A business plan is a selling document that conveys the excitement and promise of your business to potential backers and stakeholders. These potential backers could include bankers, venture capital firms, family, friends, and others
Who could help you get your business launched if they only knew what you want to do? Getting money is expensive, time-consuming, and hard work. Having said that, it is possible to get a quick decision. One recent start-up succeeded in raising £3 million in eight days, the founder having turned down an earlier offer of £1 million made just 40 minutes after his business plan was presented. Your business plan should cover what you expect to achieve over the next three years.
Most business plans are dull, badly written, and frequently read only by the most junior of people in the financing organisations they’re presented to. One venture capital firm in the US went on record to say that in one year they received 25,000 business plans asking for finance and invested in only 40.
Follow these tips to make your business plan stand out from the crowd:
Hit them with the benefits: You need to spell out exactly what it is you Hit them with the benefits: You need to spell out exactly what it is you do, for whom, and why that matters. One such statement that has the ring of practical authority about it is: ‘Our Web site makes ordering gardening products simple. It saves the average customer two hours a week browsing catalogues and £250 a year through discounts, not otherwise available from garden centres. We have surveyed 200 home gardeners, who rate efficient purchasing as a key priority.’
Make your projections believable: Sales projections always look like a hockey stick: a straight line curving rapidly upwards towards the end. You have to explain exactly what drives growth, how you capture sales, and what the link between activity and results is. The profit margins will be key numbers in your projections, alongside sales forecasts. These will be probed hard, so show the build-up in detail. Say how big the market is: Financiers feel safer backing people in big markets. Capturing a fraction of a percentage of a massive market may be hard to achieve – but if you get it at least it’s worth it. Going for 10 per cent of a market measured in millions rather than billions may come to the same number, but it won’t be as interesting.
Introduce you and your team: You need to sound like winners with a track record of great accomplishments. Include non-executive directors: Sometimes a heavyweight outsider can lend extra credibility to a business proposition. If you know or have access to someone with a successful track record in your area of business who has time on their hands, you could invite them to help. If you plan to trade as a limited company you could ask them to be a director, without specific executive responsibilities beyond being on hand to offer their advice. But they need to have relevant experience or be able to open doors and do deals.
Provide financial forecasts: You need projected cash flows, profit and loss accounts, and balance sheets for at least three years out. No-one believes them after Year One, but the thinking behind them is what’s important.
Demonstrate the product or service: Financiers need to see what the customer is going to get. A mock-up will do or, failing that, a picture or diagram. For a service, show how customers will gain from using it. That can help with improved production scheduling and so reduce stock holding.
Spell out the benefits to your potential investor: Tell them that their money will be paid back within ‘x’ years, even on your most cautious projections. Or if you are speaking with an equity investor, tell them what return they will get on their investment when you sell the business on in three or five years time.