by Leon J. Owens
When hunting for investors or loans, the only weapon you need is a business plan that speaks to your audience.
Whether you’re stalking the woods in search of startup capital, interim financing, cash for inventory, or just a bridge loan to get you over troubled waters, you need a document that details your business reality. That means you need to give some solid evidence of your company strengths, weaknesses, and bona fide expectations in a clearly written business plan that answers questions before they’re even asked.
A good business plan is real ammunition. Just as big game hunters don’t set off into the jungles armed with only a slingshot, your business plan needs to be carefully designed for a specific reader and a specific purpose. The first consideration must always be your ultimate objective:
- Are you after a straight bank loan (you’ll need to document and prove up the collateral you’re offering)?
- Are you looking for seed money from investors (you’ll need to demonstrate how they’ll make money with you)?
- Are you looking for grant funding (you’ll need to establish your adherence to a specific social/cultural/economic mission).
The best business plans are always constructed and written with the reader in mind. What will be most important to the investor/lender? The basic elements of your plan should be presented in a brief, easy to read Executive Summary:
- Exactly what is your business? Specifics are key. “Changing the world for the betterment of mankind” is not a business. “Selling bandages to hospitals” is a business. Scratch the puffery and make it tangible.
- Who is your customer? Again, be specific. “Everyone with skin” is not a customer base. “Regional healthcare system supply buyers” is a powerful target market.
- Define your competitive position. Hopefully, you have an edge on the competition that attracts lenders/investors to you rather than to your competitors. “We’re passionate about making really good bandages” won’t be enough. “We sell the best biodegradable bandages at the lowest price point” will be.
- Who is involved? Businesses either succeed or fail upon the shoulders of the people Current revenues and promising financials simply do not outweigh bad managers or negligent founders. Banks, lenders, or investors will want to quickly vet everyone involved. “Our team is passionate” will get you laughed out of the room. “We have 20 years of development, manufacturing, and marketing experience—and we have current sales to prove it” will get you a seat at the head of the conference table.
- What is the current situation? Explain your current status and how your business came to this point. What’s the legal entity of your business? How long have you been operating? What is your industry’s market profile at this point in time and in the near future? How do your revenues stack up against competitors of your size? How do those revenues translate into profits? What is your debt situation? These are the paragraphs that comprise your “dream sheet.”
- What are your objectives? What will you do with the additional capital? What impact will this have on your revenues and profits? Where do you project your business will be in a year? In five years? Do you have the data to back up that projection? (You’d better!) If you get the chance to sell or merge…will you?
- Don’t get paranoid. If you insist on getting your NDA signed off before you reveal your “opportunity”, chances are you won’t attract much interest from lenders or investors. If you truly have the business acumen or competitive advantage you claim, stop worrying about someone stealing your idea; you already own the space.
Now that you know what you need to present to outside investors/lenders, here’s the real challenge:
Put it all on a single page, no more. Until they have real interest in you and your business, nobody wants to read a PhD dissertation about all your business hopes and dreams. If your business plan and your goals are crystal clear, 250 words on a single page will be enough.
Just as important as your one-page document is your elevator pitch. Can you tell your whole story to an investor or lender in the time it takes to go from the parking garage to the penthouse? If your objectives and your plan are well-conceived, you should be able to convey all of it in three minutes or less. This is not the time for the nitty-gritty details; this is the time for clear concepts and obvious values. Clearly state what you’re about, avoid jargon and get to the point.
And the point is…
How much money are you looking for? You need a specific range here. “Enough to get through the quarter” is the wrong answer. “$500,000 to cover inventory needs over the next 90 days based upon last year’s sales for the period” is much stronger and more likely to put a check in your hand.
Yes, it’s all a jungle out there, but that’s where the opportunities for success will be found. If you have a solid business plan and can convey its key elements to lenders and investors, the “smart money” is always out there waiting for you. Happy hunting!