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3 keys to a business plan in regards to funding
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1. Detail the market need or pain: all great companies solve a real customer need or pain. You must detail what this need is, how big it is, and whether it is growing or shrinking.
2. Detail both your direct and indirect competition. If there is a real customer need or pain, customers must be trying to solve it already. In your plan, you must detail how they are solving the need currently. For example, when eBay first launched, it realized that the need for selling personal products was being met by yard or garage sales (indirect competition). This proved that there was a market need or pain.
Importantly, don’t badmouth your competition. If they’re still in business, your competitors must be doing something right. So, explain both what your competition’s strengths and weaknesses are, and how you will exploit weaknesses.
3. Create a credible financial model. Creating a financial model that shows that your company will take off like a rocket ship will do more harm than good. Investors and lenders know how a company might grow after they fund them. They know that growth takes time, even in a best case scenario.
In developing your financial model, you should really think through the timing of your growth. How long will it take to hire and train the right employees? How long will it take to repeatedly get your marketing message in front of customers until they buy? Etc. These things generally take longer than you initially think. And during this time, you are often incurring expenses and generating less revenues than projected. Which often results in companies running out of money.
So, be careful to consider slower growth scenarios so you don’t run out of cash.
The right business plan will get investors and lenders excited to write you a check that allows you to dramatically grow your company. And the right plan will keep you and your team motivated and on track to achieve your long-term objectives. So, don’t treat your plan as a necessary evil. Rather, treat it as an investment that can give you a significant ROI.
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