Can a Business Plan Help Find Investors?
Attracting an investor to a business takes a little more effort than calling up your uncle in Baltimore and saying something like, “Hey, you want to invest in my business?”
While this may work for some, it won’t for most startups — especially those that need a significant dollar amount. Investors want to see facts and figures. They want to know who you are, what value you have and more importantly, why they should invest in your company.
In other words, your business plan needs to answer the question, “what makes your startup special?” You need to put yourself in the shoes of an investor and answer the unasked questions they have in your business plan.
Just as you need a blueprint for building a home, you need a plan for creating your business. This gives a foundation to your purpose, and one of the top qualities investors want to see is STRENGTH. So the answer is yes — if you’re trying to raise money for your venture, your business plan can help get a prospective investor interested in your business.
What Does a Well-Written Business Plan Show Investors?
A well thought-out business plan increases your odds of succeeding, and shows any investor that you have taken the time to do research, plan and organize the process. The right business plan does the following:
• Offers a roadmap towards future profitability.
• Provides an estimate of needed costs and investment needs.
• Offers investors a reason for making a commitment to your project.
• Defines the market for the business.
• Provides a revenue estimate
• Allows you to create an effective and quantitative marketing strategy that investors can see.
• Allows investors to clearly see potential issues and risks.
If your startup needs fresh funding, you need to create a strong business plan. You must demonstrate in writing and with facts the future possibilities of your business. This well-written and researched business plan is the only way of attracting investor capital or a banker’s interest. The only person willing to invest in a business without a plan might be a family member or parent, and even then it’s questionable.
The Importance of Data
A business plan just isn’t a well thought-out blueprint for a business unless you include hard financial data. You must include financial statements and make predictions based on past finances.
However, if this is a brand new startup then you’ll need to include estimates of start-up costs, break even statistics and a profit forecast. You’ll also need to create a cash flow projection. The purpose of all of this data is to help an investor decide whether your business is worth supporting.
To attract investment capital, you need to think like an investor as you create your business plan. Every investor, whether for a nonprofit or profit, must calculate the risks of any venture. Your challenge is to demonstrate the opportunity available in your idea. You need to demonstrate, using research and statistics, the value of your business and the possibility for growth.