Learning how to make a business plan can seem like a daunting process for any new entrepreneur or a seasoned executive. A great business plan can be the foundation for success for any new business. While some ideas may look fantastic on the back of a cocktail napkin, it will come down to your execution and a great business plan will be key in making the dream a reality.
A business plan is a tool that will help you anticipate any challenges that you’ll face and serve as a key document that potential investors will look closely at as a guide for providing capital for your idea.
According to studies, business owners who take to time create a business plan are 2.5 times more likely to get their business past the idea stage to reality.
Below are some of our tips that will help you craft a great business plan to woo potential investors for your idea.
Get to know your audience
Write a plan with a specific purpose in mind for your audience. It needs to be tailored and you’ll need several versions of your business plan – one for potential investors, one for business partners, venture capitalists and companies.
Who is your competition?
A key to understanding your specific market is to know the strengths and weaknesses of your competition. Knowing who they are and having a clear strategy in place that shows how you differentiate from your competitors will be a key part of your plan. There’s no need to be emotional and run them down. Stick to the facts and spell out how your business addresses a problem and creates value in the marketplace.
Stick to the facts
Every statement in your business plan needs to be supported by clear and undeniable facts. Like a lawyer, you are presenting an argument on why your product or idea is better than your competition. It needs clear research and numbers to stand up to the scrutiny of bankers, venture capitalists and potential joint venture agreements.
Be conservative when it comes to dollars
Under-promise and over-deliver. Be conservative with financial projections and returns on investment (ROI). Conservative estimates will make you more credible in the eyes of potential partners, especially if this justified with market research.
Surround yourself with a great team
Building a strong management team who are experts in their field will immediately make you more attractive to investors. A board of advisors and a strong management team will give you the skills that you need to be an appealing venture for any investment team.
Don’t be afraid to mention ROI
All investors will want to see a clear and logical plan on when they expect to see a return on their investment. Document your payout options and the potential rate of return.
Things to avoid in your business plan
A well-crafted plan is one of the keys to success but there are few things that entrepreneurs should avoid in their business plan for potential investors:
Your idea may sound terrific, but without facts to back it up, it’s simply the idea you saw you on a bathroom wall or scribbled on the back of a napkin one night at the bar. Provide some hard truths, facts and research in your business plan, or don’t expect people to invest their cold hard cash in you or your business dream.
Avoid laying out claims about the competition; what they are doing is irrelevant, and the less emotion in your document the better.
The bible pitch deck
Avoid an overly long deck, no one has the time to look at 50 different slides in a pitch deck. If you can’t sell your business idea in less than 30 seconds then chances are you need to go back to the drawing board.
Unrealistic financial projections
Too many first-time entrepreneurs will promise the world but fail to deliver on the return on investment. Any type of investment that promises you cars, houses or sailing on yachts within 12 months are investments you want to avoid.