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Put passion into your business plan for investors

Written by: Larry Mandelberg

Article Overview: If you are one of the successful entrepreneurs that have made it to the point where you need outside investment to make your idea and business really fly, this article will give you insight into what investors such as Angels and Venture Caplitalists are looking for in a business plan. One thing is clear - investors invest first in the person, 2nd in the idea. Make sure you put your passion, your heart and soul and spirit, into your business plan. It will be your first, best opportunity to reach them and make a strong, personal connection that may lead to investment.

Put passion into your business plan for investors

Put passion into your business plan for investors

by Larry Mandelberg

The First Rule of Thumb

There are certain types of business that don’t fit into traditional roles and have difficulty raising money from traditional sources such as banks. If you find yourself in one of those businesses and need funding from non-traditional sources such as family, friends, and angel or venture capital investors, you need to come to grips with one simple truth: Those investors are only interested in investing in one thing – you.

Of course you have to have a good idea and be able to make some money, but be clear on this one point - they won’t invest in your idea until they are comfortable investing in you.

Have you ever lent money to someone? Did you do it because you thought they would pay you lots of interest or you’d get a windfall profit on some idea they had? Did you do it because you had more money than you knew what to do with? Have you ever invested in someone you didn’t trust? Of course not!

Nontraditional investors invest in people first, ideas second. When someone gives you their hard earned money, or even someone else’s hard earned money, they must be convinced you are an honest, ethical and competent business person.

What Are They Thinking?

Before you build your business plan to help make a compelling argument to a prospective investor, it helps to have some insights into how they think. According to Roger Akers, Managing Partner of Akers Capital, LLC in Fair Oaks, a key factor is the passion you have for your business. “Don't forget to project your passion and the fun your going to have building the company,” he advises. Akers is speaking of the importance of being true to yourself and making the investor feel comfortable with you. They want to see your passion, so show it to them.

Once trust is developed, other concerns begin to surface. Akers recognizes that good ideas have short lives and recommends creating a sense of urgency. "Make the investor feel as if the train is leaving the station and that they had better get on," he said.

Some other key thoughts investors sort through in their minds include:
• Are the company goals really congruent with the founder’s personal goals?
• What values will the company incorporate into its culture?
• What other successful companies is this one modeling itself after?
• Who is on your Advisory Board and why?
• Will the management team be able to evolve as the business changes?

Components of the Plan

Begin with an executive summary with a high level overview of who you are, what you sell, why it’s valuable and what you need money for – just a page or two – and give them your vision. Begin planting those first seeds of passion.

Start the body of your plan with your Management Team. Credibility is critical, and once they know and trust you, they want to know who else will be working with their money. Put it out there right up front, and use it to let them know the missing components as well. Understand the positions you will need to fill and provide detailed information about the kind of people you want to fill them.

And don’t ignore your investor; they have many people they can call on to help with a wide variety of skills.

The next components are relatively straight forward and include:
• Products and services – an overview with history & benefits.
• Target markets and their size or potential.
• Competition – and be honest here. There is no such thing as ‘no competition’. If you think you don’t have any, you are being naïve and you will loose all credibility. There is always an option to what you are offering, and there will always be competition. Besides, competition is a good thing. It gives you something to be compared to that will make you look good.
• Sales and marketing strategy – include high level information about current sales and key clients.
• Milestones and timelines – be specific and make sure they are measurable.
• Financials – of course sales are important, but your balance sheet is the key. Make sure it covers an appropriate amount of time – typically three years – and include just enough detail to be clear without being confusing. The red flag here? Assumptions. You will make many, so be sure to include them in your financial reports. Any set of financials should be considered incomplete without a list of all assumptions clearly outlined and explained.

A red flag for any investor is unrealistic expectations or lack of accuracy. "Experienced early stage investors dissect plans for a living. Make accurate statements, know your numbers, never lie, don't be too unique and be very clear as to what the team wants to accomplish," Akers said.

One size does not fit all when talking about a business plan. It must be written for its audience, just as a resume must be written for a particular job.

Have fun with the process, be proud of what you have accomplished and enjoy the experience. It will be one of your richest memories when you look back on it after you have reached your goals.

"Larry Mandelberg is an executive coach and facilitator for Beyond Point B, LLC, a business coaching and leadership development company in Northern California. He can be reached at larry@beyondpointb.com or (916) 787-9909 x2."

Related Articles
  How To Find An Angel Investor
  The Importance of Loving What You Do
  Who Should You Use to Raise Your Capital?
  Start With Passion!
  How To Raise Capital From Investors

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Related Forum Posts
Re: How to Get Your Business Funded - A business plan is essential for your enterprise. Whether your business is starting up or already established , it's the road-map for future development. However , perhaps most importantly , it's a key document when you are looking for business funding - whether applying for a simple overdraft or looking for new investment or capital. It must help investors and lenders understand your vision and goals , explain how you are going to spend the invested or borrowed money and set out how this will benefit both them and the business. This explains what you should include in your business plan and how you should present it to potential investors, shareholders and your bank......................
re: Suggestion for an Entrepreneur Looking for Funding - I agree with all of the above suggestions, and just wanted to add the following: investors/lenders will want to see a developed business plan with cash flow projections that contain: - how much $ you need - when and where the $$ will be spent - future capital needs (don't be niave to think that the first round is the only round) - return on investement (don't let your passion get you carried away from realistic numbers) It helps to work with a professional who has experience raising capital.
what to do when your idea is too radical - I have a computer company for almost 2 years that long story short is quite different from anything out there except one major competitor. The main problem i have is in just uploading my business plan to a bunch of "investors". I dont trust non disclosure clauses as there is really no way to enforce them. How can I find serious investors who are willing to do tech companies without all the tricks?
Proper planning to get investors - Investment is very easy to get once you have the complete idea show it to the local finance company, they can get you investors with a basic fee, since they know your business and status etc, also local presence of finance firm will help investors feel easy to check on growth of you business. It will be difficult to get direct investors for your business without proper planning and reports.
Investing in an invention - There's a lot of money out there looking for good investments. There is a subset of investors out there who are looking for inventors with hot inventions that are protectable by one or more patents. One way to get such investors is to pay for a patent search, which typically costs somewhere between $500 - $1,000. If you present the search results, along with a business plan to an investor, you have given the investor important information needed to justify the decision to invest in the rest of the patent process, and possibly also more. Thus, you really don't need that much money of your own to spend on a patent ... just be able to sell yourself, and your idea. Please contact me for more entrepreneurial coaching for inventors.


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