Making the plan pop
Some hints for creating business proposals that interest financiers
By Cynthia Spraggs
Let's say you're advising a startup company, and this time you think you've found a winner. The management team members are bright, personable, and have loads of management experience. Better yet, they've got a great idea and innovative technology.
So you lean back in your chair and start reading through the business plan they just sent over.
To your surprise, you find that the plan starts out badly and gets worse.
It's poorly written, with dense pages of text, and it's way too long. The description of the company's biggest strength, its management team, is buried on Page 5. The layout is typewriter-boring. And most crucial of all, it looks like they haven't done their homework, because there's no competitive analysis.
You find that you have to prop open your eyelids to read it, even though you've got something riding on the result. So how is that banker, VC, angel or institutional investor going to even get past the title page? This document just doesn't have what it takes to get attention, let alone get read. It certainly doesn't inspire someone to stake a large chunk of cash on the company.
If you don't want to see your client disappear down the deep hole where too many good companies have gone before, you need to effect a rescue, right away. How?
Start by considering the wildly differing worlds of the entrepreneur seeking funding, and that of the financier.
To many entrepreneurs, what matters most of all is the idea. They may believe passionately in that idea, and think that anyone else just has to be as enthusiastic as they are. This means that they see little reason to "waste" effort in packaging the idea so it looks good — the idea's so wonderful that it will shine no matter how it's presented. Also, many entrepreneurs lack an understanding of visual presentation, which is understandable because they have spent their time acquiring other skills. Possibly strapped for cash, it simply doesn't occur to them to pay for better presentation.
A financier, by contrast, needs a breadth of expertise that is generally wider than that of the person who came up with the idea. This means that his or her understanding of any specific technology will be less. An idea that is intuitively obvious to an entrepreneur may be about as clear as mud to the financier. This means that the explanation of the idea must be absolutely clear.
Also, the financier may see dozens of such funding requests cross the desk daily. She or he will be able to spend only limited time on each. It's only human for this person to reach for a document that stands out from the reams of black text in the pile, and which looks easy to read. The financier likely knows intuitively that a company that looks professional has a better chance of success than one that doesn't.
Better presentation allows the main ideas to be understood by the financier, and allows this person to defend his or her recommendations on funding to others in the company involved in making decisions.
So, good presentation gives your client an advantage; poor presentation reduces its chances of success. If you can understand the principles of making a business plan successful, you can help your clients win their funding — and you can be on the start to a highly profitable relationship with someone who owns the Next Big Thing.
The financier reading the document is being paid to pick winners. You need to show this person that your client's plan does, in fact, describe a winner.
Be sure that you understand the purpose of a business plan before beginning.
Like a steep uphill on a marathon, this is the area that is most likely to make your entrepreneur client drop behind. Your client quite possibly believes that the document's purpose is to inform the reader, and inform that reader as much as possible. As a result, we see many "kitchen sink" business plans that include all possible minutiae about the company.
Wrong. The purpose of the business plan is to sell, and to sell something very specific — a meeting.
That's because it's almost unheard of for a financier to make a positive decision on financing based just on the written business plan. She or he will need to meet the executive team in person, to hear them describe the idea verbally, to ask questions and see how well they answer.
Financiers don't make decisions based on just numbers and facts. Instead, they use their intuition, their gut-level understanding and their judgment. To get a larger sense and provide substance for that intuitive sense, they need to meet the people behind the funding request.
To them, the business plan is a winnowing tool, helping them decide whom to invest time in meeting.
The quality of the presentation will be a large factor in helping them decide whether to place the plan in the stack marked "call for a meeting," or in that big blue box under their desk. It also helps determine how many of the financier's senior people will be in the meeting — a direct influence on whether the idea is accepted or not.
So, read the business plan with this question in mind — is this information going to help get a meeting, and is it presented in the best possible way to do that?
One way to improve the plan's chances is to make sure that the information is clearly presented — unlike many documents crossing the financier's desk each day.
Many of these business plans read like scientific papers. They're full of watertight arguments, irrefutable facts, factual backup, long words and long sentences.
To be effective in reaching its purpose, however, the document should read much more like a piece of journalism. That includes writing in what reporters call the "inverted pyramid" style common to newspapers. A typical news story starts with the punch line — a "lead" or first sentence that summarizes the whole story. The most important facts follow, and are in turn followed by less important facts.
Your client's business plan must follow the same approach. Its most important information must come first — the information most persuasive in getting that meeting. That means putting the company's top strengths first. If the most impressive part of the company is its management team, put that right after the executive summary — not the technology. If the company has a major customer signed up, maybe that should go first. After the strongest point, go on to the company's next strongest.
Your client may find this a rather strange way to approach it, particularly if the group is mostly engineers. These people are trained to think logically, and they may think it is most logical to put a detailed description of the technology at the start of the plan. However, they need to put themselves in the financier's shoes, and decide what information puts the company's best foot forward first. Thinking in a journalist's "inverted pyramid" style might show them that they should discuss the market gap that creates a need, before presenting their solution.
As well as being structured like a journalist's article, the plan should read like one. This includes:
- Simple, straightforward sentences
- Avoid adjectives
- Use active voice ("Purchasers of this product will be " rather than "This product will be purchased by ")
- Bullet points where possible, rather than long sentences
- Plenty of sub-headings to break up the text, attract readers and organize the content
We recommend that the writer follow the principles set out in the classic work on clear writing, Strunk and White's The Elements of Style (www.strunkandwhite.com).
The report should follow the "Rule of Mom." Basically, your mother should be able to understand it. That is not a slur on motherhood, but simply says that you should be able to show the report to a reader unfamiliar with the industry or concept, and that person should find the message clear and unambiguous.
One area where many business plans slip is in presenting an actual plan. There may be a description of the company's eventual form, but little in the way of a step-by-step description of how to get there. The plan needs to lay out, in step-by-step format, how it will navigate the challenges involved in getting from "A" to "B."
Another common failure is in the competitive analysis. We've worked with many business plans that ignored the reality of the competitive market. The writers may assume that there is no competition, but the financier knows that there almost always is. He or she will be suspicious if the competition is not analyzed, and may conclude that the company is either not being forthright, or has not done its homework.
In looking at layout and design, the annual reports of leading companies can be a good place to look for ideas. Note how they use headlines and large type to draw attention to the most important ideas they want to convey. Techniques include:
"Callouts" or "pull quotes": these are pithy quotations repeated from the text, which drive home important points and also encourage reading of the entire section.
Illustrations: An emerging company may not have photos of a busy manufacturing facility or other demonstration of its capabilities, but photographs have a way of making the whole enterprise seem more "real."
Charts and graphs: These can often convey information in a way that words cannot, or cannot do as well. They are a good way to illustrate trends.
White space: Instead of just margin-to-margin text, insert spaced blocks of text, with "breathing room" between the blocks.
Like the words, the financial figures in most business plans appear as a great sea of dense black type. Again, look to annual reports for ideas on how to present the numbers. Typestyles, colors and formatting need to be consistent, to give it a professional appearance and for easier interpretation.
It is best to put the most important information first, in summary form, and give the reader who wants more detailed information access to that elsewhere. Important information includes a one-year summary cash flow and income statement, and three- to five-year projections for cash flow, income statements and balance sheets.
Because the financial figures are a numerical representation of the plan, most of the major numbers should be explained in the text somewhere. It is important to set out assumptions such as revenue models, capital assets models and pricing models. If there are any calculations, they should be shown in a backup sheet.
While many business plan writers start with the executive summary, it is important to leave this to the end of the process. Partly, that's because it's hard to summarize something without having written it first. Also, in many cases, writing out the plan exposes problems or unforeseen opportunities, so the concept gets changed during the writing process.
The executive summary should be able to stand on its own, as this is often the only part of the document that a financier reads, before making a decision on whether to call the company in for a meeting.
Accordingly, while the summary must provide a synopsis of the overall plan, it is also important to emphasize the company's strongest suit whether the management team, the customer base, the technology or some other factor.
How do you weave these concepts into the business plans that cross your desk before going on to a financier for a funding request?
One possible way is through the many business-plan-template software packages available. These can provide useful guidelines, consistent style regarding headlines and other aspects of layout, as well as help make sure that all important points get covered.
However, the templates also try to fit a company into a mold, and like a badly selected pair of shoes, the result can be painful. Also, the financier can generally tell if these software packages have been used, because they see so many plans and learn what to look for. This means that your client will be seen as unwilling to invest in custom design, and will be considered less professional as a result.
Generally, it is better to hire professional help to make sure that your clients' business plans have a fighting chance in the attention-getting contest happening on the financier's desk. The kinds of skills are varied, and not often found in one person.
- A professional writer, able to condense the company's story into a business plan form, and make it compelling and exciting;
- A designer able to lay out the document in a professional way, so that the key points are emphasized and become memorable;
- A proofreader, who can check for problems, errors, grammar and spelling.
If you can develop relations with professionals able to provide these services, your success rate and that of your clients is likely to soar. Freelance journalists, writing for local business magazines, can provide excellent writing and proofreading resources. Printing shops are good places to find graphic artists, either on staff or freelance.
Presentation does matter. In a world with too many ideas clamoring for attention, a document that is well presented and attractive has a better chance of survival.
Spraggs is managing director of RevisionWorks Inc., in Las Vegas. Her e-mail is cds@revisionworks.com.
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