How to Write a Business Plan which Stands out
Planning a business is as important as actually carrying it out. I wrote my first business plan during a seminar at university. And due to my academic background, of course, I spent a significant amount of time on planning, writing my business plan, preparing summary slides and re-writing all these documents.
In general, it is a good exercise to sit down and think about strategies, numbers and your product. However, I soon realized that I clearly overdid this theoretical part and lost sight of what was actually important: building the business. Below I am sharing how you can avoid that. Let’s discuss what you really need to focus on to achieve a non BS-business plan which stands out at the same time.
Before You Start: Define Your Need
First and foremost, we need to clarify if your business plan has to be a document focusing on written text or if you need a Powerpoint-style document. For my own business, I started with the “classic” way I was taught at university: a 30-page text-intensive document. Eventually, I may have used this document once or twice. Just from the perspective of an investor: they get thousands of emails with business plans and actually do not have the time to read 30 pages per start-up in their screening phase.
I recommend focussing on a very good one page document to attract attention. As a follow-up, I would then supply a more detailed document with down to the point descriptions and graphics. Only if you are required for a certain application or meeting, would I recommend a long text about your company.
Explain your product in maximum three to five sentences: Who are your customers and what is their need? What is your offer to solve it? And what are the benefits for them? Why is there a need for your specific product?
Explain why now is the best time to address this need.
Sell you and your team why you are the right people to do it.
You may also want to put one or two key financial indicators such as Return-on-Investment in there. But be careful. Initially, I made the mistake to send out very bold numbers with my teaser. Even though they were backed up, more information was needed to understand why they are the way they are. And I think it killed some of the chances to open doors because we seemed overly positive or even unrealistic about our case.
This one-page summary should attract the attention of potential investors/partners/mentors and allow them to get an overview. After that page, they will decide if they want to keep reading more about your business case. You can use this one-page summary in your emails and/or first investor/partner meetings as well.
Product Overview (about 2 pages)
Showcase your product. Add pictures, technical specifications, etc.
Concept and Business Model (1 page)
Explain how you plan to make or already make money.
Target Market (1 page)
Who is your target market? In regional terms but also as customers. Try to be as specific as possible and describe them as if this person was standing in front of you. Give numbers of the size of this market. (Note: only give final numbers, you can add the assumptions in the annex.)
Competition (1 page)
Analyze your competition thoroughly. Make a matrix of their strengths and weaknesses and compare them to your own. Competition can be direct or indirect. The first one is obvious: who offers the same product/service as you? Indirect competition is a broader concept. For example, if you work on a website comparing rental properties, your direct competition is other websites doing the same thing. Your indirect competition are the real estate agents or landlords themselves.
Potential investors and partners will always ask about your competition. I know it may be scary if you see that other companies are doing similar things. But it shows that your market is very attractive. And it also forces you to keep up-to-date and constantly improve your product. There is no market without competition. If no one has sold your product before, there may be indirect competition. Or, you may need to analyze the reasons why nobody has done it before.
Team (1-2 pages)
Investors closely look at the team: What is your background? Why can you do this? Did you face challenges which you have successfully overcome? Very often, the product may be average, but the founder or team are great. A product can be changed and improved. If the founder is the wrong one or if there are problems within the team, there will be issues down the road.
Give a brief background about you and your team members. It is not necessary to give a full CV. Focus on the skills and experiences on why you are the best team to work with for that product. I also recommend including pictures of you and your team.
Financials (1 page)
Give an overview of the most important financial data: your revenues and costs over the next five years, when you reach break-even, your burn rate (i.e. how many months can you survive with the current money and/or future raised capital), your company value, required capital you plan to raise from investors and a potential ROI after a certain period of time.
Do not be scared by all the terms here. Some may be new to you. I am currently working on a post giving you more details about how to calculate your financials.
If you pitch to investors, make a pie chart and explain why you need the amount of capital which you plan to raise. Show how many percent will go into marketing/sales, product development, salaries, etc. It is similar to when you buy products yourself: before you spend money, you want to understand the full value of the product.
It is not necessary to state your assumptions and detailed numbers in the Financials slide. I usually have my assumptions in the annex. If required, I also supply the detailed Excel-document with all the numbers separately. But usually, you will be asked for the details after a more general meeting.
The importance of the financials really depends on the country, industry and, first and foremost, on the personality of the investor. I had some investor meetings when financials where not discussed at all. I was asked to supply them after the meeting. Coming from a finance background, I know that you can always modify your models to achieve a certain outcome. Especially for a disruptive product, it is very difficult to give numbers. In my case of a mobile app, we assumed that it is very unlikely to have linear growth. Most of the successful apps grow quickly and extremely fast. Hence, of course, we were asked for numbers. But it was probably obvious that financials are only one part of the equation.
I recommend putting a timeline with milestones past and future milestones. It visualizes your journey very well. You can also include more details about your product, market, success stories in the market and financials. Nevertheless, try to keep it short. As mentioned before, potential investors and partners do not have much time and they will follow-up with specific questions.
If you follow these guidelines, your presentation (excluding the annex) should not exceed ten pages. This is a good number to follow-up your one-page summary. If it is carried out well it is enough to show the nuts and bolts of your business case. If needed, you can always expand this framework.
Have you made a business plan? What is your experience? Do you have any advice to share here with us?
Read more about my tips to start your own business and raise funding:
From Product Idea to Starting Your Own Business
Do I Need an Investor to Start a Business?