Most start-up businesses rely on investors in order to be a success, so having an engaging and exciting business proposal is essential. A detailed and accurate business plan should take months, if not years, to create, as it will require in depth research and a detailed discussion of the first few years of your business operations. So many proposals contain these common mistakes that will immediately produce disinterest from investors, but luckily they can easily be avoided when you know what you’re looking for.
Missing Out A Crucial Element
Whilst there are no strict rules about how a business plan should look, as each company will differ greatly, there are a few absolutely essential elements that must be included in any business plan.
Firstly, you need an executive summary of the business. You will give a brief overview of the company, why it will be successful, what it will offer the market that other businesses aren’t and a quick summary of your projected figures. This is your opportunity to really sell your business to potential investors and get them engaged before going into detail.
Next, you will give a detailed description of the business and how it will be structured. Knowing how your supply chain will work through and through is a must, from your manufacturing and packaging to materials used and property plans. Are you going to invest in commercial property for sale or will you rent a building? How would you be equipped to overcome administrative issues? What will the standard practice be in terms of inventory and fulfillment? You must know each area of your business in extreme detail in order to impress investors.
Now, discuss what you know about the market. Investors will be especially interested in how your product is going to fill a gap in the market to make it profitable, so knowing how your product is different and what competitors are doing is important. Also, market research will enable you to gauge how appropriate your pricing system is.
The fourth thing you must cover is your management plan. Each manager or executive in the company will need a bio containing information about their experience, the role they will play and how their knowledge will support the business. Also, will you be using any external management companies, like commercial property management for example? This should also be discussed in this area. If investors can see you have an experienced team behind you, they will be much more interested.
Finally, a detailed explanation of your finances. If the numbers don’t add up, investors simply won’t be interested. This should cover every aspect of your business and projected figures for the next three years. We will discuss how to get this right next!
Over Exaggerating Figures
When mapping out your financial plan, it is so important that you always offer both worst case and best case scenario figures. People who will be investing in your business will know what your figures are likely to look like, so adding on an extra £50,000 to your projected profits to impress them will actually have the opposite effect.
Investors will have much more respect for you and the business if you are realistic. It is advisable to contact an accountant to help with this, as they will have a good idea about how your business might fit into the market.
You should also discuss how and when you plan to pay the money back to the investors. This will help them to visualise what their return on investment might look like and this addition could be what pushes them to invest in your business.
Lack of Focus
You are likely to have spent years creating and obsessing over this business, so you might find yourself missing out important details that you might take for granted as common knowledge. You need to explain your business in detail, as missing even small things out could leave gaps in your plan that investors will scrutinise.
This is the case throughout the business proposal. Clearly explain each element in a precise manner so that investors can access the information they need without having to go through pages of information. Ask multiple people to read through the proposal and highlight information they felt was unnecessary in one colour, and information that needed more detail in another. This will give you a good indication of which areas need work!
Creating a business proposal can be a daunting process, but you will get there in the end. The main things to take from this is to include the key five areas, be realistic with your figures, make your proposal exciting and engaging and finally maintain a clear focus throughout that makes your plan easily digestible. You have every chance at success as long as you don’t rush this process.