Every year, I review a lot of business plans. Many are internal pitches for investment, while others are sent in by entrepreneurs looking to sell out. Scanning a business plan is bit like reading CVs. With experience, you can tell which business plans you want to focus your efforts on and then weed out the rejects. Here are my top ten tips for getting to the top of the pile.
One of my biggest gripes is when good ideas are very poorly presented and don’t address the key questions you need answered. So, you end up either rejecting the business plan or spending time getting information that should have been provided in the first place.
So, if you want a decent chance of getting investment for your proposal, here are my top ten tips for writing a business plan:
1. A long business plan is usually not a good plan
Nor is it any fun wading through a turgid tome. If you can’t summarise the proposal in ten well-structured pages, don’t bother. I like to see three parts to a business plan: Where are we now? Where do we want to be? How are we going to get there?
2. Make your business plan market focused
Enthusiastic amateurs often rattle on about the technical aspects of their invention. Please shove anything like this in an appendix in your business plan and focus on the market instead: size; growth; annual demand (units and value).
3. Know your prospects and your competitors
Make sure your business plan demonstrates, with evidence, the compelling reasons why customers need your offering now and how you will achieve competitive differentiation. Your business plan needs to be realistic.
4. Distribution channels
Does your business plan outline how you will generate leads and sell? Will you be selling direct or via distributors.
5. Includes the details of your management team in your business plan
Without a strong, experienced, well-balanced team, your chances of failure are high.
6. If you don’t show the breakeven point and ROI for investors, why would anyone invest?
Also, avoid hockey stick graphs with ridiculous profit margins in your business plan. You must illustrate cash-flows and sensitivity analysis.
7. Any assumptions underpinning your projections in your business plan must be linked back to your market data as a reality check
Unit sales information rather than just values help.
8. Make sure your business plan addresses risks
Also show how you will mitigate them. Can you build barriers to entry?
Does your business plan demonstrate that growth will continue beyond the plan period? External investors will want an exit.
10. Your business plan needs to excite the reader
Get somebody unconnected to read your business plan to give you constructive feedback on whether it excites, bores and above all else, is a compelling proposition.