Raise Money for Your Business Despite Recession
How to Prepare a Business Plan to Win over Investors and Lenders
Feb 2, 2009
Even in buoyant economic times, business leaders face incredible skepticism from bankers, investors and other potential financial backers. These monetary gatekeepers seem willing to put money into businesses that have no need for capital, but make it nearly impossible for those both in need of, and able to convert, capital into profits to acquire additional money.
In today’s recession-plagued economy that skepticism has reached epic proportions.
What is it that bankers, investors and others need that will convince them your company is a sound investment?
Below is an outline for a business plan designed to convince investors and lenders their capital will not only be safe, but that your business will convert it into attractive returns.
Executive Summary
Start with a one-page overview of key highlights of the company, its background, operating environment and why it requires outside capital. Include summary profiles of key personnel, the markets, the financials and the marketing plan. This is often the first section started and the last one completed. Keep it to less than one page.
Company Background
Summarize the company’s history. Include a review of core competencies which the leadership and personnel bring to the company, discuss any new proposed enterprises, and explain why the business will succeed.
Mission and Values
Define in a few words the purpose of the company and what business it is in and proposes to be in, what the business intends to achieve, and its values and principles as a business.
Industry Profile
Discuss the characteristics of the industry in which the business operates or intends to expand into. This discussion should demonstrate that management has a firm and clear grasp of the trends, issues and key elements of its industry.
Products and Services
Define precisely the current products and services, and any new products or services the company intends to provide, and why. Describe how the company’s marketing strategy will differentiate its offerings from competitors, and how the products and services compare with competing products and services.
Company Leadership
Include profiles of the company leadership and key operating personnel. Focus on relevant backgrounds, strengths and the unique skills each brings to the company and will to any new venture. Include also brief backgrounds on essential suppliers, and any special relationships with them or others that enhance the company’s prospects for success.
Marketing the Company and its Products/Services
Summarize the market for the products or services, the marketing strategy and tactical approaches the company will take to market its products and services, and itself. Discuss how the unique features of the products or services will be leveraged, and why special product features, leadership talents, and market insight will ensure success.
How Assets Make Profits
Prepare an inventory of the physical assets required in order to successfully conduct the business of the company. List which currently exist and their status (owned or percentage shared, leased, borrowed), and what additional assets will be required for the initiatives to be taken with the new capital. Quite literally, this should be a description of how capital will be converted into profits.
Plans for Profits
Describe how the business operates and, if a new division or venture is involved, how a typical business like it operates, and how management plans to operate this one. What are the opportunities and potential, and how will management capitalize on them. Discuss threats, trends, business cycles, and how the leadership will manage these profitably.
Financial Plan
Demonstrate how the company will generate profits. It should include fully-developed short-term and longer-range financial forecasts. Be sure the discussion and tables follow recognized accounting principles.
Merchant bankers, corporate finance officials and other investors will look for equity that management has invested. Company leaders cannot expect lenders or investors to take risks the leaders are not prepared to share.
Analyzing the Risks
Identify the most serious risks to the success of the business, provide an assessment of each and rank the probability of each risk occurring, and describe how management is prepared for each.
Appendix: All the Other Stuff
Include relevant support materials, such as industry statistics and projections, the company’s audited financial statements for the past three to five years, summary of the company’s strategic plan and operating plan, media clippings about the market, industry and the company, and biographies of board members, non-executive key staff and advisers. Ensure all material is directly relevant.
Finally, the completed plan must be tightly written and kept to less than 25 pages. Most investors, lenders and other potential backers will browse the one-page Executive Summary and on that basis decide whether to meet with representatives of your company. Once a meeting has been set up, they will analyze intently the rest of the plan. Make sure you are ready for a thorough grilling.
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