How to to write a business plan for investors
How to to write a business plan for investors is a question a lot of startup entrepreneurs ask often, when you’re approaching investors okay I don’t know if you’re going after angel investors or friends and family or Bank or whatever it is, it doesn’t have to be complicated okay!
Business plan does not have to be super complicated you don’t have to have a business degree don’t let that hold you back just because you don’t have a business degree you think “I can’t write a great business plan”.
What it has to do is make sense, if you go to any bank website, any major bank they’ll have templates there they’ll have templates of business plans that you can look at and see how to structure it the structure is not as important as the content and as long as it makes sense an investor is going to look at it and make a decision based on that.
Remember investors are not necessarily experts in your field, they are generalists, they want to see that you’re going to be able to make them money or be able to pay back your loans.
I used to be in the venture capital business and here are the three things that I looked at before making a decision to bring in a company and give them money or not.
How to to write a business plan for investors
1. Executive Summary
The very first thing is the executive summary that’s the one or two pages at the beginning of your business plan that explains in basic English what it is that you do and so many entrepreneurs get this wrong most of the business plans that I saw got trashed because the executive summary was terrible.
If you don’t do a good job on executive summary, it doesn’t matter how great a business plan you have nobody’s going to read it because you didn’t sell them on the executive summary so that one page is critical has everything that somebody needs to know about the opportunity ahead of them.
One thing that that we always look for is that it passed the grandmother test, this was the turmeric music s in the VC world is it so simple to understand that your grandmother can understand it because too many entrepreneurs put jargon and short forms and technical terms that the investors don’t understand.
Make sure that when you give your executive summary to a person who has no idea what your business is all about, a layman, if they can understand it and see the opportunity then you’re ready to bring it to investors, so it’s the most important first step get the executive summary down
2. Accurate Company Valuations and Profit projections
The next thing they’re going to look at is your financials they want to see how much money do you need what’s it going to be used for and how much money are they going to make back different types of investors have different criteria if you’re looking to go to a bank they don’t want to see massive huge returns they want the security that they’re going to make their money back.
If you’re going to meet an angel investor they want to see that you’re going to be making thirty percent a year on their money because they want an exit from this so they want to see high growth, if you’re a low cost low margin low growth type of business that’s not going to work with an angel investor so you’ve got to make sure that the financials make sense for the person that you’re talking to.
3. Do you have an Experienced Management Team?
The next thing and the last thing they’ll look for before making a decision to read the whole business plan is the team who is behind this company there’s an expression in the VC world again called horse for the course meaning are you the right person to be at the head of this company and make this opportunity to happen because you could be in a great market but if you’re not the right person you’re not going to be successful and you can be in a crappy market, but if you are the right person you can still build a great company.
So they want to learn about the management team, who are you and the biggest thing that most entrepreneurs fall down on here is they have lack of startup experience investors and bankers, they want to see that you have done this before or you have people on your team who’ve done this before and quite often on a management team, there’s nobody there it’s just you and you’ve never done it before and so these are like big strikes against you. So yeah I’m gonna risk my money with this person I don’t think so.
One way to combat this is, you can either look for partners, so bring on people who have more experience who can compliment you, but if you don’t want to give up equity you’re not quite sure to partnership relationship yet create a Board of Advisors and these are people who’ve had some experience have some success they don’t have any equity in your business it’s it’s kind of a loose term but they’re willing to lend their name to the business and an advisor could be structured where you meet them every month and you have coffee talk about it or it could be that you you know it’s loose and every six months you have a phone call as long as they’re willing to help you and lend their name to the project because if a banker or an investor looks at your management team and they see you with no experience no partners you’ve never done it before they’re thinking I’m going to lose all my money.
To reduce that risk separate yourself from everybody else, bring on the Board of Advisors, talk to people even if it’s your lawyer or your accountant even just putting their names on there to say their advisers you’ve already separated yourself from most of the other people who are presenting and giving their business planning because it shows that you value and trust the expertise of other people who can help you build this thing up okay if you pass those three things they’re going to look to the rest of the business plan and see if they want to make a decision to bring you in invest in you.
Or whatever okay the actual templates are not hard to find again any bank website will have sample templates but the templates is a good starting point to give you an idea of the sections but really the meat of it is going to come from having an executive summary that makes sense financials that make sense that a tailor to the person you’re talking to and then having a management team / Board of Advisors that give the investor some sense of security that they give you money you’re not going to go lose it all.
I hope the little hints in this article “how to write a business plan for investors” is helpful as you approach angel investors.
Here is the perfect sample template from Australia Government, it will be a great start to carve out your own unique business plan suitable for your business.