You can act without a written plan. But such a businessman is like a traveler who travels in the forest without a compass. There is also a psychological aspect - what is written on paper is more clearly represented in the head. Perhaps this is due to the fact that any business plan is, first of all, serious analytical work.
General concept
There are two types of analytical work of a business algorithm for its intended purpose: for itself and a business plan for an investor. But, regardless of this, a person should clearly reflect three factors:
- the most objective assessment of their capabilities, both material and expressed in resources and knowledge;
- prediction of results;
- accurate time frame.
A business plan for an investor has one important function - it convinces an outsider of the advisability of investing in someone else's business. The idea should be presented as concisely as possible, with strong arguments, with an objective assessment of risks, and be logically thought out. According to the experience of entrepreneurs, some slight risk reduction is allowed. But it’s definitely not worth promising too much.
When a plan is drawn up for yourself, you can slightly lower the bar to the presentation and formal attributes. But you can not skip a single item. The algorithm should be spelled out as detailed as possible.
One more tip from experienced entrepreneurs: it’s better to talk about how and how you will spend the investor’s money, and not how to save it.
Teaser
At the first stage, a potential investor may request a teaser - the most concise description of the project. The teaser should not be large, the maximum allowable volume is from 1 to 3 pages. A person should have time to read it within 3-5 minutes. If the teaser convinces him, then you can provide a more detailed business plan for the investor.
Can I do without a teaser? A business plan without a teaser can fulfill the goal. But if there is only a teaser, then the effectiveness of the meeting with investors will be low. According to the compilation algorithm, the business plan for the investor should also be the first. Already on its basis to write a teaser is easy. Another name for this section is a summary.
Business Plan Objectives
A business plan is a roadmap for future business. Here is a list of the most popular tasks that he solves:
- objective assessment of the idea, identification of strengths and weaknesses;
- preparation for launch;
- algorithm of actions for responsible persons;
- presentation to potential investors in order to receive funds for development or start;
- obtaining a loan at the bank;
- receiving government investments in the form of subsidies or grants;
- business development prospects;
- obtaining special economic status or joining specialized communities.
The most common problem that novice entrepreneurs face is a lack of equity. For this case, in the economy there is a special form of financial relations - investing. It is carried out on a voluntary basis if the investor sees prospects in this business. Next, we dwell on the question of how to draw up a business plan for an investor.
Presentation Methods
Techniques developed by leading organizations. Despite the large number of standards, they are similar in structure. Differ in priority tasks. Let's consider some standards:
- UNIDO standard - focuses on a detailed description of each item.
- TACIS standard. TACIS is an organization that provides technical assistance to businessmen in the CIS countries. Accordingly, the business plan for attracting TACIS investors should pay maximum attention to technical risks.
- EBRD template. The EBRD mainly finances industrial sectors. Direct financing is practiced, as well as through other banks - partners of the EBRD. Given the industrial focus of investments, the key section of the business plan from the perspective of an investor is risk analysis and SWOT analysis.
- The BFM Group consulting company template focuses on risks in terms of added value and financial business models.
- Template international consulting company KPMG. The company specializes in audit and other business consultations, which allows them to have a different position in business development. So, the key section of a business plan according to the KPMG standard from the position of an investor is market analysis and product promotion methods.
In addition, the standards of VEB, Sberbank, FRP and Russian Agricultural Bank are widely used. The most common is the UNIDO standard. It was developed in 1978 and is relevant today.
Business plan structure
Regardless of the standard by which the development of a business plan for an investor will be carried out, the following points should be considered in it:
- business concept;
- project description;
- team - who are the responsible persons, their qualifications, experience and vision of their business;
- market analysis;
- marketing, sales and sales;
- risks;
- production plan;
- investment plan;
- financial plan.
Each of these items is an integral part of the business. Therefore, the draft business plan for the investor requires a detailed review of each item.
Business concept
Under the concept of business presented various interpretations. But to summarize, the concept is its own understanding, vision of the role of its business in society. In the West, about the concept went a little further. Since the first years of the current century, its social role is relevant for business there.
It is believed that the business should not be limited to providing profit for the founders. It also should not solve only consumer problems. The participation of the company in solving social problems, the presence of their own point of view and feasible contribution to improving the environment is encouraged.
Such measures at first glance look like a marketing ploy: a trading company holds an action in support of children with disabilities and urges others not to remain indifferent. But the concept is a humanistic idea that your company will always adhere to. Therefore, its goal is not only profit, but also the solution of some problems.
In the CIS countries, such an idea is just being mastered by large corporations. For representatives of medium and small businesses, especially at the start stage, it is not necessary to be an ardent supporter of a particular idea. But it will not be superfluous if the presentation of the business plan to the investor begins with the thought of what social problem the company can solve.
Project Description
This section should contain the most detailed information about the company, if it already exists. If it is not there, then you need to reveal the vision of the entrepreneur. For existing companies, it is advisable in this section to talk about the current state of affairs, about the history, about the completed stages of implementation and how these results are supported.
Separately, it is worthwhile to dwell on the results of the first sales, on the sales channel and on the amount of profit from the first transaction. It is worth focusing on the critical circumstances that arose during the development of the company, and on how to get out of them. This is one of the important points in the question of how to write a business plan for an investor. According to the results of this paragraph, he should understand that you are promoting not a crude idea, but a carefully designed, promising project.
Responsible persons
One of the key issues affecting a positive decision of an investor is the identity of the entrepreneur and his team. This section can be called “Team Description”, “Executors”, etc. But from this section it should be clear how professional the team is, whether the staff is staffed with the necessary specialists (financier, marketer, technologist, etc.).
The experience and successful projects of each of the team members will also be useful. Not every member of the team is required to have a track record, but key personnel must have high professionalism and certain achievements in their industry.
But if we are talking about a new, just formed team, then in this section it is better to indicate the bar that the company sets before itself, and ways to achieve goals.
Writing a business plan for an investor is a doable task for every entrepreneur. But in the process or even before the implementation of the project, he must understand the key factors of his business. The staffing issue falls into this category. It is important to remember that even the most promising idea can fail because of the inability of the performers. And vice versa, professionals are able to successfully implement even unpromising ideas.
For example, PayPal settlement system. Few people know her development history. Initially, it was supposed to create a system that allows operations between two laptop computers. The idea was not successful, and this program did not work. But the team consisted of real experts. Thanks to their initiative, it was possible to reformat the system - it was decided to introduce online payments. The result was an increase in shares of the system to one and a half billion dollars.
Market analysis
Expansion, reaching a new level, even launching a new business require substantial financial investments. If the idea is promising, and the desire to work is in full swing, it is advisable to use the traditional model of external financing - investment. But how to draw up a business plan for an investor to convince him of the seriousness of the plans?
To do this, you will have to paint the idea from various aspects, the most important of which is market analysis. The analysis should be performed in the following areas:
- What is known about the industry? In this section, you should analyze the development of the entire industry: market size, what trends are emerging, what position does your company take or will occupy? The data obtained will also be used in a marketing strategy.
- Competition. An investor needs a business plan to determine the prospects for their investments. One of the evaluation criteria is how well the entrepreneur is aware of competitors. For this, most likely, you will need to conduct your own research, in which both the strengths and weaknesses of competitors should be identified. The study should relate to the functional characteristics of competitor's products, price factor, promotion strategy, marketing tools and management. What is it for? In the research process to write a business plan for an investor, you can identify the weaknesses of a competitor. In this case, your own strategy will be based on them.
- The target audience. In this matter, experts recommend not limited to office research. The more first-hand information (opinions from potential consumers), the better. In practice, most entrepreneurs rely only on official data on the target audience. As a result, the promotion is accompanied by unforeseen factors, and the strategy requires adjustment already in the implementation process. Typical questions to answer are: who are the potential consumers? What problems are there? How will your product / service help?
- Benefits. Literally one dozen years ago, business books advised looking for a niche in which there is unsatisfied demand. Gurus recommended setting up enterprises in a free industry. But, today's realities are such that it is difficult to find both the first and second factors. Traditional markets are closer to glut than to lack of players. But this should not be an obstacle for the entrepreneur, if there is something to surprise the buyer.
These four points should be carefully worked out by those who are interested in how to correctly write a business plan for an investor. In practice, this stage is called the reality test for the new brand. Unfortunately, the vast majority of companies do not stand it.
Marketing
A business plan is a roadmap of your idea, and marketing is a roadmap of a product or service. At the same time, for a serious company, marketing should become an integral part of the production process. This is a separate strategy. When drawing up a business plan for an investor, this strategy should also be analyzed in detail. In particular, the following questions should be answered:
- Analysis of demand in the region and in the time period: how much production is planned to be sold in a particular city? Forecast for the coming year - how will demand change, and how will the company act under such conditions? How can you influence demand?
- How do competitors promote their product or service? Here you can use the information above. But if there is a detailed analysis, then this is welcome.
- What factors influence demand is one of the key issues for any business. It is important to identify as accurately as possible: what makes customers buy or not buy the product: cost, season or quality of the product? It is also important to consider their income level and frequency of purchases.
- Ways to sell: retail, wholesale, online? In this case, you need to determine which of the methods will provide the maximum level of profit.
- Pricing policy: what is the price of the product made up of? What is the cost and trade margin?
- The ultimate goal: on what grounds can we conclude that the marketing strategy was successful or vice versa? This question with exactly the same wording can be made the first point, but the essence remains the same: what in the end should marketing give? This can be stimulation of individual sales methods, increasing brand awareness, increasing customer loyalty, attracting his attention or repeated sales.
The risks
Risk assessment uses various methods. The most popular are:
- Monte Carlo analysis;
- sensitivity analysis;
- scenario analysis.
Risk is also characterized by its own dynamics, which is closely proportional to the life of the company. The highest level of risk is usually at the project launch stage. Over time, as the company gains momentum, it tends to go down, but does not completely disappear. However, with the proper level of preliminary analysis, risks can be managed. If the entrepreneur is concerned about the question of how to prepare a business plan for the investor, then this item should be worked out in detail. It is he who is one of the essential evaluation criteria.
For analysis, any of the above methods can be taken. They can also be applied at the stage of developing a financial business model. If we talk about the purpose of such studies, they help to visually see the dependence of the project on various factors, for example, on cost or on sales.
Also, risk analysis helps to visually see such a factor as “safety margin”. This term refers to the likelihood of the occurrence of certain trends when changing the usual conditions of the project. For example, how will the financial performance of a company change if product prices rise by 20%? What happens if, on the contrary, the price drops by 20%?
Depending on the results obtained, alternative plans are prepared. For example, in the event of a rise in prices, the company will increase wages, and in the event of a fall, investments will have to be increased. Such decisions have another name - compensating measures.
If the project is already operational, then the entrepreneur already has experience in overcoming the risks. They are also recommended to reflect. The study of this paragraph will ultimately show the investor how prudent or experienced the business is.
Production plan
This item is very important if the project is of a production nature. If we are talking about a service or another type of activity, in this section you can list the need for office equipment, support of specialists or special training of personnel.
The production plan consists of two large groups: the necessary current assets and non-current assets. The first include:
- raw materials for production;
- materials;
- stocks;
- semi-finished products;
- VAT on purchased goods;
- cash, etc.
To simplify, the assets include those assets whose useful life does not exceed 12 months. Anything longer is non-current assets. In particular, these are:
- buildings and constructions;
- equipment;
- company intellectual property;
- funds with a long period of use;
- Deferred tax assets;
- material values.
This section does not end there.You will need to first contact the suppliers and get their commercial offers with price lists. If the project is already working, then the numbers of existing suppliers should be indicated. In short, from this section, the investor should understand the key processes in production.
Investment plan
This section should contain information on financial matters between the investor and the entrepreneur. In particular, there should be answers to the following questions:
- the required amount of investment, their schedule;
- what equipment is needed;
- investment conditions;
- investment phase of the project;
- what will be done in the investment phase, etc.
How to make a business plan for an investor in such a way as to present information concisely and easily? For this, many entrepreneurs use the Gantt chart.
In addition to the investment phase, the Gantt chart can also show critical curves that can lead to an extension of the investment period.
Financial plan
The final but most important section. Here, the abstract of the business plan is compiled for potential investors in the form of accurate economic calculations and must include the following points:
- The amount of project costs.
- The amount of expected income.
- Cost of production.
- Investment costs.
- Calculations by type of expense: direct and indirect.
- Schedule for the implementation of investment funds.
- Cash flow statement.
- Investment performance indicators, which include items such as: NPV - net present value of the project, return on investment period, PI - profitability index, IRR - internal rate of return, NCF - net cash flow, etc.
- Sensitivity analysis of the project in numbers.
- Income statement.
- The volume of revenue.
- The volume of net profit.
- Marginal profit.
- EBITDA
- Estimation of the total project cost.
Summary Tips
If you work through all these points, you get a solid pile of papers. But keep in mind that investors look through hundreds of requests and do not like to waste time on each of them. Therefore, the information should be submitted concisely and comprehensively, strictly observing the logical structure.
An integral part of financial information is charts and graphs. It is advisable to visualize each individual block of information.
Another important detail is the sources of information. Where did the statistics, these or those numbers come from? Reference to the source is required. In addition, before applying the finished data, you need to take into account the reputation of the resource and the degree of reliability.
A common mistake of many start-ups is the abuse of professional terminology to seem more convincing. But this technique can have the opposite effect. Therefore, a business plan should be written so that it is understandable even to a person far from financial issues.