How to Attract Investors to Your Business Plan?

Before you look for investors, it is important to refine your business first. That is to say, you won’t want to present something unpolished and foggy. It will not only degrade your company’s reputation but also you as well.

What do investors look for before investing in your business? Words from real investors:

As per Karin O-Connor, former Managing Director of Hyde Park Angels, an investor would like to invest in businesses that tap a big market, a big pain point, something that customer is really eager to have solved for them, and the solution that seems to make sense.

It is equally crucial to judge the entrepreneur, based on his/her presentation, whether they have experience and confidence in executing a business. Entrepreneurs must not be over-defensive or over-enthusiastic to the point they don’t understand the business projections and risks involved.

If you’re a startup entrepreneur and trying to get money and business progresses very quickly. And aim to gain huge within a few weeks. Then you are likely going to miss the deal if you are attracting investors. In fact, you shouldn’t want to make that process quickly if you want to move forward with investors.

Particularly, building good relationships and maintaining consistency are the words of a wise business process. Because when you try to make things overnight, it is likely to fail in the long run. And investors would never be interested in short-term gains.

If you do these 08 things, then investors will Walk Away:

The investors are going to reject your business plan if you:

1. Not building your background before investors are interested in listening to you:

Nothing happens by chance. It occurs by the plan. That is to say, things do not work like, someday you felt to put your business ideas to investors, and you made a cold call, email, or reach out to their location. Do you think they are even going to respond to you? Not at all. Investors are not only investing in your business but they are also investing in you.

Your high visibility and positive reputation in your business circles show real evidence of your credibility. It is called investor trust building through references. The primary reason that will attract investors is to at least let them listen to you.

2. Don’t need a team:

Building a startup is a team spirit. If you say, you are the sole founder, not backed by any other stack holders, that would be fine. However, if you don’t need a team of staff or employees and pretend to be a one-man army, you may be successful as an individual but would fail to attract investors.

No matter whether you have all the experience & knowledge and are a brilliant founder if you’re going solo, then you would lose the investor round.

3. You are trying to make quick cash:

Investors are interested in those who want to bring something large, huge, and enduring. If you are fluctuating in your business idea and trying out ways to make quick cash, then investors are not going to believe you. The venture capital business model is not going to work that way.

You should think about building a market, going yourself many options, and making money as much as possible. So, it is how you build a sustainable business long-term to give you as many options as possible.

So, anybody who tries to sell something fast is quite ingenuous about how the business system works.

4. Creating a sense of urgency:

If you managed to attract a lot of investors, and you provide each of them with a short timeframe to decide, else you would move on with the next one and would repel investors who are forced to decide things hastily.

Investors take time to decide based on market opportunities, and business durability rather than doing things up in hurry. They would rather walk away than close a deal without whom they cannot be partners.

Att6racting an investor is very much about timing. Having some sense of urgency when you are closing the investment, is fine. But it should not be a part of your initial conversation.

5. Encouraging investors to sign an NDA(Non-Disclosure Agreement):

The moment you encourage investors to sign an NDA document that indicates a lack of trust. That might be problematic in terms of building working relationships.

Being an entrepreneur, if you think that somebody can easily steal your idea and replicate that, investors won’t find you and your business to be strong & reliable, if you need too many boundaries to secure your business.

6. You don’t need a sales team:

You are so confident that, your product can sell itself without the need of a sales team. If you have a great product, it earns some short-term gains. But there is no way you can get profits in the big numbers and big deals specifically if it is a big enterprise application.

Well, it is a myth that, especially software product companies consider marketing and sales a waste of time. And if as a founder think, then you are likely to run a limited value business.

To conclude you will need a sales team if you have product-led growth to maximize that potential.

7. You just need investors’ money:

You are not enough resourceful but you just need money to invest. Then, that will totally turn off.

Being an entrepreneur, you are basically saying that you cannot do anything with investors’ money, then you are not really resourceful. Of course, funding can help you make things faster, easier and better. But if it is just impossible for you to progress without external inflows, then investors remark it as a non-serous business.

The best founders do something out of whatever they have.

8. You have no competition:

When you say you have no competition, it’s usually one of two things and none of them are very good.

First, no competition very often means no market. If nobody else finds this market attractive, maybe there is no market.

Any market will either have competition or get competition. Otherwise, it’s pretty unlikely that it’s a great market.

When someone says that they have no competition, investors are slightly nervous because, on the one hand, they want founders to be fearless and ambitious, but they also want them to have just a slight edge of paranoia.

You know, if there really isn’t competition now there will be in the future, right? If what you’re doing is valuable and interesting. So it will be. Therefore, it’s always good to find someone who’s thinking around corners.

However, no competition makes investors worry that you’re not the kind of business that they can invest in.

Top 11 Things You Mush Have in Business Plan for Investors

Most businesses fail because they don’t have any direct plan of action. As a founder, if you fail to recognize the correct business plan, you will end up doing more harm than good. Therefore, you must know how to plan things right.

1. Business Summary:

It is a great place to start with a business plan. Your ideas must be in a clear and polished way that draws the reader’s interest and attention. Basically, you are selling your idea to draw in funds from investors. And that should be worth it.

Whether you are giving it to an investor or banker, it needs to be short and crisp. But not longer than a page.

In this section, you must answer a few questions clearly. They are:

• Why should your business exist?
• What is your business mission?
• Why should investors be interested in your business?
• Why your business is going to be successful?

So, the business summary is a good place to include all these points and hook them into the document.

2. Which product or service you’re going to sell:

Now, opportunities are all over the place. Now you must figure out how you’re going to execute and create a plan around that.

• What are all opportunities to make money and create a business?
• Ask yourself the question, what products and services do you see as most viable?
• Is there a product or service that you feel solves a problem?
• What is your solution to that need or problem?
• What are the potential downsides and upsides of the business?

3. Sales & Marketing Plan:

The next thing is the sales and marketing plan. It includes how are you going to get your product or service and actually tell people about it.

It is like sharing your message, connecting with people, running display ads on Facebook and Google, or maybe even mail.

• All these different forms of marketing, this is what you need to iron out in this part of your business plan.
• How you are going to actually tell people that you offer this service or this product, and why is it so great?
• How can you tell them about the need they have for what you are selling?

Now, the sales part. There are many different ways to sell things. You can do it in person, like in a retail store, you can do it over e-commerce, or online. You can do it direct to consumer or you can go through a wholesaler or a distributor.

There are so many different ways to figure out sales. And that’s gonna really be determined by your business plan and govern everything to do with the business. For example, if you are doing direct-to-consumer, you don’t need to go get retail stores and get a bunch of real estate involved and salespeople to sell in person.

It’s going to be a completely different model. So this is very important to figure out, how you communicate your message and how it is going to transact with people, direct-to-consumer, through a wholesaler, through a distributor.

There are so many different avenues of sale. You must answer these questions in your business plan for investors.

• How do you tell people that they need your product or service?
• How do you communicate your message with people?
• How will they transact with you? What business model will you use and what are your sales projections?

4. The potential downsides and upsides:

Most investors realize that what they want you to see is that you’ve actually thought about the potential downsides and upsides of what your product or business is going to become.

They want to see what you’ve actually thought, what happens if the labor market changes, what happens if technology changes, and the further out you’re thinking, they actually start to see.

It never is smooth sailing. So there are a lot of components, to preparing a business plan.

5. Do market research:

Do market research and then analyze that data to make sure the product or service you’re offering to the market is actually going to be accepted and people are interested in buying it.

For example, you might be wanting to sell custom t-shirts and make a business around that.

And so you may collect all of that data you’re going to talk to people, or survey people, maybe do some market research around who accepts what type of shirts and, is it or some other apparel? Is it a sustainable business? Which is the best printing method you should opt for customized t-shirts? Should you go for print on demand?

These are all different types of data points you need to know. When you do your market research make sure that your product or service is going to be purchased.

6. Do market analysis based on data collected:

Ask yourself, have you talked to people and surveyed people? What data points have you studied? What types of market analysis have you done? What customer demographics are you looking for? What kind of location or physical location will you need?

7. Prepare an Organizational Chart:

The next thing we need to think about is company organization. So, a lot of times when we look at company organization, we’re thinking about an org chart.

In fact, when you first start your business is the fact that your name. It might fill in multiple boxes at the beginning. And this is the kind of traditional hierarchy of a business that you look at.

Maybe, the top part, of this position is going to be the CEO. Then maybe you have an office manager over here.  So for example, you have different positions underneath the CEO’s level position. And then underneath each of these people, you’re also gonna have probably employees down the road.

This might be, five years down a road plan. But what’s going to happen is, when you first start your business, you’re probably going to fill in a lot of these boxes.

So what you should do is prepare an organizational chart. What are the positions that you need? And then, fill out next to it.

So, what are the crucial points to be included in the organizational chart?

• What are the positions and then who is responsible for actually carrying out those functions within the business? That might change, and that will change as the business grows.
• What is your business hierarchy?
• What positions are offered at your company?
• What positions will you need to be filled and when?
• Who’s responsible for what, and how will they get the job done?

8. Unique Sales Proposition:

How do you define a unique sales proposition and how do you make yourself stand out in your business?

A unique selling proposition, has to do with the owner himself. Like your age can be a unique selling proposition, your experience, your level of expertise in a certain area. That’s really your USP or unique selling proposition. So, how long should your business plan be? – If you are going to a bank or to a lender, or trying to get an investor, they’re probably gonna want something that’s quite a bit more substantial, like 30 or 40 pages.

9. Financial projections:

Ask yourself the following and use the above section of the business plan to build out the financial projections.

• How much do customer acquisition cost?
• What is the industry average of customer acquisition?
• How much will each customer bring into the company?
• What is the industry average?
• What are your financial projections over time?
• How will sales and profits grow?

10. What’s after financial projections?

It’s the real thing, it takes money to make money. So funding this operation and funding the business plan is really important. And to me really important for an investor they’re going to know this stuff.

How are you going to actually get the money to make this all happen? Create the product, create the service, buy trucks or equipment, the real estate, the office space, whatever you might be needed, how you define it.

You can bootstrap it. That means you’re coming up with the money yourself. Maybe even going into debt, using debt to fund, finance the business.

Or you can go ahead and get an investor that’s going to give you angel round or a seed funding and give you the money, investing in the business. And there are different ways that you can get the money. It’s a matter of what’s going to be the best thing for the business. Is the business high growth where you want investors and they’re gonna be getting equity in exchange for money? Or is this something you wanna bootstrap or maybe going to get a loan from your local credit union where you can actually do this without having to go to investors, ’cause?

11. Funding:

Are you catering your business to the funding type you are seeking? What is the MVP or minimum viable product? How much money do you need to get started? How soon can you make money and make this a profitable business? You also wanna outline the money needed and plan how the money will be spent.

Final Words:

If you’re going to an angel round or sophisticated, like VC, venture capitalists, they’re gonna be wanting to see every single data point. Where did these numbers come from? Where did these industry averages that you came up with, and where did they come from?

You’re going to have to have a lot of proof behind that. So a lot of times, most small businesses get started with bootstrapping or loans from a local bank. It is just the easiest form of doing so. And usually, the requirements of all that business plan being exactly ironed out is less stringent than if you were trying to go raise funding from a venture capitalist or an angel investor.