Successfully Wooing Investors While Avoiding the Deal-Killing Blunders

Let’s say you have a great business idea but you need outside financing to get it off the ground.  Or you’re an existing company and you need additional outside investment to expand.
How do you convince banks, venture capitalists and individual investors to finance your plans?
 
Producing a good business plan is essential and second only to having a good idea.  And having a plan can benefit a wide range of businesses, from small coffee shops, restaurants and retailers, to internet start-ups, to manufacturing or software ventures with national or even worldwide reach.  It can even help nonprofits and charities focus their activities and gain additional support.
 
Your business plan is the first step in your efforts and the most important element in wooing investors. Many efforts fall short and in so doing kill the deal.  You have to convince investors that your ideas are solid and the investor can benefit financially from investing in your company if you want your “ask” to be successful.
 
Here I’ll discuss just a few of the ten key things you need to think about as you build a good business plan.
 
The first element of your plan should be the executive summary. This summarizes the contents of your plan and it is where you begin selling.  This may also be the only part of the plan that potential investors read before making a preliminary decision---if your executive summary isn’t concise, complete and compelling, the individual may not read any further.  It’s the “teaser” which gets them to read your complete plan and respond favorably.  However, the executive summary is the LAST part of the plan which you should write. It will summarize the more detailed information you provide in the body of your plan.
 
You need to include a variety of information in the body.  This includes, but is not limited to, your factual statement of market viability and information about how your team is prepared to execute your plan.  You need to discuss how you can meet or beat competitors in the market. You need to include compelling but always accurate financials.  You also need to address logistics.  How will you develop and distribute your product? How will you plan for growth?  How will you adjust to potential market changes or new competitors?
 
The last part of your plan and its entire objective is the “ask”.  Here you stress what makes your company, institution or idea attractive to investors.  This section should be tailored to the specific profile of the investor you are trying to reach.  Why should they invest in your company?  How will they benefit and what do they need to know to be persuaded?  If you are presenting to angel investors, for example, you’ll want to stress growth, financial strategies and exit plans. Banks and similar institutions will probably want more detailed financials, stressing bankable assets. Be very clear about what type of investment are you looking for and how much.  If you already have other investors, discuss who they are.
 
Once you have a clear, concise and compelling business plan, you also need to consider how you will present it to individual investors.  This can range from a formal presentation to a financial company, a Power Point presentation to venture capitalists and angel investors, or an “over lunch” pitch to an individual investor.  Even your “elevator speech” is an opportunity to woo an investor and you need a good business plan before you can distill it into a 30-60 minute pitch.
 
By following these guidelines, among others, you can produce a successful business plan which will lead to outside investment.  You’ll avoid the deal-killing blunders that so many individuals and companies make.  And, believe it or not, you can even enjoy the process!

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Ray Waldmann has started and grown three successful companies. As CFO of an early stage technology company, he created business plans and negotiated financing with banks, angel investors and venture capitalists. He is a graduate of MIT and Harvard Law School and is the author of Six-Word Lessons for Writing Business Plans.

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