What makes a great business plan: advice from our experts
At Virgin StartUp, we see hundreds of business plans. Each one is carefully and individually considered, and we’re lucky to see an amazingly diverse array of startups come our way - but the very best have some vital qualities in common. Head of investment at Virgin StartUp Andy Fishburn, and head business advisor Henry Kuang, share the key things the VSU loan panel looks for in a business plan.
You’ve demonstrated demand for your product
“It’s important to show clearly that you’ve done your research and demonstrated demand for your product. You think it’s a good idea, and we might think it’s a good idea too – but you still need to prove that we’re not the only ones who think so,” advises Andy. There are many ways to validate demand for your idea, from running a successful crowdfunding campaign, to carrying out simple surveys, or setting up a landing page for people to register their interest.
You understand your customer
Do you clearly understand who your target customer is, and how you can reach them? What newspapers do they read, what social networks do they use, what do they watch on television, what sort of jobs do they have? These are the things you need to know. “Some business plans even write up a profile of their typical customer, with a name and information about them,” says Andy. Doing this can help you visualise them.
It’s also essential to talk to your customer base first-hand, not just friends and family – get out there and start asking questions. “If you’re the target customer yourself, that’s even better!” says Andy. But even if you are, you should still get cracking on understanding just what makes your future audience tick.
“Think about what happens in the long-term,” advises Henry. “How long with the loan last you – will you start turning a profit immediately, or is a stepping stone to a second funding round, perhaps from investors or a bank loan?”
Some businesses aren’t always profitable immediately – tech startups are a good example of this – but the important thing is having a plan in place for how you can continue to develop your business, whether through making money or through winning angel investment.
You know how to make the first 10 sales
“Those first 10 sales are a test – they depend on you getting your product out there, and getting your marketing off to a good start,” advises Andy. How will you get the ball rolling – what’s the first step you’ll take to get people buying your product or service?
“Think about the first things you need to do to get the product or services into your first customers’ hands,” says Henry. “Think about the processes to make that happen, and what tools you need to support you.” It might seem obvious or tedious, but the best business plans are the ones that go into as much detail as possible. Which brings us to…
You know the details
“Everybody says they’ll use social media to market their product, but the great business plans describe how they’ll do it – what networks they’ll use and why, for example, or how they’ll build their following,” explains Andy. Don’t just say what you’re going to do – say how you’re going to do it, showing that you’ve thought through the practicalities. “Show that you understand what it takes, and the actual practical steps to putting your plan into practice.”
You understand the problem you're trying to solve
“It’s important to show you have a clear understanding of the product-customer fit – basically, who will buy it, and why?” advises Henry. Know the specific problem your product or service is trying to solve, and ensure you can articulate really clearly why this particular product is specifically valuable – if you can get your point across quickly to the loan panel, you can get it across to your audience too. If we’re struggling to work out what problem your product or service is trying to solve, then you need to ensure that you’re communicating it effectively – or that you know it in the first place!
A clear understanding of the competition
“What already exists out there in a similar space, and how does your product solve the problem better?” asks Henry. “Research your competition and have a clear understanding of what they’re doing, what differentiates you from them, and what you offer that could compel customers to change from them to you.”
Know your unique selling point and why it makes you stand out from your competitors – more specific than ‘My product is better.’ Again, think about what problem you’re trying to solve, and how it solves it in a different, more efficient way to your competitors’ product or service.
Evidence that it will work financially
“Show us that you’ve thought about the financial elements in a realistic way – show how your numbers fit together,” says Henry.
Why have you decided on the price point for your product or service, and how does this work with other costs, such as office space, manufacturing, even your daily coffee? If possible, evidence of previous sales is good (or, as mentioned in the first point, crowdfunding is good proof that people will pay an ascertained amount for your product or service.) Pre-orders are a great way of demonstrating that there are people waiting for your product right away, and can be gained using a simple landing page.
You’re the right person for the business
One of the most important things is simply demonstrating that you’re the person who can make this business work like nobody else.
“Show us that you’re the one with the passion and drive to make it a success – ensure it comes through in your business plan,” advises Andy. “Passion is the thing that will keep you going when times are tough. Why is this particular business so important to you? Enthusiasm is infectious.”