People, looking for investors to fund their entrepreneurial journey sometimes wonder if they really need a business plan. The answer is fairly simple. You always need a business plan to attract potential investors. Mortgage brokers have been around for decades, but many people seem to take them for granted. They can really change your finances to a better shape, especially if you own equity intangible assets like property or good quality bonds.
In fact, a business plan is beneficial for entrepreneurs and small businesses more than it is for impressing and wooing your potential investors. Not only it serves as a blueprint for a new company, it also builds the foundation of how your business will take shape.
The progress metrics, team communication and how your business will take off; every detail is mentioned in a foolproof business plan.
Since you are seeking investors to fund your efforts, you must be able to highlight why they should do so. A good business plan successfully demonstrates all the homework you have done before entering into a particular niche.
Here are the 7 key elements of a good business plan that will help you to attract investors:
1. Defining the problem
All business plans must start with stating and defining the problem your business idea is going to solve. No product descriptions are required in this space. Simply, establish a connection between a problem and the solution you are going to present.
A large percentage of entrepreneurs scare away potential investors by failing to highlight the value of their business idea. You must first figure out yourself whether you are truly going to change other people’s lives before you can convince anybody. Moreover, there should also be a time-frame for profits as no investor likes to wait for too long to get his piece of the pie.
When you define the problem and offer its solution; now the time comes to mention all possible benefits. Use a customer-centric quantification for listing the benefits. Avoid being too technical and describe everything in simple words so that anyone can completely understand the possible benefits.
Rather than rambling about possibilities, be specific and firm about the benefits your business idea will offer. You must be able to clearly define the customer, channel and revenue model that you are going to offer with the solution.
After you have carefully picked a particular industry, begin with how the overall industry evolved with time. State the customer landscape and market dynamics to create your market segment.
Keep in mind that influential investors are inclined to fund industries that present billion dollar opportunities and double-digit growth rates. You may seek data from accredited research groups such as Gartner or Forrester.
4. Elaborate your Business Model
This relates to information about your gross margins and how you will make money. Don’t hesitate to show your passion about making profits and generating steady revenues. Avoid using the social network advertising model for revenue, as it needs a $50M investment and 100M users.
Investors are least interested in a business that intends to capture only 1% of a market. Let them know you want to be a leader in your chosen industry.
5. Sustainable advantage and Competition
Describe all direct and indirect competitors and avoid making statements such as ‘we have no competition’ as it does not add any credibility to your business plan. Highlight all barriers to entry hat will keep your market rivals at bay.
When you overlook the fact that the minute your company will begin to show some traction; big corporations will start noticing. This is why do not assume that names such as Microsoft or IBM are too big to be considered your competitors. Investors are completely aware of these dynamics and will not fund you if you don’t reveal any interest of staying ahead of your rivals.
6. Partners, Sales and Marketing
Describe all sales channels, strategic partnerships and how you plan to penetrate the market. Selecting the wrong partners can destroy your business and reputation. This was my major takeaway from a recent interview with Luke, from crownmoneymanagement.com.au. Do your best to convince investors that you have a viable marketing strategy lined up with all sales channel.
7. Mention your Team Strength
Investors are less likely to invest in individuals, but are prone to fund teams, happily. Investors usually invest in people and not ideas. When you convince investors that your team is equipped with all necessary skills and the expertise to initiate a business; investors will be inclined to fund your company.
Keep in mind that potential investors generally ask for names and other contact details. Make sure they get a powerful response.
A good business plan that impresses investors almost always predicts both expense totals and revenues for the next five years to a decade. Your business plan must also cover growth assumptions and breakeven. You can include financial figures in a separate financial model in the business plan.
Investors are more interested in high-growth and scalable opportunities. Attractive business plans show double-digit positive growth rates annually, and revenues that are predicted to total $20M or more within the first five years. Your business plan must cover all these points along with rate and time of returns and profits.