What investors are looking for in a business plan?

Focus on why venture may fail. When investors consider a business venture they focus on why this particular new business venture may fail. This is in comparison to the perspective of the entrepreneur who focuses mainly on why this particular venture will succeed.

Main concerns of investors: It is important to clearly address areas that investors are looking for first and foremost. This includes whether the product or service will be accepted by the market as well as potential demand for the product or service. The calibre of the management team and critical risks are also of vital importance to prospective investors. Investors also look for honesty and transparency in the way information is presented to them.

Short, simple and to the point: Investors receive a lot of business plans. Therefore, generally, investors will spend only five minutes briefly looking through the business plan to determine whether this particular plan deserves more time investment for exploration.

Investors usually briefly consider new business opportunity by the reading executive summary or by listening to in-person presentations by entrepreneurs. If within five minutes the opportunity does not seem to be promising, investors will likely to move on to another opportunity.

Therefore, it is vital to be well prepared. An executive summary must highlight all important details why this opportunity is promising. Presentations by the entrepreneur should be concise, to the point and first focus on what investor is most interested.

Value credibility: When an opportunity is presented to an investor in person or via a business plan, the fact whether the investor feels he or she can believe entrepreneur or not will play an important role.

Perceived credibility of an entrepreneur influences the interest of the investor. If the investor will not believe an entrepreneur’s claims and will see entrepreneur as not being trustworthy, the investor most likely will not do business with such an entrepreneur even if the opportunity is promising. Therefore, it is imperative to provide factual support for any claims made in the presentation to the investor, verbally or in writing. The plan should include realistic sales projections and profit margins which are aligned with average figures for the industry, with the exception where the opposite can be factually supported.

High level of preparation: Investors want to see the entrepreneur thoroughly researched the opportunity and considered all important areas.

Value passion: Investors look for passionate entrepreneurs. Investors often invest in entrepreneurs and the management team rather than the business opportunity itself.

After investing: After an investor provides funds to help establish a new business venture, it is imperative to act with integrity and follow through the business plan as agreed at the commencement of the relationship between an entrepreneur and investor. Furthermore, an entrepreneur should monitor actual performance against performance standards and milestones to ensure that he or she stays on track. In building relationship with the investor, it is advisable to follow the simple rule of under promising and over delivering instead of the opposite, which is more customary. Also, the entrepreneur can only control what he or she can control. However, as long as the entrepreneur remains true to his or her word and acts with integrity – natural setbacks and troubles should not be a problem with investors as they usually understand that in the turbulent start-up enviornment setbacks and troubles are inevitable.

 

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