Four Essential Traits That Make Your Business Plan Appealing to Investors

Many business plans primarily focus on persuading investors, emphasizing figures and financial projections. However, generating financial projections for a non-existent business and an unpredictable future is a challenging task. As a result, numerous business plans rely on optimistic assumptions about reality and the future, creating a gap in understanding between entrepreneurs and experienced, often pessimistic, investors. This divergence in understanding can be counterproductive for both parties and may give rise to detrimental miscommunications.

Instead of excessively concentrating on numbers and financial matters, business plans can be crafted by relying on four crucial factors which make them more appealing to potential investors.

1-People:

The team tasked with shaping the future of the business significantly influences investor sentiment. Therefore, it’s advantageous to provide a comprehensive profile of the people involved in the investment. This ensures that investors have a clear understanding of who they are entrusting their resources to, and what they are investing in. This section of the business plan could specifically address the following questions about team members:

• What do they know?
• Whom do they know?
• How well-known are they?

Answering these questions and related queries offers investors insights into the team members’ capabilities, experiences, industry familiarity, and motivations.

2- Opportunity:

Investors prefer to invest in markets that are large and poised for growth, with a clear level of return over a 5-year period. To address this concern, a business plan must answer two crucial questions:

• Is the market for the product or service large and growing?
• Does the intended industry have an attractive structure?

This section of the business plan should clearly outline the products or services, the target customers, and how revenue is generated from these customers. Additionally, it should provide transparent answers to questions about the resources needed in this segment.

3- Context:

All the previously mentioned aspects gain significance within a broader context. Understanding this context facilitates a more comprehensive view. Economic factors and regulations can impact industry attractiveness, creating opportunities for new business development. A business plan must thoroughly address this context to make investors aware of four critical issues:

• Are the business plan presenters well-versed in the impactful issues on the industry and business?
• How do changes in the context affect the business?
• How can management respond to these changes?
• Ideally, how can management positively influence the context?

4- Risk and Rewards:

This section involves predicting the future and storytelling. The clearer the future and its probabilities are presented to the investor, the easier the decision-making process becomes. Therefore, focusing on describing possible scenarios in the future and how they impact the investor’s end game and rewards will never be a waste. In a business plan, providing investors with a roadmap is crucial, as any traveler knows that knowing the path  significantly reduces the risk of the adventure.

In essence, a business plan that delves into these four factors offers a more holistic and realistic view, fostering better communication and understanding between entrepreneurs and investors.