How To Write A Convincing Business Plan When Seeking Funding

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Having a business plan is not only important to create when starting your business, it's essential to keep updated when you're seeking funding for your business. Not every lender or grant committee will ask for your business plan, but many do.

If you plan to seek out venture capitalists or angel investors, they will almost always ask for your business plan. Here's how to write a convincing business plan for any funding situation.

When You Will Need A Business Plan

The most common situation where you will be asked for a business plan is if you seek out capital from investors. According to Accion, "no investor will put money in without one (business plan)." They need to see that you are serious about your business and are capable of making them money.

Another situation that you may need to present a business plan is when applying for business grants. Grant requirements vary greatly, but some (such as the Live Music Society Grant, Alibaba grant, KKR Grant, and others) require partial or full business plans as part of the application process.

Most lenders do not need to see a full business plan when requesting a loan, but creating one helps you determine how much to borrow and calculate the return on your investment you plan to get. In some cases, the SBA will ask for one if you apply for an SBA loan, such as an EIDL loan or 7(a).

Tips Before You Write Your Business Plan

Before you write your business plan (or revamp it), here are some tips to keep in mind.

  • Keep It Short and Concise. Investors, loan officers, and grant committee members who look through hundreds of applications do not want to read a novel. They want to know right away whether or not your business is set for success. A business plan around ten to fifteen pages is sufficient. It may be less than ten if you are a brand new startup looking for seed capital.
  • Customize It To Your Audience. Your essential business plan elements will stay the same, but customize it to your audience. If you're applying for a loan, make sure to address your plan to pay the amount back, speak about your credit history, include your collateral, etc.

    For investors, explain your investment proposition. For grants, explain how your business aligns with the organization's values and how your use of the funds will further their vision.
  • Proofread Your Plan. Nothing is more off-putting than a document riddled with errors. While a couple of grammatical or spelling errors will be mostly overlooked, having a lot of errors will turn off your prospective lenders or investors. If writing is not your strong suit, consider hiring a professional writer.
  • Use Free Resources to Help You. If you feel overwhelmed by writing your business plan, there are options your can pursue. SCORE is a non-profit association funded by the SBA. They have a lot of free resources and locations nationwide to help you with your business plan. You can also contact your local Small Business Development Center for assistance.

How To Write Your Business Plan

Now that we've covered some tips to consider before you write your plan, here's what you should include in your business plan.

Executive Summary

The executive summary is essentially the summary of your whole business plan. It gives the reader a snapshot of your business and an understanding of your business's mission and goals. Your executive summary should describe what your business does, who it caters to or serves, who the leadership is, and a high-level growth plan.

Company Description

This is where you can go into more detail about your business. Explain the mission, vision, and purpose of your company and discuss the goal(s) of your business. Specify the problems that your business solves as well as the customers, clients, or other businesses that your business serves. Highlight the strengths of your business (busy location, experts on the team, patented product, etc.) and why you can be (or already are) competitive in your market.

Market Analysis

If you are a new startup, this section is going to be crucial to explain well. Investors want to know if you understand the market you are trying to enter.

In this section, you need to explain in detail the total available market (total number of potential customers), your segmented market (the customers you intend to target within the total market), your estimated share of the market (the number of customers your company can reasonably serve), who your competition is, and how your product or service will differ (and improve) from what exists already.

Business Structure

This section is rather straightforward. You need to explain your business structure, who the key members are, the responsibilities of your key members, and the ownership percentage for each member or owner.

Products and Services

Your products and services have already been touched on in your market analysis and company description, but here is where you can go into detail. Explain how they benefit your customers, what the product lifecycle looks like, the cost of production and gross profit margins, your distribution strategy, and why your product is superior to your competitors.

It's also important to mention the patents, copyrights, and trademarks your business owns.

Marketing and Sales Plan

There are numerous ways to approach marketing and sales, so this is your opportunity to explain your marketing strategy. What have you been doing? What has been successful? What do you want to do? How are you going to attract more customers?

These are the questions you should answer in this section. Additionally, explain how your sales work so your investors/lenders understand how you make a profit.

Funding Request

Here is where you will explain your funding need. If you are seeking a loan, reiterate the amount of your loan request and your amortization plan. If you are seeking investments, be specific on the amount of investment you are seeking and what equity your investors will receive in exchange.

In all scenarios, the fundamental information to convey is why you need this funding and how you are going to use it.

Financial Projections

The financial projection section of your business plan is arguably the most important. It outlines how your business is going to generate profit and how much. Investors want to know that there will be a return on their investment and lenders need to know that you can repay the loan.

Provide your business sales, either monthly or quarterly, along with your expenses and profit for at least the last three to five years. These figures will also guide your projections into the future so you can provide accurate profit estimations. Having aggressive goals is fine, as long as they are realistic.

Appendix

The appendix to your business plan will contain all of the documents that you mention in your business plan. Your resume and those of the other owners, financial statements, profit projections, equipment leases, businesses licenses, permits, insurance cards, patents, contracts, business credit history, and anything else that you reference in your plan needs to be attached here and clearly marked.

Get Personalized Business Help

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