Most investors will look for the unique local problems you are seeking to solve through your product or service.
Of course, the market opportunity of an idea is crucial. The process of drawing up a business plan is simpler for an early stage startup, given the limited scope of operation, but for late stage companies, the business plans need to pack more power and specific information.
You can accomplish several things with a good business plan – it will help you to convince potential investors about your startup idea and your clarity of thought, financial benchmarks, and target audience will impress them instantly.
It will be fair to say that a good plan will help you raise funds more quickly, more easily, and from the right investors than you could without it.
But drawing up one is a daunting task for any new entrepreneur. To start with, there is no strict rule to draw up a business plan.
So we at got in touch with two investors – Dinesh Tiwari, founder of Broad Peak Capital; Manish Singhal, founder of Pi Ventures – and here is first-hand dope on what to keep in mind while converting your vague idea into a full-spread business plan:
Money Trail: Before seeking investors, you need to know exactly what you are seeking and where that money will be spent.
The business plan should clearly mention where all you will spend their money and how much return are you expecting from each investment. But don’t inflate the numbers.
Remember, if you lose your credibility, your fund raising plans in future can be in jeopardy.
Justification matters: Each of your plans must have a justification leading to the success of your venture. Random ideas get random results.
Well-thought-out, justified ideas get serious consideration.
Road to success: Chart out a clear path to success. Here, success means revenue growth and a logical track to turn profitable.
Ultimately, investors are looking for a good return on their investment. If the business idea is not going to make money, it isn’t for the investors.
Question your plan: Put your business plan to test with some tough questions. The purpose is to decide how your proposal matches up to your goals and objectives.
These are some of the questions, founders could be asked to answer after a business plan gets converted into a formal meeting with an investor:
What is the initial investment required?
How much of control are you willing to give to the investors?
When can the business break even and start making profits?
What are the projected profits at each stage?
What is the timeline when investors can expect a good return on their money?
What are the chances the business will fail?
How can you handle it if it fails?
Solve an issue: Share in detail what is unique about your product in comparison to your competition. Why are you better? If there is a problem that you are looking to bridge, how will you do it? But don’t complicate it with too many references.
Keep it short and concise. Make it easy for them to retain the idea in their head.
Past successes: Share the milestone you have already achieved, if applicable. Explain in detail how you achieved it. This is your time to shine, so blow your own horn.
Target Market: Don’t go cliché saying the whole world is your oyster. Dig down to details. Tell the investors who are these people you think your product is best suited for. Chart out potential markets and be realistic about who you’re building your product for.
Revenue Model: Be specific about the product pricing. How and why did you reach the amount you are proposing to charge the users? This is the most crucial detail that investors will look for. Your revenue model – be it a fixed fee, through advertising, or subscription – can make or break your startup.
Source: Money Control