The real value of preparing a business plan does not lie so much in the finished document itself as in the process the entrepreneur goes through to create it, a process during which he learns to be competitive in the market. .
A solid plan is essential to raise the capital necessary to start a business; lenders and investors need it. Lenders and investors are favorably impressed by entrepreneurs who are informed and prepared when they apply for a loan or an investment.
When trying to secure funds from professional venture capital firms or private firms, the written business plan almost always precedes the opportunity to meet “face to face”.
1. What is the problem?
A clear illustration of the problem your business intends to solve is essential to a successful presentation. This should be clearly stated in your presentation in the simplest words so that the lender or potential investor will know what exactly your proposal is about.
2. What is your company’s solution to the problem?
How does your company’s product or service provide a unique or improved solution to the problem? Your presentation should focus on the competitive advantage your business offers. Lenders and investors avoid companies that suggest “me too” solutions that offer no advantage over existing solutions to a problem.
3. What is your business model?
In other words, what is your strategy for building a successful and sustainable business? A company’s strategy determines its success in its attempts to capitalize on a market opportunity. A bad strategy, even if a management team can execute it to perfection, will make a business fail every time. Make sure your presentation shows how your business will generate sales and profit, both of which are very important to potential lenders and investors.
4. What is the technology or the magic behind your business?
Has your business developed a technology, a unique approach to the market, or some other “magic”? If so, explain it in simple, non-technical terms. Do you have any patents, trademarks or copyrights to protect the “magic” part of your business? How long will it take your competition to duplicate the magic of your business?
5. What is your company’s marketing strategy?
Who are the target customers to which your company is targeting its products or services? What do you know about them? What drives their buying decision? How will you reach them? While market research reports are important and can form the basis of a marketing plan, convincing potential lenders and investors requires providing firm feedback or commitments from actual clients. What surreys or test marketing efforts have you had? Lenders and investors want solid proof that there is a solid customer base for your business’s product or service. The question of marketing strategy is one that most entrepreneurs do not answer enough. Don’t let this happen to you.
6. What is your company’s business strategy?
In other words, how are you going to connect (and stay connected with) your customers? A useful tool to answer this question is to explain how you will communicate your company’s unique selling point (USP), the primary customer benefit of a product or service that sets it apart from the competition, to your customers and why. it is important to them. Is your product or service a luxury, a “good to have” or a “must have”? What distribution channels will your business use? How important is repeat sales? What will you do to capture them?
7. Who are your competitors and what can you learn from them?
Every business has competitors, and entrepreneurs who claim their business faces no competition make lenders and investors nervous. What are your competitors doing well? What can your business learn from and benefit from your competitors? Be specific. When discussing competition, be sure to identify your company’s competitive advantage.
8. Who are the members of your team and what makes them uniquely qualified to start this business?
Lenders and investors want to see a solid business strategy aimed at solving a real customer problem, but what they really invest in is the management team. In your presentation, be sure to emphasize the qualifications and experience of your management team. Have you or your co-founders started other businesses? If your flowchart has holes in it, be honest about it, but be prepared to explain how you plan to fill those holes. Inexperienced entrepreneurs should consider setting up a committee of advisers who can contribute their experience and expertise.
9. What is your financial forecast?
Business plans are included once within five years of financial forecasting. Today’s lenders and potential investors know that long-term financial forecasts are usually just guesswork and are unreliable. You should include a summary of your business’s income statements for three years (or more), with an emphasis on sales, significant expenses, and net income. You must also demonstrate an understanding of the importance of cash flow to the future of your business. Make sure that all of your financial forecasts are realistic, otherwise you will lose all credibility with lenders and investors – and with all hope of obtaining financing.
10. How much capital will your business need now and in three years?
How much money did you collect? Where is he from? How much money does your business need and how do you plan to use it?
11. What is the exit strategy?
Before lenders and potential investors invest money in a business, they want to know how they are going to get it back, preferably with an attractive rate of return. Depending on the type of investors you are dealing with, the lead time for the exit strategy can range from three to ten years or more. Two common exit strategies are to sell the business to a larger company and go through an initial public offering, but only a handful of small businesses will qualify for the initial public offering.
An initial public offering or launch of shares is a public offering in which the shares of a company are sold to institutional investors and usually also to retail investors. An IPO allows a company to raise capital from public investors. At the same time, it also allows public investors to participate in the offer.
12. What are the risk factors?
Every business involves risk. Entrepreneurs face this issue, however, dwelling too much on the risks associated with the business can deter potential lenders and investors. Ignoring risks completely gives the impression that an entrepreneur is unprepared, unrealistic or dishonest. What market, financial, technological and managerial risks does your business face?
Once you’ve answered these 12 questions, it’s time for you to summarize the key points of your presentation and take this opportunity to issue a call to action to potential lenders and investors in your audience.