Wanna knock ‘em dead?
Forget writing business plans. Investors don’t read them. Seriously.
Hand an investor a business plan and they will do two things; read the executive summary and then flip to the financials in the back. Why? Because ultimately the numbers say more about your ability to succeed than anything else, assuming you have the right team and opportunity.
Instead of spending hours writing a business plan. Instead of agonizing over every word and fiddling endlessly with formatting, write “The Six”. To be more specific, there are six key documents that replace the standard business plan. Developing these documents will ultimately increase your chances of getting funded and achieving success. If you can build your “Six” with clarity and logic, you will have a far better handle on your opportunity and how you will execute. After crafting these documents you will be able to confidently answer almost any investor question and/or walk through due diligence should someone be interested enough to do so.
It is recommended that you build your Six in the order listed below. You will find if you stick to this, the documents will nearly write themselves as you move down the list.
(1) A 5 year Projected Financials – A financial analysis of every aspect of your business including per function expense (G&A, Engineering, Marketing, Sales), detailed and summary sales projections, assumptions, pricing, cash flow, summary expenses, and profit and loss. This document (mine are typically a workbook consisting of 10+ spreadsheets) tells the whole story and becomes the basis for answering questions like; “How much do you need?, “What will you use the money for?”, and “What would you do if we gave you more?”.
(2) Pitchdeck – A simple powerpoint presentation, kept to under 15 slides if possible, that tells your story. Who you are. What the problem is. How you will solve it. How you will take your solution to market. Who your competitors are. What it will cost and how you will fund it. Simple, sweet, short, and to the point. Investors don’t want long drawn out pitches. If you have got their attention, you will find that you don’t make it all the way through your pitch. If you do make it through the whole pitch without interruption, it’s actually a bad sign. Interruptions means they are engaged!
(3) Executive Summary – A one page document that says it all, in short. Problem, solution, market, contact info, team, legal contacts, IP, status and the like. If you can sum it up on one page, give it to a stranger and they get it, you’ve nailed it! This is not as easy as it sounds.
(4) Team CV’s – When it all said and done, investors invest in teams. They want to know who you are and why your team has the experience to execute. This can include current team members and those who will join when funding arrives. No long resumes here. Less than a page per person with a focus on relevant experience.
(5) Offer Sheet – Your asking for money, remember? So how do you want to structure the deal. Convertible note, equity, loan etc. What is the pre-money valuation, if you have one? What are the terms? How will the investors get their money out? What about the next round? If you get to the point where they want to know the deal, you MUST have this ready. That is not to say that this is the ONLY deal structure you should be willing to take but it is a start and shows you have given it thought.
(6) IP Portfolio (if you have one) – If you have done any patent work, document it. This includes provisional, utility, pending, and granted patents. Investors like to know what additional IP value there is. Make sure to mention who your counsel is and try to document the effort spent on prior art searches. Investors often feel that entrepreneurs do not spend enough time looking for patent conflicts, due to fiscal constraints. They are often right.
All that effort you would have put into a long, drawn-out business plan has now been funneled into a well-crafted investment portfolio. Trust me, the investors will love you for it. The trick is getting it right.
Don’t worry, you won’t. There is always an investor in the room who has a thought or two but you will be far more prepared to answer and/or brainstorm than ever before. If they are interested, this portfolio will move them further towards your goal in less time. You get one shot at it. Make it your best!
Source: The Fundable Entrepreneur.com