By Fernando Berrocal
A business plan is a document that sets your organization's financial objectives, and explains how you expect to achieve them. Beyond this purpose, this document is developed for a variety of different applications; including presentation to a strategic business partner. In this situation, the mentioned partner will want to learn more about your firm's overall strategy, its main accomplishments, and the personnel working for it. Their objective is to see if working with your firm is a suitable fit for them. Similarly, a business plan can also be used to persuade potential workers to join your business.
These organizational plans are created to help think and evaluate different strategic possibilities. As you can expect, a business strategy will alter depending on its target audience. Strategic business partners, potential full or part-time employees, and internal management all have different requirements. Each group will evaluate your business plan depending on how it impacts them. Through this methodology, each will make the best decisions for their own interests–which is also in the interest of your startup’s short and long-term success.
Financing sources such as investors and lenders are a business plan audience with highly particular requirements. Unlike other audiences, funding sources are overwhelmed with organization plans every single day. Investors can only address a small proportion of the proposals they receive. As a result, keep the following in mind while writing business strategies in today’s highly competitive market.
- Define your business–and do it accurately. Start your business strategy with a simple, concise definition instead of an extensive narrative. Investors don’t need to know how you came up with your concept. For example, you could state the following phrase: "Our business is developing "X" product, and targeting "Y" audience.” Your objective: convey the essence of your business to the reader.
By opening with this simple explanation, lenders will instantly grasp what exactly you do–and whether or not they want to learn more about it. On the other hand, when you start with a background story or a lengthy explanation of your organization, investors (who would otherwise be intrigued) stop reading your business plan. They just don't have the time to peruse a high volume of irrelevant content–especially information that doesn’t relate directly to their business expertise.
- Describe what makes you unique and remarkable. Investors and lenders must understand why your business is unique–and qualified to succeed. Think about it: it's impossible to distinguish yourself with success in today's competitive market if you don't have distinctive qualifications. Consider every area of your organization while determining your unique success criteria. The following factors are likely relevant to your reader:
- The characteristics of your management team. Think about how your different experiences, skill, and relationships will distinguish your organization as one particularly prepared to succeed.
- How your products and services stand out. Consider how exceptional your products and services are. How do they stand out from what the competition offers?
- Your marketing advantages. These factors may emanate through the organization's strategic relationships–or consumer contracts you have established.
- Identify your risk-mitigating financing landmarks. Risk-mitigating turning points are events that - when performed - lower the likelihood of your business failing. Always remember to also include your risk mitigation targets in your business plan for funding sources. Note: along with identifying them, write down when you expect each to eventually happen, and the estimated quantity of capital and time each will require.
- Make a convincing financial model. Equity investors expect a high return on investment (ROI). In addition, debt investors or lenders would like to know if you'll be able to repay your loans at the agreed-upon interest rate. In both circumstances, your financial model will be a major factor in evaluating whether or not these professionals will like to invest in your business. The model you create must be trustworthy.
To build a convincing financial model, do as much research as possible on comparable organizations in your market. How fast have they grown over time? While your firm may expand even faster than theirs, it's unlikely that it will grow twice as fast as any other company has ever grown in that market. Human resource expenses will also be mentioned in the following list:
- How many employees do you require?
- How much money will they cost?
- How long will it take you to employ and train additional team members?
While you'll never be able to answer these questions perfectly, it's necessary to consider them and incorporate them into your model. Put as much effort as possible into making educated, calculated estimates. If not, investors and lenders will be skeptical of your financial predictions– and refuse to support your organization.
The most important lesson for writing a fundable business plan? Financing sources aim to work with businesses like yours. That is how they ultimately make money. The most important thing is to showcase your organization in such a way that they become enthusiastic about it. Once you've done that, they'll propose a meeting to ask more adequate questions–and see whether your business and theirs are a good fit.
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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