Getting investor ready is more about just having great ideas and the charisma to back it up with a strong pitch. It’s also about numbers and ever-dreary paperwork. And although it’s time-consuming and sometimes difficult to prepare and perfect, a business plan is the biggest part of that paperwork.
There are lots of entrepreneurs out there who question the necessity and merits of a business plan, and for companies that are self-financed with a solid cash flow, they may be right. But outside investors like private equity funds and angels barely know you or your company, and they want as much information as they can possibly digest.
And that’s the point behind a good business plan: information. In a pitch, you can only make so many talking points, so the business plan is there:
- As the proof that backs up your pitch
- To demonstrate reliable and realistic analysis of the company, including market positions, budgets, and growth expectations
- To serve as a living document of what it is your company does and why people should invest
The don’ts of an investor ready business plan
Don’t write your business plan on a napkin or scribble it on some paper. Probably the only person that could get away with the napkin plan is an arrogant entrepreneur like Mark Zuckerberg. Even he had a well-prepared business plan by the time he met with the first big Facebook investor, Peter Thiel.
Don’t be over aggressive in your business plan. The only thing worse than losing money is losing money on a business that was misleading in the first place. When approaching investors, always under-promise and over-deliver. In fact, that’s just good general business advice, anyway.
Don’t blow off the importance of a business plan. Even if you don’t have investors, it’s great to always be thinking about and planning for the big picture – and that’s exactly what a business plan helps you to do. Besides, under virtually any circumstance that you can reasonably expect to happen, having a business plan can always help, it never hurts, and many times, it’s required.
The essential layout and elements of an investor ready business plan
The format should be easy to read, access, totally organized, and consistent throughout every page. Here’s a good layout:
Team/Founders Bio and Section
Current Financial Analysis including budgets, income statements, balance sheets, and cash flows
Financial Analysis Projections 5, 10, and 25 years out
Final thoughts about your business plan
Your business plan should be considered a work in progress. As time goes on, things change, and your business plan needs to reflect the positions your company is in today.
Remember, use the business plan as your tool – your tool to connect and communicate your company’s vision; a tool to generate enthusiasm and excitement from others, including investors; and a tool to attract the capital you need to make it all happen.