The importance of a business plan

When turning to investors for investment in your company, you should give the potential investor the peace of mind to feel comfortable about your company before they invest in your venture.

A Business Plan is the foundation, or rather a springboard, towards the establishment and growth of a new business, particularly in the later stages of growth. A business plan is an essential tool for companies raising capital – and your business plan needs to be “investor ready”.
The business plan document should be professionally prepared to meet the needs of the Venture Capitalists. In your business plan, you should be able to see your own project through the investor’s eye. Your plan must be able to answer all the concerns of a potential contributor.

The investors, both VCs and equity firms, are risking their hard earned capital by investing in your venture in the hope of long term returns that are worth many times their original investment.

An investor ready business plan demonstrates to the potential investor that you are an expert in your industry and that you have a clear mission. An entrepreneur addresses these needs by preparing a comprehensive and detailed view of his/hers business objectives and goals.

Some important sections that address different concerns of the investors are below:

Management

Investors are mainly concerned with good management – not just ideas. It is very important that you express your knowledge, passion and dedication to your business as best as you can. The competence of your team along with their experience levels and commitment levels are also factors that investors research before making their investment decisions.

Customers

It is important to communicate to the investors that you understand the needs and requirements of your customers and to make your marketing strategy crystal clear within your business plan.

Product/Service Description

A complete description of the product and/or the services offered by you should be outlined in detail. It is essential to include a description of the overall market for your product and/or service along with details of your customer base. The investors need to know the reach and the kind of customers your product/service is catering to.

Marketing Plan

A marketing plan will outline your sustainable competitive advantage to your investors. In this section you should include a definitive description of your customers, market size, characteristics, growth prospects, trends and sales potential per product/service category. This is where the pricing strategies are outlined and how they can directly influence the growth potential of each product/service. It is also crucial to include the future growth, market share and trend influences.