Starting up a new business? Need funding from investors? Know why it is important to have an effective business plan to impress investors.
If you have started a new company and need to raise money to help fund your company, an attractive business plan is essential for you. But there are more management benefits to a business plan than just fundraising.
What Is a Business Plan?
There are several matters that a business plan can accomplish for entrepreneurs who are looking for funding to run their business. First of all, it will give an idea of the fund sources that the entrepreneur has given enough thought to the business he is trying to set up. A business plan also works as a financial benchmark that the investor can use to hold the entrepreneur accountable for any business liabilities.
A good business plan can be your ticket to entering the business arena. You need an effective plan to raise the money that you require quickly to start your business. The effectiveness of the plan helps to raise your money from investors easily and completely.
Things To Consider Before Creating The Plan
Before setting out to seek investors, you need to determine exactly what your expectation from the business is, and how you will allocate the money to be spent. You need to plan clearly where you would need funding and justify how much will be required. The investors will need to see where and how the money they are investing will be utilized. You have the option to ask for more so that there is room for negotiation.
And you must also maintain reasonable credibility while making the plan as you are bound to require additional funding once your company begins to grow. So be careful in disbursing the money investors have allotted, as squandering it will seriously hamper your chances of getting additional funds later on when required.
If you want to gain the trust of the investor then you have to put in justifications for the contents of your plan. If your justifications are well thought out and properly formulated, your plan will be considered seriously. Random inputs in your plan will get random results as well. One other thing you must decipher if your company can succeed in achieving the goals you have set out for before spending the invested capital. You might have a lot of ideas and ambitions but if your business idea is not credible or realistic then you will achieve nothing.
This is where a business plan comes in use. A proper business plan will also help you figure out if the business concept that you want to realize is going to succeed or not. Many businesses don’t go past the planning stage as during that time the aspirations of the would-be founders were deemed to be unrealistic and unattainable. A business plan is therefore also a reality check. So it’s imperative to have a well-written business plan. Luckily, if you are in the UK there are plenty of business plan writers in London, getting their services will ensure you an effective professional plan.
How To Know If Your Business Has Potential
To find out if your business venture has potential and is going to succeed, you need to figure out a few details. This will help you to get a clear vision of the progress of your company by keeping your goals and objectives in mind. You need to be clear about the initial investment or funding the business will need. If some control of your operations is given to the investors it is necessary to outline how much control you will relinquish and how that will work out.
Try to project how long it will take for the business to make a profit. This will ensure the timeframe for you, and your investors can expect the investment to start paying off. You also need to have a projected profit outline over time. You must make sure whether you will be able to commit and devote yourself completely to the business in a financial aspect.
You also need to consider the possibility of business failure. In that case, your plan will need to have a layout of how to deal with such a situation and what will be your backup plan.
How To Create A Winning Plan
As mentioned above, one of the key roles of the business plan is to win the faith of the investors and get you the funding that you need to get your business off the ground. So here are a few tips that will help you in creating a winning plan to secure the funding you need.
Create a Well-Thought Executive Summary
The investment banks and investors receive a lot of plans nowadays from potential businesses so they sometimes skip directly to the executive summary to get a zest of what your plan is all about. So your executive summary must be factful and precise so it catches the attention and wins the confidence of the investors.
Ensure To Bring a Completion To The Plan
Submitting a business plan with important and crucial data missing is a very big mistake. If your investor finds incomplete data, he is sure to reject your proposal altogether. That is why you have to make doubly sure that all the information required is present in the plan. Triple check if necessary to see that your plan is concise and complete. This will automatically increase the chance of you securing the finances you need.
Have A Paper Backup Ready
A complete business plan is supposed to contain all the detailed information that an investment banker will require but some sharp venture capitalists may have additional questions that might not be included in the plan. So have a list of backup answers to any questions you foresee that they might inquire about, noted down on paper. Be prepared for all types of unforeseen situations as well.
Starting up a new business from scratch requires a lot of painstaking work that includes a lot of detailed planning. You will need funding from investors and for that, you need to build a solid business plan, one that the investors cannot refuse. You can also use the plan as a means of management decision making in the future. So get a well-written plan ready and impress the investors into making your dream come true.