In order to maintain their wealth, they invest some of it in businesses that are just starting. In return for their investment, these individuals become part owner or shareholder in the company they have invested in. They have some say in how the company is run, and earn off return on their investment off the equity of the company. The percentage of ownership of an angel investor is usually between fifteen and thirty percent, depending on the amount of risk associated with the business.
Five Things Prospective Investors Are Looking for in Your Business Plan
Before writing a business plan, put yourself in the investor's place and consider what the investor might be looking for when reading your business plan. Obviously, investors will expect to see the details of the business, such as the type of business, location, business structure, and markets addressed.
Beyond the basics, however, there are key areas that investors will focus on. While the particulars may differ depending on the type of investor, the amount of the funding required, and the nature of the business, there are five main things investors will be looking for.
1. Investors will want to see your background in the industry and business experience as well as that of your management team. Many small businesses fail because of weaknesses in the management team.
2. Not only do you need to show how your product is unique, you need to prove that there is a demonstrated need for your product or services and a large enough market potential to make the investment worthwhile. Investors don't want to invest in "little" ideas - you have to show them the potential to be a big success
3. No matter how unique your product or service may be, you must show that you know your demographics and will reach your target market in an ongoing manner. Your pricing and sales strategy have to be clearly defined and in line with industry norms.
4. Investors want to know that you have acknowledged and researched your competition thoroughly. In addition, they will want to see how you plan to contend with your competitors and distinguish yourself. What will give you the competitive edge?
5. Investors expect to see a return on their investment. Therefore, they want to see realistic financial projections that show how long it will take for the business to show a profit and for them to recoup their initial investment. They will also want to see a clear exit strategy: a way to make a profit and move on to the next deal.
