Business Plans for New Startups Must Address Investor Expectations

For those budding entrepreneurs out there, now may be the best time to begin the planning and preparation phase for making your “dream” become a reality.  The economy has been tepid at best, but a recovery is imminent, and the best time to enter the market is when an uptrend is in full flow.  The past decade has been rough for the investment community, especially for those investing in startup operations where risks are high and usda home loans, but the potential for a large payoff is also present.

Investor audiences have grown more discerning as a result of previous losses and are now much more risk averse when committing their funds to an early development stage company.  Glossy marketing materials and business plan projections that magically predict $100 million in revenue in five years will no longer do the trick.  Investors will expect your business proposition to already be confirmed in the market, with customers willing to pay their good money for your “idea”.  Business plan materials must also address various investor expectations, based on real data and assumptions that can withstand heavy scrutiny.

Whether you are searching for outside capital or a business cash advance, your investment materials must tell a convincing story where marketing and financial data relate the identical picture with the “numbers” grounded in reality.  The days of raising money for just an “idea” are behind us and may never return.  Here are a few pointers to follow in this new world of financing:

  • Market Sizing:  Investors want to understand the market where your products and services will be sold.  Hopefully, your market sizing will be based on published data and will indicate positive growth prospects over the next five years and more.  You will also be asked to defend why the market will accept your new entry to the field;
  • Competition:  Never say you have none.  Investors want to know who the competitors are, how old, how big, and how many and why you can beat them at their own game;
  • Distribution:  The focus here will be on how you plan to market and sell your product to potential customers.  Sales cycle timing and pipeline analysis of future prospects are basic demands, along with actual cost data for acquiring a new client;
  • Operating Margins:  Profit margins must be predictable, based on detailed figures for cost of goods sold related to revenue.  These figures must demonstrate that increasing sales will produce “benefits-of-scale”.  Balance sheet needs and related cash flows must supplement and correlate well with revenue and expense data.

Investment-ready materials that address these considerations will enhance your effort, whether for acquiring startup funding or a simple business cash advance.