As an angel investor, former venture capitalist, private equity investor and serial entrepreneur, I’ve seen and written many different business plans and pitch decks over the past 20+ years. I also recently launched ACHIEVE: Exploring the Non-Linear Path podcast, where entrepreneurs share their journeys. Many of them shared their business plans and talked about how they have overcome adversity. Based on thousands of pitch decks and business plans, I’ll share some of my experiences with the most notable. These are the best practices that I have used when writing business plan.
1. Getting a meeting should be your goal
Let me start by saying that when reviewing a business plan, the most crucial question is whether I would like to meet the company’s management team. Most investment decisions are made after the meeting and sometimes after multiple sessions. Rarely are they made after reading the business plan?
My takeaway will often be probability-grounded. Some deals will have a high probability, while others will be less likely. The author’s task is to get me to the meeting decision quickly.
These ideas range from the simple to the more labour-intensive. These ideas will help your plan stand out from the rest. These are the things that I look for when reviewing business plans to make them stand out.
2. First impressions
Could you please tell me in the first sentence what your business does? There must be a triage, given the number of business plans I have seen over my career and continue to see. If there weren’t, I wouldn’t have enough time to choose the ones I want to pursue.
The first sentence of the business description is the most critical gating point. Your elevator pitch should be embedded here. If I spend too much time looking for the company’s core competencies, I start to wonder what else might be missing and what other areas of the business lack efficiency.
It’s essential to communicate it right away with your audience.
A tone that is simple and based on eighth grade English should be used. I don’t want to process complex sentences or track multiple clauses in my head. The sooner you tell me what you are doing, I can use my cognitive energy to decide whether or not I like your idea.
3. Don’t just provide data, but analysis
Many companies provide a list or data dump, especially when discussing the competition. It isn’t exciting to have a list of competitors and a description of their websites. However, this doesn’t mean that you can understand the competitive landscape and the forces at work to make you successful.
You must explain why you are concerned about competition. How do they view the market? I would love to hear about the star employees they have. I would love to hear about your experiences at their booths at conferences. Let me know what weaknesses or blind spots can be exploited. I feel more secure knowing that you have carefully analyzed your competitors, making my investment less risky.
4. Segment your potential market
I hate it when a market of enormous size is identified for companies that are just starting. It is a waste of time in terms of investment horizon. It needs to be reduced and shown as a percentage of the market that you can hope to control within five years.
The best plans I’ve seen are those that combine the revenues of competitors. You may have another operational metric that is more easily accessible to back into a sales range, such as square footage of the building, number of employees of critical customers, data on import trade, etc. You can find out more.
Would you please share a few sentences about your go-to market strategy? You must share any information about sales cycles in this section. Make sure that your financial section includes that information.
5. Don’t show your financials
Although it may seem odd, I don’t care about the numbers. First, I want to see how you did the mental exercise. Do not bog me down with assumptions. Instead, simplify them to see your thinking process quickly, without getting lost in the details.
I would like to see how you constructed your projections. I want to know how you calculated revenue and costs over five years. It will help me determine if you truly understand your business. These revenue questions are essential to answer:
- Which were the components of your income?
- It is possible to break it down into economic levers that will help you drive your business. For example, are you focusing on volume and price?
- What are your methods of increasing revenue? Are you gaining market share, or are you growing the overall industry?
- Can you explain which percentage of growth each source produces?
- What should the pricing trend be?
What assumptions have you made regarding scaling about cost? For example, are you able to distinguish between fixed and variable expenses? Are you familiar with break-even points?
It is essential to communicate clearly and tell a story. It shouldn’t be enough to have a lot of numbers on one page.
6. Personalize your management background
This section is where people often list their education, work experience, and professional recognition. These are all things that I can find on my LinkedIn profile. Please give me something more personal to help me see your passions. It will provide your team dimension.
It could be the anecdote that ignited your interest in the industry, the aha moment when something was missing, and it became clear that you had the opportunity to fill that void or do it better, or the pivotal moment when the decision was made that you would like to start this business.
Management background sections that are well-written provide information about the facts of a career, followed by a story that hooks me. I must hear your reasons for doing this. If I suspect it is to make money, I will likely move on to the next pitch. However, if there is a deeper calling, a sense of purpose, I’m intrigued.
That’s because I know that there will come a time when your body is so tired that it makes you want to stay awake. Only then will you be able to push yourself to the limit. You might say no to money and look for other ways to get it done. If you are an entrepreneur who has had some success in your business, you will likely have many options.
I would like to know how you plan to run the company I’m reading and asking for investment.
7. Clearly outline how you’ll use the funding
It is just one of many approaches business plan writers can take. This number can be pretty elusive. It is essential to break down the spending by the main areas of output. It’s a good rule of thumb to create a separate line for spending that exceeds 10% of the total.
Aside from that, I also like to see:
- Did you stage your capital raise?
- Have you set reasonable milestones for each step?
- Are they suitable for your business type?
- Do you allow yourself enough time between raises to ensure that you don’t feel like you’re constantly fundraising?
Incredibly, you can spend just a few quarters building your business and setting up the infrastructure necessary to make it ready for the next stage of growth. The best plans I’ve seen will show how many months they can get with a specific dollar amount and estimate when and how much the future will be.
8. Consider who you want to add to your advisory board
A Board of Advisors can be an excellent way for you to gain in-depth expertise at a fraction of what it costs to hire people. Every startup should make this a strategic decision. Advisors may work for equity, equity plus a nominal fee.
Myself, I am an advisor to several companies. My goal is to see a Board comprised of strategically able people who can help you access what you don’t have. However, they may not be able to do it as quickly. So, therefore, someone with a lower title in an industry you worked in is less attractive.
However, it can be very beneficial to have experts in the industries or markets you are trying to sell. Don’t combine it with people you don’t like; I wouldn’t recommend that you see your accountant, lawyer, or college friend unless there’s a clear strategic benefit. These people will introduce you to others without sacrificing compensation that should be reserved only for people you do not know.
9. Take into account the overall appearance and feel
When presenting your business plan in its entirety, you must remember that not all companies have to spend a lot of money or go to great lengths to achieve a professional feel. For example, you don’t need to use fancy graphics or erudite languages.
Visual unity and a matching tonal unity in work are the two most important aspects. Editing should be done by one person, even if there are multiple members of the management team. It ensures that the tone is maintained.
Your idea is as good as your plan
The strength of the business idea will ultimately be the overarching quality of a business plan. Therefore, it is essential to include the following guidance to make a strong statement stand out from the many others. I very much appreciate your business plan.
Disclaimer. The opinions and views expressed in this article are the authors Shalom Lamm.