If you want to get any sort of funding for your business, you’re going to need to put together a brilliant business plan.
The quality of your business plan will be the main factor determining whether you get that loan you need from the bank, or the investment you need from VCs or Angels.
A business plan for startups is not merely an academic exercise. It is the action of looking deep into your business’s upcoming operations and working out precisely how to make them profitable.
Doing a thorough business plan can open your eyes to potential failures you hadn’t seen before.
Your business plan can either cover the essentials, or it can be done extremely thoroughly and cover far and beyond what is usually required.
If you want to interest Venture Capitalists and other investors, your business plan needs to contain as much easily-digested information as possible.
Also, the fewer credentials you have, the more thorough your business plan will need to be. If you have a track record of starting unicorn after unicorn, sure, your name alone might be enough to inspire confidence.
For the rest of us, and especially for first-time business owners, we need to do our homework.
Here’s what goes into a business plan.
Your executive summary will contain an overview of the rest of the document. It is intended to give readers a broad-level look at what the rest of the business plan will contain.
Your executive summary needs to be concise, and it needs to grab attention.
Don’t use high-flown language to try and impress. Be professional and give hard facts and figures that potential investors will want to know about.
The only reason a VC would put money into your venture would be if they felt they would get a return on it. Tell them the expected return in the executive summary so that their attention is piqued.
Why are you starting your business? What social impacts will it have? What is the overall goal of your business, both for itself and society?
Businesses which will bring value to their community and to the world itself are generally the types of businesses that interest investors.
Sure, businesses are there to make money. Even charities need to make money.
But that’s not the business’s mission (even if you thought it was until right now!) and it certainly isn’t your vision.
The Mission Statement is the broad, overall goal or objective that your business wants to achieve, such as: “Provide the finest dining at rates everyone can afford.”
And your Vision Statement states what effect you want your business to have on the world, e.g. “To elevate people’s self-esteem by showing them they are worthy of — and can afford — the finest meals”.
What product or service is your business going to provide? This section will contain an overview of that product or service.
The section needs to contain sufficient detail to show potential investors that your product is unique while, at the same time, being concise enough that they are not bored by excessive copy.
Provide high-quality images if possible.
If you’re starting a new FinTech or MedTech company, what makes you different from the hundreds of others that already exist in this field?
Instant payments? Cash App and Verge already do that.
No Forex fees? TransferWise and Revolut beat you to it.
Without USPs, you will never command the type of funding that turns startups into unicorns.
The reason you won’t get the funding you need is
the same reason your business will likely struggle. Businesses without USPs have nothing new to offer consumers so there would be no need for users to flock to you for your product or service.
The USP doesn’t need to be some new, disruptive service. It could be as simple as “Offering the best customer service this side of the Atlantic!”
You’ll need to back the statement up with credible facts and figures, perhaps also highlighting examples of perpetual shoddy or low-quality service from your competitors.
Your USP must be, by definition, unique.
How is your business going to make money?
Ah, yes, now we’re really getting into the types of things that investors and banks want to know about!
Will you make money on a monthly basis, through subscriptions or regular service? Is your income going to be locked to a single purchase per person per lifetime? If so, part of your revenue model needs to include the marketing that would be done to continue to gain new clients.
Some points to cover in the revenue model section are:
Some examples of revenue models are:
There are many different ways to earn revenue. Tell your potential investors in this section which ways you’ll be using.
You need to conduct research on your market.
Starting a business or deciding to sell a product in the absence of knowing your market is as predictable as spinning the roulette wheel.
This section should contain a detailed overview of the market you intend to do business in.
Key points to cover in this section are:
A SWOT analysis is a fundamental tool to be used constantly in business.
SWOT stands for:
In SWOT analyses, Strengths and Weaknesses are generally considered to be internal. Opportunities and Threats are considered to be external.
A SWOT analysis will allow you to take a straight look at your company’s position in relation to itself, its environment and its competitors. It is quite an eye-opener.
A SWOT analysis is crucial to ensure that your business actually survives for the next ten years. Do it well, and do it often.
You need to know who your competitors are if you want to have any hopes of succeeding. You need to have insight into their profits, business model and revenue model.
This might require scouring public records or, for the bold amongst us, actually going to a competitor and outright asking them! You’d be amazed by how many would simply answer you!
Much of the information regarding your competitors would’ve been flushed up in the SWOT analysis if it was done properly.
You need to give a high-impact description of your leadership team and other key figures.
This section should be spiced up with professional profile photos of each team member.
Don’t bore your readers by copying and pasting endless details from your leadership members’ respective CVs. Mention only the highlights and pay particular attention to
aspects that might reassure potential investors that their money is being placed in competent hands.
Don’t hesitate to namedrop. If you’re a tech startup and your C-suite has a combined experience of working at Google, Facebook, TransferWise, Square any other high-tech company, mention it — and do so in big, bold letters.
Numbers talk. Add factual information about how each of your execs has increased revenue for the companies they previously worked at.
If your team profile doesn’t have a high impact, you might want to consider bringing a few people on to nominally occupy key positions so as to reassure investors that their investment is secure.
Also, talk about key employees — team leaders and managers.
As for the general staff, give an overview of their skills. It also doesn’t harm to add some information about how employees think it’s so great to work at your startup.
Next up on the business plan comes the Marketing Strategy.
Part of this description must include costs, as well as who will be doing the marketing (i.e. in-house or external).
Agencies are notoriously expensive when it comes to preparing a marketing strategy. As a rule of thumb, agencies tend to work better with large brands that have big budgets — TV campaigns and that sort of thing. (There are exceptions to every rule, and there are many agencies that provide stellar service at a great price, too.)
Marketing for marketing’s sake is a fantastic way to waste money. Get some tabular data together showing how your marketing spend is going to result in ROI. Actually, break this down into a granular level — how many sales will Campaign A bring in?
How many leads will Social Media Marketing Campaign B bring in?
Delineate clearly what each goal of the marketing campaign will be.
Ultimately, marketing should result in sales (and don’t let anyone tell you otherwise!), but there are subgoals to sales such as:
There’s a well-known concept that often does the rounds on the internet: It takes ten years to be an overnight success.
A marathon is not won in a blink. There are milestones to be passed and indicators that determine if the runner is on track to achieve their goal.
If a runner is in the top twenty at mile ten of a twenty-seven-mile marathon, and the number one runner is just a few hundred yards ahead, that would be considered a great “Key Performance Indicator”. We know our runner has high chances of winning or at least finishing in the top ten.
KPIs come in many flavours, and you have to define them to know if you are on track to achieving your goals. Some examples of KPIs are:
Ultimately, if your business does not start earning a profit, it will not survive.
For ambitious startups that require a lot of capital before they can really get going, it can take several years before their P&L (Profit and Loss) statement shows them being in the red.
A P&L statement (or Income Statement) shows your company’s revenue (“top line”), expenses and net income (“bottom line”) for a given period of time.
It also shows precisely where the money is being spent and where it is being earned.
The P&L Statement is the brass tacks of business, divorced from high-flown ideas and dreams. If you cannot translate your dream into profit, you will not survive.
Even charities must turn a profit to keep going.
P&L Statements are prepared as part of a company’s monthly or annual accounts, usually by an accountant. In the case of your startup’s business plan, however, these figures might need to be forecast. (If you are not just starting out, then the P&L Statement provided should be your actual P&L.)
Forecasting a P&L Statement is a fairly gruelling administrative exercise, but a very necessary one.
You need to know where you’re going to spend your money. And you must know where more money is going to come in from.
The P&L links in deeply with the marketing strategy and KPIs.
This is one of the key sections that serious investors will spend the most time on. If you need to hire the assistance of an accountant to put it together, then do it
Similar to the P&L Statement, this Cash Flow Statement will show projected cash if you’re just starting out. (For established businesses looking for further capital, the Cash Flow Statement in the business plan must be the company’s actual Cash Flow statement.)
The P&L’s net income value is the first line in a Cash Flow statement.
The P&L tells you how much money the company made. The Cash Flow Statement tells you precisely how much of that money is actually in the bank account.
It is a key metric for investors when deciding whether or not to invest in your company.
Banks and investors want to know where your funds are coming from and what you intend to use them for.
This is another one of those financial report sections that give investors serious numbers for them to determine if your startup is a safe bet for them.
If you’re putting together a business plan primarily for investors as opposed to for a bank, including an Investor Proposition section is crucial to winning those investors over.
This section will contain an overview of what is in it for the investor when they invest in your company. It needs to be worded with finesse, and give potential investors a high-level concept of what their investment is going towards.
It’s one thing to look at a Cash Flow Statement, and it’s another to delineate specifically what an investor’s ROI is going to be at the end of the day.
GM, for example, is renowned for paying investors with borrowed money.
How much return will you bring your investors, and by when?
Investors feel more comfortable when there is a defined exit strategy in place for their investment.
The exit strategy allows investors to liquidate their position if certain criteria exist.
Exit strategies exist for businesses that are not profitable as well as for those who have achieved their goals, allowing investors to sell their stock or to remain in the company if they choose.
Your business plan needs to be written professionally, using proper English and good grammar.
Many investors understand that entrepreneurs are not necessarily master graduates in English, but some might not. Maybe some fusty bank manager might look at you with disdain if there are too many commas out of place or if you repeatedly used an N-dash instead of an M-dash in your copy.
We personally don’t feel that’s right. Unfortunately, whether it’s “right” or not, does not make it less true.
Your business plan might be kicked back if it is written improperly.
If you are weak in the English language, then hire a copywriter to put the content together after you provide them with all the facts and figures.
The purpose of your business plan is to get a message across. If your plan is written thoroughly, there will be a tremendous amount of text to consume.
Serious investors will take the time to go through it if they are particularly interested in your concept, but even they might have a hard time if the plan comes across as “dull” or “boring”.
And, as for investors on the border, they might not get beyond a few pages if the content is too text-centric.
Spice the plan up with visuals that add to understanding what you are talking about.
In the marketing and sales section, put a chart that shows a correlation between the two.
In the product section, put in CGIs of what the product will look like.
If you’re developing an app, add screenshots of the prototype.
Use your judgment, and utilise just the right amount of visuals to add to understanding without making the business plan seem like a pitch deck.
If you think this is a lot of work, that’s because it is! Building a business is not for the faint of heart. Seven out of ten businesses collapse in their first ten years.
That’s a lot of broken dreams and failed hopes.
It is also a lot of wasted money.
Putting the work in now to get a thorough Business Plan put together is not merely an administrative exercise. A well-prepared business plan will open your eyes to elements that could hinder your growth now or later.
If you need any help putting your business plan together, check out our business plan service for companies seeking funding, from bank loans to government grants to millions of pounds in investment.