Most entrepreneurs and business owners know they need a business plan to attract funding. Unfortunately, most plans fail to achieve this goal. Below are the keys to developing a business plan that investors and lenders want to fund.
Answer the Right Questions
A business plan is not a laundry list of information about your business. Rather, it’s a concise list of answers to questions investor care about most. A good business plan template will layout these questions for you, but below are the most important ones:
- What does your business do?
- Why are you uniquely qualified to succeed?
- What is your market and how big is it?
- What customer segment(s) do you target?
- What products and services do you offer?
- Who is on your management team?
- What are your financial projections?
The answers to these questions tell investors and lenders whether their interested or not. If interested, they’ll schedule a meeting with you to learn more, during which they can ask any questions that weren’t answered in your plan.
Most investors and lenders get bombarded with business plans. As such, their time is extremely limited, and brevity is key.
Start your plan with a quick description of your business versus a long story. And make it easy to read your plan. Have short paragraphs and lots of white space, and generously use charts, graphs and pictures. Would you rather read a page with 800 words of text or a one with 400 words and a couple of pictures? The latter is true for investors and lenders, and the former can easily dissuade them from reading further even if your company is incredible.
Present a Realistic Financial Model
When a business plan presents an unrealistic financial model, reaching $50 million in sales in year one for example, it strips your credibility. Rather, make sure your financial model is properly reasoned.
As much as possible, research other companies both within and outside your industry. How long did it take them to launch and scale their businesses? Don’t say you’re going to accomplish sales growth that no other company ever has.
Likewise, think through other core financial assumptions. For example, how must you ramp up your staff as you grow? How long will it take to hire the right people? What salaries will they command?
While you will never be 100% accurate with your assumptions, as long as you think through them, and they’re based on reality, they can convince investors and lenders that you’re a worthy funding candidate.
Show Your Successes to Date
The best indicator of future success is past success. As such, as much as possible, present past accomplishments in your business plan. For existing businesses, this is easier. You can include milestones achieved such as launching your business, gaining X customers, reaching $Y in sales, hiring your Zth employee, etc.
For startups, this can be harder. But oftentimes you still have come a long way and should stress your accomplishments. Maybe you’ve identified or secured a location. Or built a website. Or designed a cool logo. Or maybe you’ve gotten commitments from potential customers, partners or employees. Whatever you’ve accomplished, be sure to stress this in your business plan.
To recap, a fundable business plan answers the key questions investors and lenders need to know to decide whether they’d like to meet with you to discuss further. Be succinct in your plan so its gets read instead of discarded. Present financial projections rooted in reality. And stress your accomplishments as they will give readers confidence.
Importantly, when you do this, your chances of raising funding and building a thriving business will grow exponentially.