This is a guest post by Ally from Home Loan Finder
In business, great ideas are half the battle. Being the first or the best will give you an edge over the competition. But the other half is also the more crucial one: getting investors to back you up. Unless you’re particularly well-off and have a big risk appetite, without financial backing, your ideas won’t take off. That’s where your business plan comes in.
The goal of a business plan is to communicate your big idea to potential investors. Sounds simple enough, but remember, these people have hundreds of big ideas pitched to them every year. Here are some things you can do to get noticed, and merit their time and money.
The Executive Summary
This is basically your entire business plan squeezed into a couple of pages. Explain each section of your plan in one or two paragraphs. The point is to wrap up your main points in a form that’s easily readable, giving the reader a general idea of what’s in the rest of the report. Specifically, you want to include an overview of the market, the financials, the prospects for growth, and a quick background of what you do.
Again, it sounds like a breeze, but it’s not. The executive summary is probably the most crucial two pages of your business plan. Many investors go over the executive summary and decide whether the rest is worth reading, so you want to put your best foot forward. Whether it takes you two hours or two weeks, do what it takes to write a summary that puts your idea in the best light possible.
Although there are no set rules on where each section goes, it makes sense to start with a background of you and your company. Explain how you the company got its start or, if it’s your first venture into business, where you are in your career and why you’re making the change. Do the same for your management team and anyone with a significant amount of influence. Highlight relevant experience, education and training, and anything that will lend credibility to your case.
You’ll also need to offer a view of the market, including its current state and projections for the next few years (with figures to back them up), and where your business will fit in. This will naturally require you to acknowledge the competition, if you have any, and how they can impede your entry into the market. Be honest about what you’re facing—underestimating your competition is one of the most common pitfalls in business. If you have some strong competitors, bring them up and show how you plan to overcome them.
The Money Trail
The first thing investors want to see is where they’re putting their money. Once you’re done highlighting your main points, work out the money trail—the route you’ll be taking towards profit and where their investment comes into the picture. Provide solid figures and make sure they add up. Pay particular attention to the link between predicted outcomes, forecasts, and financial data. Any investor worth your time will notice blatant holes in your math. Spreadsheets can be a drag, but it really pays to go through each and every figure. You want to be sure of your own numbers before serving them up to investors.
That being said, you don’t want to bury your main idea in figures. Some investors admittedly skip through the numbers when they take up page after crowded page. Providing summaries of projections, cash flow, loss and profit, and balance sheets will make their job easier—and probably get you a response sooner.
Strengths and Weaknesses
There are strong and weak points in any business plan, and every investor knows that. If you don’t bring up the weaknesses in your plan, an investor will find it himself and wonder why you didn’t notice it—or worse, assume you left it out on purpose. In any case, play it safe by being honest about your idea’s strengths and weaknesses. Show potential problems in your plan and how you plan to address them. (Don’t have a plan? Now’s the time to make one.) If anything, it will show investors that you’re not blind to your own faults, and that you have the initiative to find ways around them. So put those flaws out in the open, and let investors make of it what they will.
Your choice of words and tone of writing can speak volumes about how you conduct your business. First, remember to cut back on the jargon unless you know for yourself that your reader is as well-versed on the subject as you are. This is particularly common in the tech industry. Many first-time entrepreneurs are so engrossed in their business that they forget to step back and realize that not everyone sees it the way they do.
Next, think about visuals. These days it’s easy to add a splash of color to your graphs, a few catchy pictures and phrases to grab the reader’s attention. What’s difficult is finding the right balance between spicing it up and trying too hard. Start by getting the basics down pat—choose a reasonable font size and style, use easy-to-read headings, and break up your text into paragraphs that can be skimmed over. Then you can add striking visuals where you think they’ll be most helpful, such as a picture of your product right on the description page.
Convince Yourself, then Convince Others
Perhaps the most important thing in a business plan is that you believe in it yourself. It’s normal to have apprehensions, but investors don’t need front-row access to your fears. To put your plans into perspective, step into the shoes of an investor and look at it from a different angle. If you had $10,000 to spare, would your business be a good place to put it? Why? What would you expect in return? It’s not the time to be humble. Focus on the high points of your plan rather than the ways it can fail. If you can convince yourself that your business is worth it, convincing the rest of the world is like second nature.
Ally is part of the team that manages Home Loan Finder, a free mortgage broker service in Australia. Before joining HLF, she was a Media Planner with McCann Worldgroup Philippines, Inc., with award-winning executions, including the Levi’s 501 “Live Unbuttoned” global campaign.
Image by Ivan Walsh