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Don’t Hype the Business Plan

A business plan is a living breathing document in that it can help you obtain capital through angel investors and then serve as the blueprint for goals and strategies. However, the business plan filled with hype is dead on arrival during fund raising because business plan readers will quickly recognize over-promising exuberance not based in reality. You may have an amazing idea and believe it’s a wide open market niche with no competition, but can you prove so?

Though angel investors are not financial institutions, they still rely on solid market and financial evidence for decision making. Using an abundance of words like ‘unprecedented’ and ‘one of a kind’ sends a signal that you have not done in-depth market research. Even if you have done the research, these kinds of hype words set a tone of naiveté and inexperience because very few products are unprecedented and lack competition.

As you write the business plan with the intent of submitting to angel investors, the words you need to be thinking should be more along the lines of ‘proven’, ‘accomplishments’ and ‘competition.’ If you say that your product is unprecedented then that word needs to be supported by third-party market research proving to the best of their ability that you have actually developed a radically new product.  Even in that case, you also must still prove that an expanded market will want to buy your unprecedented product before angel investors will capitalize your startup. An unsold unprecedented product has no value.

Avoiding the hype in a business plan takes discipline because entrepreneurs are naturally excited about their initial stage of business growth. Hype makes your job of selling a business plan to angel investors much harder than it needs to be. Avoid the hype and the business plan begins on solid ground, and from there your fund raising chances can only go up.

More detailed information and useful advice can be found at www.funded.com Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website.

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Attracting Equity Partners for Strategic Success

Two of the main reasons an entrepreneur or business may want to attract equity partners for business funding are: 1) to fund a particular project, or 2) to fund general business operations for the purpose of advancing the goals established in the strategic plan. It is critical that you precisely define your reason for needing additional investment dollars to insure that you target the investors most likely to fund your financial needs.

When you talk about funding a particular project, the word “project” takes on a broad meaning. A new project can include introducing a new product line to the marketplace or buying another company that sells products or services that will enhance your current company market position. A new project can also include expanding sales into foreign markets or expanding production.  Also qualifying as a new project would be the acquisition of equipment that will strengthen the company’s ability to meet customer demand.

On the other hand, equity partners may also agree to fund company operations based on a long-term strategic plan. Instead of a finite project, the investors may agree to provide startup funding for a new business that is equivalent to venture capital. Unlike most venture capital and business loans though, the equity partners will take part ownership of the company and participate in the management of the business.

Minority or Majority Ownership

What makes equity partners different from other types of investors like angel investors or venture capital is that the institutional or private equity investors will require a share in the ownership of the business (thus the use of the term ‘equity’). When the equity partners invest in a project, they will remain business owners usually up to the point the project is completed and the expected returns have been earned.  In these types of funding arrangements, the equity partners are often willing to take a minority ownership share.

When the equity partners offer business funding for general strategic operations, the requirements often include taking a majority share in the company. This makes sense if you consider that the equity investors are putting cash into the company with the expectation operational expansion or revisions will lead to higher profits in the future. The longer term nature of this type of funding naturally means the equity partners will want to control operating activity.

In the final analysis, it is clear that there are equity partners willing to consider almost any type of business financial need including startup funding.  One of the steps a business should always take when preparing a request for funding is to consider the various investment alternatives including business loans or angel investors that can fund the type of activities whether they are project based or based on strategic operations. If searching for equity partners is the best option, the business plan will be written to make it as attractive as possible to that particular type of potential investors.

Learn more at http://www.funded.com. Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need to access a vast network of business people, entrepreneurs, partners and service providers to help you start, finance and run your business, check out http://www.funded.com.