Write a Business Plan That Will Wow Angel Investors and VCs
17th December 2015
Angel investors and VCs see hundreds of business plans every year, and the sad reality is that the vast majority end up in the bin. Sometimes however, these business concepts end up in the bin not because their concept is flawed, but simply because the way they have set their plan out is rubbish.
Words: Vaughan Evans
The key thing to remember is that the way to wow angels is to speak their language. Before you start writing your plan, consider everything they might need to know then research and analyse it until you’re ready to present it to them clearly, consistently and convincingly. Your business plan is written for your potential backer, not you, so make sure every word and number is geared towards their requirements.
To get your business plan right you need to tackle seven essential tasks, with due research and analysis:
1. Understand market demand
How big is the market for your business and how fast is market demand growing? If you are a start-up you must demonstrate to your backer that a market for your product or service exists and that people will buy your offering at the price point you will be pitching at. If you have spotted a gap in the market which you plan to fill, show that there is a market in the gap with some testing as evidence.
2. Acknowledge the competition
Don’t fall into the trap of omitting the competition from your plan or dismissing competitors as hopeless or irrelevant. Competition always exists, directly or indirectly so show them respect, set out in your plan how they position themselves, speak generously of their strengths, but expose their weaknesses.
3. Highlight your sustainable competitive advantage
How will your offering have a competitive advantage? Explain clearly if you have lower costs or a differentiated product, how that advantage is achieved and how it can be sustained. Think about evidence to display your advantage, whether that is testimonials, letters of intent or consumer survey results.
4. Explain resources realistically
If you are going to see your business plan through, chances are you will need help. Set out exactly what resources and partnerships you will realistically need to achieve the forecast growth rates in your sales volume forecasts, whether that is employees, premises, equipment, distributors or any number of other likely costs.
5. Make forecasts credible
Your financial forecasts will be subject to forensic examination, so cut out all wishful thinking and keep the numbers simple. The numbers must reflect the market demand and competitive context, but backers want to see you are thinking strategically, so don’t try to forecast revenues with a ludicrous degree of accuracy.
6. Tell a clear story
You should be able to write why someone should back your business in just one sentence. Stick to that story throughout your plan and remind readers again and again of why your business is backable.
7. Balance risk and opportunity
Every investment has a degree of risk so acknowledge the specific elements of risk then show your backer why they are containable and how their impact can be mitigated should they occur. Risk can be outshone by opportunity if you show their likelihood or impact means the overall balance between risk and opportunity is favourable. So many business plans sweep risk under the carpet, but your sooner or later your backer will find out and walk away.
In summary, go through your business plan in detail, viewing every statement and figure from the perspective of the angel or VC you’re trying to wow. Address all likely concerns, be objective and let your passion for the business shine through, tempered with openness, realism and sound judgement.