Secure Investment with These 3 Crucial Steps for a Winning Business Plan!
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.
Outlines
😊 Key Things Investors Look for in a Business Plan
The paragraph discusses the 3 most important things investors look for when evaluating a business plan to fund: 1) The executive summary that clearly explains the business idea and value proposition in simple terms 2) The expertise and experience of the management team to successfully execute the idea 3) Realistic financial projections that show a viable path to good returns for the investor within 5-8 years
😃 Advice to Create a Convincing Investor Pitch
The paragraph provides suggestions to create a compelling investor pitch: Show evidence of startup experience and momentum, assemble a strong advisory board to complement your skills, have sensible financials and exit strategy. Ask friends and family to review your executive summary to ensure simplicity. Demonstrating these aspects can get an enthusiastic investor response.
Mindmap
Keywords
💡business plan
💡investors
💡executive summary
💡management team
💡financials
💡projections
💡returns
💡exit strategy
💡use of proceeds
💡working capital
Highlights
99% of the business plans venture capitalists see get rejected
Investors want executive summaries to pass the 'grandmother test' - easy enough for anyone to understand
The management team is more important than the idea itself
Show experience and wins to make the management team look as good as possible
Add advisors to make up for lack of practical experience
Understand your strengths and weaknesses and surround yourself with people who complement you
Investors want to see reasonable financial projections they can believe
Explain clearly how you will use the funds requested
Show a clear path to an exit for investors to make a return
Target 30% average annual returns for angel investors
Have a clear executive summary to attract investors initially
Show expertise in the management team
Have solid financials you can explain line-by-line
The first things investors look for are the executive summary, management team, and financials
Getting funding starts with a clear, understandable business plan focused on these key areas
Transcripts
if you're looking to get funding for
your business today I'm going to share
the most important three things that
investors look for in a winning business
plan so I got a question for one of my
YouTube viewers Jaz love you guys who
wrote in to say yes I would like to say
thank you so much for sharing your idea
I'm glad I could help I just want to ask
you how to make a business plan for my
investor a plan that is clear to them to
show them how they will make money your
reply is highly appreciated thank you
so Jaz this is a great question and I
used to work as a venture capitalist and
my role in that business was to screen
the business plans I was a guy who was
getting all the business plans coming in
and had to make a decision whether I
would accept a meeting or politely say
no and you have to understand that 99%
of the plans the venture capitalists see
get rejected so I'm going to tell you
how to get your foot in the door and
have it get a yes out of an investor
here are the three most important things
that we looked at when evaluating a new
business plan number one was your
executive summary the first thing that
an investor looks at is the executive
summary of your business plan they don't
have time to read a 30 40 50 page
document they want to see that one to
three pages at the start that quickly
explains what it is that you do if they
don't like it if they don't see the
opportunity if they don't understand it
then your business plan is going
straight to the garbage pile there's a
term in the industry called the
grandmother test where you want to make
your business plan so easy to understand
that your grandmother can understand it
remember that investors don't know your
business as well as you know your
business and never will so you have to
make your business plan and especially
the executive summary easy enough for
anybody to understand make it simple
dumb down the language take out any
industry terminology or acronyms or
short forms so that anybody can
understand what you're talking about and
before you give your executive summary
your business plan to an investor make
sure you run it by your friends and
family first to again see if they
actually understand what the opportunity
is when you past a grandmother test then
you're ready to give it to investors
number two is your management team so if
an investor
your executive summary the next thing
gonna look at is your management team
because in investors eyes the idea is
important but much more important than
the idea is the team that's going to
execute it as a venture capitalist I saw
dozens of companies pitch me variations
of the same idea the real question for
us became which management team is going
to be the company that can actually
execute it and deliver results so on
your management team you want to show
that you have experience and that you
know what you're talking about the
biggest factor here that held a lot of
plans back from getting a yes was a lack
of start-up experience on the management
team so when you're managing BIOS you
want to make yourself look as good as
possible show off all the work that
you've done show up all the wins that
you've have and show up all the momentum
that you've built so far into your
business and if you don't have a lot of
practical business experience yet
consider building a Board of Advisors
and bringing on people into your
business to help advise you to grow even
something as simple as adding your
business lawyer or your accountant to
your Board of Advisors can give you a
lot more credibility and Trust in an
investor's eyes it's important to
understand your strengths and what your
skills are that you are the best in the
world at and then surround yourself with
people who can complement your
weaknesses and put that in your business
plan so that the investor see you've
thought this thing through and number
three is a financials so if an investor
likes your executive summary they like
your management team the next thing you
know flip through is the back of the
document which is typically where all
your financials are they want to see
that the numbers make sense they want to
see that there's an opportunity for them
to make money some of the common
pitfalls that a lot of entrepreneurs
make in their business plan in specific
to the financial section is one they
have projections that are astronomical
like we're going to be the next
Microsoft and we're going to get there
in three years well you might want to
taper that down a little bit too they
pay themselves huge salaries right
they're asking for $500,000 for their
business and there's four partners and
I'm going to give each other
$100,000 each for the year and only have
$100,000 in working capital for the
business that actually happened that was
a business plan that somebody submitted
to me so the use of
seeds has to make sense use of proceeds
means how are you going to use that
money you're asking for X amount of
money where is that going to go in your
business and does that make sense or not
and then the third is how am I going to
get a return out of this if you're
talking to angel investors they
typically want to see 30% return every
year on average and be out of your
business in five to eight years so they
have to see first of all that one there
is some kind of exit that somebody is
going to buy you out or that you can go
public with your business and two that
you can generate returns in excess of
30% average per year to be able to give
them that's when you get an investor
excited so work on having a really clear
executive summary build out that
management team expertise and have solid
financials that you can explain every
single line on it and tell them how you
arrived at those numbers those are the
first three things that any investor is
going to look at from there they'll flip
through the rest of your business pining
that they like it have you come in for
meeting I hope that helps Jaz good luck
on getting that investor for your
business and for those who are watching
you have a question or comment leave it
below I'd love to engage with you
remember to believe and if you like this
video you want to see more don't forget
to subscribe to the channel thank you
guys so much for watching
I'll see you soon self-improvement books
are like Fitness books they never work
on their own what you need is a trainer
that's Evan gap the newsletter
you
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