Rarely can a business raise funding without a thoroughly researched business plan. Entrepreneurs must convince investors they are on the road to success, that they’ve mapped the terrain and know how to conquer challenges.
The management team, core business idea, market, and financials are critical, but how you convey those elements to venture capitalists (VCs) and angel investors can be just as important as what you say.
Here are 10 tips that will magnetize your business plan and make investors sit up and take notice.
- Hook them immediately: Investors are deluged with business plans and reject most quickly. To stand out and keep them reading, open by grabbing the investor’s attention and entice them into reading more.
- Project solid management expertise: Your startup’s management team is absolutely critical to both your success and your ability to raise venture and angel financing. You don’t need a complete team to raise funding, but you should have key players on board with the experience and vision to make the company a success. Investors look for a team with:
- experience starting and running other companies
- ability to collaborate
- a range of industry knowledge and functional skills
- integrity, passion, flexibility and reliability
Corporate and advisory board members can make you more appealing, as can respected professional resources such as accountants and lawyers.
- Develop believable financials: Investors want to know the assumptions behind your financials. If you have an existing business, you can draw on that experience. But when you’re just starting out, you have to develop your financials from the bottom up. Remember that VCs and angels have different tolerances for aggressive projections. Angels may have less demanding goals than VCs.
- examine potential distribution channels to estimate revenues from different streams
- source manufacturers and suppliers costs
- project staffing needs with salaries and start dates
Know your numbers and be ready to be grilled on the details. Know your break-even point and burn rate. Know what the investor’s exit strategy will be (buyout, IPO, merger/acquisition).
- Target a significant market with opportunity: VCs in particular want to know that your business will serve a large market (at least $1 billion). They want to understand the market gap you plan to exploit. Is the consumer frustrated by an industry plagued by poor quality control? Is it an untapped market niche?
- Include a well-researched market analysis: To target an opportunity you have to know everything about it. Analyze the market’s characteristics, growth potential and all relevant trends. Include a competitive analysis, showing your strengths and your competitive advantage.
- Create competitive barriers: You must have a sustainable competitive advantage. Do you have patents, copyrights, a proprietary process or technology, exclusive licenses or agreements? Are you the first to market? How long can you protect that lead if a big company enters the market? Do you have the best people or the best strategic partners?
- Forge strategic alliances: Strategic alliances with industry distributors and vendors shows venture capitalists and angels that others trust and want to work with you. It establishes your concept’s merit and increases an investor’s confidence.
- Show management’s commitment: Invest in yourself. It says you are serious and confident.
- Attend to the details: VCs and angels don’t have a lot of time or patience. Your business plan should be:
- consistent; numbers in particular need to be consistent
- well documented; footnote where appropriate
- accurate; don’t make things up
- easy to read; use a font and type size that are readable, as most investors are over the age of 40
- well laid out
- written in an acceptable business plan style
- handsome: use of color on the cover and graphics can be beneficial
Be sure the cover page has all the basic info: company name, logo, address, phone number and URL — plus the name and title of the contact with email address. Include a table of contents (with page numbers) that provides a logical arrangement of the sections of your business plan.
Getting funding is no easy task. Hard work, persistence and a thorough plan will improve your chances.