When you put your heart, soul, and life savings into your business but still need help to move it forward, an investor can help. They can offer you money or support to grow your business in exchange for a share of the profits.
Bringing in an investor (or group of investors) involves more than just asking someone to give you money. A serious investor will ask for a copy of your business plan and possibly for a live pitch. Are you ready if they ask for your business plan?
Here’s what you need to know about writing and pitching your business plan to investors for capital to grow your business:
What are investors looking for?
Quite frankly, investors are looking to turn a profit by investing in your business. Your job is to show the investor exactly how their investment in your company will be profitable for them and when. While this is a business transaction for them, emotion plays a big role in their decision-making process.
You want to present your business and yourself in a way that makes you likable. If an investor is deciding between two similar business opportunities with equal opportunity for profit, they’ll likely choose the business with an owner or CEO they like more. It’s part of human nature to do business with people you like.
Aside from the human connection you need to make with investors, they also want to know about the growth potential for your business. A few key points to include in your business plan to support this goal include:
- What’s the market potential for your product or service?
- Is the market projected to grow, stay the same, or decrease in the coming years?
- Is your company promoting breakthrough technology or processes, or is it more of a temporary fad?
- What’s the exit strategy for the business?
- How much can your investor expect to make on the investment and when?
Investors who see your business plan or listen to your pitch will only give you a few minutes (just like on Dragon’s Den on TV). You’re unlikely to get a call back for a second chance. That’s why it’s so important to know how to pitch and summarize your business and the above points within a few minutes.
Just like Dragon’s Den, you may want to offer your investors a stake in your business. The investor may also bring particular skills or connections to the table that can be included in the negotiation of the investment offer and terms. Consider each one carefully and balance their offer and your non-negotiables to find a mutually beneficial investment agreement.
What are lenders looking for?
Lenders and banks are more numbers-driven and are less influenced by emotional factors. They look at the risk versus the return on their investment. Banks care less about your story and more about the financial sections of your business plan.
They are more impressed by facts and figures, not vague ideas or possibilities. Here are a few questions to highlight to lenders within your business plan:
- Does your product pricing match your market and target customer?
- How are you managing and controlling your budget?
- What’s the risk you won’t pay off your loan?
- Will paying off the loan affect your growth potential?
- How much are the company owners financially invested in the company themselves?
5 tips to writing a business plan for investors
In addition to including all the standard business plan content sections, here are some tips to writing content your investors want to see:
1. Research your investors
If you’re going after specific investors, choose ones with a history of either helping businesses to succeed or ones who already have a personal or professional interest in businesses like yours. Find out the following:
- Are they new or experienced in business investments?
- How much do they generally invest in projects and companies like yours?
- Do they invest on their own or part of an angel investor network?
- Do they have any personal connection to your business or niche that you can use to appeal to the emotional side of their decision?
- Do they prefer silent partnership or active involvement in their investment companies?
- What’s their personal experience in business?
When you know more about the investor, you can customize parts of your business plan to make it more appealing to their experience and preferences.
2. Clearly define the problem/solution
It’s a standard part of every business plan, but it’s an area an investor will want to know more about. They want to know that a problem or opportunity exists in the marketplace and exactly how you can fill that market gap. It’s about the viability of the business.
Your business won’t succeed over the long term if you’re selling a product that no one needs. Same if it’s just a temporary obsession, like a fad diet. Investors need to see the need for your product and that your offer is positioned to meet that need. Include a clear statement in your business or executive summary that defines the market need or gap and the solution your business is proposing.
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3. Establish your credibility
Investors need to trust that you can run your business to profitability. This doesn’t mean you need to have years of business experience under your belt. Many investors love to invest in first-time business owners as long as they can prove that they’ve done their research on the business and the market.
This is where the market research section of your business plan will be important. It will show that you:
- spent the time to research your industry inside and out,
- know every detail about your target customers,
- understand how this all related to your business, and
- that you are invested in the success of your business.
4. It’s not all about YOU!
There are 2 main reasons to write a business plan: to act as your guide for growing your business and/or to get investors for funding to grow your business. You may want to have two versions of your business plan so you can customize certain content for the specific investor (like we talked about in tip #1 above).
While it is YOUR business plan and will be written about you and your business, be sure to include content that will resonate with the specific investor you’re sending it to. Don’t call out the investor specifically, but bring attention to issues and causes you know they care about. Ask for a funding arrangement they are likely to accept based on previous deals they’ve made with other businesses.
5. Tell a story
If you need to appeal to the emotional side of your prospective investor, tell a brief story. If you got into business for a specific reason (illness in the family, a financial necessity, laid off unexpectedly, personal success with the product or service) share that within your business plan.
Share stories that show your perseverance, success in the face of adversity, or another personal story that might interest the investors. This shows that you have a positive track record and the motivation to make your business a success!
How to write a business plan for investors
The last piece of advice regarding writing your business plan and pitching it to investors is to get a professional business plan writer to create your business plan. This will become the foundation of any in-person pitches you make to investors and will be the physical takeaway they’re left with to make their decision.