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Start-Ups

5 Reasons to Read Your Business Plan From the Perspective of an Investor

By Garrett Spence   |    April 1, 2016   |    8:42 AM

Why Investment-Seeking Entrepreneurs Need to Think Like Investors

Do you think you have the perfect business plan and strategy? Don’t be so quick to answer, because you might want to give it another review; try thinking like an investor the next time you read through your business plan.

Putting yourself in an investor's shoes could be a game-changer when it comes to attracting outside funding, and here are some of the top reasons to read your business plan from their highly qualified perspective.

1. Investors read hundreds (sometimes thousands) of business plans

Top-notch investors will review hundreds, and very likely thousands, of business plans in a single calendar year. Imagine reading similar documents over and over again and it’s easy to see why your plan needs to stand out.

When writing up your business plan, remember that these investors are busy, busy people. They respect entrepreneurs who can get their main points across in as few pages as possible. Your goal should be to pique an investor’s interest with a clear and concise plan.

2. You’ll better estimate your startup’s true value

Sometimes, entrepreneurs get so caught up in the excitement of their startup that they begin using overinflated “hype” words to describe the value they bring to the market. Investors don’t care about “unique opportunities” or “unparalleled services,” because they want the facts. Buzzwords might sound appealing, but they’re really just fluff and filler.

Reviewing your plan from an investor’s perspective will help you describe the problem your startup will solve, exactly how you’ll solve it, the market size, how you’ll approach sales, and how you can beat the competition. And those things are exactly what investors want to know.

3. By thinking like an investor you can identify your strengths and weaknesses

In a similar vein, reading your business plan from the perspective of an investor will make it easier to identify your strengths and weaknesses objectively. Weaknesses will vary from one business to the next, but once you identify those weaknesses you can then work on ways to fix them.

It’s important to remember that your strengths can also hurt your business plan. For example, one of your strengths might be expert-level insider knowledge. You need that knowledge to run your business, but you also have to be careful not to overwhelm investors by using language that is too technical or difficult for them to understand.

4. Investors care about your strategies, and you should, too

An effective business plan absolutely needs to include information about your business strategies, including sales, marketing, and distribution. It’s easy to forget about these important details when you’re reading your business plan from your own perspective, but investors might not be as tuned in to the particulars of your industry.

If you’ve already made some pre-orders, or even sales, describe exactly how you did it, from finding the customers all the way through distribution. If you haven’t made any sales yet clearly outline what that process might look look.

5. You’ll gain a better understanding of your competition

Investors are extremely interested in your competition… and how your business will beat them. Even if you don’t think you have any direct competitors, make no mistake, competition exists.

If your business plan states that you don’t have much competition, that will be a huge red flag to investors. Remember, any business that is competing for the same customer dollars that you’re trying to acquire is a competitor.

If you’re still working on creating an investor-friendly business plan, be sure to read our how-to guide on creating a business plan for your startup.