Secure Investment with These 3 Crucial Steps for a Winning Business Plan!

Evan Carmichael

21 Mar 201505:51

Summary

TLDRThe video provides advice to Jaz on creating an effective business plan to secure funding from investors. It emphasizes crafting a simple yet compelling executive summary, building a strong management team with relevant experience, and including realistic financial projections that demonstrate a viable path to substantial returns. By focusing on these key sections and avoiding common mistakes like overpromising, setting unrealistic salaries, and lacking startup experience, entrepreneurs can create a polished plan that convinces investors of the opportunity and team's ability to execute successfully.

Takeaways

😀 The executive summary is the most important part of a business plan for investors. It should be 1-3 pages explaining the key details in simple terms.
👨‍💼 Investors look at the management team to evaluate if they can execute on the business idea successfully.
💰 Investors want to see realistic financial projections with details on how the funding will be used.
📈 Have clear projections for investor returns, target 30% yearly returns on average.
👵 Use the 'grandmother test' to simplify the language so anyone can understand your business.
🤝 Add advisors and partners to make up for any lack of direct experience.
❌ Don't have unrealistic growth projections that promise to be the next Microsoft in a few years.
💡 Play to your strengths as a founder and surround yourself with people to complement your weaknesses.
🤑 Don't allocate unreasonable salaries for yourself or large % of funding to working capital.
🚀 Clearly explain the exit strategy and path to liquidity for investors.

Q & A

What are the 3 most important things investors look for in a business plan?
-The 3 most important things investors look for are: 1) A clear and easy to understand executive summary that passes the 'grandmother test', 2) A strong management team with relevant experience, and 3) Solid financial projections that show a path to strong returns.
What is the 'grandmother test' mentioned in the transcript?
-The 'grandmother test' refers to making your business plan simple enough that even your grandmother with no business experience could understand your idea and opportunity.
Why is start-up experience for the management team so important?
-Start-up experience is important because investors want to see that the team executing the idea has practical experience building and running a business before.
How can you make up for lack of direct start-up experience on the management team?
-If the management team lacks direct start-up experience, consider creating a Board of Advisors and bringing on people to advise and guide the team.
What are some common financial projection mistakes in business plans?
-Common financial mistakes include wildly optimistic growth projections, paying yourself a huge salary too early, and not having a clear explanation of how investor money will be used.
How can you show investors they will make money from your business?
-Show a realistic exit strategy and target over 30% average annual returns so investors can get a return in 5-8 years.
What should the executive summary explain?
-The executive summary should clearly explain in simple terms what problem you solve, your solution, the market opportunity, and what makes your team qualified to execute.
What financial information do investors want to see?
-Investors want to see realistic projections tied to assumptions and costs, a use of funds showing where money will be spent, and a path to providing a return through exits or going public.
What questions should you ask others to test your executive summary?
-Ask if they understand what problem you solve, how you uniquely solve it, who your target customers are, and what the major risks or challenges you face are.
How much detail should the full business plan contain?
-The full plan should provide all necessary detail on the opportunity, product, go-to-market, operations, team, financials, etc. to validate claims in the executive summary.