Investors look to invest in businesses and industries they understand. Therefore, a smart entrepreneur will build relationships with people that have an interest in their line of business. As you work on building your investor network craft your business plan ensuring it encompasses all the important business plan sections. Anyone putting in thousands or even millions of dollars would want to do due diligence before they invest in your venture. They’ll be especially interested in your strategic roadmap, your business model, and a solid financial plan. You can cover all these elements with the following 10 business plan sections.
The 10 Things Investors look for in a Business Plan
- Executive Summary
- Business and Industry Overview
- Market Analysis and marketing strategy
- Risks and Significant Opportunities
- Location and Assets
- Management and Human Resources
- Financial Plan
1. Executive Summary
Keep this section short and comprehensive. Provide a summary of your business model, your strategy, and your business structure. Among the key details that an investor will be looking for are who you are, your business objectives, what you are offering and the problem your business will solve, your target market, size, and scalability of your business, how much fund you are seeking, your location, management overview, unique selling position, and the projected revenue.
An investor will go through the introductory section to have an overview of the business. This is where you give a brief history of your business under the company profile, state your mission and vision, core values governing the running of operations in your company, and the business goals and objectives. To complete this section, briefly describe the organizational structure with the flow of operations.
3. Business Industry and overview
In this section, investors will be keen to point out your product description, the major external factors that will affect the success of your business, the industry, and the regulatory requirements. Make sure to discuss the product and/or service you will be offering with clarity along with the target market. Point out, and describe the industry in which your business falls, its nature, and the factors impacting your operations being keen to state how you will maximize the opportunities your industry provides. Under regulations, state the Laws, Acts, and other compliances to which your business is obliged to adhere.
4. Market Analysis and Strategy
An investor will be interested in knowing the specific target market you will be serving within your industry, the size, region, potential growth rate, and purchasing behavior of your consumers. Additionally, they will want to know who your business will be competing with both directly and indirectly, their strengths and weaknesses, how you compare with them, and how you will position yourself with distinct factors of your products to guarantee your success. Also, an investor keenly looks out for your competitive advantages, the strengths that will give you a chance to seize industry opportunities and deal with the threats that may arise.
As your audience wind up going through this business plan section, they will be interested in knowing how you will penetrate the market. This is where you show your investors you did your homework by giving specific information about your market and how you are going to successfully introduce and build your brand among your prospective customers. Make sure to describe the robust advertising strategies, specifically for your target market, you will use to successfully penetrate the market. Questions you may ask yourself in this section include: Would direct marketing be more appropriate? Or sales representatives with remuneration based on performance? How about social media and digital channels? Will community outreach work better? Or maybe integration of all these? etc. Answers to these questions depend on your target market and business model. Clarity and precision are of utter importance.
5. Risks and Significant Opportunities
This is the section where the investor wants to see an evaluation of your business in terms of your strengths, weaknesses, opportunities, and threats. Simply put, it is where you do a SWOT analysis of your business. Of importance is to include how you strategize to maximize your strengths and opportunities and mitigate the risks that come with your weaknesses and threats.
6. Location and Assets
Here you have to convince your potential investor that your business premises will be located in a lucrative place with various business advantages. The advantages may vary from demographics, favorable laws, and regulations, community advantages, infrastructure, social amenities, etc. About your premise, it is important to mention whether you will be leasing, renting, or owning the place, which consequently has an impact on your costs.
While talking about assets, state the equipment, furniture, and fixtures that your business requires for successful commencement of operations.
Operations mainly describe your workflow. It includes your suppliers, distribution plan, selling terms, inventory plan if any, logistics, and research and development. Mention your suppliers describing your choice criteria i.e., quality products, negotiable prices, consistency, order fulfillment timeline, etc. Your potential investor will be interested in knowing how you chose your suppliers as they will account for a major portion of your expenses. Remember to discuss your distribution process as well especially when you have multiple market segments or when dealing in the transportation business. Selling terms are the terms and conditions that govern your operations. They mostly apply when you are running an online business. Also, talk about your inventory as investors would want to see that you are managing your resources well. Logistics mostly applies if you are running a transportation business. Make sure to point out your packaging and shipping process, the couriers, storage and warehousing if any, etc.
8. Management and Human Resource
Investors want to know whether they are giving their money to experienced professionals who will bring your idea to accomplishment or not. In this section list your employees, the job positions, and include their resumes in the business plan. Also, include the Human Resource Policy and Procedures that will guide your relations with your employees. Among important aspects, you may want to include are employee benefits, hours of operation, vacation program, performance assessment, and training and development.
Everybody starts small. However, does your venture have the potential to achieve exponential growth? The scalability factor excites investors. It justifies the risk-reward mechanism; a typical investor would be interested in. Make sure to describe the scalability plan of your business clearly articulating all the steps for growth.
10. Cash flow and Financial plan
This is the last of all the business plan sections. Your investor will want to confirm that you have cash in your business despite your expenses. Having cash flow will show that Include the financial forecasts for your business for the next 3 to 5 years in your financial statements. A complete financial plan excites an investor hence increasing your chances of obtaining funding. Investors scrutinize this section keenly to determine whether your business is financially viable.
An entrepreneur with a good business idea avoids jumping into the waters without a plan. Here at Vaisus Consulting we guide entrepreneurs through the important business planning questions and help them develop a fund-ready business plan with all the important business plan sections. Schedule an appointment today and talk to one of our business plan consultants.