In “Business Plan: Securing Funding Part 1” we saw “How” you write your plan and how a professional business plan gives you credibility with investors. This included, avoiding hype, writing about a “plan” rather than an “idea”, being realistic, and paying attention to editing and presentation. In Business Plan: Securing Funding Part 2 we look at content. Therefore, this focuses on the key elements that you must include (and some to exclude). There are, of course, no guarantees. However, you will significantly increase your chances of funding if you include the following:
1) Solving a Genuine Problem – Your Market Opportunity
Be clear in your business plan what problem you are solving. Because, if you are not solving a real world problem your product or service is simply a “nice-to-have” rather than a “must-have”. And, “must have” propositions have a much better chance of getting funded by investors. So, be clear what problem you are solving and get clarity on the size of the problem – both in terms of volume (units) and value (£). Then, you can show an estimated size of the market opportunity. From there, you can go on to explain how you are going to reach that market with your solution to the problem.
2) Executing the Business Plan – Management Team Experience and Expertise
Most of us wouldn’t let someone who can’t drive and hasn’t got a license borrow your car. Above all, whilst they have nothing to lose, you are lining yourself up for an expensive fall! Similarly, an investor is not going to invest in your business unless the management team has proven track record, For instance, they look for a team that has the knowledge and experience taking your type of product or service to market. In other words, banks or investors need assurance that the management team will deliver the business plan in front of them. So, if you haven’t got the experience yourself, get it, or get someone on board who has. In addition, investors like to see that the management team are prepared to get their hands dirty and shoulder some of the risk. In particular, they don’t like “consultants” being paid fees without bearing any risk. So, you are more likely to secure funding if an investor and the management team risk profile are aligned.
3) Delivering a Return – Return on Investment (ROI)
You need to convince investors that you have an opportunity that has the potential to generate significant profits and cash-flow. In addition, you need to show that they can exit their investment (cash in) at a future date that is not too far in the future. So, avoid the temptation in the business plan to over-analyse projected revenues, market growth, industry norms and financial valuation models. Above all, this ends up with a highly speculative future business valuations / ROI. These can easily be dismissed as over-optimistic by a potential investor. So, you might want to work out funding round valuations yourself. But, focus your main effort on justifying the commercial opportunity. After that, they will see the value and potential for themselves. Then you can then discuss potential ROI with them.
Good Luck!
Jon Hunt
Lead Consultant
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
The Business Plan Team specialises in helping entrepreneurs, start-ups and growing businesses. It translates ideas & a vision into coherent and executable business plans that help secure funding and guide management. It provides a range of services. Thee include early feasibility studies & market research through to full business plan development. It is based in just outside Oxford, UK.
