Writing a Business Plan with Investors in Mind

Brian Hill reports:

"To attract investment capital for your venture, you have to think like an investor as you write your business plan...Your first challenge is to show them the financial opportunity you are presenting to them. Explain why your venture has the potential to grow quickly and be extremely profitable compared to other ventures they might be looking at. Then show what you have done to mitigate risk. Write in an engaging, enthusiastic, confident tone. The business plan can be compared to a marketing brochure. Your goal is to get the investors as excited as you are about the future prospects for your venture. It’s not just a recitation of facts and figures. It’s an expression of your vision for future success. Emphasize growth potential. Investors want to back companies that can achieve considerable size in a three- to five-year period. Show them why your market is rapidly developing, or already large, and why your venture will be able to capture market share at an accelerated pace. Explain how your technology works in simple, straightforward terms. Don’t try to impress them with your technical knowledge or assume the reader of the plan has the technical background you do. Investors see business plans for many dynamic technologies over the course of a year. Their major concern is whether the technology can make money. Present a compelling case for why the customer needs your product and will pay money for it. Don’t make the mistake of talking about how amazing your product or technology is, while forgetting that it's all about the customer. The solution you are providing the customer must not only be good, [but] it must [also] be important--addressing a problem that the customer has an urgent need to solve, right now. Demonstrate you can sustain your competitive advantage...[Show] what you will do to ensure your product or service offering is so superior that your customers would have little incentive to buy from anyone else. Make the investor believe in your management team. Build credibility with investors by showing past successes your team members have had that will translate into success in your new venture. Show what types of skills and experience are required to succeed in this type of business--and how you have gone about assembling your team with these specific requirements in mind...Before you send the plan to investors, ask two or three trusted associates to read it and let you know if they find any areas that are confusing or need further explanation. Keep the plan to a reasonable length, 20 pages of narrative and 10 pages of financial projections. Present optimistic, but not outlandish, financial projections. The assumptions behind the numbers are what matters most. Make sure you can explain why you believe your assumptions are realistic. If the investor sees the logic you used in the projections, and agrees with it, your chances of obtaining funding are greater."