A business plan is essential to attract investors, but it must have the right components to help them understand your business’s financial potential. Your ideas, market research, financial projections, customer personas, and risk and challenge mitigation strategies should describe how you anticipate growth and profitability.

 

But your business plan should be realistic and optimistic to convince investors that your startup or fledgling business is a worthy investment. Your plan’s pitch must show that you’ve thought through the entire process and complete research and analysis of your marketplace or target customers.

 

Beyond strategy and projections, potential investors are also interested in your personal and business financial standing. Let’s examine how you can incorporate aspects of planning, the vision of the future, market fit, traction, and exit strategies, into your business plan.

Why Do Potential Lenders and Investors Demand a Business Plan?

A business plan, whether used to garner financial backing or as a frame of reference or roadmap for accountability, aims to outline your company’s goals, market data, revenues, and mission. It offers a holistic view of your enterprise ideas and projections while summarizing how your operations and marketing will impact growth.

 

Investors are interested in something other than your business plan as a document but in the generated knowledge and planning you’ve vested in the process. They have hundreds if not thousands of plans coming to their desks daily, and most of what they do is screen these documents for viabilities and probabilities.

 

Also, not all investors besides family or friends are the same, as there are venture capitalists and angels or private lenders. While some are more demanding than others, no investor will risk investing money in your business if there’s no potential for earning returns.

 

Attributes of an investor-attracting business plan include being easy to review, brief and concise, and flexible regarding ease of update or expansion. Information, data, analytics, presentations, projections, and a fine-tuned business model must be straightforward.

What Aspects of Your Business Plan Will an Investor Look For?

When an investor is done reading through your business plan, they should clearly understand several aspects that convince them your enterprise is investment worthy. That includes having the right ideas, product or services, strategy, time, or team to venture into your marketplace.

 

Investors want to learn the problem to which you’re providing a solution for your target customers and how your product or services accomplish that. They need to see accurate analytics of your intended market size, buyer demographics, and sales channels as a vision for the future.

 

As a result of your market research, an investor will look closely at your marketing strategy, competitor analysis, and your enterprise’s competitive advantage. Along with product marketplace fit and traction, your business plan should include factual financial projections with revenue and cash flow forecasts.

 

The investor wants to know the amount of funding your business needs and how you plan to utilize these funds in your business plan’s ‘sources and use of investment’ section. Your financial forecasts will detail cash flow requirements, additional safety net finances, and a timeline for your business’s expected milestones.

 

Besides business owners, proprietors, or partners, investors will also be interested in your business’s team members and advisors championing your enterprise’s success. A return on the investor’s investments is the ultimate goal for funding, so they’ll be looking for an eventual exit strategy.

What Should You Include in Your Business Plan to Positively Impact Investors?

One of the aspects of a business plan that investors will be looking for is enterprise growth and risk mitigation to determine a worthwhile investment. A well-written executive summary incentivizes a prospective lender to continue reading into your corporate proposal, so it must be precise, specific, and concise.

 

Within your business plan executive summary, you’ll give the investor a snapshot of your enterprise model and highlight sales, profit, and spending figures. It emphasizes factors that will make your venture successful, containing market trends, size, strategy, goals, and capital requirements.

 

Attributes of an executive summary that passes an investor’s 20-second scan include credibility, clarity, and excitement at opportunities and possibilities. It should communicate to the investor several elements, whether yours is a new business idea or an existing enterprise seeking expansion funding. These aspects include but aren’t limited to;

Background of Your Business or Enterprise Idea

It’s a segment composed of three or four sections presenting specific information about the nature of your business. In this section, avoid including information on market research, the industry, or competitors but concentrate on your enterprise’s unique aspects.

Business Entity

­­

  • Type of business, whether manufacturing, retail, services, or wholesale
  • Its legal entity type, if an LLC, sole proprietorship, partnership, or corporation
  • When the company was created, and where its location
  • Its facilities, type, and number of employees
  • The organizational structure that shows duties and responsibilities
  • Information on its operations, such as opening hours and schedules

Besides simply stating facts, explain why you decided to have the business in its current status, helping the investor understand your decision-making process. You may also present any qualifications you or your team members have that augment any suitability to undertake that type of venture.

 

For a startup, the absence of an existing business is interpreted in terms of your plan for the enterprise instead of any operational history. Your business plan, therefore, must portray a clear picture of its operation and present a realistic idea of what’s needed to make it work.

Product or Service Description

Another crucial inclusion of an investor-attracting business plan is your executive summary’s product or service description. Without going into an in-depth analysis of competitor comparisons, which is reserved for your market analysis segment, offer a simple, clear statement of your offering.

 

It’s best to focus on what makes your product or service unique and how customers will find it preferable. Explain your offering, what it does, how it works, lasts, and the options available, plus if it’s a standalone item or one used alongside others.

Conclusion

Knowing what investors look for in a business plan is crucial when looking for startup or expansion financing. If a potential lender can read past your executive summary, you’ll have captured their attention to proceed into company management, financial and market analysis, and scalability.

 

Your funding request will also communicate comprehensive customer acquisition strategies, costs, and how you plan to execute sales and marketing. Besides showcasing a thorough marketplace understanding, your business plan that investors want to see will help score pivotal funding.