The credit crunch has made it harder than ever for small firms to attract investment. But before pitching for funding, you need to ensure your business plan provides the information that potential investors are looking for.
This update was published in Small Business Update 83 - November 2010
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1. Spell out your proposition. You need to excite investors from page one of your plan, so an attention-grabbing executive summary is vital. In just a page or two this needs to summarise your entire plan, capturing your unique proposition in a clear, focused and enticing way.
2. Include detailed financial information. Potential investors will understandably be fixated with your finances. Ensure you include financial information for the last three years where available, as well as projections for at least the next three. Show detailed profit and loss, cashflow and balance sheet information, but provide summaries too. Explain any major expenditure, as well as any discrepancies and missing figures.
3. Lay out your goals. Be clear about the amount of funding you need and why you need it, detailing exactly where it will be spent. Outline your short and long-term growth strategy for achieving your goals.
4. Introduce the team. However good your strategy, investors want to know you have the personnel to execute it. Include any relevant experience you and other members of your executive team possess.
5. Demonstrate market knowledge. Show how your product or service fits into the market, who your potential customers are, why they should be interested in your offering and how you intend to target them. Back up your knowledge and predictions with solid market research.
6. Spell out the benefits for them. Investors want to know what is in it for them. They will need to be convinced that your business is a viable proposition and they will get their money back with interest. Different investors will want to know different things, so tailor your plan accordingly. For example, a bank will be interested in how you intend to repay a loan or overdraft, while a venture capitalist will want to know about their exit point and expected return.
7. Highlight your own risk. Investors like to see a concrete demonstration of a business owner's confidence. Detail your own investment in the business, as well as that of friends and family. State whether you are using your own assets as guarantees against other loans for the business.
8. Be honest and realistic. For example, investors will quickly see through attempts to downplay or ignore the competition. However, recognition of it demonstrates market understanding. Likewise, over-ambitious financial forecasts will be quickly spotted. Remember, too, that any attempts to conceal may have legal implications.
9. Be professional. Ensure your language is clear and jargon-free, and your plan does not include any spelling errors. Present your information in logical sections, well signposted for ease of reading. Bear in mind that tables, pie charts and graphs can impress as well as elucidate, but a variety of fonts and colours rarely do either. Find a trusted person such as a business adviser or accountant to read through your plan and offer constructive feedback.
10. Review and double check. Keep your business plan up to date by regularly reviewing it. Before presenting it to a prospective investor, always ensure your projections remain correct and the figures add up.
Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.
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