If you are a manufacturer wanting to use your business plan to attract investors, then your plan must do two things. It must:
- Comfort prospective investors with putting their money into your hands, and
- Show why potential customers will award business to you rather than your competitors.
Earn the Trust of Skeptical Investors…
Prospective investors want to select the best investments. For an investor, this means earning the highest return on their money for the risk they take. Besides their own research, they seek more specific information from business owners and entrepreneurs about potential investment opportunities.
The major challenge to investors is deciding what is a good opportunity. Often asked to invest funds with little reliable information, investors have difficulty deciphering information about the various investment alternatives they are evaluating. This leaves them fearful of getting into an awful deal and skeptical of the deals being presented. In addition, time pressures often force investors to decide on investing in a business when their time frames don’t align with the business’ need for funding.
To your prospective investors, the most important factors you must show are results and evidence. They simply want the opportunity that they enter to match the expectations that they have developed. They want to be educated about the investment opportunity and the investment options available to them. But, they won’t accept this education at face value; they want to see the evidence to support it. Even for niche businesses.
When investors object to investing in a business, the objection is often of the “Educate me…” type. Tell me your story, show me your numbers, and then prove it. Prospective investors want information that they can validate, options and risks that they can see, and to be educated about your specific business. Moreover, they want to know why you and your team are the ones that can produce the projected results. If your business plan doesn’t address these “educate me” objections, it will fail to win the trust of your prospective investors. When that happens your plan will not get funded. Period.
If you successfully win the trust of potential investors, then you must be able to…
Show Why Customers Will Award Their Business To You Rather Than Your Competitors…
Investors invest money in businesses based on the business’ expected cash flow. To create cash flow, you must first win business. That’s why it is important for your business plan to show investors why customers will award you their business at a price that allows you to provide investors a return on their investment.
When potential investors begin evaluating your business plan, they are likely to be skeptical of your ability to consistently win business. In their minds, there is already a manufacturer who is providing the same or similar product as yours to your prospective customers. They are skeptical as to why prospective customers with little or no time to investigate the options available to them and who are reluctant to upset their own customer base would change manufacturers.
You can expect your potential investors to understand that your customers need to move product and generate higher margins. They expect quality and general customer support to be givens, the basic requirements to win business. Therefore, their focus will be on understanding how you help your prospective customers earn more money.
To your potential investors, the biggest problems your customers face are products that stay on the shelf, don’t work properly, or carry low margins… situations that cost your customers money and the opportunity to make money on other products. Does your business plan show investors how you plan to solve these problems? It should if you want to capture their attention.
Be sure to clearly explain why you can win over prospective customers who have extensive experience in dealing with manufacturers in your market space…customers who have “heard it all.” Your business plan has to reveal to investors how you’ll protect your products from damage during transit, guarantee their availability, offer a wide range of product selection, and modify the product as needed. In short, your business plan has to leave investors feeling confident that your product will be delivered as ordered, undamaged, on time, and working properly.
You’ll also have to convince investors that you can overcome the biggest objections your customers will have in switching manufacturers, which from the investors’ perspective will involve product quality and your ability to deliver on time. If the product stays on the shelf too long or doesn’t work properly because of poor quality then that is a problem. If the product can’t be used or sold because it hasn’t been delivered then that is a problem.
Prospective investors know that to win a customer’s trust you’ll have to show them quantifiable evidence that they can earn more using your products and that the risk of changing over to you is low. Since this is what it will take to win business, it is only logical that your prospective investors will want to see this same evidence before they invest in you.
Points For Manufacturers To Address In A Business Plan
In summary, if you’re a manufacturer trying to attract investors, these are the points you must address in your business plan:
- How and why customers will earn more money doing business with you rather than your competitors.
- How and why they will have less hassles and it will be easier for them to do business with you rather than your competitors.
- How and why customers will face less risk doing business with you rather than your competition.
When you address these points with verifiable evidence to support your position, potential investors will have to conclude that they would be foolish to invest in any other manufacturer but you.
Mike Elia is a chief financial officer and an advisor to venture capitalists and leverage buyout specialists. His business plan ebook
shows how to make your business the most appealing investment choice to venture capitalist, bankers, and other business investors. Click here to learn more about creating a