors need to know that you’ll spend their money responsibly and that there’s demonstrable proof that how you’re spending the money will result in revenue growth. Every money should be allocated to a specific destination and for a good reason.
Your business plan should prove that you have a strong management team in place.
Many investors run their portfolios with a people-first mentality. This means that who you are is just as important as what you have to offer. The “Management” or “Team” section of your business plan is a great place to humanize your company and highlight your strengths.
Thorough Understanding of Your Market
Is there a market for your product or service, how can you reach your market, and what share of the market do you have a stronghold on?
It’s crucial to demonstrate that you have a thorough understanding of your market and target demographic. Many businesses have failed because they didn’t conduct market research or speak to their customers and clients. Product validation should precede fundraising efforts.
“Market size” is a basic number that every investor looks for. Your competitive analysis, market research, metrics, and customer surveys should all be factored into the equation.
Take the time to detail every aspect of your business and consider working with a professional business plan writer to ensure you are communicating your message effectively. If an investor is impressed with your business plan, chances are you’ll score pivotal funding.
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