Most of the investors use the business plan as the first step to decide if the project is actually something they can add value to and if it’s actually a viable one. This also helps them decide if they actually want to invest in the project and jump on board (Mason & Stark, 2004). Most of the investors won’t invest or won’t get in the project if they feel that they can’t add much value to it even if the project is exceptional. So, they use that to direct those entrepreneurs to someone else in their network who would be of help to them.
Investors also use the business plan to analyze the business and their team dynamics. The work ethics and commitment of the team is also displayed by the business plan which they look at. Further, how hard they have worked to give it a shape, customization aspect and all those things give an idea of how serious the people are and if they’re manageable.
Four anchors that the potential investors are attempting to validate would be as follows:
They add value or create one for the end users: The customers in today’s economy aren’t dedicated to a certain company or product if they don’t get the value they desire. Thus, as an entrepreneur, it’s significant to ensure that the value that you’re offering through the product or service is clearly conveyed to the end customer (Teece, 2010). For example, Tyro City provides subject-based notes for students of high school. Thus, the platform provides a solution to the need of taking full notes in a classroom instead of grabbing what’s being taught or even in the situations when you’re not able to make it to the college.
They do so by solving a significant problem for which the end users are willing to pay a premium charge: There’s a common example used in the business world of you being stuck in a desert with no water and days away from crossing it. It’s extremely hot, and you’re sweating a lot, someone offered water to you but at a charge, how much are you willing to pay for it? That bottle of water is your life saver and thus you would be willing to pay a premium price for it. Similarly, Tootle, Sarathi and other such companies have emerged to provide a ridesharing, taxi platform for the users to solve the problem of overcrowded public vehicles. These modes even though are priced a bit high, people still are willing to pay the premium.
They have a robust market, margin, and money making traits: Consider that you have a very innovative product that no one has even thought of. It is something everyone needs at a cost, your market study proves everyone is willing to buy. There is a robust market. And, a decent margin gaven that you can sell it for four times more than your expense for a product. With maximum sales, it definitely holds money-making traits. Aren’t you willing to go forward with this type of business? It looks into both SWOT and PESTLE analysis for the business given clear idea of what the goods and bad are that need to be stressed, improved and as such.
The founder(s) and management team are a good fit at that given time in the market along with it having a good risk-reward balance: No matter how good the idea or opportunity is, if you don’t have a right mindset with the right team, the idea or opportunity will generate no huge impact. You need the perfect blend of skills and command within the team. It is also equally necessary to have a product or service that is the need of the market or be able to generate one. Right product at a wrong time calls for a lot of struggle and need for surviving admits a lot of challenges in the market when the time for it might come. Further, once both those factors are considered, the risk-reward balance is also looked into in this anchor to see this factor (Brinckmann, Grichnik & Kapsa, 2010).
Thus, the above listed four anchors are often looked into by the potential investor to see the viability of the business plan and if they would like to invest in it or not.
References
Brinckmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning-performance relationship in small firms. Journal Of Business Venturing , 25 (1), 24-30.
Mason, C., & Stark, M. (2004). What do Investors Look for in a Business Plan?: A Comparison of the Investment Criteria of Bankers, Venture Capitalists and Business Angels. International Small Business Journal , 22 (3), 227-229.
Teece, D. (2010). Business Models, Business Strategy and Innovation. Long Range Planning , 43 (2-3), 172-173.
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Most of the investors use the business plan as the first step to decide if the project is actually something they can add value to and if it’s actually a viable one. This also helps them decide if they actually want to invest in the project and jump on board (Mason & Stark, 2004). Most of the investors won’t invest or won’t get in the project if they feel that they can’t add much value to it even if the project is exceptional. So, they use that to direct those entrepreneurs to someone else in their network who would be of help to them.
Investors also use the business plan to analyze the business and their team dynamics. The work ethics and commitment of the team is also displayed by the business plan which they look at. Further, how hard they have worked to give it a shape, customization aspect and all those things give an idea of how serious the people are and if they’re manageable.
Four anchors that the potential investors are attempting to validate would be as follows:
They add value or create one for the end users: The customers in today’s economy aren’t dedicated to a certain company or product if they don’t get the value they desire. Thus, as an entrepreneur, it’s significant to ensure that the value that you’re offering through the product or service is clearly conveyed to the end customer (Teece, 2010). For example, Tyro City provides subject-based notes for students of high school. Thus, the platform provides a solution to the need of taking full notes in a classroom instead of grabbing what’s being taught or even in the situations when you’re not able to make it to the college.
They do so by solving a significant problem for which the end users are willing to pay a premium charge: There’s a common example used in the business world of you being stuck in a desert with no water and days away from crossing it. It’s extremely hot, and you’re sweating a lot, someone offered water to you but at a charge, how much are you willing to pay for it? That bottle of water is your life saver and thus you would be willing to pay a premium price for it. Similarly, Tootle, Sarathi and other such companies have emerged to provide a ridesharing, taxi platform for the users to solve the problem of overcrowded public vehicles. These modes even though are priced a bit high, people still are willing to pay the premium.
They have a robust market, margin, and money making traits: Consider that you have a very innovative product that no one has even thought of. It is something everyone needs at a cost, your market study proves everyone is willing to buy. There is a robust market. And, a decent margin gaven that you can sell it for four times more than your expense for a product. With maximum sales, it definitely holds money-making traits. Aren’t you willing to go forward with this type of business? It looks into both SWOT and PESTLE analysis for the business given clear idea of what the goods and bad are that need to be stressed, improved and as such.
The founder(s) and management team are a good fit at that given time in the market along with it having a good risk-reward balance: No matter how good the idea or opportunity is, if you don’t have a right mindset with the right team, the idea or opportunity will generate no huge impact. You need the perfect blend of skills and command within the team. It is also equally necessary to have a product or service that is the need of the market or be able to generate one. Right product at a wrong time calls for a lot of struggle and need for surviving admits a lot of challenges in the market when the time for it might come. Further, once both those factors are considered, the risk-reward balance is also looked into in this anchor to see this factor (Brinckmann, Grichnik & Kapsa, 2010).
Thus, the above listed four anchors are often looked into by the potential investor to see the viability of the business plan and if they would like to invest in it or not.
References
Brinckmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning-performance relationship in small firms. Journal Of Business Venturing , 25 (1), 24-30.
Mason, C., & Stark, M. (2004). What do Investors Look for in a Business Plan?: A Comparison of the Investment Criteria of Bankers, Venture Capitalists and Business Angels. International Small Business Journal , 22 (3), 227-229.
Teece, D. (2010). Business Models, Business Strategy and Innovation. Long Range Planning , 43 (2-3), 172-173.