Business Plan: Securing Funding Part 2

In "Business Plan: Securing Funding Part 1" we looked at "How" you write your plan and how a professional business plan gives an indication of your professional approach. We looked at avoiding hype, writing about a "plan" rather than an "idea", being realistic and paying attention to editing and presentation.

In Part 2 we look at content. What are the key elements that you must address in order to secure funding? There are, of course, no guarantees. However, you will significantly increase your chances of funding if you include the following:

1) The Opportunity to Solve a Problem - Your Market Opportunity
Be clear in your business plan what problem you are solving. If you are not solving a real world problem your product or service is simply a "nice-to-have" rather than a "must-have". Must have propositions have a much better chance of getting funded. Once you are clear that you are solving a real problem get clarity on the size of the problem - both in terms of volume and value. You then have an indication of the market opportunity. From there you can go on to show exactly how you are going to reach that market with your solution to the problem.

2) Delivering the Business Plan - Management Team Experience and Expertise
You wouldn't let someone who can't drive and hasn't got a license borrow your car. Whilst they have nothing to lose and will be more than happy to get behind the wheel, you are lining yourself up for an expensive fall! In a similar way, an investor is not going to lend you money for your business unless the management team has proven track record - in particular the knowledge and experience driving your type of product or service to market. Banks or investors need to be assured that the management team will deliver the business plan in front of them. If you haven't got the experience yourself, get it, or get someone on board who has. Investors also like to see that the management team are prepared to get their hands dirty and shoulder some of the risk. You are more likely to secure funding if investor and management risk are aligned.

3) Delivering a Return - Return on Investment (ROI)
You need to convince investors that you have a real market opportunity and that the scale of it has the potential to generate significant profits and cash-flow. You also need to show that they can exit their investment at a future date. Avoid the temptation in the business plan to over-analyse projected revenues, market growth, industry norms and financial valuation models. All this can end up with a highly speculative future business valuation / ROI that can easily be dismissed as over-optimistic by a potential investor. So, you might want to work out funding round valuations yourself, but concentrate your efforts in the business plan on justifying the commercial case. Let them see the potential for themselves and you can then discuss potential ROI with them.

Good Luck!

Jon Hunt
Lead Consultant
The Business Plan Team
www.TheBusinessPlanTeam.co.uk
The Business Plan Team specialises in helping entrepreneurs, start-ups and growing businesses translate their vision into a coherent and executable business plan that can help secure funding and guide internal management. It provides a range of services from early feasibility studies through professional business plan development, to introductions to sources of funding. It is based in just outside Oxford, UK.

10 Key Sections of Your Business Plan

Follow a typical structure for your business plan as it makes it easier for anyone evaluating it. Bankers and Investors see hundreds of plans and if they have to work out whether you have all the information it will likely end up in the reject pile.

The following sections should be in every business plan:

1. Executive Summary: This should be no more than two pages, compel the reader to read on, and be written last of all once all other sections are complete.

2. Company Background and Legal Entity: How and why the company came into existence, what products and /or services it offers, any track record of performance and its legal status.

3. The Market: This should include current statistics and trends on the market being addressed. It should also include an analysis of the customers in the market space - who they are, how and what they buy. It should culminate in the market opportunity facing the company. 

4. Company Product and/or Services: What are you proposing to bring to the market to meet the market opportunity?

5. Competitive Analysis: This should include an analysis of your direct and indirect competition and culminate in how your offer differentiates from that of your competitors in such a way that will gain you competitive advantage.

6. Sales & Marketing Plan: This identifies your target audience and details how you are going to reach it as well as giving a summary of your sales forecast.

7. Operations: This section shows how your business is going to deliver your product or service operationally - who does what and how.

8. Management Team: This is a key section that needs to show that you have the experience and skill-sets within your management team to deliver your proposition to the market.

9. Financial Plan: This is a summary of your financial projections, cash-flow highlights, breakeven, and investor proposition.

10. Appendices: This should include all the detail that you need to support your plan but would make the body of the plan too long if it were included. This will likely include detailed financial statements, management resumes, legal documents, letters of interest etc.

You should also remember that completeness and coherence are important. It won't matter how well written an investment plan if you have omitted to include how an investor will get a return (yes - it happens!) or your marketing plan doesn't address current trends in the market.

Finally, remember to emphasise the three critical elements - Market Need, Product to meet that need, and a Management Team able to deliver the plan.

Jon Hunt
Lead Consultant
The Business Plan Team
www.TheBusinessPlanTeam.co.uk

The Business Plan Team specialises in helping entrepreneurs, start-ups and growing businesses translate their vision into a coherent and executable business plan that can help secure funding and guide internal management. It provides a range of services from early feasibility studies through professional business plan development, to introductions to sources of funding. It is based in just outside Oxford, UK.