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Before we look at how to produce a great plan, lets learn from the lessons of history – why do most plans not work?

Fail to identify & explain the “pain”

In this context pain is investor short hand for “what’s the market opportunity”. Successful businesses solve problems, they make life easier and better for their customers. So investors need to see that the pain being solved is sufficiently widespread and acute as to make a really scaleable business (scaleable means capable of big growth). It goes without saying that the more scaleable – the more profitable will be their investment.

Lack of Focus

There is a cliché that whenever you start a project of any kind it is amazing how many doors seem to open. This is certainly true in business and is one of the biggest management challenges – which doors should you go through.

When writing the business plan there is a temptation to include all the options, so as to show a much bigger opportunity. Now while investors are looking for scale and replication, they want to see focus. This means a clearly identified, well researched niche which on its own is big enough to build an attractive business.

Light weight marketing

The sales and marketing section of the business plan is critical. Most businesses run into difficulty because sales are below target. It is so easy to underestimate the quantity of effort required to generate each £ sales. Just how many people will need to hear about you to generate a sale – ratios vary from industry to industry and whether you are in B2B or B2C but 100:1 is a reasonable starting point i.e. each sale requires and 100 people to know about you. Curiously this is the success rate of business plans arriving at venture capital houses.

The investor wants to understand clearly how you plan to build that mythical “bridge” to your customers. This requires a well thought out analysis of marketing, selling and distribution tactics.

What’s the competition?

Frequently entrepreneurs (in their enthusiasm) get caught up in their own hype surrounding their product or service and as a result don’t look objectively at the competition. When did you last spend a morning really analysing what else is out there in your space? When did you last enjoy a cup of coffee and “Google” the internet for competitors? And remember it is not just direct competitors – you are competing with all the indirect substitutes that are chasing the consumer £.

Poorly formatted document

There is an accepted structure for a business plan that the money boys are familiar with. We will look at it later – in the meantime just remember there is no reason to depart from this. This structure tells the story logically and builds a compelling excitement to invest.

The Business Plan is a marketing document and so like any marketing collateral it will say something about you. It should be professionally laid out, indexed and printed with appropriate use of colour. Don’t go overboard – investors may get suspicious.

Make sure the document is carefully proof read – silly typos and poor spelling have resulted in loads of sound plans hitting the bin.

Poor elevator pitch

Everyone is now familiar with the idea of the elevator pitch. Imagine you have got into a lift with a potential Investor – you have until the next stop to fire them up to find out more! But even if the investor is in the office, they are super busy people and the bad news for you is that they are deluged with plans, so keep it brief!

Every plan should have a brief executive summary of 1-6 pages which tells the whole story in outline. A fuller business plan of 20-25 pages should then be available with more detail. Remember the objective of the Business Plan is to secure a meeting.

Risk analysis

If you bear in mind that on average only 1 in 10 investments turn into a real star investment, then you will appreciate why investors are so focused on “what can go wrong”. So rightly or wrongly, your standing in the investment community will rise with a mature review of risk that covers the market, technology, people, operations, and legal/financial.

Poor financial forecasts

As you might expect financiers get excited about numbers – or do they? Numbers wont sell your project (assuming they are exciting enough), management sells the project. However poor forecasts will quickly consign your plan to the bin.

So make sure they all add up! Something like at least 50% of spreadsheets don’t add up…Give at least 3 years projections (you may need to give more if the project becomes strongly cash positive after year 3 – but investors tend to focus only year 1), with the all important next 12 months broken into months.

Ensure you include all the key reports i.e. balance sheet, Profit & Loss and cash flow along with a clear commentary on the results and assumptions used.

Use of C word

Never ever use the word conservative to describe an assumption in the plan. It is like red rag to a bull – assumptions should be realistic. Investors have just heard people use that term too often and then miss targets by miles…

Starting too late

Even with the best plan in the world investors just hate being under pressure – it makes them nervous. You should allow a minimum of 6 months from starting to write the plan to getting a cheque in the bank.