If you Google ‘how to prepare a business plan for investors’, you will find a great deal of the same type of advice – business plans for investors should be comprehensive, detailed and answer every question that a potential investor might have for you.
That might have been the case in 2005, but investors are a bit different today.
Back then it would have been unheard of to write a snappy one-pager for an investor, but that’s just what they want these days – particularly in the tech sector, which has turned many an investor’s head.
In fact, the old style business plan is not just an encumbrance, but a downright turn-off for most, and it could see the deal go south pretty rapidly.
Two things have happened to precipitate this fresh approach. Firstly, an explosion in startups, many grounded in new technology, have meant that the queue at the investor’s door is getting longer by the day. Plus, the near absence of the traditional banks as a funding option for these types of businesses means that the angel network is now a mainstream source of funding. Hence, reading through a raft of detailed business plans just isn’t practical for the potential investor.
Investors want to get straight to the point – they want young businesses to grab their attention. Dozens of pages of technical jargon and detailed sales projections aren’t going to cut the mustard, and worse, might just lose them completely. A concise, punchy summary of the product, the market, the screaming market need and the management team is what’s needed.
The shift is towards more of an ‘elevator’ type of approach. The one-pager or two-sider that encapsulates your business and the potential return. However, don’t be mistaken – this is not a casual approach – refining your proposition into a shorter format is just as challenging as pulling together a full business plan. The work behind it has to be sound and working with your advisers to agree a bespoke approach is still crucial.
A traditional business plan will serve you well but not as your initial door-opener with investors. Your pitch is simply your ticket to the party but you still need to shine when you get over the threshold.
Gareth Magee is a partner at Scott-Moncrieff, leading business advisers and accountants in Edinburgh, Glasgow and Inverness.