How do investors evaluate a business plan?

Before going into the specifics of the banker’s approach versus the equity investor approach, let’s start by examining their decision-making process which is very similar.


While skimming an investment manager or bank advisor will read your executive summary and decide if they think the opportunity is worth looking at in more detail. As this is a quick decision, it is important that you put the odds in your favor by making sure:

Keep your summary short, to the point, and to the point: in 5 minutes the reader should be able to understand who you are, what you do, what the financial potential is, and how much money you need. Avoid going into too much detail, just make him want to know more about your project.

If your business plan takes this step, the investor will then start to go into the details of your plan.

Due diligence

The due diligence phase is a phase of analyzing and studying your plan.

The first two things an investor will check are the market and the competition. Once convinced that there is a market for your product and that this market is not already saturated, he will look at your strategy: how do you plan to attack the market and especially what is your competitive advantage. After the strategy he will look at your numbers, and test your main assumptions under different scenarios (for example: what if the sales are 20% lower than expected?).

Here you want to make the investor’s life easier by citing your sources. If you say the market is x, the investor will check where you got that number from. And if your source seems doubtful he will challenge you.

During this due diligence phase you may receive questions from the investor on certain points he wishes to explore in depth, and if this has not already been done, an invitation to meet him.

Once the investor is satisfied with the plan, he will write a memorandum presenting the investment opportunity that he will support in the investment or credit committee as appropriate.


I have attended both investment committees as well as credit committees and they are very similar. There are two teams: the team that supports the investment project and the team that makes the decision and whose job is to ensure that the loan will be repaid or that the equity investment will generate a return. sufficient given the risk of the project. The team in charge of the final decision will explore all the scenarios that could lead to the failure of the project. The team presenting the opportunity aims to convince them of the strengths of the project. To do this, it must demonstrate that they have studied all the possibilities and that the risk of failure is limited given the elements in the business plan.

How do investors evaluate a business plan?
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