Put passion into your business plan for investors
Put passion into your business plan for investors
by Larry Mandelberg
The First Rule of Thumb
There are certain types of business that don’t fit into traditional roles and have difficulty raising money from traditional sources such as banks. If you find yourself in one of those businesses and need funding from non-traditional sources such as family, friends, and angel or venture capital investors, you need to come to grips with one simple truth: Those investors are only interested in investing in one thing – you.
Of course you have to have a good idea and be able to make some money, but be clear on this one point - they won’t invest in your idea until they are comfortable investing in you.
Have you ever lent money to someone? Did you do it because you thought they would pay you lots of interest or you’d get a windfall profit on some idea they had? Did you do it because you had more money than you knew what to do with? Have you ever invested in someone you didn’t trust? Of course not!
Nontraditional investors invest in people first, ideas second. When someone gives you their hard earned money, or even someone else’s hard earned money, they must be convinced you are an honest, ethical and competent business person.
What Are They Thinking?
Before you build your business plan to help make a compelling argument to a prospective investor, it helps to have some insights into how they think. According to Roger Akers, Managing Partner of Akers Capital, LLC in Fair Oaks, a key factor is the passion you have for your business. “Don't forget to project your passion and the fun your going to have building the company,” he advises. Akers is speaking of the importance of being true to yourself and making the investor feel comfortable with you. They want to see your passion, so show it to them.
Once trust is developed, other concerns begin to surface. Akers recognizes that good ideas have short lives and recommends creating a sense of urgency. "Make the investor feel as if the train is leaving the station and that they had better get on," he said.
Some other key thoughts investors sort through in their minds include:
• Are the company goals really congruent with the founder’s personal goals?
• What values will the company incorporate into its culture?
• What other successful companies is this one modeling itself after?
• Who is on your Advisory Board and why?
• Will the management team be able to evolve as the business changes?
Components of the Plan
Begin with an executive summary with a high level overview of who you are, what you sell, why it’s valuable and what you need money for – just a page or two – and give them your vision. Begin planting those first seeds of passion.
Start the body of your plan with your Management Team. Credibility is critical, and once they know and trust you, they want to know who else will be working with their money. Put it out there right up front, and use it to let them know the missing components as well. Understand the positions you will need to fill and provide detailed information about the kind of people you want to fill them.
And don’t ignore your investor; they have many people they can call on to help with a wide variety of skills.
The next components are relatively straight forward and include:
• Products and services – an overview with history & benefits.
• Target markets and their size or potential.
• Competition – and be honest here. There is no such thing as ‘no competition’. If you think you don’t have any, you are being naïve and you will loose all credibility. There is always an option to what you are offering, and there will always be competition. Besides, competition is a good thing. It gives you something to be compared to that will make you look good.
• Sales and marketing strategy – include high level information about current sales and key clients.
• Milestones and timelines – be specific and make sure they are measurable.
• Financials – of course sales are important, but your balance sheet is the key. Make sure it covers an appropriate amount of time – typically three years – and include just enough detail to be clear without being confusing. The red flag here? Assumptions. You will make many, so be sure to include them in your financial reports. Any set of financials should be considered incomplete without a list of all assumptions clearly outlined and explained.
A red flag for any investor is unrealistic expectations or lack of accuracy. "Experienced early stage investors dissect plans for a living. Make accurate statements, know your numbers, never lie, don't be too unique and be very clear as to what the team wants to accomplish," Akers said.
One size does not fit all when talking about a business plan. It must be written for its audience, just as a resume must be written for a particular job.
Have fun with the process, be proud of what you have accomplished and enjoy the experience. It will be one of your richest memories when you look back on it after you have reached your goals.
"Larry Mandelberg is an executive coach and facilitator for Beyond Point B, LLC, a business coaching and leadership development company in Northern California. He can be reached at larry@beyondpointb.com or (916) 787-9909 x2."
Put passion into your business plan for investors - To learn more about this author, visit Larry Mandelberg's Website.
Like this article? Share it with your friends
Put passion into your business plan for investors
by Larry Mandelberg
The First Rule of Thumb
There are certain types of business that don’t fit into traditional roles and have difficulty raising money from traditional sources such as banks. If you find yourself in one of those businesses and need funding from non-traditional sources such as family, friends, and angel or venture capital investors, you need to come to grips with one simple truth: Those investors are only interested in investing in one thing – you.
Of course you have to have a good idea and be able to make some money, but be clear on this one point - they won’t invest in your idea until they are comfortable investing in you.
Have you ever lent money to someone? Did you do it because you thought they would pay you lots of interest or you’d get a windfall profit on some idea they had? Did you do it because you had more money than you knew what to do with? Have you ever invested in someone you didn’t trust? Of course not!
Nontraditional investors invest in people first, ideas second. When someone gives you their hard earned money, or even someone else’s hard earned money, they must be convinced you are an honest, ethical and competent business person.
What Are They Thinking?
Before you build your business plan to help make a compelling argument to a prospective investor, it helps to have some insights into how they think. According to Roger Akers, Managing Partner of Akers Capital, LLC in Fair Oaks, a key factor is the passion you have for your business. “Don't forget to project your passion and the fun your going to have building the company,” he advises. Akers is speaking of the importance of being true to yourself and making the investor feel comfortable with you. They want to see your passion, so show it to them.
Once trust is developed, other concerns begin to surface. Akers recognizes that good ideas have short lives and recommends creating a sense of urgency. "Make the investor feel as if the train is leaving the station and that they had better get on," he said.
Some other key thoughts investors sort through in their minds include:
• Are the company goals really congruent with the founder’s personal goals?
• What values will the company incorporate into its culture?
• What other successful companies is this one modeling itself after?
• Who is on your Advisory Board and why?
• Will the management team be able to evolve as the business changes?
Components of the Plan
Begin with an executive summary with a high level overview of who you are, what you sell, why it’s valuable and what you need money for – just a page or two – and give them your vision. Begin planting those first seeds of passion.
Start the body of your plan with your Management Team. Credibility is critical, and once they know and trust you, they want to know who else will be working with their money. Put it out there right up front, and use it to let them know the missing components as well. Understand the positions you will need to fill and provide detailed information about the kind of people you want to fill them.
And don’t ignore your investor; they have many people they can call on to help with a wide variety of skills.
The next components are relatively straight forward and include:
• Products and services – an overview with history & benefits.
• Target markets and their size or potential.
• Competition – and be honest here. There is no such thing as ‘no competition’. If you think you don’t have any, you are being naïve and you will loose all credibility. There is always an option to what you are offering, and there will always be competition. Besides, competition is a good thing. It gives you something to be compared to that will make you look good.
• Sales and marketing strategy – include high level information about current sales and key clients.
• Milestones and timelines – be specific and make sure they are measurable.
• Financials – of course sales are important, but your balance sheet is the key. Make sure it covers an appropriate amount of time – typically three years – and include just enough detail to be clear without being confusing. The red flag here? Assumptions. You will make many, so be sure to include them in your financial reports. Any set of financials should be considered incomplete without a list of all assumptions clearly outlined and explained.
A red flag for any investor is unrealistic expectations or lack of accuracy. "Experienced early stage investors dissect plans for a living. Make accurate statements, know your numbers, never lie, don't be too unique and be very clear as to what the team wants to accomplish," Akers said.
One size does not fit all when talking about a business plan. It must be written for its audience, just as a resume must be written for a particular job.
Have fun with the process, be proud of what you have accomplished and enjoy the experience. It will be one of your richest memories when you look back on it after you have reached your goals.
"Larry Mandelberg is an executive coach and facilitator for Beyond Point B, LLC, a business coaching and leadership development company in Northern California. He can be reached at larry@beyondpointb.com or (916) 787-9909 x2."
Put passion into your business plan for investors - To learn more about this author, visit Larry Mandelberg's Website.
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