Starting or growing a business takes a lot of hard work, commitment, planning and another very important element: money. Unless they have their own money or a family member is willing to invest in their business, many business owners look to investors for the funds they need to realize their vision. . But they must first help investors not only understand their vision, but also want to share it. This requires a solid business plan.
The typical investor has piles of business plans arriving on his desk every day. So how do you make yours stand out and get investors to open their minds and wallets to your business? Here are some key things investors look for in any business plan.
Executive Summary Lean, Mean
The key to creating an impactful executive summary is striking the right balance between providing potential investors with enough information to understand and get excited about your business and being clear, concise, and engaging. Although this is the first section of any business plan, it is usually written last as it includes a summary of each section of the plan. If the executive summary doesn’t immediately grab investors’ attention and interest, the entire business plan can end up in the recycling bin. This is why it is essential to understand what investors are looking for in this section.
- Introduction — If you were meeting an investor, or anyone for that matter, for the first time, you would start by introducing yourself. The same is true here. Investors want to know who you are, your background, why you started your business, how it fills a customer need, who those customers are, and how your business is uniquely positioned in the market.
- Financial needs — The reason you send your business plan to a potential investor is to get money, so don’t beat around the bush. Detail how much you are looking for and what you will do with it, down to the nearest dollar. Investors want to know how you are going to use their hard-earned money.
Realistic financial forecasts
Investors who are successful in IPOs may consider investing in your company. And they probably don’t do it out of the goodness of their hearts. This section will help them assess the risks and rewards of an investment. They want to know how long it will take them to get their money back and what kind of return they can expect beyond their initial investment. They’ll also want to understand your company’s exit strategy so they can do what they do best: make a profit and move on to their next investment.
In this section, they want to see numbers. Projected numbers over the next five years, to be exact. Make sure these projections are based on solid data and include:
- Income statement — How much revenue does your business generate and how much of that revenue remains (profit) after deducting expenses (including payroll, rent or mortgage, inventory costs, public services) ?
- Cash Flow — This is the amount of money coming into your business minus the amount going out.
- Balance sheet – The purpose of a balance sheet is to provide an overview of your business’ net worth which is calculated using your current assets (cash and anything that can be converted into cash) and your liabilities (what you owe) plus your equity.
While it’s true that most investors care about the financial side of any transaction, they’re savvy enough to understand that it’s people who produce the real results. Having strong leadership, direction and advisors to help you operate and grow your business is essential. This is the section where you share with potential investors how great your team is. In other words, brag a little. Include bios, experience, awards, accomplishments, degrees, certifications, inventions – whatever it takes to prove your team will help take your business and profits to the next level.
Remember that they are not just investing in you. They invest in the whole business, and that includes your people.
Having a plan for your business is one thing, but making sure it’s executed perfectly is absolutely essential. Once you have completed your business plan, review it. Then read it again. Ask someone you trust to review it as well. It’s worth taking the extra time to make sure it’s error-free. The last thing you want is to send a business plan to a potential investor that has incorrect data, misspellings, typos, or bad grammar. This business plan is a reflection of you and how you run your business. It should be cleanly designed, organized, precise and easy to read.
Another thing to consider is that just as no two companies are the same, neither are two investors. You may want to do some research to understand who your potential investors are, what other companies they have invested in, and what they tend to look for in a company. You may be able to customize certain sections to suit your audience. The more directly you can appeal to them, the better.
It starts with a plan
Developing a business plan that will get investors excited is an important step in getting the money you need to take your business to the next level. If you have questions about your finances or are looking for other ways to grow your business, talk to a Chase investment banker.
For Informational/Educational Purposes Only: The opinions expressed in this article may differ from those of other employees and departments of JPMorgan Chase & Co. The opinions and strategies described may not be appropriate for everyone and may are not intended to be specific advice/recommendations for any individual. . The information has been obtained from sources believed to be reliable, but JPMorgan Chase & Co. or its affiliates and/or subsidiaries do not warrant its completeness or accuracy. You should carefully consider your needs and goals before making any decisions and consult with the appropriate professional(s). Prospects and past performance are not indicative of future results.
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