How to Construct a Sustainably Funded Business Plan

By Fernando Berrocal

There are a variety of different reasons - both internal and external - why entrepreneurs must compose business plans. This is a document that outlines an organization’s objectives, and how it intends to accomplish them.

Business Plan

In some instances, a key business partner will want to know more about your organization–you will need to produce a specific type of writeup for them.  The partner might want to learn more about your overall strategy, main objectives, and your team’s various capabilities before deciding to engage. In separate instances, a business plan might be called upon to persuade potential talent to join your organization.  In today’s competitive market, applicants want to have a sense of how successful a potential employer might be in the long run.  Lastly, some business plans are created to discuss and evaluate strategic choices internally in the organization, which will help the operations in both the medium and long run. 

As you would expect, your business plan will change based on the particular audience you're trying to persuade in each of the scenarios described above. Each of your organization's partnerships, potential workers, and internal management workers will evaluate your plan based on how it impacts them directly.

Venture Capital

The different funding sources available in the market, such as investors and lenders, are one business plan audience with highly particular requirements. Unlike other types of stakeholders, these funding sources are overwhelmed with business concepts and can only support a small percentage of those that they observe. For this specific business case, keep the following items in mind while developing business strategies in this highly competitive market:

  1. Describe the factors that led - and will lead - to your accomplishment: Funding providers must be able to see why your business is prepared to flourish. It's difficult to be successful if you don't have distinct qualifications. Consider every area of your firm while determining your success criteria, and take into account the following points:

  • What makes the products your organization produce stand out from the rest?
  • Have you built operating skills that help you stand out from the competition?
  • Are there any marketing benefits that you have, such as strategic alliances or customer contracts?
  • What features of your management team (skills, experience, relationships) differentiate your organization as particularly prepared to succeed?

This information will encourage business lenders and investors to gain confidence in your organization’s future success.  They want to know that they'll eventually obtain a healthy return on their investment, so give them prominent profitability statistics for measuring the performance of their investment–make sure to detail your unique success factors.

  1. Be specific when defining your business: Start your business plan with a concise definition rather than the entire narrative of how you came up with the concept. Use the following statement to demonstrate confidence and transparency in your startup: "Our business is creating  "X" product to target "Y" sector."

By opening with this simple explanation, readers will instantly comprehend what you do and decide. When you start with a long explanation of your organization, however, investors who would otherwise be intrigued stop reading. They just do not have the time to look through business plans–especially those that don’t directly relate to their expertise.

Construct a Sustainably Funded Business Plan

  1. Determine your risk-mitigating funding milestones: When risk-mitigating events are completed, your organization's chances of failing are vastly reduced. As expected, for example, while developing a mobile app from scratch, the chance of failure (both economically and operational) is enormous. However, once the prototype software is built, your chances of failure are lowered. Once you've gotten user input and tweaked the mobile app, the risk is much lower. You have millions of users and dollars in a steady income, your business risk is much reduced.

When designing a plan for sources of funding for your business, it's essential to include risk mitigation milestones. Along with identifying them, write down when you expect each to happen and exactly how much money you'll need to complete them.

  1. Make a convincing financial model: Equity investors expect a high return on investment (ROI), whilst debt investors and/or lenders want to know you'll be able to repay your loans at the agreed-upon interest rate. In both circumstances, your financial model will be a critical factor in determining whether or not they will invest in you. The model you create must be trustworthy.

To build a convincing financial model, do as much research as possible on comparable firms in the market. How big have they gotten? While it is conceivable for your business to develop quicker, it is unlikely that it will grow twice as fast as any other organization has ever grown.

Pay attention to costs such as human resources as well. How many employees will you require and how much will they cost? How long will it take you to employ and train them? While you'll never be able to answer these questions precisely, you can get closer. It's critical to consider these issues and include them in your strategy. If you don't, investors and lenders will be skeptical of your financial predictions and won't support your business.

The key thing to remember while writing a fundable business plan?  Financing sources want to support businesses like yours. That is how they profit.  The idea here is to promote your firm in such a way that compels them to become enthusiastic about it. Once you’ve accomplished this, they'll offer a meeting.  During this appointment, they will engage you with deeper questions, and see whether your organizations are a good match.

Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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