This type of proposal comprises the major part of all types of business plan applications. It has many interesting nuances that make it a stand-alone business plan category. One that needs to be discussed separately from other types of business plans. If you intend to approach investors with your plan in order to attract their funding, then this chapter is for you.
In it we will discuss the main points that differentiate this type of business plan from the rest, as well as give you important nuances that need to be known prior to making your next decisions. Like the rest of the blogs, this article will be styled in a Question and Answer format so as to address the main concerns in a point-by-point manner. Let us begin.
Question: We previously discussed other types of business plans, such as business plans for startups and government bids. What are the main differences between an investor proposal and other business plans?
Answer: The business plan for investment, or an investor proposal as it is also known, is different in a few significant ways. First and foremost, the investors, unlike the bank (which just gives you a loan and will want it repaid), will want to see very real revenues. Your business does not need to simply succeed to attract investment capital. It needs to have a really good rate of predictable success.
To provide a reliable prediction of success, more planning will definitely be necessary. A detailed and thorough market research will have to be conducted for the business plan foundations to be laid and secured. The plan will have to be impeccable from the bottom up, more so than for any other type of application. You will need to show not only how the plan succeeds but actually showcase what will be the return on investment and the schedule for it. In simpler terms, this means you have to tell the investors when they will be able to recover their investment and start profiting from being involved in your project. This is dictated by the main difference between an investor and a lender. A lender simply gives you money and expects it back. An investor becomes a shareholder that supports your business with their funds, sharing the risks of its failing. In return, they will also share in its rewards when it succeeds. To convince an investor to put their faith and funds in your enterprise, you will need a more thoroughly researched, a more thoroughly written, and a much better presented business plan.
Question: Seeing how the process of applying for investment capital is more detailed, there must be many more ways to get it wrong. What are the main mistakes that an entrepreneur is prone to make when producing an investment proposal?
Answer: This is a very good and a very important question. There are several pitfalls that are obvious only from the standpoint of experience and are sometimes hard to see at first. Saving you the grief and disappointment of landing them is, in fact, the main purpose of this article. One of the most common mistakes made by the beginning entrepreneur when they approach an investor, is that they are trying to convince the investors by bringing their passion to the presentation. Negotiations are made by figures and facts. The passion is obvious and necessary, but it alone is not enough to prove that the idea will lift off and succeed. Any business plan shown to an investor should be strongly oriented towards numbers with a theoretical part that gives just enough background to show that the idea is a good one.
Read on about investor proposals in the next blog article or call BPE Experts Inc. and get your plan on the road!