Creating a business plan to raise investment

The old adage that ‘failing to plan is planning to fail’ holds as true today as it has ever done. Drawing up a business plan will provide you with a roadmap to achieve the success you are aiming for – whether you are at the early stage of your business development, or already running a well-established company.

Our recent research into the thoughts of 200 UK business leaders revealed that businesses without a business plan have grown less over the past year and those with a plan are much more optimistic about the growth of their business going forward.

A typical business plan addresses a wide-ranging list of key questions, such as:

  • What’s your vision for the business over the next one, three and five years?
  • Who or what are your target markets?
  • What is the clearly defined product or service you are offering?
  • What level of revenue are you aiming for?
  • How will you grow and expand your business?

If you’re looking to raise investment you’ll need to cover extra ground in your plan to attract investors. But before you start looking at funding requirements, it’s important to ensure the foundations of your plan are in place.

Business planning basics

All business plans need to include basic analysis of four main areas:
Company analysis – what products or services are you going to offer, both now and in the future?

Industry analysis – how large is the target market or markets? How has the market changed, and how is it likely to change in the foreseeable future? What market trends can you identify?

Competitive analysis – consider the key strengths and weaknesses of your business, along with the threats and opportunities it is likely to face (a SWOT analysis). You should also explore the areas where your company will have a competitive advantage, and identify your main competitors.

Customer analysis – who are your current and target customers, and how do you plan to reach them? What marketing channels will you adopt and how will you price your products or services?


Marketing should play an important role in any modern business plan, particularly if you are looking to launch a new product or service in an already competitive market. It can also be an essential part of your strategy to attract investment – investors are more likely to provide funding for a company they have heard of, or one that is creating a ‘buzz’ in the market, so ensuring that you have a credible PR and marketing campaign will help to raise your business profile and generate interest.

It’s important to pick the marketing and PR channels that are the best ‘fit’ for your business, but it’s also worth noting that social media is becoming increasingly influential for both start-ups and established companies; an engaged community of customers and even potential investors can add credibility to an investment proposition. As people become far more digitally savvy it can also be important to be transparent and look after your online reputation for your business. But, social media is just one part of that digital marketing mix and some businesses can thrive particularly because of their digital marketing strategy. Being up to scratch on the tactics small businesses use for their digital marketing such as search engine optimisation, email marketing, paid advertising and social media can help gather momentum even in the early stages of development.

A winning team

A strong management team is essential for a successful business, but the importance of having the right team in place when trying to attract investors shouldn’t be underestimated. Recent research in America found that around 95% of venture capitalists cited the management team as the most important factor when deciding whether to invest in a business, so make sure you have the right management team, board and external advisors in place before you start talking to potential investors.

If you do have a gap in the team, don’t look for a temporary or makeshift appointment; identifying the funds needed to hire the right person as part of your business plan, as opposed to putting together a weakened team, will give you more credibility among potential investors.

Tax Relief

There are a number of generous tax reliefs available for qualifying companies, including research and development (R&D) tax credits, Business Rate reliefs, and capital allowances.

There are also incentives for investors looking to fund new and developing businesses, including the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). Make sure that you take potential tax reliefs into account in your plan, and highlight reliefs and incentives available to investors.

Financial Track Record & Projections

For new businesses yet to make a profit, the business plan will need to demonstrate at what point the company will become profitable, as well as detailing the expected increase in revenue and returns. Established companies seeking investment will also need to show they are profitable or cash-generative and have a track record of growth.

Set out the expected future financial performance of your business using an integrated financial model covering profit and loss, cash flow, and balance sheet. You should also include key excerpts within the business plan, and provide explanation of any large, one off expenses.

Remember, you’ll be presenting your company’s financial track record to an outsider, so it’s important to identify and address any possible weaknesses before an investor spots them.

Milestones are memorable…

Specific milestones in the development of your business can make a strong impression to an investor – for example, when will the company first achieve revenue of £10m, when will employee headcount exceed 50, and when will the company enter international markets? Within your business plan set out the milestones you’re aiming to achieve in specific timeframes – the next year, two years, five years, etc.

business plan investment

Essential elements for potential investors

Funding requirement

Any business plan that aims to raise money from investors requirement. These include:

  • What is the current funding requirement?
  • How will the funds be used, and when exactly is the money required?
  • How long is this round of funding anticipated to last?
  • What are the future funding requirements of the company likely to be – for example, when will additional investment be sought, how much, and how will it be used?

It’s also important to identify the type of funding you require – for instance, are you looking for equity funding, debt funding, or a blend of the two? If you’re hoping to raise equity funding, you will need to specify the equity stake (or range) as well as the pre-money valuation (the valuation of the company before any investment).

The methodology underpinning the valuation of the company should be clearly explained, and if possible, multiple methodologies should be considered; for instance, earnings, net assets (NAV) and discounted cash flow (it’s worth noting that the valuation of the company is likely to form one of the main areas of investor due diligence – see below). If you’re considering debt funding (for instance, if the company is raising a bond), commercial terms such as the interest rate, coupon and term, and time period should all be outlined.

Investment Terms

Investors will want to be clear about the terms of their investment. For example:

  • Will their investment provide them with board representation?
  • Will the shares provide voting rights?
  • What pre-emption rights will attach to the shares?
  • How can the shares be sold if the investor wishes to divest their investment?
  • What financial or company information will the investor be provided with in order to monitor the performance of their investment?

ROI and exit strategy

Investors will want to know how they will realise their investment. Common routes include a trade sale of the company, a full or partial buy-in by private equity, an initial public offering on a stock exchange, or a share buy-back by the company.

They’ll also want to know the estimated return on investment (ROI). Investors are likely to have a minimum ROI level, under which they will be unwilling to invest. For start-up or early-stage businesses where the future exit value (and therefore, the potential ROI) is being estimated, it’s important to support these estimates with detailed assumptions which can withstand the scrutiny of due diligence; your future valuation of the business must be much more than a ‘stab in the dark’.

Executive summary – the ‘teaser’

Before sharing your detailed business plan it’s usual to provide investors with a two-page executive summary outlining key highlights of the company and the investment proposition (sometimes referred to as a ‘teaser’).

If a potential investor wants to get a more detailed understanding of the company via a review of the business plan, you should consider asking them to sign a non-disclosure agreement before the business plan is released, as it will contain a large amount of confidential information.

Other investor issues

Investor profiling

Where are your investors likely to come from? It’s important that you understand the type of investor most likely to be interested in your business, so that you can make sure you are targeting the right investment audience.

The type of investor you target will depend in many cases on the stage your business is at, and the type of funding being sought – for example, are you looking for seed capital for an early-stage or start-up business, or a second round of funding for a more established company?

For early-stage companies, investors may comprise friends and family (particularly if you are seeking seed capital; if the company has at least some trading history, you may be looking to angel investors (including a syndicate of investors). Typically, venture capital (VC) and private equity (PE) firms will only consider investing in businesses which have a demonstrable trading history. A PE firm will usually require a company seeking investment to be even more established than a VC firm would.

Once you know the type of investor you need to target, you should seek to identify actual potential investors via a detailed profiling process; look at those who favour investing in your particular sector or with businesses of your size, and examine their track records – for instance, do they have the necessary experience to make an informed investment decision, and are they able to self-certify as a high-net worth individual or sophisticated investor?

Further reading: What are Angel Investors looking for when considering an investment?

Due diligence

Having read the business plan, any interested investor will want to undertake due diligence, a comprehensive appraisal of your company to establish its assets and liabilities, and evaluate its financial and commercial potential. This often involves a long list of questions which will need detailed answers, so be prepared for a time-consuming and sometimes stressful process. But it could be the final stage in securing the funding you need, so make sure you give the process the time and attention it requires.

Key considerations

  • Fundraising takes time: it takes time to prepare investment documentation, identify and meet with prospective investors, and respond to due diligence information.
  • Build the right team: ensure you have a strong management team, board and external advisors.
  • Know your requirements: know what you need to do and when during the fundraising process.
  • Know your financials: understanding the financials of the company and your funding requirement will lend credibility to the investment proposition.
  • Prepare investment documentation: ensure your investment documentation is consistent and accurately represents the company and investment opportunity.
  • Be realistic with your valuation: an overly ambitious valuation may deter investors (it makes the cost of equity higher) and could result in awkward conversations around negotiation.
  • Ensure all relevant tax reliefs are applied for: being able to provide investors with the assurance that they will benefit from SEIS or EIS could be the difference between receiving investment, or not.
  • Prepare due diligence information in advance: pre-empting due diligence questions and preparing information responses in advance will save time and expedite the fundraising process for all involved.

This post was written by Price Bailey Partner, Chand Chudasama. If you need further information on any of the above please feel free to get in touch with Chand using the contact form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.


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