7 Elements Prospective Funders Look for in a Business Plan

Many entrepreneurs and business owners consider starting or expanding their small businesses. However, most small business owners do not have the financial resources to do this without obtaining outside funding. If you are looking for funding for your business, you will need to provide prospective funders with a well-thought-out and professional business plan, regardless of the type of financing you seek to obtain. Sources of financing will expect to see the following key elements in your plan.

1. Executive summary and company description. The executive summary should include a short description of your business spelling out a mission statement, the product or service provided, the company’s management team and employees, and the location. It should also include an explanation of why you expect the business to succeed. A more detailed description of the company can follow providing the specifics about its history, the needs your business fills, and the customers it serves. In addition, the business plan should highlight your business’s competitive advantage (e.g., employees with relevant expertise or new innovative technology).

2. A market analysis. Prospective capital providers need information about the market opportunities for your business, including market research showing the outlook of the industry, the existing competitors and their products, pricing, distribution channels, and how your business will meet those challenges. Information about your existing and target customers should also be included, as well as your sales and marketing strategies.

3. Your products or services. Detailed information about the product or service your business provides should be included, including photographs, a description of the benefits it provides to customers, the product life cycle, when it will be launched (if it is a new product), a description of research and development, and the steps taken to protect intellectual property, such as copyright, trademark, or patent filings.

4. Your business organization and management team. Indicate the legal structure of your business, i.e., whether it is a corporation, partnership, LLC, or sole proprietorship. Also, provide information such as an organizational chart showing the management of your business. Financial backers will also be interested in management qualifications, past successes, and how their expertise will contribute to the success of the business. Be sure to include resumes of the business’s owners or key employees to serve as supporting documentation.

5. Prospective financial outlook. Sources of financing need to be assured that your business is likely to be a success. Established businesses should supply financial information such as income statements, balance sheets, and cash flow for the past several years. Both established and new ventures should provide detailed financial projections for the next five years that are tailored to the funding request. The financial projections can be optimistic but must also be realistic.

6. Previous funding and proposed use of funds. If your business has obtained funds previously and has any outstanding loans, that information should be provided in the business plan. In addition, there should be details about how the funds sought will be used (equipment, salaries, research and development, etc.), how the funds will be repaid, and the impact the funds will have. It is also helpful to provide a copy of the business’s credit history.

7. Timeline. Outline when your business plans to meet important milestones aimed at increasing the company’s value, such as launching new products, hiring key employees, meeting targeted sales goals, etc.

Next Steps

Experienced Utah business attorney, Paul Sparks, is here to help you with all aspects of your business planning, including the preparation of a well-developed business plan that will help you to obtain the funding your business needs. If you need help creating a business plan, call Summa Business Law today to set up a consultation.