Pitch Deck: How to write a winning business plan

Franklin Izuchukwu

Business plans are needed to establish startups and seek funding from investors; here is a detailed analysis of what is required in a good business plan.

An individual making calculations.

A business plan is a document that provides a purview of the potential outlook of a company or a startup. A good business plan tells the story about the company's structure, market strategy, mission, and revenue.

Business plans inform strategic decision-making; it guides how to measure and analyse results in an established company.

Business plans are more than a mere document because entrepreneurs can use them to woo investors into funding businesses or startups. Entrepreneurs are allowed to present business ideas to investors in a bid to get funding for businesses,

Complex business plans are unrelated to superiority when grading good business plans; a good business plan needs to be comprehensive, precise and suitable for the audience.

This article will highlight the common errors and where the emphasis needs to be placed while attempting to write a winning business plan.

A winning business plan must be planned before a presentation.

Errors made when writing business plans

Admittedly, business plans open investment doors, but such is only the case when the investors are presented with outstanding business plans.

If the goal of a business plan is to win the hearts of investors, it must be written in such a way as to assuage their needs. Entrepreneurs often disregard the misconception that a good mousetrap is a necessary strategy when writing business plans. Mousetraps are essential, but that is not the only important factor in a winning business plan.

The other important aspect of a winning business plan is satisfying the interest of the investors and marketers.

For a business plan to stand out, it needs to inform the marketers on the evidence of a feasible market and customer interest. It must also tell potential investors how and when they can cash out; suffice to say that a desirable financial projection is needed to convert investors.

Investors are not in the business of dishing out investment funds to companies without being convinced of the idea; an excellent business plan can do the trick.

The business plan should describe the idea of business in its entirety. For an established company that requires an extra round of funding, the business plan must describe the present status, current needs, and expected future. The business plan must justify why additional funds are needed and explain recent marketing decisions.

Many business plans or pitch decks often overlook a thorough explanation of the financial projection, production demand, logistics, and personnel needs.

Another error encountered while writing business plans is overlooking the fundamentals. A winning business plan is not rated based on the number of pages or descriptions. Instead, there are viewpoints constituencies that Entrepreneurs must reflect in a winning business plan, like:

  1. The market
  2. The inventor, producer or entrepreneur
  3. The Investor

Erroneously, business plans are usually written from the viewpoints of the second constituency - the producer.

These business plans will describe the technology advantage or creativity offered by the product or services. Yet, they fail to recognise the factors responsible for the financial viability of the project - the Investor and the market or customers.

For instance, there was a case of six business executives who needed investment funds for their project or business that sought to offer technology services to customers. During a business pitch, the executives were able to stress the creativity and uniqueness of the new venture; they even told investors that the projected annual sales and profit growth stand at 15%.

One of the problems with their business plan was that they could not analyse the services their potential clients needed and which would be more profitable. The error underlines that the executives overlooked the possibility of the potential clients showing interest in other services not listed ab initio.

Further analysis revealed that the executives also failed to disclose the price of the new shares or the percentage available to the investors. It is imperative to write business plans from the investors' viewpoints because most investors expect a 20-40% ROI per annum - an annual profit gain of 15% (as seen above) cannot satisfy investors unless the executives were willing to give up a good percentage of their shares.

The business plan presented by those executives failed because it could not stress why potential customers will opt for their services and how or when the investors will cash out; it is safe to say that the business plan did not have enough credibility for investment funds.

What makes a winning business plan

The goal is to create and write a winning business plan. Business plan templates may not be enough to include the vital viewpoints pointed out earlier.

Without understanding what is needed in a winning business plan, potential entrepreneurs can not figure out which business templates meet their criteria of standing out, hence the reason for explaining some of the crucial viewpoints that must be considered while writing a unique business plan:

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1. Show the market value

Investors want to invest in a market-driven enterprise rather than a tech-driven venture because they understand that it is the market that brings profit.

A winning business plan must emphasise the market by showing the benefits of the services to the potential customers and identifying interests in the marketplace.

Exhaustive research made on the market potential, profits and sales of a product is more convincing than the technical advantage of the product - use the business plan to show investors that the product or service has a viable market.

2. Be vocal about the User's benefits

entrepreneurs must emphasise the benefits of the products or services to the potential users to convince potential investors.

For instance, during one of the Enterprise Forum sessions in MIT, an entrepreneur spent the bulk of his time talking about the uniqueness and creativity behind his product. Industries can use this machine in specific sectors of textile production. The entrepreneur also spoke about the financial projection of the project in the next five years.

The first panellist (a venture capitalist) to react to the pitch was not convinced, declaring that its market was in a depressed industry. Another panellist also responded following the presentation; he asked the entrepreneur, "How long does it take your product to pay for itself in decreased production costs?". On hearing 'Six months, the second panellist was quick to tell the presenter that that was the most important thing he has said throughout the presentation.

Following the new development, the venture capitalist reversed his original opinion. He revealed that he could provide funds for any company that can prove crucial User's benefits. According to him, if the product can pay for itself in 6 months, then the product will, after that time, essentially 'print money.'

Commons sense shows that instruments, products or services that pay for themselves in less than a year are a must-buy for future users.

The MIT panellists later advised the entrepreneur to rewrite his business plan and vocalise the short payback period (User's benefit) instead of the self-serving description regarding the innovative product. The entrepreneur took the advice and secured funding for his new venture.

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3. Evaluate the Market's interest

After showing the user's benefits, the next step is to prove that the market is intrigued enough about the products to buy them.

A winning business plan must reflect positive responses from potential customers, which shows the market is interested in the product.

One of the ways to obtain evidence of the market's interest is to offer the products for free to receive written evaluations from the users. Secondly, entrepreneurs can also provide the product at a discount; this method shows potential investors that the real customers for the product exist.

The end game proves to potential investors that a feasible market is available for the new product.

4. Document all claims and analysis

Among the factors that make up a winning business plan is valid data to support analysis. Entrepreneurs must show data to support growth rate, sales, and profits claims.

These data must be precise; often, entrepreneurs make claims like, " we would be able to reach 10% of the entire market, but we will still be ok at 1% conversion". Such assertions are not only misleading but lack credibility and trust.

Investors are aware that a company could still end up with 0% of market penetration even when entrepreneurs did everything right; thus, raw and accurate data is needed to convince them and build a winning business plan.

For instance, if an entrepreneur wants to create a software service that handles food items from campus canteens. The entrepreneur must access the government's data on the different campus populations (demographics) and try to ascertain the likelihood of these demographics eating from the campus canteens. It will give a near-accurate gauge of the potential market.

The marketing research data will also help document a credible sales plan and project what the product and staff need.

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5. Cashing out: Address Investors' needs

Once entrepreneurs provide good evidence for market value and penetration, the next stage will be a valid projection about how much is needed for the venture and what price this will be for the investors.

A good executive must consider who the potential investors are before considering how to satisfy them. Entrepreneurs see their ventures as lifetime commitments, but Investors are primarily interested in when to get in and out.

Venture capitals and other investors usually make profits by selling their holdings to more giant corporations or by IPOs; thus, entrepreneurs must be able to consider some essential questions like:

  • Do they plan to go public
  • Sell the company
  • Buy investors out in 3-5 years
  • Can investors make a 35% to 60% when adjusted after inflation?

Many business plans do not include how Investors can exit make a profit from their initial investment. For example, there was a report about an executive who presented a request for 1.5 million USD for his start-up; one of the potential investors calculated that to satisfy their aim, the entrepreneur will need to give up the total shares and more.

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Conclusion

The above guidelines provide enough information on what is needed to write detailed and winning business plans. Good business plans are evident in how many factors were carefully considered by the entrepreneurs.

Another essential factor to consider before looking for investors is the stage of the project. Investors are always looking out for ways to reduce risk; hence they tend to evaluate the status of the product and management team.

A single entrepreneur with an unproven idea and no proven track record will face a tremendous hurdle on the road for funding, unlike an executive with a product that has penetrated the market and can boast of a competent management team.

To succeed, entrepreneurs must consider things from an Investor's perspective; such will be a good start in writing a winning business plan.