Writing a business plan as a study project easily becomes just another report – basically written for the teacher to get good grades or at least to pass the exam.
In real life however the business plan is always written for a more or less specific reader and with a specific purpose. Sometimes of course you just write the business plan for yourself to get a clear idea about the business you are going to start and to be sure, that you have thought about all relevant aspects of your startup company. And in other cases you write the business plan together with your business partner to be sure, that your visions and goals are the same and that your have the same image of the roadmap to succes with the business you are starting together.
But as soon as you need external financing from banks or investors, you should hav the banks and the investors in mind, when you write your business plan. You will have to understand the mind of the banker and the investor when you write the business plan, and you will have to have a clear goal with the presentation – fx. a 100.000 € loan or an investment of 1 mio. €.
What do bankers need
If you want a bank loan, you basically go to your bank and ask for it. You will probably be given a new contact person in the business department, but basically it is quite simple to ask for a bank loan in your bank – or in another bank.
What the banker needs to know is basically whether you can pay back the loan – and that you can start paying as soon as possible. And if they are not too sure about the business, they will get some other kind of security. Fx a mortgage in your house.
Therefore the banker will always ask for budgets to see the expected profits and estimate the necessary loan. In the business plan you will need to include
- Investment budget to estimate the startup loan.
- Profit/loss budget (monthly basis) to estimate profits and your ability to pay back.
- Cash flow budget to estimate the level of your cash credit.
The banker probably prefer a business with a low risk and steady income in stead of a more risky project with the potential of huge profits and growth. Remember that bankers are usually generalists, so it is safer for them to give credits to common businesses they know in stead of completely new innovative ventures with products that the market does not know yet.
Basically you will have to convince the banker, that your can generate profits very fast and that you have the experience and enthusiasm to succeed. Than banker is usually looking at the general family economy too.
What investors look for
Contrary to bankers, investors are willing to take risks, and they usually invest higher amounts. Investors usually invests equity (typically shares) in stead of loans, so they don’t need to get interest and repayment right away. In stead they are expecting a high profit, when they sell their part of the company after fx. 5-7 years. Therefore investors are looking for companies that they can help grow fast, so their shares will increase in value.
There are different kinds of investors, but i will mention two of the most common:
Venture Funds – companies with capital from fx big companies or bigger funds. Their purpose is to invest in typically smaller companies with big growth potential. Not all Venture Funds invest in startup ventures, but some do. Venture Funds usually have a clear focus on one or a few specific industries.
Business Angels – are individual investors or groups of individual investors, who have free capital to invest in smaller companies with growth potential. Their capital often comes from succes with their own businesses or from selling it, and they usually invest in industries they know, and where they have management experience. They will usually be interested in or demand a seat in the board in the companies the invest in.
To get an overview over venture funds and business angels can be complicated. In particualar Business Angels can be hard to spot or identify. And you will need help or advice to spot the right Business Angel. Fortunately there are usually people that can help you find them. In Danmark the DVCA – Danish Venture Capital & Private Equity Association – has a website with a list of members, so that is a good place to start seaching.
In general the investors will look at the factors below, when they consider investing:
- Strong team
- Attractive market
- Scalable business model
- Unique product
- Progress in the business project
- Attractive investment conditions
- Exit opportunity
Some people say, that investors go backwards into the company with their eyes fixed on the exit sign 
Filed under: business plan, funding, investors
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