How to write a winning business plan
Serial entrepreneur Adam Baker shares his tips on how to write a top-notch business plan
I’ve raised both angel and venture capital (VC) money in the past and a well-articulated, detailed business plan was essential in opening doors. However, it’s surprising how many start-ups don’t have a business plan.
Your business plan should be the first thing you craft – before website wireframes, before a profit and loss (P&L) sheet, before anything else. It should not be written purely for the purpose of raising outside investment.
The plan charts and details your business strategy, and should be used as the document that you and your management team refer to in order to ensure you’re on course. Or, quite often, the document you update when you’re changing course.
The more detailed the plan, the easier it is to execute it and measure success across all of the important metrics.
The way I format business plans may not be text book, but it has helped me grow businesses and raise cash, so take from my advice what you will.
I tend to break down all of the components which make the business plan and work on them one-by-one, before bringing it all together into a single document. I find this approach useful for shaping and re-evaluating the plan as I go; plus it’s nice to have the different elements as separate files for future use.
How to write a business plan
The key structure of a business plan should be:
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- What is it?
- What purpose/inefficiency does it solve?
- Market opportunity
- Key business objectives/milestones
- Product differentiation
- Market conditions
- Customer universe
- Revenue models
- Marketing and PR
- Key people and headcount
- Top line three-year P&L numbers
Here are a few steps I take when creating my business plan:
1. I always start with an elevator statement. I need to articulate my entire proposition in a single sentence so it is clear and obvious what we do, to everyone.
2. Next I use a single page to highlight key milestones for the next three years: engagement/users and revenue/number of customers I expect to have, ie a snapshot of your P&L.
3. Create an executive summary. This is typically one A4 page which starts with your elevator statement and highlights every facet of the business. The important points to cover are: business purpose, market opportunity, key business drivers and milestones, revenue, and P&L.
4. Detailed piece on your vision. What does your business look like today, next year and by year five? How big can the business be? How will you realise your vision?
5. Your product/service. What are your competitive advantages? What IP have you created or proprietary technology developed? List the five key features of your product or service that will win adoption for you.
6. Marketing & PR. How will you/are you taking the product/service to market? Demonstrate how you can get traction, what channels you will use and what your customer and user acquisition strategy involves. How will marketing support your monetisation strategy? PR is also important and is required for building and maintaining relationships and growth.
7. Revenue. How will you make money? What are your revenue streams? Don’t fudge this. Plug in numbers that will challenge you but you are genuinely confident of delivering. Never forecast based on what you think investors want to see. That is a sure-fire way to kill your business.
8. Management/founding team. Investors will almost always be sold on you and your founding team before they buy in to your business idea. A concise, well-articulated, detailed business plan with accurate revenue projections is the first step to demonstrating you are intelligent and understand your business and marketplace. However, a one-pager on you and key members of the team is important. Cover off work history/education but don’t make this boring. You all have personalities, show this off too.
9. Exit. Finish on how you think you’ll get a return on investment for investors, when it’s likely to happen and what it looks like (in terms of return) when you do. Remember, investors do not like lifestyle businesses. They want a return, usually with a multiple of at least 10 times what they commit. Show them how they can achieve this.
10. P&L. This isn’t a business plan, but a budget. Formulate a three to five-year budget outlining your income and expenditure forecasts in granular detail. This should also cover cashflow based on you receiving investment too, so an investor can clearly see when you break even, or run out of cash. Be realistic with it and attach this to the business plan.
Is this the formula to a winning business plan? That depends on you. No matter how great a business plan is, investors buy people. A solid, defensible business plan helps and should be used as your manual and point of reference when executing the strategy.
If you’re looking for more detailed advice on how to write the perfect business plan, we’ve got a whole channel dedicated to doing just that. Our business planning section is packed full of tips and advice to help you evaluate your business idea, conduct reliable market research, price your products and services, write your business plan, and much more.