Attracting investment is a wonderful opportunity to secure the funds necessary for business development. However, no seasoned entrepreneur would invest their own money in a project without a clear business plan outlining all sources of income and expenses. Documents are thoroughly scrutinized, making it essential to accurately present figures without embellishing the data.
A document hastily drafted on a napkin with rough estimates is unlikely to capture the interest of potential investors. On the contrary, it may deter a person who was willing to invest and paint both the project and its author in an unfavorable light.
To enhance the chances of securing investment, it is vital to present the business correctly. How can this be achieved? What are the specifics of creating a business plan?
Founder of Oil Resource Group, Sergey Teryoshkin, aims to clarify the rules for preparing documentation. More about the entrepreneur's activities can be found on his website: oilresurs.ru, where all necessary information is available.
Key Data in a Business Plan
Experienced investors require a number of indicators in a business plan to make decisions regarding project financing. These include:
- Internal Rate of Return (IRR). This is one of the main indicators used in assessing projects requiring investment. It defines the interest rate at which the present value of cash flows equals zero. At this rate, the investor can recover their investment, although profit cannot be anticipated.
- Net Present Value (NPV). This is the sum of discounted cash flows at the present time. The indicator helps to determine the volume of excess funds.
- Payback Period. This indicator defines the timeframe within which the investor can recoup their investment.
- Discounted Payback Period. The period during which the accrued profit will offset the funds invested in the project, with income calculated considering the discount rate.
- Profitability Index. This is an indicator of the efficiency of the investments.
Additionally, to make a decision regarding the allocation of funds, investors need to have information about the specifics of the project, the problems it can solve, the technologies involved, the products produced, competitors, the financial model, and more.
Most entrepreneurs place business planning at the bottom of their priorities. Instead, investment seekers rely on verbal presentations where they vividly describe the project's potential and merits.
However, this tactic is flawed. For a knowledgeable investor, charisma and eloquence do not hold as much weight as solid numbers and analytical data. Expecting to attract investment without backing up your words with substantial figures is unrealistic.
Furthermore, drafting a document without the necessary expertise is impossible. So how can one correctly create a business plan?
Features of Document Preparation
To simplify the task of writing a business plan, international standards can be utilized. For this, one can draw upon the rules set forth by UNIDO, the World Bank, and the International Finance Corporation.
The standards of the aforementioned organizations share similar traits and parameters, differing only in the structure of the document and the order of the information provided.
When creating a business plan, one can choose to adhere to a single standard and build upon it. For seasoned investors, indicators matter more than the order of items. Preparing the document can take up to a month, resulting in a well-crafted business plan that may span several dozen pages.
However, even after careful examination of the document, many financiers conduct interviews with investment seekers. This allows professionals to filter out candidates who do not meet the necessary criteria.
Simultaneously, interviews enable potential investors to create a business plan independently and ascertain the project's real prospects.
Presentation of the Business Plan
Simply creating a business plan is not enough. The document must be effectively presented. To maximize impact, one should follow a series of recommendations prepared by Sergey Teryoshkin:
- For the initial meeting, it is advisable to create a concise presentation that briefly outlines the project's main advantages and prospects. The document should contain only the most critical data to showcase the business in the most appealing light.
- If venture capital funding is required, it is recommended to adhere to a specially designed format for presentations aimed at this purpose.
- In addition to the business plan, slides should be prepared to visually present the project to the group of investors. These can include relevant images, graphs, and other data. A short video may also be utilized.
An effective presentation combined with a well-crafted business plan constitutes half the battle. Without these, even the most promising project is unlikely to attract the necessary investment. Therefore, a casual approach is not advisable.
While preparing these documents may be time-consuming, the efforts will pay off handsomely. The business plan and presentation materials can help attract funds from both private and professional investors. It is unwise to attempt to devise documentation in a hurry, especially if funds are needed immediately. Such an approach can lead to prolonged disinterest from potential investors.
If necessary, the seeker can outsource the creation of a business plan to a specialized company, significantly saving time and reducing stress. Professionals can efficiently handle all documentation and calculations using modern software.
