If you’re just beginning to look at how to write a business plan, but don’t know where to start, then we’ve compiled a simple and digestible guideline on how to write a professional and compelling business plan that’s ready for investment.
Why do We Need to Learn How to Write a Business Plan Properly?
A business plan needs to create a compelling story about your company’s prospects in order to convince investors you have a product or service that matches customer needs. It’s is a serious, legal document used to convince VCs that you are worthy of investment and you understand everything there is about the market, along with some comprehensive USPs
To do this, you need to capture data that demonstrates to investors that there is a market for the product. Whilst demonstrating that the market has strong growth prospects and the company is equipped to capture a significant share of it.
Finally, a business plan must show that your company has a team capable of delivering the plan.
We have written a brief overview of business plan content previously so if you’re looking for a more concise post, please read ‘What is a Business Plan & What Needs to be Included?‘
What should be included in your business plan?
A business plan outline should loosely follow the below structure to make digesting information easier at the right stage.
Table of content in business plan
- Investment Summary
- Executive Summary
- Product Road Map
- Business Model
- Business Development Plan
- Appendix – to include :
- Profit & Loss
- Balance Sheet
- Appendix Links
- Risk Assessments
Essential points to note before writing your business plan
It is essential that the narrative and the three financial projections (Profit and loss account; cash flow; balance sheet) are consistent.
The commercial data contained in the projections also must be ambitious, but not so ambitious that they defy credibility.
Only people who have never run a company believe the projections in the early years of the plan will be entirely accurate. If the first year’s forecasts are met then you are witnessing a very special business. Most investors will see one or two companies in their career achieve their 3-5 year forecasts.
As a result most investors won’t base their decisions entirely on the finances, but they will want to be reassured the company is heading in the right direction. The point is unpredictable events emerge that nobody could have reasonably predicted and throw you off course.
The success of a company is best judged when it is under this type of pressure and how it responds. For this reason, the plan needs to demonstrate the combined excellence of the team and its ability to identify an issue and act and respond to it decisively.
Finally notwithstanding the reality that in the early years hitting the commercial projections will be as much about luck as judgement.
Investors will judge a company by monitoring progress against a business plan. For this reason the preparation of the plan is not something that should be regarded as purely a function to be undertaken by an accountant. It is far more important than that. The preparation of the plan is a team effort. The document must reflect the team’s collective view of what amounts to the company’s destiny. If the process of preparing the plan fails to capture the collective views of the team it inevitably means that when events deflect the company it opens the team up to the prospect of disagreement and fracture as opinions emerge that were never originally contained in the plan. As a founder you will also be held to the plan by your investors or board, think carefully about the weight that will carry!
Getting started on writing your business plan:
Business Plan format:
1. Investment Summary
Your investment summary is your way of making a short and snappy overview of what your investors can expect from your business plan.
This is your opportunity to grab their attention and make them want to read on.
Often the big investors with little spare time will glance at this page only to see if this business plan is worth their time in reading more. You need to include the most critical information which will be important to the investor. This should include a brief statement on the following:
- Market opportunity and market problem
- Your solution
- Your proposition/ USP
- Overview of your business model
- Funding needs – state how much it is you want
- Financial predictions and ROI- (Typically 3 year plan) growth and profitability.
- How you’ll use the investment funds
- Your Team
You’ll be expected to justify these numbers later in your business plan with a clear outline of how you arrived at this conclusion.
As we mentioned above, it’s important you introduce your team and their experience. It is the core team who has the success of the company in their hands. Be sure to include job roles and descriptions and of your board of directors, their roles and experience too. There are a number of investors that will invest mainly on the team. Products can fail due to a number of unforeseen circumstances, even to the best of teams. A new product/service is often easier to find than a good team.
2. Executive Summary
You should look at your executive summary like a baseball card. All of the important information is encapsulated on one rectangle.
The executive summary is essentially your pitch to get a meeting as an initial read from the prospect investor. It’s the first key to unlocking the doorway of your entire business plan. If the executive summary doesn’t get the attention of your prospect investors you can bet they won’t read the rest of your business plan.
That’s why your executive summary needs to be at the beginning of your business plan, and easy to find.
No executive summary is the same, but generally some important information to include will be your business model, the capital requirements, the use of funds, potential markets, your buyers, and return on investment.
This is your opportunity to showcase what it is that you want from the investors and how you’ll deliver in return. Clearly state what you’re asking for here in the executive summary. Remember to keep it short. Don’t waffle on in unnecessary detail. Your investors will have little time so will require the details of your business plan in as short time as possible.
We will soon be writing a separate blog post on how to write an executive summary. Keep a look out, or subscribe to our mailing list to get notification here.
You can either begin your opportunity page with a solution to the problem for your customers, or by introducing an opening opportunity in the market where you can demonstrate star positioning.
This is where you get to invite your prospect investor into the exciting opportunity of making a sizable return on investment.
What problems will you be solving amidst this opportunity?
Explain the problem you solve, who you are solving it for. Introduce your target market, the demographics and psychographics (the behaviours of consumers).
Bring in figures that estimate the size of the market with the potential for encapsulating on these figures.
You must demonstrate first and foremost that you have in-depth knowledge on the people who are buying your goods/ services. Investors will be looking to see that you absolutely understand your market. This way you can make informed predictions on how they may purchase your goods.
The best way to do this is to present your opportunity with evidence.
Your opportunities page must clearly have supporting evidence to back up your argument. Have many links to sources and studies that back up everything you are saying about your industry and potential market. Or provide your primary market research , highlighting real-life problems voiced by potential customers. There is no substitute for your own evidence though, make sure you share your own success stories here.
Providing validation to an existing problem will give you a more viable business concept. You must prove that your solution is a good fit for the market problem and opportunity.
This is where you present the solution to the problem.
What are your plans to seize this opportunity? We mentioned earlier the ‘secret sauce’ and what is your unique solution to the problem in your industry? How is it offered to your customers?
You can even present user cases to sell the idea of your solution.
Include screenshots and easy to view visuals of any product features that can support your explanation of your solution.
5. Product Road Map
Your product road map is describing your products current position and where it will be after investment. It is important for potential investors to know how their money is going to be spent.
This is essentially your product development strategy. Be sure to include phases of development and proposed timelines
The goal of this section is to prove to your potential investors that you can compete with incumbents and see off any potential new entrants.
Distinguishing yourself from competition is a critical component to your business plan. Investors need to see your worth in the market to part with their funding. You need to establish your direct and indirect competitors and their individual competitive advantages. Then you’ll need to communicate how you set yourself apart from them.
Whatever your competitive advantage be sure to explain it in detail. Whether it’s your pricing strategy, location or product features. Ensure you communicate why your buyers will choose you over your competition.
So by now you’ve identified your market problem, your solution, your competitive advantage, now here’s where you tell investors how you’ll make the money.
This is arguably one of the most important sections of the business plan. You’re asking for funding, so investors will need to know how and by what mechanism you’ll be making a return for them.
You need to convince potential investors that your business model is capable of propelling the company into the financials you hope to achieve. Many companies will make financials that sound promising to investors and look great without doing a breakdown of how that will work with their model. We’ve seen business plans where millions of individual sales would need to be made in year one for them to hit their financial projections. Be realistic!
There are dozens and dozens of business models to choose from, we will cover these in a future blog post so make sure you’re on the mailing list so you don’t miss out.
Are you single sale? Is your product self signed up? A SAAS business? Freemium? Distributor? Retailer? Do you need a physical location? Is it a franchise? Does it have a proven model? Does it make sense to your business? Is it scalable and sustainable?
For instance if you are writing a business plan for a consultancy, the limitations are the amount of time you consultants can give, creating a SAAS business off that could lead to scaling issues?
It’s important to note that business models aren’t mutually exclusive, successful companies often have blended business models. For instance software companies can charge subscription fees then take commission on sales and charge for custom development work.
In this section you should go into detail on how you will charge, how frequently you will charge and go into further details like pricing tiers where applicable.
8. Business Development Plan
When looking at how to write a business plan, your business development plan is where you demonstrate how you will acquire customers.
It’s important here to introduce in detail your marketing and sales strategies.
In whichever order you present these details, be sure to include current inbound strategies, future inbound strategies involving your Key Performance Indicators (KPI’s), and the same for current outbound and future outbound strategies.
Within your strategies be specific and show your progress on chasing and closing leads. How this currently is working with figures and how you project these figures will progress with future strategies.
Do you have any partnerships that will acquire more customers? Conversions? Outsourcing?
Give detailed reports on current progress and how using these techniques can give you gains in the future.
Here is where you can also talk about projected company recruitment and a growth timeline.
Be sure to include all forms of your business development in acquiring customers.
Here are some ideas for an example:
- Website( mobile and desktop)0
- Retail Outlets
- SEO (Keyword content and blogging)
- Paid Search (Google Ads, Facebook ads etc)
- Social Media Marketing
- Email Marketing
Introduce the investment section of the plan by re-igniting the exciting opportunity the market is unfolding to your investors and why you are the right company to get behind to capture these opportunities.
Here is where you’ll provide a forecast on your financials. Remind investors of the investment capital and in detail state what it is you’ll do with the investment.
Start by stating your projected return on the investment. Then provide a breakdown of how you’ll get to these figures.
Be realistic about potential customer acquisition, but as we mentioned in the introduction, not too modest that you put off investors with such low figures.
Your sales forecast news to cover at least the first 12 months of your business. List your projected customer growth and annual revenue. This is typically 2 or 3 years.
These predictions should cover sales and expenditures. Attached with this will be your Cash flow statement, Balance sheet and Profit and Loss statements. You can also induce any new partnerships, new markets or new product integrations if these are part of your business development plan for the future.
Your appendix is where you’ll provide all your evidence to show your predictions of the business plan and any other material to support the credibility of your business idea.
In your appendix you should include:
- Profit & Loss
- Balance Sheet
- Appendix Links
- Risk Assessments
Table of content in business plan
For the finishing touches, your business plan must also include a title page or cover and a table of contents so that potential readers can find sections within your plan easily.
Your business plan design matters too!
You may be on this page as you’re looking how to write a business plan, but you should also seriously consider, how to ‘design’ a business plan.
Your business plan is all about attracting the attention of potential investors. How it looks is half the battle. Investors will have other business plans competing with yours, so you need to make sure it stands out!
This is a great opportunity to show off your branding. You’ve heard of the phrase used for cooking, “the first bite is with the eye”, well it is the same for investment. If the business plan is professionally presented then you come across as a serious company.
Be careful of your spacing, margins and formatting. Not to mention it needs to be grammatically sound!
For the finishing touch a business plan should be professionally printed and bound.
We will write soon a post on how to design your business plan.
And lastly, be prepared for additional questions.
Some investors may want to talk to you and ask more about your business idea. So it makes sense to be prepared for additional questions.
For example, these could include:
- Who is your target market?
- What’s your customer pain points, and how do you address it?
- What’s your customer acquisition cost?
- What share of the market do you propose you’ll achieve? What is the size of the market?
- Who are your core team members, what’s their expertise? What’s their experience?
- What’s your USP? What makes you stand out from the crowd? How can you communicate this to your target market?