Business Action Plan
Investors react well to a practical and measurable plan to mitigate risks in the business. When an equity investor looks at a plan they want to see economic potential and that the risk v reward balance is right. Risks present themselves in many forms, and each business objective will have inherent risks. Investors want to see that there is a plan split into logical milestones that need to be achieved to deliver business objective because this is what underpins the financial forecasts. Your action plan for each business objective should detail who will be responsible, how much it will costs and in what timeframe it will be delivered. This is the information they require to make an investment assessment. If you demonstrate this concisely your business plan will be much more credible in the eyes of the investor.
Realistic Financial Plan and Business Valuation
An equity investor is looking to take a stake in your business. How much they have to pay to get in is driven by the valuation you place on your business. Be realistic! If your business is relatively embryonic do not base your valuation on what is projected to happen. Why? Well, because it hasn’t happened yet and you will just price yourself out of the market and show financial naivety. Your projections should be bold, but supportable. When you are thinking about how to create a business plan that will be attractive to investors you have to think of it from their perspective in order to get the funding you need. Only base your valuation on contracts that are in place or firm letters of intent for orders. Investors won’t factor in projections that are based on contracts that “may” come to fruition. Obviously you should include these in your financial projections but when it comes to the valuation don’t make the mistake of thinking they will share your optimism. They are trying to get a bargain. Remember that you can always walk away at any point if you think the deal isn’t beneficial. You are trying to make your plan stand out…
When considering how to create a business plan that will stand out you must present something that will be attractive to investors and spark an negotiation.