It's easy to lose sight of what needs to be communicated to prospective investors when writing the various sections of a business plan. Successful business owners/entrepreneurs use each section of their business plan to work up interest, to present arguments and, most important, to build trust and confidence.
How To Earn The Trust Of Skeptical Investors?
Usually some sort of upfront investment precedes starting or expanding a business, whether it be time, energy or cash. If you plan to raise cash from investors, you must get prospective investors comfortable with putting their money into your hands.
To start you must understand that investors simply want to select the best investments, period. This means choosing businesses that earn a high enough rate of return on investment to offset the risk of the investment. That said, deciding what is a good opportunity is an investor's number one challenge.
That's why investors thrive on information. Good information - good decisions, bad information - bad decisions. But, investors are often asked to invest funds with little reliable information. This, combined with the difficulty of deciphering the information they do get about various investment alternatives, leaves them fearful of getting into an awful deal and skeptical of the deals being presented.
To get comfortable with an investment, prospective investors want to see results and evidence. They want to be educated about the investment opportunity and the investment options available to them. But, they won't accept this education at face value; they want to see the evidence that supports it. Even for niche businesses.
Investors use this education to expand their research and use the evidence they gather to develop their expectations. In the end, investors merely want the opportunity that they select to match the expectations they have developed.
When investors object to an investment the objection is usually of the "Educate me?" type. Tell me your story, show me your numbers, and then prove it. Prospective investors want information that they can validate, options and risks that they can see, and to be educated about your specific business. They want to hear why you and your team are the ones that can produce the projected results.
If your business plan "educates" prospective investors on these issues, you'll win their trust. When that happens, its time to?
Build Investor Confidence - Show Why Customers Will Award Their Business To You Rather Than Other Service Providers?
Investors invest money in businesses based on expected cash flows. To create cash flow, you must first win business. That's why it is important for your business plan to show investors why customers will award their business to you at a price that allows investors to earn an acceptable return on their investment.
When potential investors begin evaluating a service business plan, they are likely to be skeptical of your ability to consistently win business. In their minds your prospects need someone to do something for them. Something that your customers either don't know how to do, don't want to do, or don't have to do.
Service provider business plans must convince potential investors of two things. First, that the customer's pain of not having this "something" done or the pleasure of having this "something" done is so great that it compels the prospect to act. Second, that the customer is willing to pay to have this "something" done.
Potential investors in service type businesses expect that your customers are feeling confused about which service provider is the best at providing the solution you offer. They may also perceive your market as saturated with so much information?some of it true and some of it not so true?that customers are finding it difficult to decipher the information they have about each solution.
As a result, investors in service type businesses often picture skeptical customers with fresh memories of negative service experiences. Moreover, they suspect that your potential customer's biggest fear is getting awful service.
To overcome this, your business plan must show investors how you plan to successfully educate prospects about your solution and convince them that you can deliver the expected results. It must present the evidence you'll use to convince customers that you will do the job right, do it right the first time, and won't fix what doesn't need to be fixed. It has to explain how you will educate the prospect about the service and the options available to them in a way that they will understand and trust.
Your plan must convince investors that you can win over prospective customers who are likely recovering from a negative experience in your market space?customers who have been promised the ultimate solution only to be disappointed. It must provide details about how the principles and techniques chosen to market your service enable customers to view you as honest. It has to help investors see how the chosen delivery method for your service ensures customer satisfaction.
The business plan must also convince investors that customers can verify the service results you promise and that prospects can easily compare the results to other alternatives. This proves to investors that prospects can determine the superiority of your service and it shows them how you differentiate your services from other service providers.
Points For Service Providers To Address In A Business Plan
In summary, if you're a service provider trying to attract investors, these are the points you must address in your business plan:
When you address these points in a business plan with verifiable evidence to back them, potential investors will have to conclude that they would be foolish to invest in any other service provider but you.
Mike Elia is a chief financial officer and an advisor to venture capitalists and leverage buyout specialists. His business plan ebook "business plan secrets revealed" shows how to make your business the most appealing investment choice to venture capitalists, bankers, and other business investors. For his free business plan guide "business plan secrets revealed"
efficient cleaning crew Highland Park ..Business rises and falls on leadership. According to business guru,... Read More
Q: A key investor in my business has suggested that... Read More
I recently took an organizational behavior class where my professor... Read More
Many cities have home pages on the Internet. Many of... Read More
Many of Ohio's downtown areas are in need of upgrading... Read More
Can you imagine going on a road trip without knowing... Read More
When looking at Akron carefully one cannot help but notice... Read More
Human beings are rational agents. Rationality endorses one to take... Read More
Much of what we heard in the mass media about... Read More
Before becoming a netpreneaur, I was an entrepreneur. First, I... Read More
American Eagle Outfitters and Wet Seal Stores have issued statements... Read More
Writing a business plan can be tricky when all the... Read More
As a business owner, you've likely created a hurricane plan... Read More
If ever there were an industry where we want zero... Read More
"Begin with the end in mind," says Stephen Covey in... Read More
"Bozo" ? A clown with a forlorn look, always finding... Read More
As fast as you can say business disaster, your business... Read More
Have you been in a "brainstorming" session where each person... Read More
Possibly THE most frequently asked question of me is "What... Read More
A survey released by the American Institute of Certified Public... Read More
You know you need a business plan. You probably realize... Read More
When in doubt, cut that out! Yeah, yea, doubting Thomas... Read More
Mobile auto detailing equipment becomes very inexpensive around March each... Read More
In 1989, Sony founded its Institute of Wisdom at the... Read More
Many business start-up kits or consultants will tell you one... Read More
scheduled maid service Park Ridge ..Many cities have home pages on the Internet. Many of... Read More
Writing a business plan is not an easy endeavor, nor... Read More
I'm not talking about posting the HBO schedule on your... Read More
Every decade we seem to come up with a buzz-word... Read More
The University of Exeter in the United Kingdom recently published... Read More
After 128 years of business, a household word, Montgomery Wards,... Read More
When someone mentions business planning we have been conditioned to... Read More
"I don't need a business plan."Neither did Alice in Wonderland."Would... Read More
Mobile auto detailing equipment becomes very inexpensive around March each... Read More
There's nothing automatic about corporate growth, particularly in the information... Read More
A significant advantage of some business ideas is that the... Read More
No "meme" isn't a typo and Got Milk, the more... Read More
The current state of the available technology at the disposal... Read More
1. Attempt Succession Planning Without Other Strategic Plans. Succession plans... Read More
Let us look at a few of the big distribution... Read More
Anyone who has been watching the Idaho Market Carefully for... Read More
David E. Gumpert, author of Burn Your Business Plan, often... Read More
A focus group is a group of employees or current... Read More
It doesn't take a Terrorist Act, Tsunami or Earthquake to... Read More
Conventional wisdom has it that there are only three ways... Read More
It's easy to lose sight of what needs to be... Read More
I've either been involved with or held a process-related role... Read More
Storytelling and writing a business plan actually go hand in... Read More
How important is a vision statement to your company or... Read More
Would you like to jumpstart your online or offline business... Read More
Strategic Planning |