In episode 6 of our Making Best Informed Decisions series, clarifying and communicating your business plan is vital for seeking investment or funding. Natasha Teeling shares eight tips for success.
Investors buy the future earnings and direction of their target business. This future story is your business plan. It communicates your financial and non-financial goals to gain support and buy-in from key stakeholders. The business plan can be used, for example, to secure investment from banks, government and other third parties or to formalise your transformation plan ahead of a sale. Whatever the purpose, it's the opportunity to sell your strategic vision and maximise value.
With major macroeconomic and market challenges affecting most sectors, the ongoing impacts of Brexit and the Covid-19 pandemic, businesses are rethinking future direction and their approach to funding. A clear business plan will maximise the value of your business, increase credibility externally and internally, help align efforts across your organisation, and create a smoother transaction.
How do you tell your story in a credible way?
While every business plan will necessarily be different, some of the challenges in preparing one are relatively the same from organisation to organisation. Here are eight tips we have collated from our experience of supporting the preparation of robust and credible business plans:
1 Consider a meaningful timeframe that aligns to your commercial strategy (three to five years is common).
2 Develop integrated financial forecasts (not just a profit and loss account) that align with your story and can help you to identify where actions need to be taken within your plan.
3 Provide context to your robust revenue and cost assumptions through market and operational insight. For example, the size of the global market demand, your competitive position within that market, your global footprint, and your available capacity to facilitate growth.
4 Reference macroeconomic changes to the extent that they may impact your business. As an example, a business plan that doesn't mention inflation or relevant new legislation will lose credibility on first impression.
5 Show credibility through your management team. Highlighting what makes them effective in their leadership will give readers more faith that the plan will be executed.
6 Consider the wider ESG impact of your business, such as how your approach may give you a competitive advantage, open up new investment channels or more generally show credibility through awareness of future requirements in your industry.
7 Utilise third party independent support where you do not have a proven track record, where you need external data as proof points, or when you want to test the plan.
8 Think about the aesthetics as this document should sell the strategy, future direction of the business and the management’s ability to deliver. Substance is better than style, but the communication of your plan needs to be digestible and impactful.
What would we expect a robust business plan to cover?
Committing to your vision, financial performance targets, and plan for execution in a coherent document can be a complex task – and a daunting one when faced with a blank page! You may be asked for a business plan checklist. We believe that there is no single way to collate a business plan. We've seen many very successful plans that have managed to communicate all the necessary details in a convincing way in just a few pages. We've seen others that have included minute details and extensive analysis, but failed to convince because they lacked a coherent thread or story.
Rather than a business plan checklist we would instead encourage organisations to consider the following areas for inclusion – while noting that the biggest factor in success will be the cohesion of the plan as a whole:
A summary of the global industry from both a demand and supply perspective, including consideration of key geographies
The market position of your business including key geographies, competitive landscape and barriers to entry
Commercial strategy including unique selling points (USP), key customers, access to new markets, products and technology
The operating model of the business including footprint, employee headcount, operational capability and capacity
Board and key management profiles
Financial overview including three years of historical financial performance, and a three to five year forecast integrated profit and loss, balance sheet and cashflow model. This should include detailed insight of price, volume and capital expenditure assumptions
An outline of your ESG strategy and the value it adds to your business
Socioeconomic analysis illustrating the expected economic benefit of any future growth/investment (where relevant, such as when seeking government investment or support)
Timeline to achieve the plan and key intermediate steps or actions along the way
Matrix of key business risks and the steps you are taking to mitigate them
How we've helped our clients
We support management teams with the drafting of business plans required to access investment/funding and undertake independent due diligence on business plans on behalf of the relevant body (eg, banks, private equity, government and local councils). Experience working on both sides allows us to write credible business plans that stand up to due diligence and to test business plans and assumptions against our experience of best practice. As part of a recent client engagement we supported a management team in drafting its business plan to support a government funding application. We worked with the client to develop a bespoke scope of work aligned to its needs. In this case the client required the following support:
Designing the format and structure to demonstrate professionalism
Coordinating client inputs to minimise disruption to business as usual, and ensure all inputs included the required level of detail
Coordinating third party inputs, including specialist market research that would contribute to the business plan
Acting as a critical friend and testing/challenging management’s assumptions
Conducting macroeconomic research including any forthcoming changes to relevant legislation
Conducting more general market research, including industry-specific challenges and competitor research
Building an integrated financial model using management’s assumptions and historic financial information as a basis
Challenging the integrity of any financial assumptions, comparing to our industry-specific benchmarks and getting insight from our industry experts/advisers
Supporting management at key meetings with due diligence providers
So, as you create your future story consider how you will demonstrate commercial credibility through robust market insights and articulate your strategic priorities to facilitate any future growth. Overall consider how you bring together a coherent plan through realistic financial forecasts that align to your commercial strategy, your operational capabilities and your access to funding and investment.
For support developing your business plan, get in touch with Natasha Teeling.
What’s coming up next
Our next article in this series about making best informed decisions will focus on how to ensure you have the process and technology in place to enable the analysis and decision making to take place.