Jane Khedair, Executive Director Of London Business School's Institute of Entrepreneurship And Private Capital, On Writing The Ideal Business Plan "What used to be a 30-page detailed document is now more commonly distilled into a more headline pitch deck that serves as a door-opener to potential investors."
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A 2024 article on the global financial media platform Investopedia reveals that not preparing a business plan is among the most common reasons for business failure in today's ecosystem. This, of course, isn't new information- indeed, a study by Harvard Business Review in 2017 had highlighted that, "entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs."
However, over the years, the idea of what constitutes a business plan has gone through quite a bit of a revamp, notes Jane Khedair, Executive Director of London Business School's Institute of Entrepreneurship and Private Capital. "Business planning -or at least preparing a business plan as a fundraising document- has changed considerably over the last 10 years," Khedair explains. "What used to be a 30-page detailed document is now more commonly distilled into a more headline pitch deck that serves as a door-opener to potential investors. Of course, the need for a more in-depth document for internal purposes still prevails, as that's where the information for the pitch deck is pulled from, albeit having a different audience in mind."
So, what does an ideal business plan look like? According to Khedair, entrepreneurs should start working on it by having it focus on the key benefits of their value proposition, rather than the features of their products or services. "Highlight how your target market would value what you are doing, instead of the audience having to draw that conclusion themselves," she says. "I call this the 'so what?' test– don't leave this question unanswered when explaining what your service/product does. The benefits will underpin your differentiation, which, in a crowded market with upcoming competitors due to rapid technological advancements, will be integral to you building a moat around your business as a barrier to others in that same space. Additionally, make sure you can clearly identify your target and addressable market, and how you are going to reach it. It's not as easy to secure even 1% of your market as most people think, and it's an overused assumption that displays naivety. A large market doesn't necessarily equate to ease of market penetration."
Khedair also points out that businesses can have many operational roles, and mapping them clearly is essential to formulating an effective business plan. "Aside from identifying who is involved in your business -their background and its relevance to their role- you should also be open to recognizing gaps in the team and how these will be plugged," she explains. "Operational expertise is easier to source rather than sector knowledge, which should be clearly available within the founding team."
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Jane Khedair with her team at London Business School's Institute of Entrepreneurship and Private Capital. Image courtesy London Business School.
As for financial projections, Khedair suggests handling them as conservatively as possible. "All too many financial projections are often depicted with an overzealous and incredulous hockey-stick curve," she declares. "Whereas they are key to demonstrating your business' growth potential, they are meaningless without detailed financial assumptions that sit behind the numbers. This is especially pertinent to your projected turnover, behind which your accruing customer numbers, churn rate, average sale/contract value, and customer acquisition costs will be integral to underpinning the growth rate of the venture. Even with a breakdown of the numbers, it will usually take twice as long, and require twice as much money to achieve what you initially forecast."
Entrepreneurs would do well to heed these notes from Khedair, since her insights also incorporate the point of view of an investor, given her role as the founder and Director of Enterprise 100, a private angel investment club that she set up in 1999, which today operates out of the London Business School. "The best business angels are typically those who are able to provide a business with something over and above the cash they are investing," Khedair says. "This is known as 'smart money,' and it usually suggests that the angel has a background that affords a relevant network or expertise that will be instrumental to helping the venture grow. Angels can serve as informal mentors, providing support and advice for these fledgling businesses– a role which we know is an invaluable component of our MENA Start Up Competition, which we host in Dubai every October, which has been behind the growth of so many early-stage ventures since it was launched a couple of years ago."
Now, for all of you founders out there hoping to get angels onboard your businesses, here's what Khedair believes you need to be showcasing in your business plans and pitches. "Most experienced angels will first and foremost look at the strength of the team, and their belief in their ability to execute on their strategy," she points out. "Once they have satisfied themselves on that, the value proposition of the venture, and its route to a sizable market, will be integral to driving the scalability of the business, which will hopefully provide the potential for an exit within three to seven years."
According to Khedair, the importance of the profiles that make up the founding team -especially in a startup's early stages- cannot be understated. "On a personal front, the resilience, drive, and passion of the founders are fundamental characteristics as the backbone of the business," she says. "Any weak links in the team will quickly become apparent, and they are all too often the cause for a startup failing in the early months. The cracks will show much quicker in a saturated market, where growth will be stunted, without the business having a clear unique selling proposition. The team should thus work collectively to satisfy themselves that there is a genuine need for what their business is planning to bring to market, without which the founders' efforts will quickly be frustrated."
