A business plan is essential if you are seeking funds from outside investors. Ensuring you include certain factors can help raise your chances of success, whether you are seeking funds to help grow or start your business.
Be honest with the financial data
“Don’t exaggerate your reasoning for what the company will be worth in five years’ time – investors will be very wary. Do understand the running multiples in your industry area – do as much research as you can into the state of the market, says Tim Berry, founder of business plan software company Palo Alto.
He adds that investors are much more likely to look at your management team and track record than your finances.
“If you are just starting, there are ways to build up your management team. Surround yourself with advisers with grey hair. For a start-up, competitive advantage is also essential – you have to explain why someone would want to buy what you are selling,” advises Berry.
Top Business Plan Tips
Preparation is key: Remember that investors are looking for a risk-return relationship – your business plan must address the investors’ point of view so try to include points such as how much money there will be in 3 to 5 years’ time.
You have to have realistic cashflow: Be conservative and donÂ’t exaggerate. Unrealistic estimates will show up when an investor checks the business plan.
An analysis of the market can raise credibility: Putting together figures for your market and similar industries can lend weight to your plan.
You can’t afford to wander: Investors get distracted very quickly – using bullet points can help make the plan easier to read. Compile an executive summary that contains all important information – ideally it should be no less than 2, and no more than 5 pages.
Don’t forget the basics: Investors will want to know information such as present ownership with percentage breakdowns, valuation and the benefits of investing in your business.
See also: Example business plans