Strategic business plans for early-stage companies

In my last few blogs I’ve written about the general principles of a strategic business plan to attract lenders, and offered tips on what banks, mezzanine lenders and venture capitalists will be looking for in a business plan from a hopeful borrower. But if yours is an early-stage company rather than an established business – for example, if you are still involved in research and development, market research or the construction of manufacturing facilities – there are specific things that any lender or investor will want to see.

An early-stage company that can offer the prospect of substantial profits if it can graduate to the big leagues in a few years’ time may be an attractive proposition for risk-tolerant investors. However, balanced against the promise of such rewards is the fact that a considerable proportion of development-stage companies fail. Therefore, the business plans of early-stage companies wishing to obtain capital funding must emphasise three things more heavily than those of advanced stage companies:

  1. Their unique value proposition
  2. Why the market will benefit from it
  3. Why the market is ready to accept it

An early-stage business plan must also supply significantly more product detail and empirical research than an advanced-stage business plan. You should focus your plan on how you intend to:

  • acquire market share, and
  • educate customers about the benefits of your product or service.

Early stage business plans should include more prospective evidence of customer acceptance and technology capability to validate viability. Sometimes this requires pre-sales confirmation and independent technology verification.

Finally, an early-stage business plan should highlight the background of the company’s founders.

My final blog in this series about strategic business plans for funding applications will list some common but avoidable mistakes that CEOs make.

For information or advice on any aspect of corporate finance or strategic business plans, please email me or call me on 020 7099 2621.