Last post: Apr 17, 2023
For over a decade I’ve been helping business owners to plan and grow. One of the UK’s leading business plan writers, I have worked with many hundreds of business owners from start-ups, sole traders, limited companies, through to large corporations. To date I would conservatively estimate I have raised over £175 million in total for clients.
A business plan is a critical document for any entrepreneur seeking funding from investors. It outlines the company's mission, products or services, financial projections, and management team, among other things.
Investors use the business plan to evaluate a company's potential and decide whether to invest. In this article, we will discuss the key elements that investors look for and how to structure a 'funder-friendly' business plan.
What a Business Plan Must Include
- Executive Summary
The executive summary is the first section of the business plan and is often considered the most important. It should be a brief, but comprehensive overview of the business plan. Investors use this section to quickly understand the plan's key elements and decide whether to read further. The executive summary should include the company's mission, products or services, target market, financial projections, and management team.
In general, an effective Executive Summary should be at most two pages. However, depending on the complexity of the underlying business, an additional page or two may be necessary. Critically, the contents should be clear and concise, drawing in potential investors and motivating them to keep reading.
- Market Analysis
Investors want to know that the company clearly understands its target market and the industry it operates in. The market analysis section should include information on the size of the target market, the industry's growth rate, and the company's competitive position.
Your plan's market analysis section provides evidence that your company can exploit a niche in the market. This analysis also provides the foundation for your marketing and sales plan. This section must also demonstrate your expertise in a particular market and the sector's attractiveness from a financial standpoint.
- Product or Service Description
Investors want to know that the company understands its products or services and how they will be marketed. The product or service description section should include information on the features and benefits of the products or services and the company's pricing strategy and distribution channels.
This section should also include a detailed explanation of the company's unique value proposition or the benefits it offers that are not available from competitors. Ideally, this section needs to communicate concisely why a customer would choose your product or service - the clearest benefits that customers receive, which also makes a case for your company as the problem-solver.
- Management Team
Investors want to know that the company has a strong management team with the experience and expertise to run the business successfully. The management team section should include information on the backgrounds and qualifications of the key team members and their roles and responsibilities.
This section needs to detail the relevant credentials and expertise of a team of managers in a company, as the quality of your company's management team will rank high on an investor's list of priorities.
The management team section should help the reader to recognise what sets your business apart from others. Remember, investors will invest in people as much as in good ideas.
- Financial Projections
Investors want to see that the company has realistic financial projections and a clear understanding of how it will generate revenue and profits. The financial projections section should include detailed information on the company's projected income statement, profit and loss statement, cash flow statement and balance sheet. This section should also include information on the company's break-even point or the point at which it will begin to profit.
Typically, an investor will need to see three of five years' detailed financial projections, including capital and operating costs, staffing plan and revenue.
The financial projections in a business plan should show how you anticipate your business growing and how it will give enough back to an investor to justify his or her risk. Business plan financial projections should be both optimistic and realistic, based on research and experience. Much like the business plan itself, the financial forecasts demonstrate how you intend to achieve your commercial objectives, make a case for funding and get your business to where you want it to be.
In summary, an investor will want to know exactly why you need the cash and what you plan to do with it – he or she will also want to know when they can expect a return.
- Marketing and Sales Strategy
Investors want to know that the company has a clear plan for generating revenue and a good understanding of marketing and sales strategies. The marketing and sales strategy section of the business plan needs to present the approach you plan to take to reach your target market and convert them to customers.
Essentially the marketing strategy section of the business plan builds upon the market analysis, outlining where your business fits into the market and how you'll price, promote, and sell your product or service. This section should provide a summary overview of intended marketing initiatives of how you plan to integrate a marketing mix across paid, earned, shared and owned (PESO) channels.
The marketing and sales strategy is your overall plan for making your business profitable; therefore, provide examples of previous successful marketing assets, campaigns, and collateral wherever possible.
- Exit Strategy
An Exit strategy is a plan for how the investors get their money
back. It is a clear plan for how the company will be sold or how the
investors will be able to liquidate their shares in the future.
Investors want to know that the company has thought about its exit
strategy and has a plan for how it will generate returns for its
investors, so you need to think about that in advance.
In Summary
It is important to note that a business plan should be professionally presented. Investors receive many business plans, and a well-written document will make it more likely to stand out and be taken seriously.
This includes having a clean and consistent layout, using appropriate language and terminology, and including charts, graphs, and other visual aids to help explain complex financial or industry data.
A solid business plan demonstrates to investors that you are serious about your business and have thought about the plans to make money. Whilst a business plan alone will not be enough to convince investors to back you, a comprehensive, carefully thought-out and detailed business plan is essential to gain the funding you require.
Investing in a business is risky. Investors put their trust in your business to deliver on their promises and take care of their money. Because of the risk, investors look for reassurance that they are making the correct decision – something to convince them that they will see a good return on their investment. That reassurance comes in the form of a solid business plan.
The key thing to remember is that investors see an abundance of business plans each week and it's your job to make them think that, for whatever reason, your business plan is worth a second glance. No investor will take you seriously without one.
To find out more about how Andrew Ludlam from 'The Business Plan Writer' can help and give you the very best chance in securing funds, please
go to 'The Business Plan Writer' website www.thebusinessplanwriter.co.uk
Alternatively, we are more than happy to create an introduction.
Call Choice Business Loans on 01494 410125 or email: info@choicebusinessloans.co.uk
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