How to create the perfect business plan

The point of your business plan is to communicate to potential investors what your business opportunity is, and persuade them to seek a meeting.

Investors see literally hundreds of plans every year, but probably don’t read past the executive summary for most of them. Here’s how to do all you can to get yours noticed.

BEFORE YOU START

Before you start your plan, you’ll need to be clear in your own mind about why it’s a great opportunity. Don’t spend too long getting this “just right” because it’s very likely you’ll re-write the plan numerous times, and during the process you’ll come up with much better ways of explaining how good your business is. Once you’ve started, it’s easier to think of ways of making your business plan more attractive than when you’re faced with a blank sheet of paper.

Investors will want to see exactly where their money is going. Your plan must therefore map a specific and clearly defined route by which you intend to reach your goal, and how their investment will help you do this.

It’s also important to be clear about any actual or potential weaknesses in your business. Every company has them, and as long as you show how you’re going to address them, you will reassure investors you’re not blind to possible pitfalls, and you’re being completely upfront about your proposition. “You need to be open and honest. If you start to conceal things and you do receive the money, it can have very serious legal implications,” says Simon Keeling, director at corporate financier Corbett Keeling. “It’s much better to put your cards on the table and let the investor make up their own mind about it.”

Frequently, business plans are full of jargon and not completely clear about what’s so great about the proposed investment opportunity. Entrepreneurs are often so close to their company they find it hard to understand that the rest of the world won’t understand certain aspects of their industry – especially with more technical businesses.

Your plan should try to answer any obvious questions that any reader who does not know your business could have while reading it. The best way to find out what these are is to get someone sensible, and not too close to the business, to read it and give you their comments and questions. Equally, the Business Plan should not seek to include an answer to every conceivable question. Its objective is to excite investors enough to make them want to find out more face to face.

STYLE OF PRESENTATION

Entrepreneurs often wonder how stylish and colourful their business plans should be. These days, adding colour and pictures is easy, and they can help you to get your ideas across. Against that, some are concerned about appearing to be trying too hard. It’s a similar situation to job applications – often you receive hundreds, with some that stand out through coloured paper or unusual fonts. There are no definitive rules, but common sense works. Make it easy for your messages to be read by your potential investor.

Use a type size that doesn’t force people to squint (probably 11pt or 12pt for most core text), and have sensible headings, making it simple for readers to find what they’re after. Leave plenty of white space and paragraph breaks to make it easier for the reader to digest the information.

It’s important that you have a contents page, with page numbers, and break information down into sections, placed in a logical order. This will make it easy to navigate. This will allow the investor to refer back to important points quickly. Use graphs where they show something useful, and remember that colour can make spreadsheets far easier to read. There’s also a place for colour photographs, where they give a better idea of your product or service. The more professional and easy to read your plan is, the more likely investors are to give it the time it no doubt deserves.

Investor opinions vary about the ideal size for the plan, but somewhere between 30 to 50 pages is about right.

THE EXECUTIVE SUMMARY

“Producing a clear, brief, but completely understandable, business plan takes time and effort and the executive summary is key,” says Teresa Graham, advisor to Baker Tilly. “A lot of the time we see plans where there’s no executive summary or it’s far too long. Technology companies are particularly bad at this. You really need to capture the essence of the plan on page one or else risk losing interest.”

At no more than two pages long, the executive summary must do exactly what it says on the tin – summarise everything that’s contained in the business plan. Spend around two paragraphs on each of the key areas. These include prospects for growth, company background, the market, and the management team. Highlight the important points without getting caught up in too much detail – if a potential investor wants to know more at this point then that’s a good thing. “Remember, a VC has probably dozens of business plans sitting on their desk, so unless your summary does its job it’s unlikely they will read on,” says Stephen Goschalk, director of corporate finance, at Insinger de Beaufort. “Balance the desire to tell everything with being comprehensible. Keep it tight and arouse interest without revealing everything.”

THE PROPOSITION

Once the executive summary is completed it should make it much easier for you to map out what will be contained in the body of the business plan over the next 30 or so pages. The exact order in which you display the relevant information is not set in stone, but a sensible place to start is by detailing the company’s background, explaining clearly the stage of development you have reached and exactly why, with investment, there’s now an opportunity for a fast growth, highly profitable business.