How many types of plan does a business need?

No doubt this will date me, but I come from a corporate background where there was no shortage of planning tools and documents. And to this day I remain highly sceptical of many - but not all - approaches to overall business planning. I still remember adding a page of nonsensical gibberish in the middle of a business plan I’d be ‘asked’ to prepare just to see what would happen. And what happened was exactly nothing. My plan was signed off and I was given the ok to execute it. True story. 

Of the various types of plan, fortunately not every business needs every one of them. In many cases, much of the purpose of very specific plans can be accumulated into one overall document. So here I’ll briefly mention the most important plans when it comes to raising investment. And I’ll touch on other varieties which you may be asked about, especially by prospective investors. 

Investor Deck

The most important document when raising equity investment, especially via crowdfunding but also common for other forms of private equity raise such as via VCs. The purpose of a deck is to present an investment proposition, which as well as succinctly providing a background to the business, sets out how much they’re wanting to raise, how they’ll spend the money i.e. what will the investment enable the business to achieve, and what the terms of the investment are e.g. valuation, ROI intentions etc.. An investor deck is not intended to address each and every conceivable thing an investor might want to know. Instead, its primary purpose is to generate engagement and dialogue with potential investors. 

Typically an investor deck is a landscape-style presentation of perhaps 5 to 25 slides. 

Financial Plan

Every business needs a financial plan irrespective of whether or not they’re raising investment. It’s a core part of the strategic planning process to forecast your revenue, cost, and profit expectations over a say 3-5 years time frame. Yes, it’s largely crystal ball gazing but you can think of a financial plan as a map for your intended business journey. If you don’t know where you’re headed, how will you know which way to go or when you’ve arrived? How will you know when you need to correct your direction? A Financial Plan answers those questions.

Every financial plan should be based on assumptions such as how many things will you sell, at what price, what will your production costs be, how you will access your markets, and what fixed costs will you incur such as salaries, rent, and so on.

For the most part, only a very high-level Financial Plan is needed for crowdfunding i.e. that which can be easily described on one or two slides. However, that doesn’t mean you can get away with not having a more comprehensive plan. It’s quite common for a potential big-ticket investor to want visibility over your financials; not being able to provide such a document wouldn’t instil much confidence. 

Business Plan

(Sometimes known as Strategic Plan, albeit not entirely accurately)

This is where things can get tricky. Unless you’re something like a major corporate entity I’d argue that most businesses don’t need a comprehensive 50 pages + word document business plan. But having something documented that generally sets out your business ambitions over an extended time frame, and how you’re going to realise your ambitions isn’t at all a bad idea. But it doesn’t need to be a tree-felling exercise. 

There is a bit of a complication when it comes to applying for SEIS/EIS however. HMRC’s view is that an investor deck isn’t usually sufficient for them to consider an application for advance assurance. They want something a bit more robust which shows them that you have actually thought about it in quite some detail. They need you to pass the ‘Fly-By-Night’ test.

HMRC aside, if your expectation after preparing your BP is that you’re never going to refer to it again, then you probably don’t need it. A BP needs to be a living usable document for overall strategic leadership of your company. 

Hybrid plan

There is an emerging trend of having a hybrid plan, which is between an investor deck and a business plan. So it’s a plan which is a bigger and more comprehensive document than an investor deck, but not as much as a full-on Business Plan which has literally taken hundreds of hours to prepare. These hybrids aren’t really appropriate for a crowdfunding campaign. 

Here’s a schedule of other plan types you might hear about, although they’re not typically relevant for crowdfunding:

Do check out our Knowledge section for other articles you might find useful.

Author: Richard Mojel - Commercial Director, ISQ