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Is Your Business Plan Written for Your Prospective Investor...or More Likely, Your Prospective Customer?

Most entrepreneurs spend countless hours putting their business plan together for outside capital, and much of it is wasted because it's, often targeted at the wrong audience.  And what's worse, is that it's usually a "telling" document, not a "selling" document. This, most often comes about from three common mistakes that most small business owners make:

  • The entrepreneur is, usually, so close to the market and is pitching that market every day that they assume whoever they're in front of understands the jargon, terms and nuances of that market.
  • The feeling that "more is better,", that an investor want to know every feature and function for the product that underpins their business concept (often, what they do with prospective customers as well).
  • The belief that their plan needs to have as much mind-numbing detail as possible. And, the more complex the financial model, the better!

Overall, the purpose of a capital raising business plan is...TO RAISE CAPITAL.  Period. End of story.  Sure, it should be the blueprint for the entrepreneur's strategies and tactics and the steps you take to implement them, but, typically, it's out of date before it comes out of the printer.  No, that plan, which is a "living, breathing document" should be your small business "battle plan," the one you operate with, day-to-day (I've written multiple blog posts about the importance of this, previously - see those - here and here).

This plan, plain and simple, is to sell investors on why they should invest in you, the entrepreneur, your management team and your business.

So, what you're developing is a detailed "brochure" for your company. Something that makes folks "want to buy."  Here are some basic considerations that you should be in any "selling" capital raising business plan:

What is the problem you're solving or the need you're addressing and the opportunity that that presents?
Give some background on the market, overall size, etc., why the problem or need exists and, more specifically, size the addressable market for the opportunity.  If you're going to use jargon, define it, explain it and put it in context.

How will your solution solve the problem or address the need?
Keep feature/function and specs to a minimum, or translate them to benefits and the solution.  Wherever possible, translate benefits to cost savings, revenue generation for your addressable market. Quantifiable benefits make an impression.  Who else is doing this?  What inroads have they made? And if no one is else is doing this, why are you so smart? What have you found that everyone else has missed?  This could be "your secret sauce!"

What are your key strategies to sell, deliver and support your solution?
This is where the "rubber meets the road," where your credibility gets tested.  And the most critical of these is how you will sell, to whom and why they will buy.  Here you're tying together how your solution solves the problem or addresses the need and how you will drive that solution to the marketplace.  And most importantly, how it will scale as you penetrate the market.

How will you make money?
Then the investor knows how he/she will make money. Explain how you price, the rationale behind it and the margins that support it. Show how scalability translates to cost-efficiencies and greater margins. Sure, have spread sheets, forecasts, etc., but somewhere distill it down to what the basic business proposition short, how you make money!

How much money do you need and how will you use it?
Be specific. No "abouts" or ranges.  You must show precision, after all, it's their money. Delineate where it will be spent by function or specific task(s) and why those areas are important. No more than 10% in working capital or other "catch all" categories. This is where your audience really learns how much you know about running your business.

How will you exit?
Put real thought into this, not just the usual, "we plan on a strategic acquisition for exit."  Think it through and justify who might acquire you and why, or how else your investors can monetize their investment.

Who are you; who is your team and why are you so good?
Especially highlight if you or your team has either market experience and/or credibility in your target market or has had experience starting, developing and growing previous small businesses.  If you don't have any of this, go get it.  Investors invest in the jockey, not the horse.  You and your team are the jockey.

Developing a "selling" capital raising plan starts with understanding who your market is - the investment community - and creating a "selling" document that makes them want to buy (invest)!

"The Entrepreneur's Yoda" knows these things.  He's been there.  May success be with you!


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