Business plans are crucial to getting your ideas out there and getting funded. Unfortunately, just because your business plan is being circulated to investors doesn’t mean it’s getting read. Think of it like a resume. If your business plan doesn’t have the right content or the correct format, the investor will easily pass on it. Some of these investors receive upwards of 10-15 deals per day or more. And they are not going to read a 40-page business plan. Those will end up in the trash can. More is not necessarily better.
If you think you might be in this predicament, don’t worry! Keep reading and you’ll be well on your way to prepping your business plan for success.
Business plan 101
If you’re venturing into the start-up world or have an existing business, a business plan is for you. It’ll help you create a plan to track your goals, sales projections, milestones, tasks, expenses, and budget for your business. Remember, a business plan will be a work in progress up until you’re ready to send it to investors, so make sure you give yourself some time to draft. All of the below tips are best utilized when you process them over time and update your plan as you go.
Tip #1: Keep it concise
This is basic, but it is so necessary for everyone involved. Just think, if you were an investor, would you spend your time reading the 40-page business plan or the 10-page business plan? If that 10-page business plan reads well, offers great information, and sells them on their idea, do you think they’ll even get to your 40-pager? Not likely. Long business plans are a hassle to write and a hassle to readso skip them. Investors are primarily interested in some basics:
- What is the product or service?
- How much money do you need and where will it go?
- Do you have any proof of concept or sales traction?
- What is the exit plan and how does the investor benefit?
Use more graphics if you can with smaller amounts of text to support the point you are making. It tells a better story visually and provides less to read.
Tip #2: Put your money where your mouth is
Okay, so maybe you don’t have money yet, which is why you need a business plan. But what you can do to prove you know your stuff is to have evidence of everything you put into your business plan. Why will your product or business transform the market? Back it up with facts! If not, you’ll sound like you’re all talk, which no investor wants to back with their funds. And great ideas rarely get 100% funding, so don’t believe it when you read it. If you don’t have some skin in the game with your own money, why would you expect someone else to put all of the money in and not receive all of the equity? Why would they need you and not just do it themselves?
Tip #3: Be realistic
Writing your business plan is not the time to be optimistic. Why? Because you’re dealing with other people’s money. If you project that you have a certain profit or capture a certain percent of the market, and then fail to do so, it looks less than stellar on your part. Be realistic in your business plan to avoid this issue at all costs.
Make your numbers and projections conservative, but let it be known they are conservative.
Tip #4: It’s not one-size-fits-all
Remember how we compared resumes and business plans? Here it is again. Business plans are not one-size-fits-all either. Just like you change your resume based on the employer to which you’re applying, you’ll want to have several versions of your business plan. Have one for individual investors versus companies for joint ventures versus venture capitalists. It may sound exhausting in the beginning, but as long as your business plan isn’t 40 pages (and remember it shouldn’t be!), then tweaking it shouldn’t be terrible.
Tip #5: Show tangible evidence
If you have it, real evidence wins every time, so don’t forget to document your work. The best indicator of future work performance is past work performance. If you can show them a past instance where you’ve worked successfully on a start-up, created a prototype or another tangible example within your business plan then you’re a step ahead of everyone else.
With all of this in mind and after speaking with various funding sources over the years, I have tried to cook it all down to the following short and concise items that investors really want:
- Description of the need in the market or current problem/challenge
- Your solution (which is your product or service)
- The basic business model (how you make money from beginning to end)
- Target market (who is your customer, how many, market size in dollars)
- Your competitive advantage
- Management team (resumes or brief bios will work here)
- Financial summary (history and/or 3-year consolidated forecast)
- Amount of funding required and how it will be used with the outcome
- Exit plan and what’s in it for the funding source (note with interest, equity, etc. or can even be left open)
If you can accomplish the above in 10 pages (plus or minus a little), there is a relatively good chance your plan will at least get looked at. From there, it’s up to you to sell the idea and yourself – but this is a basis from which to start.
If you’d like help with your business plan for a startup or expansion capital, contact PMG today. We offer business plan services along with funding sources for existing businesses. The consultation is free and we never use hard-sell tactics.