What do I need to check before submitting my Business Plan to the potential investors?
February 5th, 2007Q: I have completed my Business Plan using Rosetta Business Planning software. What in your experience do I need to check before submitting it to the potential investors?
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A: In my experience investors tend to pay attention to a number of parameters when reviewing a Business Plan, but first on the list would undoubtedly be the Profit. The reason it tops the list is very simple – it is very easy to understand (total income minus total expenditure) even without having any specific financial knowledge and it is a very clear indicator of business’s “health”. You can see Profit analysis in the Highlights screen or you can run a full P&L report.
So what sort of Profit position is likely to upset a potential investor?
If you analyse the example you will be able to notice two things. First of all the proposed Business Plan suggests a Profit of over 20% in the second month of trading. Secondly the Profit jumps to over 60% in December and then back to 39% in the second year. I am not suggesting for a minute that this Business Plan is wrong – may be for this particular business venture this Profit analysis is correct. However from a point of view of potential investors this Business Plan will certainly ring an alarm bell. Investors like to see a gradual and steady increase in Profit level. They don’t like to see very high figures as it usually indicates overconfidence. In summary: if your Business Plan tends to look like the example above - double check it to make sure that your assumptions are valid and if your are 100% certain that you did not make a mistake then attach a clear set of notes to the P&L statement explaining the Profit position.
