Business Plan Due Diligence
Good Business Plans: How to Persuade Investors
An investor will naturally need to be convinced to give money to any business. Of the dozens of deals that come across their desk, they can choose only a few to fund, if that. This makes investors skeptical of plans that promise easy money and exorbitant returns.
A well-written and convincing plan, however, will have investors changing their tune. Instead of asking “why fund this?”, the investor will start to ask “why not fund this?” That is the one question you should make sure your plan provides no answer for.
Getting Investors to Ask “Why Not?”
Getting investors to think in this way means all of the pieces of the plan have fallen together neatly. The market need stands on its own as an insightful and impressive opportunity for a business. The strategy you present fits well with the specifics of the market and the product or service you offer. The qualifications of you and your team to lead the business are clear and convincing. The financial returns of the business are appropriate for the risk taken on by investors. When all of this is the case, and the plan itself is impeccably professional and free of errors, the reader will begin to feel some of the excitement you felt when you thought of the idea in the first place.
Due Diligence
However, because it is their job to be skeptical, savvy investors will work extra hard at this point to seek out any reason they can find to disprove that the business makes sense to fund,
rather than merely jumping at the opportunity to hand over cash. They will do their own due diligence, checking the research you have done, checking references for your qualifications, and looking more deeply at your financial assumptions. Though all of this double-checking may sound intimidating, it is all a good thing. This is the process any entrepreneur must go through with an investor to build trust in their relationship and move it to the point where a deal is struck. Assuming you prepared your business plan carefully and ethically, there is nothing they will find which will answer “why not?”
About the Author
Eric Powers is associated with Growthink, a Business Plan Consulting Firm. Since 1999, Growthink’s Business Plan Writers have developed more than 2,000 business plans. Call 800-506-5728 today for a free consultation. Or, if you’re writing your own business plan, Growthink’s business plan template can help you finish your plan quickly and easily.
Know The Investor -Due Diligence when Raising Money
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