How to get your business plan investor-ready
Shane O’Hanlon, InterTradeIreland’s Funding for Growth manager takes a look at how to hone your business plan to get it investor ready.
Even during these uncertain times, investors are out there, looking for businesses to invest in. Attracting equity investors requires an accurate understanding of what the investor is looking for. You need to show them what makes your business different and why they should play a part in your success. This is where the business plan is key.
You should pay particular attention to your presentation as first impressions are important. Approximately 95 per cent of business plans are rejected because their presentation lets them down. Make every effort to sustain attention from start to finish. Make sure your plan is easy to read – include headings, paragraphs, tables and graphs if appropriate. Try to avoid the use of industry jargon and acronyms.
Remember the objective
Remember that the objective of a business plan is to raise money. It therefore has to convince a potential investor your business is going to make them money. If you are looking for equity then you should tailor the output to an investor’s point of view, i.e. a return on their investment after a period of programmed development and a sale to maximise their investment – usually via a trade sale for cash. If you are using the business plan to approach a lending institution (bank) for funds then you need to tailor the plan slightly differently – they are interested in the business’s ability to repay.
Try to attract the investor’s attention
The executive summary is the most important part of the business plan and should convey the main points of your investment proposal to potential investors, attract their attention and encourage them to read on. Detail the particular strengths of the business whether in its management, products or market sector.
Keep it to an appropriate length
An investor may have to read a lot of business plans. The more concise and to the point that your plan is the better. The executive summary should be no longer than two or three pages, with the whole plan not exceeding 25 pages.
It is important to ensure what you say in the plan is correct. Use your prior trading experience, provide external data and research results.
Detail the management team’s strengths
Investors invest in good people. Who are the key people in the business? If there are only one or two, that’s fine. An investor will want to see that you recognise there are gaps in the company and that you plan to do something about that in the future.
Don’t concentrate on the product too much
An investor will, of course, want to know what the product is, but it would be better to describe the benefits of the product, identify the need that your product addresses and why the product is stronger than what’s currently out there.
What are the risks?
Does the success of the venture depend on the completion of product development or licensing/regulatory approvals? Are there Intellectual Property issues? Investors are usually impressed by a recognition of key risks, and attempts to mitigate them
Address the development of the business
You need to include achievable milestones. For example, if you plan to hire a salesperson then state when you hope to achieve this by. An investor will look favourably on a plan that has clearly defined stages of development..
There are usually three ways in which an investor can realise their investment – Initial Public Offer (IPO) – sale of shares on the open market, a buyback of owned shares and a trade sale for cash.
Getting the financials right
If your company has been trading, include the accounts in the financial appendices. If you have taken advice on preparation of the financials, make sure you understand the numbers. Include projections, but be realistic about them. Don’t forget to state the assumptions used in the projections.
Bringing the product to market
Traditionally, the weakest sections of a business plan are the marketing section and the route to market so take a good deal of time with this section. Who are the key customers and how are you going to get them to take your product as opposed to another? Will there be incentives? How is the product going to be promoted? Remember to set out pricing and discount plans and don’t forget to address the possibility that competitors may react to your product.
What are the funds to be used for?
The ultimate objective of your business plan is to attract funding so investors will want to know exactly how much financing is required, why that financing is required and how it will be spent.
Leave enough time to prepare
Don’t rush your business plan. If it is prepared in a hurry, it will look like it has been. Get it ready and then leave it alone for a few days before revisiting it.
Business Cube Methodology
The Business Cube is a simple and intuitive business planning tool. It outlines the key information components that investors look for when evaluating investment opportunities, and is therefore a useful guide for ensuring that your business plan addresses those key issues in which potential investors will have greatest interest
To download your free copy of the Business Cube go to https://intertradeireland.com/funding/seedcorn/seedcorn-how-it-works/ (You will find the document in the downloads section towards the bottom of the page.)
2020 Seedcorn Investor Readiness Competition
InterTradeIreland’s Seedcorn competition, aimed at early and new start companies, mirrors the real-life investment process and can greatly improve your ability to attract equity investment for your business by helping you to become investor ready and ultimately achieve your commercial potential. There is a total cash prize fund of €280,000 up for grabs. Closing date for applications is 1pm on 29th May 2020. Find out more at www.intertradeireland.com/seedcorn