Evan Carmichael breaks down what investors actually read in a business plan: an executive summary that passes the grandmother test (no jargon), financials matched to your investor type, and a credible management team. Banks want repayment security; angels want high growth. Use free templates as a starting point, but substance wins.
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How to write a business plan for investors. A lot of entrepreneurs come to me with this kind of question. It came in recently from one of my YouTube viewers, Beauty Box. Beauty Box wrote in to say, "I'm a new subscriber, Evan. I'm a recent graduate with a great business idea. My major wasn't business and I'm having difficulty putting together a business plan. Do you have a generic template I can use or know of a site where I can get one? Thank you." When you're approaching investors, okay, I don't know if you're going after angel investors or friends and family or bank or whatever it is. It doesn't have to be complicated, okay? A business plan does not have to be super complicated. You don't have to have a business degree. Don't let that hold you back. Just because you don't have a business degree, you think I can't write a great business plan, okay? What it has to do is make sense. If you go to any bank website, any major bank, they'll have templates there. They'll have templates of business plans that you can look at and see how they structure it. The structure is not as important as the content, and as long as it makes sense, an investor's gonna look at it and make a decision based on that. Remember, investors are not experts in your field. They are not experts in the beauty business. They're generalists. They wanna see that you're gonna be able to make them money, or if it's a loan, to pay back that loan. I used to be in the venture capital business, and here are the 3 things that I looked at first. 3 things. These are the 3 things that I looked at before making a decision to bring in a company give them money or not. Okay, the very first thing is the executive summary. That's the 1 or 2 pages at the beginning of your business plan that explains in basic English what it is that you do. And so many entrepreneurs get this wrong. Most of the business plans that I saw got trashed because the executive summary was, was terrible. If you don't do a good job in executive summary, it doesn't matter how great a business plan you have, nobody's going to read it. Because you didn't sell them on the executive summary. So that one page is critical, has everything that somebody needs to know about the opportunity ahead of them. Okay? The one thing that we always look for is that it pass the grandmother test. Okay? This was a term used, I guess, in the VC world. Is it so simple to understand that your grandmother can understand it? Because too many entrepreneurs put jargon and short forms and technical terms that the investors, they don't understand that. And it makes sense to you. You read it and say, "Yeah, that's what we do, of course. How do you not understand that?" But it doesn't make sense to the average person. So make sure that you give your executive summary to a person who has no idea what your business is all about. A layman. Because if they can understand it and see the opportunity, then you're ready to bring it to investors. So it's the most important first step. Get the executive summary down. The next thing they're going to look at is your financials. They want to see how much money do you need, what's it going to be used for, and how much money are they going to make back. Different types of investors have different criteria. Okay, if you're looking to go to a bank, they don't want to see massive huge returns. They want to— they want the security that they're going to make their money back. If you're going to an angel investor, they want to see that you're going to be making 30% a year on their money because they want an exit from this. So they want to see how high growth. If you're a low-cost, low-margin, low-growth type of business, it's not gonna work with an angel investor. So you've gotta make sure that the financials make sense for the person that you're talking to. The next thing, the last thing to look for before making a decision to read the whole business plan is the team. Who is behind this company? There's an expression in the VC world again called "horse for the course," meaning are you the right person to be at the head of this company and make this opportunity happen? Because you could be in a great market, but if you're not the right person, you're not going to be successful. And you can be in a crappy market, but if you are the right person, you can still build a great company. So they want to learn about the management team. Who are you? And the biggest thing that most entrepreneurs fall down on here is they have lack of startup experience. Investors and bankers, they want to see that you have done this before. Or you have people on your team who've done this before. And quite often on a management team there's nobody there, it's just you. And you've never done it before, and so these are like big strikes against you. Say, "I'm going to risk my money with this person? I don't think so." One way to combat this is to— you can either look for partners, so bring on people who have more experience who can complement you. But if you don't want to give up equity, you're not quite sure of a partnership relationship yet, Create a board of advisors. And these are people who've had some experience, have some success. They don't have any equity in your business. It's kind of a loose term, but they're willing to lend their name to the business. And an advisor could be structured where you meet them every month and you have coffee and talk about it, or it could be that you, you know, it's loose and every 6 months you have a phone call. As long as they're willing to help you and lend their name to the project. Because if a banker or an investor looks at your management team and they see you with no experience, no partners, you've never done it before, they're thinking, "I'm gonna lose all my money!" So reduce that risk, separate yourself from everybody else. Bring on a board of advisors, talk to people, even if it's your lawyer or your accountant, even just putting their names on there to say they're advisors, you've already separated yourself from most of the other people who are presenting and giving their business plans in because it shows that you value and trust the expertise of other people who can help you build this thing up. Okay, if you pass those 3 things, they're gonna look to the rest of the business plan and see if they want to make a decision to bring you in, invest in you, or whatever. Okay, the actual templates are not hard to find. Again, any bank website will have sample templates, but the templates, it's a good starting point to give you an idea of The sections. But really the meat of it is going to come from having an executive summary that makes sense, financials that make sense, that are tailored to the person you're talking to, and then having a management team/board of advisors that give the investor some sense of security that if they give you money, you're not going to go lose it all. Thank you for the great question. If you have any more questions, let me know. Believe. For those of you watching, like the video, give it a thumbs up. If you have a comment about this video or you want me to expand on any of the things I talked about, leave a question below in the comments. I'll make a video response. Thank you so much, and I'll see you soon.
