Wowing angel investors by speaking their language in your business plan

Angel investors and venture capital funds see dozens of business plans every week.

The vast majority end up in the bin, and most deserve to — the business concepts are fanciful.

All too often, however, a business concept is discarded for the wrong reason.

The concept may be good, or even great, but the plan setting it out is rubbish.

The way to wow your angel is to speak his or her language, to think of everything they might need to know, address it, research it, analyse it, and present it to them clearly, consistently and convincingly.

Make sure every word and every number on your every page is geared towards the requirements of your angel.

Don’t let your business plan be about you, your wonderful concept, your valiant journey of bringing your magnificent venture this far.

Let it be about what your angel needs to know.

Do you have just a concept, but a business? Do you have a product or service that fills a need? Will it sell at a price that will cover all costs, including the cost of capital?

To get there, you need to tackle seven essential tasks, with research and analysis:

• Pinpoint market demand.
• Dissect the competition.
• Define your sustainable competitive advantage.
• Be realistic on resource deployment.
• Compile credible forecasts.
• Keep a clear, tight storyline.
• Weigh the balance of risk and opportunity.

Pinpointing market demand and how fast demand is growing is the first step.

If yours is a start-up, 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 are setting out to fill, show there is a market in the gap.

Failing to dissect the competition is foolish. When, not if, your backer finds out competitors exist, and they are credible players, you will have no deal.

Competition always exists, directly or indirectly.

Respect competitors. Set out in your plan how they position themselves, speak generously of their strengths, but expose their weaknesses.

Defining your sustainable competitive advantage involves showing how your offering will have a competitive advantage.

Is your offering lower cost or more differentiated or more focused than the competition?

How is that advantage achieved, how can it be sustained? If yours is a start-up, what evidence can you display confirming this advantage?

Being realistic on resource deployment means assessing your need in regards to employees, managers, advisers, premises, equipment, and supplies.

You will need partners — suppliers, agents, distributors, customers. And don’t undercook the pie.

Your financial forecasts must be coherent, consistent and credible.

They will be subject to forensic examination, so cut out all wishful thinking.

Keep the numbers simple. Precise forecasts which show revenues of €4,672,591 in three years drive me nuts. Is the writer sure that they won’t be €4,672,589?

Such forecasts are a giveaway. The writer does not think strategically.

A strategist would forecast revenues of €4.67m, even €4.7m, knowing it would be ludicrous to suggest any greater degree of accuracy.

Keeping a clear, tight storyline means writing out in one sentence, an extended one, if you wish, why someone should back your business.

Stick to that storyline throughout your plan. Let your reader be reminded again and again of why your business is backable.

I recently came across a 200-page business plan in portrait, well written, well analysed. But what was the storyline? I was lost.

No investment is without risk.

Acknowledge specific elements of risk, but show your backer why these are containable.

Show that they are either of low probability or that their impact can be mitigated should they occur.

And show that risk can be outshone by opportunity. Show that for every risk there is a countervailing opportunity.

Show, preferably graphically, that the overall balance between risk and opportunity is favourable.

In summary, view every statement in your business plan from the perspective of your angel or VC.

• The FT Essential Guide to Writing a Business Plan, by Vaughan Evans, is published by FT Publishing.