27th April 2016 | Andrew Youngjohns
- The year is 2016 and for every entrepreneur out there the business plan has become an absolutely crucial start-up or expansion tool. Talk to any investor, investor’s platform or even a business partner and inevitably the question comes up, do you have a business plan.
So why has it become such a must have if you are going to even stand a chance of getting off the ground and raise the money you need to start or grow?
There’s a few answers to this question and it all boils down to confidence, insight and competitiveness. Investors, bank managers and crowdfunding contributors want to know where your business stands, what is unique about it, what are you forecasted to achieve in the first few years and where are the risks? Not only that, but you as the entrepreneur really understand the business that you are in, do you understand the environment you are competing within and do you have the skills and determination to endure the tough challenges ahead and achieve real success.
So what are these investors and bank managers looking for?
- The first crucial element is your background in the industry and business experience as well as that of your management team. Many small businesses fail because of weaknesses in the management team.
- Not only do you need to show how your product is unique, you need to prove that there is a demonstrated need for your product or services and a large enough market potential to make the investment worthwhile. Investors don’t want to invest in “little” ideas – you have to show them the potential to be a big success.
- No matter how unique your product or service may be, you must show that you know your target market and typical customer and that you have both the understanding of these customers and other competitors operating in the field that you will be able to attract your customers and clients in an ongoing manner. Your pricing and sales strategy have to be clearly defined and in line with industry norms.
- Investors want to know that you have acknowledged and researched your competition thoroughly. In addition, they will want to see how you plan to contend with your competitors and distinguish yourself. What will give you the competitive edge?
- Investors expect to see a return on their investment. Therefore, they want to see well informed and realistic financial projections that show how long it will take for the business to show a profit and for them to recoup their initial investment.
So simply putting a quick outline of your idea with some basic figures together is unlikely to get you the finance or right business partners that you need.
As a business owner you are almost certainly to have enough on your plate to not even think about finding time to still write the business plan but it’s becoming ever more crucial that you do.