Dr. Paul Magelli, who teaches an Entrepreneurship and Enterprise Development course at the University of Illinois Urbana-Champaign, once said, “I don’t buy green bananas.” No respected investor would. Below is a list of business plan essentials that will help boost your chances of receiving investments.
Before you start:
- Record every bit of work you put into your business. By doing this, you will ensure that the hours you commit are not undervalued should you ever choose to sell your share.
- Breakdown and document the exact portion of intellectual property each person involved owns. If you are married, know that your spouse owns half of your share by default.
- Consider hiring a lawyer. Given the number of legalities affecting today’s competitive landscape, consulting a lawyer regularly will help you avoid unnecessary legal mishaps.
Research
What is the current state of the market you are trying to enter? Is it stable, growing or in decline? Are there any legacy systems in place that might keep your business from achieving its potential? By demonstrating your awareness of industry trends, as well as environmental, economic, and political factors that may affect your business in the future, you will give potential investors confidence in your plan’s viability. If possible, conduct market research with a focus group or a survey in order to build your case.
Customers
State whose needs are met by your product or service, and demonstrate how you are going to get your message out to those people. Without a market, you have an idea, not a business.
Financial Models
Use financial models to play out all of the possible what-if situations. Show that you have a plan whether things go wrong, right, or anywhere in between. Demonstrate your commitment to your potential investors’ first priority — Return on Investment.
Pricing Strategy
Is your goal to maximize revenue or quantity sold? Do you want to be a price leader or a quality leader? Maybe you are just trying to minimize losses at the start. Will you settle in with the industry status quo in order to avoid a price war? A skim pricing strategy can help to recover start-up costs; a penetration strategy could be employed in hopes of building a large customer base. Back up pricing decisions with strong reasoning, and assure investors that you are prepared to deal with future shifts in the marketplace.
Burn Rate
How much money do you have right now? How much will you spend every day? Week? Month? How long can your business survive without making profit? Show that you understand the risks involved, and display a sense of urgency in regard to generating a positive return by including this information.
Exit Strategy
Decide when you are going to get out before you go into business, and stick to the plan. From day one, never latch onto any idea so much that you cannot let it go. Always be open to the possibility of change for the better.
The Elevator Pitch
You will not always have time to sit down and carefully review your business plan with potential investors. Knowing how to effectively convey your business idea in one minute or less will allow you to capitalize on chance meetings.
The Name
You would not have read this article if the title had not appealed to you in some way. Take care in naming your business. The name should convey credibility to investors. Also, keep in mind your target customers — you are trying to build a brand that they will embrace, so do not choose a name that will drive them away.
Competitive Analysis
Competition is not always a bad thing. The presence of competitors may be seen as a sign of your idea’s credibility. Still, be sure to highlight your idea’s distinct competitive advantage, and demonstrate how you will maintain that competitive advantage long-term.
The Kicker
Is there something about your product or service that will ensure its long-term success? If you want to strike a deal, make them an offer they simply cannot refuse. Present a piece of information that wows investors in a good way.
Know that…
Investors do not buy into a few sheets paper. They buy into your team’s ability to carry out a plan. Bring energy to your meetings — be dynamic and have something to say. Your determination and enthusiasm won’t cover up a bad business model, but if investors do not sense your passion or believe in your ability to drive a project forward, your plan will be tossed aside no matter how good it is in theory. Show investors that you have already addressed all of the tough questions that might come up down the road. Sell them on your ability to construct a long-term strategic plan, as well as your ability to perform short-term executions in pursuit of the larger vision.
Image Credit: Tojosan, linkedmediagrp, iconoclast020
