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According to a 2024 article from Investopedia, a global financial media platform, in today’s ecosystem, not preparing a business plan is one of the most common reasons for business failure. Of course, this is not new information. In fact, Harvard Business Review A 2017 study highlighted that “entrepreneurs who created a formal plan were 16% more likely to achieve business survival than similar entrepreneurs who did not have a plan.”
However, Jane Kedea, executive director of the Entrepreneurship and Private Capital Institute at London Business School, points out that the concept of what constitutes a business plan has undergone considerable revamping over the years. “Business planning, or at least the creation of a business plan as a fundraising document, has changed significantly over the past decade,” Kedea explains. “What used to be a detailed 30-page document is now often reduced to a more headline-heavy pitch deck that serves to open the door to potential investors. Of course, the need for a more detailed internal document remains, as that’s where the pitch deck information is drawn from, but the intended audience is different.”
So what does an ideal business plan look like? According to Khedair, entrepreneurs should start by focusing on the key benefits of their value proposition, rather than the features of their product or service. “Highlight how your target market will find value in what you are doing, so your audience doesn’t have to draw their own conclusions,” she says. “I call this the ‘so what?’ test. Don’t leave this question unanswered when describing your service or product features. Benefits are the basis of differentiation, and in a crowded market where rapid technological advancements are driving competitors to enter, they are essential to build a moat around your business as a barrier against others in your field. Additionally, make sure you clearly identify your target and addressable markets, and how you will reach them. Capturing even 1% of the market is not as easy as most people think. This is a worn-out assumption that shows naivety. A larger market does not necessarily mean easier market penetration.
Khedair also points out that there are many operational roles within a company, and clearly mapping them is essential to developing an effective business plan. “In addition to identifying who is involved in the business – their backgrounds and how they relate to the roles – you also need to be open to recognising gaps within your team and how you might fill them,” she explains. “Operational expertise is more accessible than sector knowledge, so sector knowledge should be clearly available within the founding team.”
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Jane Keder and her team from the Entrepreneurship and Private Capital Institute at London Business School. Image courtesy of London Business School.
When it comes to financial projections, Khedair suggests being as conservative as possible. “Many financial projections are painted with overly enthusiastic or implausible hockey stick curves,” she asserts. “Financial projections are key to showing the growth potential of a business, but they are meaningless without detailed financial assumptions behind the numbers. This specifically relates to projected revenue, with customer numbers, churn rates, average sale/contract value, and customer acquisition costs all essential to support the growth rate of the business. Even with a breakdown of the numbers, it usually takes twice as long and twice as much money to achieve the original projections.”
Entrepreneurs should listen to these notes from Khedeir because her insights also incorporate an investor’s perspective, as she is the founder and director of Enterprise 100, a private angel investment club she founded in 1999 and now runs out of London Business School. “The best business angels are those who can usually offer companies more than just the cash they invest,” Khedeir says. “This is called ‘smart money,’ and it usually means that the angel has the background to provide relevant networks and expertise that can help the venture grow. Angels act as informal mentors, providing support and advice to these startups. We have found this to be an invaluable element of the MENA Startup Competition that we hold every October in Dubai, which has helped grow many early-stage ventures since it began a few years ago.”
Now, for founders hoping to attract angel investors into their business, Khedeir has some suggestions on what to highlight in your business plan and presentation: “Most experienced angel investors will look first and foremost at the strength of your team and their confidence in your ability to execute on your strategy,” she points out. “Once you’re convinced of that, your venture’s value proposition and path to a large market will be essential in driving the scalability of your business and the potential to sell it within three to seven years.”
According to Khedair, the importance of the personalities that make up a founding team cannot be understated, especially in the early stages of a startup. “On the personal side, a founder’s resilience, drive and passion are fundamental traits as the backbone of a business,” she says. “Weaknesses within the team become apparent quickly and are too often the reason startups fail in the first few months. In a saturated market, without a clear unique selling proposition, growth is stunted and cracks quickly appear. Therefore, teams need to work collectively to convince themselves that there is a real demand for what their business is trying to bring to the market. Without that, founders’ efforts will quickly falter.”
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