6 steps to winning personal investors

Step 1: Demonstrate the profit potential of the business.

The best way to prove that your business idea is viable is to test it in the marketplace with what Michael Masterson calls "a working model." That gives you actual numbers to work with to estimate anticipated revenues and expenses.If it’s not possible to test your product/service on a small scale, you’ll have to do some research to come up with numbers from similar businesses that are already successful in the market you’re entering.

Step 2: Show that there is a substantial - and growing - demand for your product/service.

Use statistics - from census reports, economic reports, the Internet, and relevant news articles - to illustrate the need for your product/service.

Step 3: Lay out your marketing plan.

If you were able to test a "working model" of your business idea, there’s at least one marketing channel that has already proven to be effective for you. Include your test numbers in this part of the marketing plan, as well as projections for additional channels you intend to try...

Step 4: Specify your strengths.

Write about your actual experience in this particular type of business. If you don’t have that, explain how the experience you do have qualifies you to run one. Then add anything else that will convince your prospective investor that you will be successful. This could include your educational background, as well as personal achievements that demonstrate you have the intelligence, determination, and desire to make the business work.

Step 5: Outline how the business will function.

You don’t need to go into too much detail here, but you’ve got show your prospective investor that you’ve thought it through. If you’ll be selling physical products, explain how they will be procured, stored, delivered, etc. If you’re starting a service business, describe, in general terms, how the customer will be taken care of..

Step 6: Write out a budget.

Using the actual and projected numbers from Step 1 and Step 3, come up with a monthly budget for your first year in business and annual budgets for the next two years. Be sure to include exactly how and when the investor will be paid.As you can see, the kind of business plan you use to secure private funding is somewhat different from the formal plan that a bank or venture capitalist is likely to require. Since you probably know your prospective investor, you can make it more personal. You can also make it more persuasive by using a little creativity.