I was recently discussing with a friend the best way to describe how investors often review business plans following my post below on the "Three Cornerstones of a Business Plan" and we decided that another really helpful way of understanding what investors look for is the "4 P's" - "People", "Proposition", "Plan" & "Payback" - generally in that order of priority. If the venture does not provide a good match in all 4 areas investors will not part with their money - they will see the risk as too high !
So how do they review these criteria for investing ?
Qualified, experienced, people with a track record of success represent a far higher likelihood of a company succeeding than a team with little commercial experience, an unrealistic plan &/or no track record of setting up or managing a new business.
If the team have the necessary credibility & the proposition is compelling (with unique selling points & the potential to generate a healthy profit in its target market), the venture will start to look like an appealing investment opportunity.
The quality & practicality of your 'Business Plan' is a critical document for investors. If your plan conveys (in easy to understand terms) what is compelling about your venture, why it will make money in a competitive market & that you have a seasoned team capable of building a profitable business, the company will be worthy of serious investor evaluation.
If the investor can see an exit strategy through which they can achieve a good payback over the short to medium term (a multiple return on their investment for their shareholding, such as a trade sale or stock market flotation), the likelihood of the venture securing an investment at terms that work for both parties, increases significantly.
Thanks to Grant for our discussions on this
The Business Plan Team
- Jon Hunt is the Lead Consultant for The Business Plan Team which works with entrepreneurs, start-ups and growing businesses that need help developing a professional business plan to secure funding and guide internal management. It has developed business plans for a wide range of businesses and corporate clients looking to raise funding of between £50,000 and £200million in many different industry sectors including Social Media, Retail, Construction, Mining, Renewable Energy, Technology, Healthcare, Interior Design, Sport & Leisure, Investment Banking, Wealth Management and Trading. Testimonials from these clients illustrate the high levels of service TBPT provides.