So you want to raise money for your business. You need a business plan to take to potential investors or lenders. Where do you start? Here are some ideas to get you started.
A compelling “executive summary”
Give them a strong statement up front. Say how much money you need to raise and what it will be used for. Make this a short and positive statement, something to get folks to read on
Description of your business
What do you do? You’d be surprised how hard it is to answer this question clearly and simply. Cut to the chase. If you can’t bring any focus to the description of your business, you might as well forget about this whole effort. Investors and lenders like to give their money to focused people.
What’s your market?
Who buys your goods or services? What is the size of your market? What percentage of it do you reach? What do the rest do to satisfy their needs in this area? Who are your competitors? How will the current proposal increase your customer base and improve your share of the market? Or do you plan to increase your business with existing customers?
What’s your expertise?
How do you stand out from your competitors? Who are the people who are principally responsible for the management and operation of your business? What are their backgrounds? What are their track records for making a successful business?
What will the new funds do for the business?
Do you plan to buy equipment or a building? Do you need inventory? Do you need working capital so you can afford to bring on new people or start a new project? How will this plan add to the profits of the business? How will it be possible for you to repay a loan or distribute profits to equity investors as a result of the plan? If you have made preliminary arrangements with vendors or customers, you will have to provide documentary evidence, such as leases or contracts or other documents pertaining to your plan–to show that you will be able to carry it out.
What is the financial history of the business?
A key document in your plan will be a set of financial statements indicating how the business has operated in the past. This will include income (profit and loss) statements and balance sheets for recent years. You may be required to furnish tax returns for these years as supporting documents. You will also be required to furnish credit reports, indicating whether or not you pay your obligations.
Financial projections
You will need to prepare a number of projections indicating how the funds you need will be spent and how those expenditures will affect your bottom line for at least the next three years. You may need to prepare several sets of these showing how the bottom line is affected by different assumptions. You will need to show what factors will lead to lower-than-expected results and what factors will lead to higher-than-expected results. Finally, you will need to show what level of sales (or other assumptions) will be needed for you to break even on the plan.
A good business plan
A good business plan can be a forceful persuader. If it shows a thoughtful and realistic plan together with a history of drive and success, you are well ahead of the game. It pays to take seriously this aspect of getting financing for your business.
