What Do Investors Look for in a Business Plan?

When you’re building and growing a business, it’s easy to stay focused on day-to-day operations, sales and connecting with customers.

However, when it’s time to raise additional funding, most investors will want to see your business plan to feel confident about investing in your company. 

A business plan is a strategic document that outlines your company’s goals, strategies and financial projections. 

It paints a solid picture of your business’s current position and future direction, allowing your team to make more informed decisions, and helping investors understand why you need funding.

What Is a Business Plan?

There are two main types of written business plans:

• Traditional business plans are very detailed and comprehensive. They typically have multiple sections and include a clear company description and supporting documents like credit reports, patents and contracts.
  Businesses frequently use this type of plan when seeking funding from banks or other investors. The amount of detail and depth helps investors better assess how credible your business model is, and whether your company is worth investing in.
• One-page (lean) business plans summarize the most important, high-level elements of your business. As their name suggests, they are typically only one page long.
  This type of plan is frequently used by startups that are looking to quickly summarize their concept, or by businesses who are planning to change and refine their plan in the near future.

Do You Need a Business Plan?

On a day-to-day basis, you don’t necessarily need one to operate successfully. However, having a well-crafted and strategic business plan in place can be helpful since it allows you to keep your operations on track and guide daily decisions.

The moment you’ll most need a business plan is when reaching out to investors for funding. Most banks, investors and other lenders want to read a full plan in order to better understand your business concept, financial forecasts and future goals.

Now, let’s take a look at what an investor wants to see the most when reading your business plan.

What Investors Look for in a Business Plan

A Strong Executive Summary

A business plan can be 20 or 30 pages long, or potentially even longer if you include a lot of images, graphs and appendices. 

Investors don’t have time to read every page when they’re first meeting with you. Instead, they want to get to know you and your business by reading your executive summary. 

Typically placed at the front of a business plan, an executive summary is an introduction to your business and the rest of your plan. It should grab a potential investor’s attention, giving them a complete overview of what you do and why your business stands out.

As the executive summary gives an overview of your whole plan, most business owners choose to write this summary last to avoid forgetting anything important.

Solid Financials

Once you’ve caught a potential investor’s interest with your summary, they’ll want to know you can back up your concept with strong financial data.

It doesn’t matter if you’re a brand new startup with no sales or an established business with years of history, investors expect to see a strong, realistic financial forecast.

Without this, a potential investor will have no idea how you plan to use their funding to generate a positive return.

Include the following forecasts in your plan:

• Profit and loss statement
• Cash flow statement
• Balance sheet
• Sales projections
• Break-even point

Your forecasted numbers should be strong, but they also need to make sense. The financial section of your plan is not the place to be overly optimistic or shoot for the moon. 

Keep in mind that investors are unlikely to believe you if you claim that your new startup is going to be making a billion dollars by next year. Be realistic, and back up your figures with as much real-world data as possible.

A Strong Core Management Team

The success of a business doesn’t just rest on how good your concept is and whether there’s a market for it. Investors also want to see whether your management team will be able to execute your goals successfully.

Remember that investors see dozens of companies every week, many of whom also have strong business plans. What truly sets one apart is a strong, capable and highly credible team behind it. 

Successful prior experience in related industries helps, and so does showing that your team is organized and communicates effectively. 

Your management should be goal-focused, and everyone should demonstrate clearly how they’re contributing to the team.

A Solid Understanding of Your Market and Audience

Investors want to know that your products or services have a clearly defined target audience and address a real problem. Additionally, they want to know that your audience is large enough to support future growth.

Including a strong, data-backed market research section in your plan shows investors that you understand who you’re selling to and how your business fits into the current market.

Consider including:

• Total market size and the portion of the market you expect to be able to reach
• Profile of your target audience
• Current market trends
• Competitor analysis
• Your company’s unique value proposition

A Well-Organized Plan

Investors want to see that you’ve put time into crafting your business plan. Errors and typos can signal a lack of preparedness and care. 

There’s no one right way to write a business plan. While there are outline templates available online for you to use as a starting point, tailor the format to best highlight your strengths.

Use the sections that make the most sense for your business, your goals and what you want to convey to potential investors. Not every business plan will need every section.

Some potential sections include:

• Executive Summary
• Company Overview
• Mission and Vision
• Market Research
• Competitor Analysis
• Products and Services
• Marketing and Sales Strategy
• Operations Plan
• Management Team
• Financial Plan
• Future Goals

Final Thoughts

Writing a strong business plan is one of the smartest things you can do for your long-term success, especially if you’re planning on seeking funding in the near future. 

Investors want to be able to clearly see your market potential and how your team will use an injection of cash to achieve your goals.

Need help refining your plan or building accurate financial forecasts? Get the experts to help! Finvisor’s financial advisors and accounting team are here to give you the assistance you need. 

We recognize that every business’s goals are unique, so we tailor our services to your needs to help you plan for the future success of your company.

Get in touch with Finvisor today!