Entrepreneur’s Journal: Grabbing investors’ attention … and wallets
Posted by: in Small BusinessFiled under: Small business
I recently reviewed a business plan (for a school). It was well written and had lots of supporting financials.
The problem? It didn’t have the kinds of things that investors look for. That’s, when I read the one-page overview, there wasn’t much talk about why investors should shell out huge bucks. Instead, there was a focus on the quality of the school and the importance of education.
As should be no surprise, the plan got tiny momentum.
So, here were some of my recommendations:
Proof Points: What kind of traction does the business have? Are there more customers? Revenue growth? New partnerships?
Basically, show evidence of growth - using a variety of metrics. For example, in the case of the school, there was an investment in advertising, which produced strong growth in student enrollment. Clearly, the school has formulated useful marketing strategies.
De-Risk: Investors also want to limit their downside. In other words, what kinds of things protect your business? Is the customer churn rate low? Do you have patents? Long-term contracts?
I also look for owners who have committed their own money to the venture. This shows “skin in the game.”
Strong business model: Investors like to see multiple revenue streams. It shows that the business model is powerful and, more important, there are opportunities for growth.
So, in the school example, some of the new revenue stream possibilities included: dorm fees, book and yearbook fees, technology usage fees and application fees.
Helpful Resources: Checking out the internet, you can find some real-life examples of good investor overviews.
One approach is to check out IPOHome.com, which has recently filed IPOs (that is, companies raising capital). If you find a company that is in your sector, you can then click to the prospectus. In it, you’ll get an executive summary, which can be a great reference point.
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