What Investors Will Want To Know From Your Business Plan? 5 Important "Must-Haves" To Have In Your Business Plan

November 12, 2016

Your new business concept is AWESOME and you know it. But you need startup funds and a way to convince investors that they’ll see a return on investing in your business. The thought of putting together a business plan that will effectively “sell” your business concept to seasoned investors is intimidating, but it Is also essential in getting the funding you desire for your business.

image source:Lev G. Fedyniak

A well-prepared business plan will provide you with valuable insight into your business, its potential for success, and the areas in which you may want to fine-tune your operating model.

Pitching your idea to investors, regardless if they are bankers, VCs or angels, can be impossible thing, so prepare by putting yourself in the investor’s shoes. What do they look for when evaluating your company?

Below mentioned is the list of 5 important “Must Haves” that investors will want to know from your BUSINESS PLAN:

1. Background and Experience of the industry

Investors don’t want entrepreneurs to make mistakes on their money invested. Investors look for experienced entrepreneurs and management teams with a track record of high performance and leadership in the company’s industry or in prior ventures. Most investors will research your business experience and your background in the industry. Passion and commitment should be evident to inspire confidence in investors and stakeholders.

Having an “Investor fit” business plan is particularly important to angel investors compared to venture capital fund managers. Angel investors place great importance on “chemistry” between themselves and the entrepreneur because they generally take a more hands-on approach in the businesses they invest in.

2. An Experienced and Solid Management Team

A solid, complete management team with leadership ability is a must. Essentially an angel investor is investing in people, so he or she needs to see the evidence that your business is in the hands of people who are knowledgeable, experienced, competent and trustworthy – and possess the skills to lead your business to the next level.
For most businesses, a complete management team will include skilled, knowledgeable people who know about marketing and selling products, manufacturing, managing people, and accounting.

3. Large Market Size

Investors typically invest in solutions that address major problems for significantly large target markets. On the other hand, venture capitalists look at market characteristics such as significant growth and limited competition when investing.

The larger and more stable customer base that your brand has, the stronger competitive advantage you will have when pitching to investors. A larger and more stable customer base will serve as proof that your company has a great impact to its target market.

Investors look for companies that can grow quickly and manage this high growth scale. Investors must see that the company can generate significant profits beyond the initial product idea with adequate financial projections and a plan to include multiple sources of revenue.

4. A Competitive Edge

If an investor is familiar with your industry, they probably know of at least a few competitors for your business, and if they don’t already know, they can find out quickly. Before they invest in you, they will want evidence that you have some significant advantage that the competition cannot easily overcome.

5. The Exit Strategy

Every investor wants to talk about exit strategies, and they want to know that their investment companies have a sophisticated understanding of the exit strategies that would likely be available to the business. As an investor, he/she wants to invest in companies that will have a positive return in a short to moderate time frame, such as three to seven years.

Startups need capital, and any investor needs a positive return on my investment. Investors wants to know that the company is thinking about this balance of needs and is actively developing the product, partnerships, and network, and understands the motivations behind M&As in the company’s industry that will facilitate that exit opportunity in the future.

Other things that interest INVESTORS include:

A shot at increasing the value of the company from whatever they think it is now to about 100 times that in three to five years.
A plan that requires at least substantial investment–in fact, the more the better. Your plan has to show that the money is carefully planned and really needed.
A plan that has several other similar investors ready to invest at the same time. Investors like venture capitalists find safety in numbers so they don’t want to be the only investor in a deal.
A clearly stated exit strategy. Investors like to see that you’ve thought ahead to how they’re going to get their money back on the deal.

Bottom Line

Wooing investors is a full-time job, and even if you commit yourself to it, there’s no guarantee you’ll find the funding you’re looking for. Most investors, before they even consider your business as a potential investment, will take a look at your business plan–sometimes just a quick one- or two-sentence summary of your idea–and instantly determine whether or not you’re worth their time.