How to write a business plan to impress your investors
Hannah Sheath, our business growth advisor, explains the power of a really good business plan, and offers tips on how to write one. She explains in detail exactly how to do it, but her top ten tips are:
1. Have a consistent message. Get someone external to proofread: are you telling the story you want to tell about your business?
2. Be as concise as possible. Try to keep your business plan as short as possible, ideally 20-30 pages; investors don’t want to be wading through information
3. Ensure the plan is accurate. If investors start to spot inaccuracies they will challenge the rest of the plan more.
4. Demonstrate that your projections are achievable. Make sure you have assumptions to back up the projections
5. Iron out any possible challenges. Investors like to know you have thought about the challenges and ways to overcome them
6. Include charts, images and graphs. These break up the text and make it easier for investors to grasp key points
7. Establish benchmarks / KPIs from the outset
8. Confirm the maths. And then confirm it again. And then get someone else to confirm it. You do not want to lose the faith of an incredible investor because you hadn’t checked your sums or equations in Excel.
9. Make sure it reads well and looks good. Spend time on editing.
10. Update the plan regularly. When you raise investment over multiple rounds, you cannot just recycle the same old material – show them you’re on track, show them previous investment has made a difference.
Why write a business plan?
A business plan is required by investors in order to raise capital – however, it can also be useful internally to communicate your vision and check progress against your plan.
Writing a business plan shows you have truly thought through your ideas and strategy to implement them and the financials work. It’s a great way of reviewing your business; it helps you think about strategic direction and enables you to review past performance.
A business plan should be clear, concise, and achievable – and throughout, it should demonstrate a deep understanding of your own business how it is situated within the market as a whole.
How to write a business plan
Key areas include: the market opportunity; competition and your competitive advantage; sales and growth strategy; team and board; and a brief financial overview. This should also be condensed into an easily digestible one page executive summary that highlights the key points from each section.
The executive summary should highlight the key points from each of the other sections – it is normally written last and should be kept to one page long.
Section One: Business Overview
This should not be detailed; it should summarise the purpose of the business, how it operates, the market it operates in and give a brief financial snapshot; this is especially important when you’re looking at expressing social impact along with business growth. Start with the history – make sure your reader (whether that’s your Board, or your investors, or a potential partner) knows the motivation behind your business; where you have come from is important to understand before you can think about where you have been.
Outline your business model (including products and services) and make sure you discuss social and/or environmental impact in detail if you’re an impact-focused business. Impact cannot be an add-on: if your business genuinely has social change at its core, you need to express this right from the start.
Section Two: Social Impact
So not every business has social impact at its core – but every exciting, transformative business does. Foreground this in your business plan: relate it to key stakeholders (not only shareholders, but customers, employees, your local community). Discuss your environmental impact and sustainability strategy. Be very clear on what your social impact is, who benefits and what it is that you are doing differently to your competitors.
Section Three: The Market
Start with an overview: your target market, its size, recent trends, supply and demand. Think through the competitive landscape – this doesn’t just mean talk about competitors, competitive advantage and market share, it also means thinking about collaboration and where there are opportunities for partnership.
In this section, you need to show why there is a gap in the market for your business – and how you will use this to your advantage.
Section Four: Growth Strategy
Ensure your growth plans are achievable – financially but also from a capacity and market standpoint. Present your growth action plans – short, medium and long-term. Create an action plan and timeline to really give weight to your strategy. Implementation matters too: demonstrate that you understand the requirements and considerations needed for successful growth.
Section Four: Clients, contracts and partners
This is where you show deep understanding of your customer. You need to explain who your clients are, and how and when you earn revenue from them. Ensure you breakdown key contracts – thinking through amount you will earn, length of each contract and percentage of total revenue. Talk through your partnerships, relationships and other opportunities in detail.
Section Five: Management and Governance
Include an organisational structure chart. This is the simplest way to demonstrate how your team fits together. Show off your management team, too – explore their roles, and give short biographies that chart their skills and experience. If you have a strong Board or collection of Advisors, make sure they are included too; they will give your business plan real credibility.
Ownership is important too; do you have an employee ownership scheme? Who are the majority shareholders? And if you have stakeholders or service users in the wider community, how are they represented? This area will be particularly key if you are seeking impact investment.
Throughout this section, be very clear on roles, strengths and why these are the right people to be running the business. Keep detailed roles/CVs in the appendix.
Section Six: Operations
Draw out the key points here; you do not need to go into too much detail on different policies/IT systems – just highlight that you have them. Talk through business locations, legal structure and ownership, contract details, IT and technology, and environmental and other company policies.
Section Seven: Financial Overview
Include summary historic and forecast financial statements and explain variances, trends and assumptions. Include a reasonable contingency in case revenue or costs differ from your forecasts. This is where, for many investors, outstanding entrepreneurs can sink or swim (and yes, sometimes you might need to call in an advisor – that’s what we’re here for.
- Historic financial performance: Profit and loss, cash flow, balance sheet
- Financial projections: Profit and loss, cash flow, balance sheet
- Current trading
- Key risks and mitigations
If you don’t know where to start, check out my previous blog on Building a Financial Model.
Section Eight: Capital Raise
If you’re asking for money, you need to show exactly what you are going to do with it. Be clear on the amount of money you are looking to raise and what type of investors with which you are looking to work.
Explain your use of funds and tie it directly to your growth strategy; discuss the amount of investment you require and the terms you are looking for (check out my blog on how to value your business if you aren’t sure). Provide a timetable and a pro forma capital structure.
Include relevant and important information that does not fit into the core business plan in the appendices. This might include a detailed company history, a group structure chart, case studies, CVs, production flow chart / product journey, key contracts, and detailed financials.
Your business plan will tell the story of your business without you there – make sure it is accurate, ensure financials are correct, and remember to keep social impact at the heart of your strategy for growth. Impact investors want good numbers and clear marketplace positioning, but they want commitment to social or environmental value too: use this as an opportunity to give it to them.