Over the past 4 years, I have written on occasion about Funding and Financing Sources for a Business. This will be a series about Financing and how to view it in your business. The goal is to talk about various stages of funding for different kind of companies as well as the various types of players. The thing is that this is so vast a topic that I will probably miss something.
The there are two issues that will be at the core of everything else: Your Business Plan and Return on the Investment.
There are people that will not want to understand Your Business Plan, but they are not going to fund most Businesses. You need to be able to describe to people how you are going to make your Business work. That is the point of the Business Plan. But the part here that is front and center is the Financial Part of Your Business Plan. People will expect at least 3 years of realistic Financials with some narrative with them that helps explain why your Financials will be that way. Most people often don't think through their Financial considerations in any detail. For example, How many customers do you need to make your Business match the Financials that you have presented? That question alone leads to a line of question involving Products, Marketing and Sales that help make a Business Plan tick. So, there are several threads that you can follow through your Financials to make the narrative of Your Business Plan.
Now, the important part of the Return on the Investment is the addition of the word "the". I am not talking about how you are planning to improve your Business results. I am talking about how your investors are going to make money. When you talk to investors, that is what they actually care about. The Business Plan is simply a vehicle to describe how your business will grow. There is a difference in that translating to how the value of their investment will grow. There is another difference in how that translates to the investor being able to exit their investment and get all their capital back and make a return on top of that. You also need to ensure that you have the risk associated with the investment being comparable with the potential return on the investment.
If that is too much text, then let's make it simple. You need to tell people what they are getting and how you are going to grow the value of their investment by executing your business. Remember, you are competing in a market for this funding. You will find that investors have choice. And it is your job to align with them to get their investment.
Have a great day!
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