4 Tips on Developing Your Business Plan for Potential Investors

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Strengthen Your Business Pitch With a Well-Formed Strategy

In today’s economic environment, venture capital for a startup or expansion of an existing going concern is difficult to come by. Investors need to have a reasonable expectation of a solid return on their investment. When developing your business plan in anticipation of approaching investors, there are four critical areas that must be addressed.

 1. Honesty Is the Best Policy

Your first impulse might be to highlight only the positive aspects of your business history, your future plans, and of yourself. While you certainly want to do so, excluding the less positive aspects is a mistake. Any investor knows that a business comes with the good and the bad. By leaving out the concerns and issues, the savvy investor will believe – rightly or wrongly – that you are being less than forthcoming.

First and foremost, you need to give your potential investor a clear picture of your team. No matter how outstanding your business plan is and the future of your industry, poor management can kill any business. You need to illustrate that you and your team have the experience to handle any situation that may arise. If you have worked in the industry for 10 years, make sure you include that information. If your general manager increased sales by 20% in a similar business, your business plan should contain that as well. The more hands-on experience you can demonstrate, the better.

2. Assess Your Financial Needs

Have a clear picture of what your monetary needs are. If you seek an investment that is too large or too small, it will signal a lack of understanding of your industry and business in general.

Cash flow, and the lack of it, is a leading cause of business failure. Not being able to exhibit to your investors that you have a solid understanding of your business’ financial needs, raises a serious red flag and a quick path to losing potential investors.

3. Map Out a Detailed Business Strategy

Not all industries are created equally. Some come with a higher than average failure rate. If your industry is one of these, you will need to be able to show your investors why your business will be the one to buck the trend. Plan to have clear strategies in place to deal with and overcome any hurdles. Providing detailed market analysis and procedures to meet government regulations and illustrating that you understand the challenges of your industry should calm your investor’s concerns.

4. Look To he Future… With Caution

Your goal is to be in business not only today but tomorrow and in the years that follow. Projections into the future can be difficult. Many economic, political, and  social circumstances are out of your control and  even the best forecasting models can be off. Having said that, these are still necessary to securing investors for your business. It is imperative that your projections are not too high or too low. If you provide sky high numbers, your investors will assume you are either exaggerating your potential or lack a clear understanding of your business culture. Neither of these assumptions will help you. If your numbers are too low, your investors may not see a positive return on their investment. Finding the middle ground may be tricky, but it is important.

 

Writing a business plan and approaching investors can be a time consuming and intimidating process. Before you do, determine that you are completely prepared. Doing so will help you obtain the investment you are looking for.

 

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About The Author

E.J. Dealy is CEO of The Company Corporation, which provides incorporation services and products to small businesses and entrepreneurs nationwide including incorporating in Delaware, Florida, and California. The Company Corporation does not provide legal, financial, or tax advice.