Any entrepreneur will tell you that one of the first steps for a business is creating the business plan. Your business plan will serve as a blueprint for the company you’re about to create, dictating it’s structure and operation. It’s also the only artifact related to your business that you’ll have during the early stages. Thus, it’s often what you’ll use to pitch your idea to investors and appeal to potential partners.
Creating a business plan for prospective investors is always a time-intensive process, but if you want to maximize your chances of appealing to potential investors, you’ll need to spend even more time refining it. In this guide, we’ll explain how to create a business plan, from scratch. It’ll both accurately captures your business idea and efficiently packages it for presentation to investors.
Overall Goals when Business Plan for Prospective Investors
Let’s start by identifying the main goals you’ll want to achieve in this process:
- Good first impressions. Startup investors tend to be busy people. They don’t want to waste time listening to ideas that don’t stand a chance of success. They’ve likely heard a lot of similar pitches in their years as an investor. If you want a reasonable chance to make your case and pitch your business, you’ll need to lead with a good first impression. You need to convince these investors that your business plan is worth considering.
- Competitive dominance. Chances are, you’re not the only entrepreneur pitching a business idea to these investors—and you may not even be the only entrepreneur pitching in the same day. Additionally, there are probably dozens, or even hundreds of businesses like yours already operational. If you want a chance at getting the funding you need, you’ll need to convince these investors that you have a competitive edge; you’ll need some way to prove you’re better than the competition.
- Accuracy and reliability. The whole point of a business plan is to set a course for your business’s creation and development. If its foundation is inaccurate or otherwise unreliable, it could be devastating for your chances of getting funding (as well as your long-term chances for success). The accuracy and reliability of your business plan are vital.
Professional Appearance
It may seem like a small, irrelevant choice, but make sure your business is presented with a professional appearance. The external binding and internal formatting of your text will be some of the first things your investors will see, and will therefore be responsible for forming their first impressions. Make sure you’re using a professional font, with adequate spacing between lines to make your text easy to read. A table of contents will help to organize and lay out your high-level ideas, and if possible, get your business plan professionally bound with spiral binding (or something similar) to make a better impression. You can also invest in higher-stock paper and a glossy cover page to make your business plan stand out even more.
Sections to Include
Once you’ve made a decent first impression, your investors will dig into the “meat” of your business plan. This is where you’ll either win them or lose them.
When writing your business plan, make sure you include these sections, at a minimum:
The executive summary.
The executive summary is usually the first part of your business plan when presented, but it’s also the last one you’ll write. Here, you’ll recap all the major points you’re about to cover in the rest of the plan, and give readers an idea of what they can expect. It’s a critical point for forming a good first impression.
The company description.
The company description is a more extensive section that describes what your company is and how it’s going to operate. You’ll define the industry, the operational model, and some of the main variables that will be responsible for determining your success.
Products and services.
In this section, you’ll describe the core products and services your company is going to offer. What is it that makes these products and services appealing? Will you start with a small selection and gradually expand over time? What are you going to charge for these products?
Market research/target demographics.
Next, you’ll need a section to prove that people will be willing to pay these prices for your products and services. You’ll define your target audience and use demographic information, surveys, and focus group data to explain why your business will be appealing to this market segment.
Competitive research/main competitors.
After that, you’ll need to describe your current competitors. What other businesses are currently operating in this space? Who is dominating the field? What is it about your business that makes you think you can compete with them, and how will you differentiate yourself?
Leadership and team.
Here, you’ll describe what makes you worthy of leading this business (speaking to your experience and disposition). If you’re not the one leading the business, you’ll need to identify and describe the credentials of your chosen CEO. This is also an opportunity to define the organizational hierarchy you’re going to use, and list any partners who will help your business grow from the beginning.
Financial projections.
This is arguably the most important section for investors.
- How is your business going to make money?
- How will you budget your expenses in the early days of development?
- How is your business revenue and profitability going to increase in the years to come?
There’s some flexibility in which sections you include and how you arrange them, but you should at least speak to the core idea behind each of these sections. Effective business planning is key, here’s a guide on business planning we’ve found useful.
Preparing for the Presentation
Once the business plan is written, you’ll need to spend time preparing it for presentation. In most situations, you’ll be responsible for pitching your idea to investors directly; in these scenarios, your business plan serves as an additional reference document.
If you want to nail your presentation:
- Do your research. Don’t stop researching just because you’ve completed the final sections of your business plan. You should be intimately familiar with the industry you’re about to enter, and you should be prepared to rattle off statistics that are relevant to your business at a moment’s notice. You should also be familiar with every page of your business plan. Nothing should take you by surprise.
- Rehearse but don’t over-rehearse. It’s important to practice your presentation, ideally in front of a mirror or with video so you can better judge yourself, but it’s also possible to over-rehearse. If you practice your phrasing too much, you’ll end up sounding robotic and uninteresting; additionally, if you stumble over a phrase, you may lose your place and find yourself unable to improvise. Instead, practice a few times with minimal notes, and don’t try to memorize your speech entirely. Get used to varying your words and speaking from your heart.
- Add new insights. Throughout your presentation, be prepared to throw in additional facts or statistics that aren’t in your business plan. It’s a good way to prove that your knowledge and experience isn’t merely limited to what’s in the business plan. It shows you’ve done your research and that you know how to keep a presentation interesting.
- Anticipate criticism and questions. Investors tend to be savvy, sometimes ruthless people. After your presentation and after reading your business plan, they’re going to have challenging questions to ask you—and may have criticism about your business plan. Do whatever it takes to anticipate these points of criticism and objection, and be prepared to respond to them.
Additional Tips for a Successful Business Plan
These additional tips may help you find success:
- Plan conservatively. Throughout your tenure as an entrepreneur, you’ll likely encounter many variables and situational twists that defy your expectations, from unanticipated fees to new competitors. That’s why it’s important to plan your finances conservatively. Your investors will appreciate your careful forethought, and will value you more than an entrepreneur who’s overly ambitious or naively optimistic.
- Tweak the plan for your audience. You shouldn’t write the same business plan for multiple groups of investors; different types of investors will be looking for different hallmarks of value. For example, some may be more interested in the growth trajectory of your operation, while others may be more interested in its leadership and staffing.
- Appeal to long-term ROI. Most investors’ highest priority is achieving a return on the investment (ROI), especially over the long term, so this should be one of your biggest points of emphasis. How are you going to make your investors’ contributions worth it? The more specifically you can answer this question, the better. Just be prepared to back up your claims with objective evidence and logical reasoning.
Following these tips and putting together a fantastic business plan is still no guarantee of success. You may face stiff competition from other startup entrepreneurs, or your prospective investors may feel that you’re simply not ready to lead this business.
If that does happen, ask for critical feedback if you’re rejected, and incorporate that feedback into the next iteration of your business plan. There will always be new investors to pitch to, and other funding opportunities to try if you truly believe in this business idea.
