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Creating a Business Plan

Creating a business plan for investors was presented in the definition of scenario no. 4, of our simulated coffee shop business. This is the scenario that requires substantial financing from Angel Investors, or Venture Capitalists. This step demands a formal, well-prepared business plan.

There is a mountain of information available about creating a business plan of this type, especially how to develop and present your business plan to an investor. So, I’m not going to dwell on those details here.

Instead, I intend to provide you with some practical suggestions, information, and links to some other sources that I have reviewed and found to be helpful in creating a business plan.

More importantly, I hope to offer you some guidelines and tips on creating a business plan, and how best to approach your prospective investors. Having worked on both sides of this issue, I may have a little different slant on using outside investors than you will find from other sources. For instance…

Don’t Plan on Outside Investors Too Soon!

Too many new entrepreneurs start off early in their pre-venture planning, spending an inordinate amount of time creating a formal business plan while thinking that the only way to finance their business is by seeking an outside investor.

Actually, most small startups can get quite far along in their startup without involving professional investors, and the longer you can wait, the more you will have to offer them—and the better the deal you can negotiate. In fact, in many cases you may never require professional investors at all.

Briefcase with money Don’t get me wrong—there are instances in the early life of many small businesses where outside investors are absolutely essential…they can make the difference between your business even starting or not. The important thing is knowing when they are necessary and not just the most convenient.

Personally, I would first try the methods of financing outlined in the Small Business Financing, module including alternative methods, or even “bootstrapping,” before I spent the time and effort required to create a business plan suitable for investors. Unless it is very obvious, try the other methods of financing first.

Of course, you probably wouldn’t be reading this report if you weren’t convinced you absolutely needed the involvement of outside investors. So, let’s talk about how best to approach creating a business plan for investors.

There are basically two major types of professional investors in the business startup world: (1) Angel Investors, and (2) Venture Capitalists. These two groups have somewhat different requirements for business plans, so let’s see how creating a business plan for each might differ.


Angel Investors

Every city has Angel Investors, and they usually prefer to operate within a fairly small radius of their home location. So, whatever city you live in, or near, is where you would normally contact your Angel Investor.

This is where your Advisory Group can play an important role in helping you with your business, because they can (or should be able to) introduce you to a local Angel Investor or group.

If all else fails, search out local Angel Investors for your area on the Internet and follow the instructions on their web site on how to submit your application and business plan. They should also tell you what would be required for your in-person presentation.

It should also be noted that many Angel Investor groups provide coaching on how to improve your business plan, as well as prepare a great presentation for their group. Usually, you can get considerable help from local sources when creating a business plan for Angel Investors.

Venture Capitalists

Venture Capitalists operate a bit differently than Angel Investors in that they typically make larger investments, work primarily with referrals, and have strict requirements for viewing your business plan. Unfortunately, requirements for creating a business plan are somewhat different for each Venture Capitalist (VC).

introduction However, one thing that is very common among most VCs is the need for a personal introduction and/or referral. I read recently where an A-Tier VC said. "…in all the years he had been in the VC business, he could not remember funding even one business plan that came into his office unsolicited."

That should give you some idea of the importance of getting a personal referral before you try to submit your business plan to a VC.


Tips for creating a business plan for investors

Regardless of whether you are creating a business plan for an Angel Investor or a Venture Capitalist, there are certain things you need to watch out for in your plan:

  • Prepare Your "Presentation Script" First
    Your script for your personal presentation can be the best form of an outline for creating a business plan. As you visualize giving your "pitch," it allows you to be more "in-the-moment" when you are writing your plan.

  • Keep Your Business Plan Up To Date
    Business plans have a very short shelf life and you never know when you might get that call to make your pitch, or deliver your plan. So, don’t let your business plan get stale…keep it investor ready.

  • Make Your Plan Tell a Story
    Tell your audience who is going to benefit from your new business idea—and how. Make it interesting—but believable—reading. The story must be true and accurate.

  • Don’t Leave Information Gaps
    If you are seeking investor money, but fail to include an exit strategy, your plan will never fly. When you talk about your management team, make sure all resumes are complete and there are no gaps. In your marketing section, be sure to profile your typical customer, or segment of the market. Double-check everything after creating a business plan, to make sure you have no gaps in your information.

  • Make it Read Smoothly
    It doesn’t look good if you only provide details in certain areas and not others. If you go into great detail about marketing, but gloss over technology, it makes it look like you are weak on technology. Make your level of detail consistent and read smoothly.

  • Stay Away From Fancy Titles
    You’re a startup company, and it aggravates investors when all three or four founders have “C” level titles. Give the head person a title so everyone will know whom the leader is, and then hold off on fancy titles—they’re annoying.

  • Wages and Salaries
    Investors deal with startups every day, so they know how much the founders sacrifice, but that needs to end when you are creating a business plan for investors. Provide for reasonable wages and salaries for everyone in your organization—investors will expect that and respect you for including it.

  • Eliminate Non-esentials
    No investor is going to be happy giving you money to buy better stuff around the office than they have, so keep the projected expense very conservative for "stuff." Keep it simple, keep it Spartan, and eliminate the cheap giveaways that you might pass off as PR.

  • Price vs. Quality
    Unless you are in the commodities business, don’t try to be the low priced business in your industry. Investors know that you don’t increase market share by lowering your prices—you do it through differentiation and segmentation. Investors will be looking for this in your business plan…so be warned.

  • Pie-in-the-sky Profits
    This has probably killed more funding deals than anything else. Investors want to work with entrepreneurs who have a true sense of the real world they will be starting their business in. Extraordinary sales, and higher than normal industry profit ratios tell the investor that you really are not part of the real world—and also someone they do NOT want to do business with.

    • Writing a Plan
  • Don't Write a Book
    The more pages in your business plan—the less likely it will be read. A good target size is between 15 and 20 pages, depending on your business, but never more than 25 pages regardless. You also should minimize the information you put into the Appendix…use summary formats and leave all the details and fine print for later.


Professional investors deal with so many applications for money that they often become hardened to "pitches," so it is necessary when creating a business plan to develop one that really stands out. Here are a few additional tips that may help you in approaching professional investors:

    • Write a “Killer” Executive Summary. There is an entire report in this module directed to the Executive Summary and you can access it here, or at the end of this report.

    • Forget Non-disclosure Agreements. Do not ask a Venture Capitalist, and usually not an Angel Investor, to sign a non-disclosure agreement. They are far too busy to bother with them, but more importantly, if there were no initial trust the deal probably wouldn’t work anyway.

      There is a time and place for using a non-disclosure, but never tell a VC you will show them your business plan if they sign a non-disclosure. Most won’t; and they certainly have enough business plans to review without looking at yours.


    • Don’t “Shotgun” your Business Plan. One of the early questions you may be asked by an investor, is “…who else has seen your business plan?” If you tell them you sent out 100 copies to all the Venture Capitalists you could find listed—and not yet been funded—you just sealed your fate to rejection by this investor as well. If none of those investors were interested, why should this one be interested?

      Be very judicious in who you pitch to…that’s why personal introductions and referrals are so important.


    • Send your plan to a specific person. Here is another reason for a personal introduction and referral. Rarely, if ever, does an investor fund a business plan that comes in “over the transom.” With an introduction, you can call your new contact and ask them whom you should direct your material to (although many times they will only want to see your Executive Summary initially).

      With a specific name, and a cover letter mentioning who suggested that you send your business plan to them, you stand a very good chance of your plan being thoroughly read. Also, while creating a business plan, try to visualize writing to a single business person. Your plan won't read like a speech transcript that way.


    • Approach the right investor. You don’t want to send your business plan or executive summary to the wrong type of investor. Find out early on, what an investors specialty is. If they are heavy into construction, and your new business is high-tech…move on to another investor.

      Otherwise, you are just making a bad name for yourself in the investment community. This is a pet peeve of most of the serious investors.


    • Look for opportunities to present your Business Plan. There are many investor “events” held around the nation where you can submit your business plan for review, and if the organizers like your plan, they will invite you to make a full personal presentation. This is a tremendous opportunity for those of you who are unable to obtain that personal introduction, or even a referral.

      Moreover, many of these events offer training workshops on creating a business plan and how best to present your business plan. They usually charge a modest fee for their workshop. The fee can be a few hundred dollars, and this is fine, but NEVER PAY TO PRESENT YOUR BUSINESS PLAN AT AN EVENT!

      If these are serious investors at the presentations, they do not expect you to pay for the privilege of presenting to them. This practice has become a bit of a scam of late so don’t fall for it. There are plenty of events where you can present your business plan without paying any “entrance fee.”



There you have it—some different information on creating a business plan. To move on from here I would suggest you proceed to the report on the Executive Summary and find out why this might just be the most important business document you will ever write during the life of your business. For direct access, click here.

For more information and resources on business planning and creating a business plan, review the following for areas of specific interest.

Resources to Help You Write Your Business Plan

Executive Summary.
This is an entire report devoted to the subject, because it is that important.

Business Plan Software
(Each name is a link and opens in a new window.)

  • Business Plan Pro
    This is the granddaddy of all business plan software and is used by 3 out of 4 companies that prepare formal business plans. It is offered by PaloAlto Software and is not free, but it is likely the most complete do-it-yourself business plan package available. It also supports Mac platforms. Click here to access their website.

  • Growthink
    This company offers more than just software to write a business plan. They also offer a number of guides, templates, courses and reports on the business planning process (some of which are free). They also can provide actual consulting services that help you properly start your business so it is more attractive to investors. In addition, they can assist you in finding the appropriate investor for your business. For more information click here.

  • PlanWrite
    This company has been in business since 1989 and has a broad base of business planning guides and templates. Their business plan template appears to be highly customizable, and they also emphasize strong support to help you use their products. They do NOT offer products for Mac, and they also are not cheap, but for PC users they do seem to be very comprehensive. For more information, click here.

  • PlanWare
    This company is based in Ireland and is one of the most complete sources of all types of business plans. They not only offer software for business planning, but they have numerous support documents and articles that will help in the preparation of your plan. Unfortunately, their software does NOT run on Mac platforms.

There are, of course, many sources of software for writing business plans, but I believe these are the ones most used by entrepreneurs today.

Free sample business plans

Several software companies and other business sites offer sample business plans that a person can look at and perhaps figure out from them how to best write their own business plan. Here are a few of the more popular sites that offer free sample business plans. Just remember that many of them would also like to sell you their software, or plan-writing services.