Organising a business plan that is articulate, ambitious and stands to scrutiny, is essential in today’s competitive global economy. This requires plenty of time and research, and the process should not be rushed, even if you are anxious to get your business to market as soon as possible.
First of all, define what you do
Define what your business does and the problem it's trying to solve. If an investor doesn’t understand what your business does after reading the first paragraph of your business plan, you may have lost their attention already.
Make this definition as succinct as possible, as you will only have seconds to make a good first impression - whether an investor is reading your business plan or listening to your pitch face-to-face.
Create your executive summary and description
Include all the relevant information about your business, such as the year it was founded, where your office(s) is located, what you offer, and what differentiates you from competitors.
Next, describe your business in more detail and talk about the strengths and weaknesses of your competitors. Investors will want to learn how your business will capitalise on its opportunities and try to alleviate its threats.
Determine who your ideal investors are
This is an important - often overlooked - factor when businesses are looking for capital. Ideally, you should target investors that have a good track record of investing in successful companies in your industry.
You will need to do your own investigations. For example, you might want to check how an investor's investments are performing, what their reputation is like among their peers, and how often they invest in products or services that are similar to yours.
Get your stats right
This may sound obvious, but it’s very easy to make an error in your financial projections. Investors have a meticulous eye for detail and will spot an obvious mistake.
Make sure your business plan includes the following information:
- Annual turnover and net profit/loss for the last year
- Total liabilities
- Your projected annual turnover and net profit/loss for the next 3 years and the annualised percentage increase
- The number of customers/clients you have
- The average expenditure of each customer/client
- Stats on projections of your industry’s growth in 3, 5 or 10 years (use reliable sources), to garner investors’ enthusiasm
Prepare your written and verbal business pitch
One of the most daunting tasks you will face as a business owner is pitching your product to investors. If you’re familiar with the show ‘Dragon’s Den’, you’ll understand how daunting it can be to pitch to investors who may seem overly critical or sceptical.
However, this is a rather pessimistic interpretation. Investors are not trying to catch you out; they are looking for opportunities that will deliver good long-term returns for them.
Creating a written business pitch gives you more time to perfect your tone and optimise your messaging for your target audience.
However, you’ll still need to be ready to pitch your business verbally when the opportunity arises. Be confident, don’t pause after each question, and memorise important stats (such as last year’s turnover) to instil confidence and build trust in your business.
Explain your marketing strategy
A coherent, carefully planned marketing strategy can help you attract investors' attention, particularly if you work in an industry that they're interested in. Your marketing materials need to demonstrate clearly to investors that your business is in safe hands and your products or services - including your intellectual property - are unique and unlikely to be easily replicated by big corporations.
You'll need to show how you intend to grow your customer base in different environments - such as your website, social media, networking events, word-of-mouth - and how you will measure the success of your marketing campaigns (for example, with click-through rates for online paid media campaigns). At a minimum, investors will expect you to have a well-designed website and a strong social media presence.
Explain your sales strategy
This is your chance to impress investors with your numerical skills. You don't need to be a maths genius to create a great sales plan; however, you need to know your key numbers off by heart and confidently explain how you calculated them.
For example:
- If you expect your overheads to fall each year and your net profit margins to increase, an investor will want to know where these savings will come from.
- If you predict that sales will increase by 30% in year 1, 50% in year 2 but 200% by year 3, an investor will want to see the evidence to support these predictions.
Three big mistakes to avoid when preparing a business plan to attract investors:
1.Underestimating or overestimating how much funding you need
If you ask for too little funding, your business may struggle to cover its overheads and repay any debts. But if you ask for too much, a prospective investor may be confused about what you need the money for. They may also ask you to give up more equity from your business.
2. Overestimating your valuation, future revenue or profit
As we alluded to earlier, investors will quickly know when a business is overvalued or your future revenue or profit projections seem too high. Don’t exaggerate. Be honest about where you are now and how much your business could grow with an investor’s help.
3. Being opaque about how you’ll use your investors’ money
Investors don’t inject capital into a business just to help it stay afloat for a short while. This money is supposed to act as a bridge that will get you to the next stage of your business journey.
Conclusion
Creating a business plan that attracts investors is a challenging but rewarding process. You’ll need to articulate your business clearly, have a good understanding of the opportunities and threats in your market, and be ambitious but realistic. You must know your finances and avoid making any careless mistakes in your projections. Ultimately, however, your success will be determined by your ability to pitch your business idea confidently and earn investors’ trust.
