Over the past 20+ years, as an angel investor, former venture capitalist and private equity investor, and serial entrepreneur, I have seen and written, a wide variety of pitch decks and business plans. In addition, I recently launched a podcast called ACHiEVE: Mining the Non-Linear Path, where entrepreneurs share their personal journeys. Beyond discussing facing adversity and overcoming obstacles, many of them have shared their business plans with me.
Based on these thousands of business plans and pitch decks, I will share anecdotes over my career of what stood out for me in the more notable ones I have seen. These have been the best practices I have adopted in doing the same when I am writing a business plan.
1. Your goal should be to get a meeting
I’d like to start by highlighting that the biggest question I am trying to answer when I review a business plan is whether or not I want to meet with the management team of the company. Investment decisions mostly come after the meeting, and perhaps after several meetings. Rarely do they happen simply upon reading the business plan.
Oftentimes, my take away will be probability-grounded — some deals will be high probability and others less so. Hence the task of the author is to get me to that meeting decision quickly and efficiently.
The ideas below range from the elementary to the slightly more work-intensive. Enacting them will make your plan stick out above the others. Here are some of the things I look for in business plans to get them to stand out.
2. First impressions
Can you tell me what your business does in the first sentence? Given the thousands of business plans, I have reviewed in my career, and continue to receive, there has to be a triage. Otherwise, I would never have enough time to find the ones I truly wish to pursue.
A key gating point is whether or not the business can be explained in the first sentence. This is where your elevator pitch needs to be embedded. If I have to spend time digging for what the company does, I begin to worry about what else may not be presented succinctly and in what other parts of the business the company lacks efficiency.
Give it to your audience right upfront.
Use a tone that is very straightforward and relies on simple eighth grade English. I am not interested in processing a compound sentence or tracking multiple clauses in my mind. The sooner you let me know what you are doing, the sooner I can devote my cognitive energy to deciding whether I like your concept or not.
3. Provide analysis not just data
I have seen many companies do a data dump or provide a list, particularly when it comes to discussing the competition. Merely having a list of the competitors and a description from their website is not very interesting and it doesn’t indicate to me that you understand the competitive landscape of forces at play in order for you to be successful.
It is important that you tell me why you are concerned about the competition. What is their orientation in the marketplace? Tell me about their star employees you wish you had. Tell me anecdotes of trolling their booths at conferences. Tell me what are weaknesses or blind spots that can be exploited. This analysis gives me comfort that you have thoughtfully sized up your competition, making my investment less at risk.
4. Segment your potential market
One of my pet peeves is seeing an obnoxiously large hundreds of billions or trillions of dollars sized market identified for a company starting up with no further breakdown. That is pretty meaningless in terms of an investment horizon I am thinking about. You have to trim that down and show what segment of the market you can realistically hope to commandeer within five years.
Some of the best plans I have seen define the size of the market by amalgamating the revenues (reported or estimated) of their competitors. There usually is some other operational metric more readily available out there where you can back into a sales range (square footage of their building, number of employees, sales figures from a key customer, import trade data, etc.).
Share a sentence or two of your go-to-market strategy. If you have some intel on sales cycles, it is important to share that within this section and be sure your financial section incorporates that as well.
5. Don’t just show your financials explain your process
This may sound odd, but I’m not interested in what the actual numbers say. I want to know first that you went through the mental exercise. Don’t bog me down in assumptions, streamline them so that I can quickly see your thinking process, but not get lost in detailed minutiae.
I want to know how you built your projections up. Knowing how you determined revenue and costs over a 5-year projection period let me know if you really understand your business or not. Some revenue questions you’ll want to be able to answer include:
- What were the components of your revenue?
- Did you break it down in terms of economic levers that can help you drive your business? Is it simply price and volume?
- How are you growing your revenue – are you taking market share or is the industry growing overall?
- Are you able to articulate what percentage of growth comes from each?
- How should the pricing trend?
Regarding cost, what assumptions have you made in terms of scaling? Have you shown an understanding of variable versus fixed costs? Have you thought through break-even thresholds?
The key is to be succinct and present a story. A lot of numbers on a page shouldn’t be the end goal. The narrative behind it should be the key.
6. Personalize your management background
Often in this section people will write a laundry list of education credentials, work experience, and any professional recognition. These are all things I can find on a LinkedIn profile. Instead, give me something personal so I can see what you are passionate about. That will really provide dimensionality to your team.
Examples of this include the anecdote that first ignited interest in this industry, the a-ha moment that something was missing and you identified the opportunity to do it better or fill the void and add value, or that pivotal moment when you decided, yes, I will start this business.
The best management background sections provide bullets on the factual elements of a career and then give a few sentence story to hook me as the reader. The critical element is that I need to hear why you are doing this. If I suspect that it is purely to make money, I am likely going to move on to the next pitch. When there is a greater calling, sense of purpose, or mission, then I am intrigued.
The reason for that is that I know there will be a time when you are so exhausted that you are desperate not to go on that five in the morning flight, and only because of what speaks to your core will you push yourself. If it’s money, you may say to heck with it and find an alternative means to accomplish that. As an entrepreneur with some business success already, there would likely be several means by which you could do that.
I want to know what is going to keep you running the company described in the business plan I am reading and being asked to invest in.
7. Clearly outline how you’ll use the funding
There are a myriad of approaches that business plan writers take with this. This figure can also be a notoriously moving target. It’s important to show the categories of spend broken down by the major areas of output. A good rule of thumb is that if it’s more than 10% of the total, create a separate line item for it.
In addition to that, what I like to see is:
- Did you stage your capital raise?
- Did you put reasonable milestones to achieve at each turn?
- Are those reasonable for the type of business you have?
- Have you allowed yourself enough time between each raise so that you aren’t constantly fundraising?
I like to see that you can actually spend a few quarters exclusively building your business and establishing the critical infrastructure needed to ensure it is ready for the next phase of growth. Some of the best plans I have seen will indicate the number of months of runway they will get with a specific dollar amount raised and will estimate the quantity and the timing of future raises.
8. Carefully consider who you add to your board of advisors
A Board of Advisors is a great way to get some in-depth expertise at a fraction of the cost of hiring people outright. It is an important strategic decision that every startup should leverage. Often time Advisors will work in exchange for equity or equity plus a small nominal fee.
I myself am an Advisor to a number of companies. What I want to see vis-a-vis a Board is if you picked people who can strategically be of benefit and who can get you access that you can’t get. Not necessarily that they can do it more easily. Hence, someone in an industry you operated in but with a slightly higher title is less appealing.
But, having experts in other industries or industries you are targeting for sales can also be highly beneficial. Also, don’t stack it with readily agreeable people; I’d rather not see your lawyer, accountant, or college friend unless there is a sound strategic benefit. Those people will make introductions for you without you sacrificing compensation that should be reserved for those whom you don’t know well.
9. Consider the overall look and feel
In thinking about the overall presentation of your business plan, it is important to keep in mind that companies don’t have to go to great lengths or expense to create a great feel. There doesn’t have to be a lot of fancy graphics or erudite language.
The two most important things are visual unity throughout the work that matches a tonal unity to the language. If there have been multiple members of the management team involved in editing, one member should do the ultimate pass through so that tone is preserved.
Your plan is only as good as your idea
Ultimately, the overarching quality of a business plan will be the strength of the business idea. But in order to help a strong concept stand out amongst the numerous ones out there, it is desirable to incorporate the above guidance. I look forward to reading your (revised) business plan!