Secure Funding by Nailing These Key Elements of Your Business Plan
Owning your own business is exciting and rewarding. But it can also be challenging – especially if you need funding from an investor or lender to launch or grow the business.
One of the most important steps to obtaining that funding is writing a proposal that gives would-be business lenders and investors information about your business, your business objectives and goals, current financial situation, and future financial projections.
When a potential lender or investor reviews your proposal, they're looking for certain elements. If you provide all of the details they're looking for, you have a better chance of getting the funding you need.
Here's an overview of the core components of a successful funding proposal.
1. Executive summary
The executive summary briefly tells the reader what your company does and why it will be successful. It should include basic information about your product or service, the company's leadership team, and what you're looking for from the reader.
Since your funding will likely come from people with a financial background, your executive summary may include a high-level look at your business' finances and growth plans.
While the executive summary is the first section of a funding proposal, it's usually best to write it last. That way, you've thought through the other aspects of your funding request, which makes it easier to summarize the details. Remember, bankers and investors receive many requests for funding. If your executive summary doesn't pique their interest, they might not read any further. So put some thought into making it compelling.
2. Business opportunity
This section is a chance to take a deeper dive into why your company is a worthwhile investment.
Your proposal should include:
- A company description. Provide more details about the need your product or service fills in the market and the customers your company plans to serve. If you have any particular advantages, such as industry experts on your team or the exclusive rights to a product or service, now is the time to boast about these strengths.
- Product or service. Describe the product you will sell or the service you will offer and explain how it will benefit your customer. Avoid getting too technical, as you don't want to confuse your reader. You can always provide more technical descriptions if needed.
- Market analysis and marketing plan. Show the reader that you have an in-depth understanding of your industry and target market. What are your competitors' strengths and weaknesses, and how will you do it better? How will your ideal customers find out that your products and/or services exist? While specific marketing strategies will evolve over time, give the reader an idea of your initial marketing plans and pricing strategy.
- Organization and management. Let the reader know how your company will be structured and who will run it. Provide an organizational chart laying out who is in charge of what and how their unique experience will contribute to the company's success.
- Funding request. This is where you'll explain how much funding you'll need over the next five years and how you plan on spending it. Let the reader know if you intend to use the funding to hire salespeople, buy equipment and materials, or cover overhead costs until you start bringing in consistent revenues. Specify whether you're seeking a loan or an equity investment.
- Financial projections. If you're just starting out, coming up with financial projections can be challenging, but they're essential for convincing the reader that your business will be a worthwhile investment. Provide forecasted financial statements for the next five years. Be sure to clearly explain your projections and match them to your funding request.
You may want to prepare different versions of your business plan based on whether you're applying for a loan or approaching an investor. Your proposal should anticipate h a potential funder may need, and you need to be prepared to provide additional information when asked. This will help show the reader that you and your business are worth the investment.