A business plan is the backbone of any company-existing or startup. It contains DNA of the business such as reasons stating why the venture is entering a market or expanding. It is an existing or anticipated market, plans for expansion, the uniqueness of the venture, diversification possibilities and above all, returns on investments and profits. Every great business plan generally consists of these elements.
Current Scenario & Investors
The number of startups opening nowadays, as well as existing businesses seeking additional funds, are increasing at an unprecedented rate than ever before in history. Consequently, every investor- from crowdfunding platforms to venture capitalists, banks and institutional lenders are wary about putting their money into just any business. You can get great tips on writing an excellent business plan online. However, for any business plan to attract investors it has to be workable and all claims verifiable independently.
What Attracts Investors
Understandably, investors are spoilt for choice of funding a venture. Additionally, they also bear the risk of losing investment, should the money go into the wrong business. Hence, they study the business plan very closely. Further, they also check the business plan for any false claims and misleading statements.
On a positive note, there are many other things investors want to learn from your business plan with a genuine interest to provide funding. Here we look at some of the topmost things that investors want to learn from your business plan. Always include the below elements when drawing your investment plan. It can attract great investors or put off potential ones, depending upon how it is drafted.
This is the topmost thing that any investor would want to learn from your business plan. They wish to know who is behind a venture, their experience and expertise in the field and a proven track record. This helps investors assess whether the leadership is capable of making the proposed business or its expansion a success.
Further, they also want to learn the capacities at which these key leaders with the proven track record. How this would contribute to the venture and their relevance to rest of the team as well as the business itself. In other words, they wish to learn what every member of the leadership team can bring to the table. This is important in order to ensure the success of the business. Therefore, it is very important to include correct professional profiles of every member of the leadership team while writing an excellent business plan. Often these profiles instill confidence among investors.
Uniqueness of Business
Other than relevance to a market, your business and its model should also be unique. This is something investors will look into deeply. The more unique a business offering, higher the chances it stands for attracting clients. However, this uniqueness will also be weighed against relevance to the market by investors studying your business plan. Roughly put, your product or service could be unique and yet completely useless or unnecessary for your targeted clientele.
While studying the uniqueness of your business and its relevance, investors will also look at the affordability of your brand. This is to gauge how many clients can afford your product or service. Of these, what numbers would actually culminate into confirmed customers for your brand. These parameters are essential for investors to estimate how large a market can be captured immediately upon launch or expansion.
Relevance to Market
Unfortunately, a lot of new business ideas are copycats of those extant and flourishing. In such a scenario, investors are bound to question the rationale behind putting money in a business that has well-established players on the market. If your business is unique or you plan to offer it at locations where a particular product or service is not available, investors would like to see whether you have conducted research or study into demand from that market.
In addition, investors also look at how your business will help the targeted clientele and how likely are they to patronize your product or service or brand, based on economic conditions prevailing in the market. They will eye pricing structures and affordability within the demographics you target. Unless your brand is priced rightly for any particular market, chances of its success are low. Hence, investors will try to learn how many clients you can realistically bag, through your business plan.
Advertising & Marketing Plan
Your business could be unique and highly relevant. Yet, it would fetch scant profits unless you have a well-defined advertising and marketing plan. These are other elements that investors will seek to learn from your business plan. They would try and determine the relevance of advertising and marketing strategies as well as budgetary allocations for these two functions.
A business plan that includes well defined and clear advertising and marketing strategies will be favored by investors. They would know that you are targeting the right people in the right place at the right time, which would ensure the success of the business. Going aggressive on advertising and marketing policies are not always helpful because investors may learn you would splurge heavily on these activities and starve other vital functions of cash.
Payrolls eat heavily into investments and seed money of any new business or expansion project. Hence, investors will keenly study your proposed patterns of recruitment and staffing of various departments. Investors would like to verify whether you are allotting more budget to staff in a particular department that may be irrelevant to the success of your business and lesser funds to a key function that can flourish the business.
Parameters they will analyze include number of qualified and experienced staff and fresher employees in various departments and their relevance to the business. For example, a business with too many production staff and marketing personnel clearly indicates incorrect planning for a particular sector while the reverse may be true for another. They will also look for after-sales service you will provide to customers and ways and means you will adapt to retain existing clients while bagging new ones through your staffing patterns.
Return on Investments
The most important feature that investors want to learn from your business plan is the return on investments. Here they will consider every other element mentioned earlier and determine the accuracy of your projections on anticipated profits. Moreover, investors will also look at how you intend to utilize your profits such as investments in expansion, newer staff, the launch of newer products and services, opening new markets, taxation, and payroll, among others.
Here, investors will want to learn how much return they can get by investing in your business. Further, they want to know whether these returns justify the period for which they stay invested in your company as compared to other ventures. Investors do not mind waiting longer for returns provided they are assured of high profits with opportunities for growth in future.
Remember, investors seldom read your business plan themselves. Instead, they hire experts in various fields to learn from your business plan. These experts will advise on profitability and sustainability of the business.
Additionally, they will advise on whether the business is worth investing depending upon economic and market projections. Such as anticipated demand, expected rules, and regulations. Possibilities of expansion into lucrative markets domestically and abroad and of course, the benefits they get from funding. Hence, it is essential to draw an excellent business plan to attract investors.