This post is the first in a series that addresses the crafting of an effective business plan. I use the term “crafting” because an effective business plan involves much more than just writing.
This installment takes a step back to consider what investors are looking for in a business plan. Without a true understanding of your audience and what they are looking for, writing even a single word is a pointless exercise.
First, keep in mind that the vast majority (99.9%?) of all investors are looking for the same thing…a solid investment that will yield a significantly higher return than they could get by investing in stock in a publicly traded company. The risk for startups is MUCH higher than investing in a stable, ongoing operating business and will therefore require a significantly higher return.
To be more specific, in order to generate a higher return and minimize risk, investors are going to be looking for the following:
- Big Addressable Market
- Sustainable Competitive Advantage
- High Profit Margins
- Solid Management Team
- Traction (signs that the business is already succeeding on some level.)
Investors do NOT want to fund an idea, a concept, or your personal hobby. Most investors have other ways to enjoy their money. I personally, prefer to hike into the green room on Kauai so unless you can convince me that your idea is going to allow me to convert the cost of one trip to Kauai into the benefits of 30 more trips to my favorite island, I don’t think I’ll be too interested.
Your first goal is to convice me that you have the above bullet points and get me interested in your overall idea. How you do that is the subject of my next post…stay tuned.
