What Do Investors Look for in a Business Plan?
A basic purpose of writing a business plan is to attract capital for your venture. Avoid the mistake of including too much information. At the same time. do not inadvertently omit anything a prospective investor needs to determine if you have done your homework and will run your business with success. Know what investors expect from your business plan.
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Clear Strategies
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A good business plan not only presents an overview of your business for the short term, but provides investors with a clearly-planned, well-researched roadmap how you will move from one stage to the next in the long term. Be both realistic and informed in your projections, through knowledge gained from carefully studying every aspect of your proposed business venture.
Management Team Competency
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An investor examines the management team's experience, how it was gained and gauges their business acumen. Because investors expect a return on their investment, they want a management team with sufficient ambition and commitment to grow the business rapidly. If team members have experience in other fields, an investor wants to be certain those endeavors were successful and whether the skills and talents required there are transferable to this business.
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Repayment Time Frame
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A business plan's primary objective is to outline a clearly defined, realistic time frame that a potential investor will begin seeing a return on his investment. Investors are accustomed not only to taking risks, but to success. Vagueness on this point will bring your business plan sure rejection.
Ownership Arrangements
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An investor wants a clear understanding of just how much input and control his funding will give him. Some investors, once becoming part owners, may insist upon having some decision-making control. Others, such as angel investors, are sometimes more comfortable simply mentoring the entrepreneur, preferring to avoid day-to-day decisions.
Prospects For Growth
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The business plan must clearly and objectively substantiate why the business will generate a sustainable, competitive advantage in the market. This requires research into both the market and competitors. Exaggeration or overly-optimistic projections tell investors you either don't know what you're doing or don't realize the difficulty in penetrating the market.
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References
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