How is an investor business plan different from one for a bank?

A lender underwrites the downside — repayment, security, what happens if it goes wrong. An investor underwrites the upside — how large this could get and what a stake is worth. The financial model overlaps considerably; the argument around it does not.

Do investors read the whole business plan?

Usually not at first. Most read a short deck or summary, and ask for the plan and the model when they are interested. That is exactly why the plan has to exist before you start: the request arrives with a deadline attached.

What financial projections do investors expect?

Monthly for the first two years and annually thereafter, with the assumptions visible and changeable. Investors will want to test your numbers by changing them, so a model that only produces a fixed answer is a disadvantage.

Do I need advance assurance before approaching angels?

Not legally, but many UK angels expect it, and it needs the plan and the share structure settled. Getting it in place first removes a common reason for a soft no.

Can SquarePlan write an investor plan?

Yes, from £499. We build the financial model and write the plan; we do not give investment advice or handle the regulated side of a raise, which needs an appropriately qualified adviser.

By purpose

Business Plan for Investors

A plan written for a bank and a plan written for an investor are not the same document. A lender is underwriting downside: can this repay, and what happens if it does not. An investor is underwriting upside: how large could this become, and what does my stake return. Sending one to the other is the most common reason a raise stalls before it starts.

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Written by Clive Unitt FCA, Founder & Chartered Accountant

What an investor is actually assessing

Angels and early funds see far more plans than they can back, and most are rejected in minutes. Four things decide whether yours gets a second reading.

How big this gets if it works. Equity only pays when there is a large outcome, so a business that comfortably supports its founders is a good business and a poor investment. The plan has to show a credible route to something much larger, and be specific about what has to be true for that to happen.
What the money actually buys. Not "growth". Which hires, which build, which market, and what those specifically achieve by when. An investor is buying the next eighteen months of progress, and vagueness here reads as not having decided.
Runway, and the milestone at the end of it. How long the raise lasts and what the business will have proved by the time it runs out. Raising with no defined milestone means raising again from the same position, which is the hardest conversation in the sector.
Whether the team can do it. At the early stage this often outweighs the numbers. Who has done the relevant thing before, what is missing from the team, and how you intend to fill it. Naming the gap is stronger than pretending there is not one.

What raising costs you

Raising is not free, in either money or time, and founders routinely underestimate both.

Cost	Typical range	What drives it
Business plan and financial model	From £499	What SquarePlan charges to write the plan and build the projections behind it.
Legal fees	Varies with the round	Shareholders agreement, articles, subscription documents. Larger for a priced round than a convertible.
Advance assurance application	Time, not fee	HMRC does not charge, but the application needs the plan and the share structure settled first.
Accounting and valuation support	Varies	Cap table, share classes and the model behind the valuation.
Founder time	Months, not weeks	The largest real cost. A raise typically consumes a founder for a quarter or more.

Tax relief schemes have conditions and limits that change. Check the current position with HMRC or an adviser before making any claim about eligibility to investors.

The figures investors ask for

A lender wants to know you can repay. An investor wants to know how big this gets and what their share is worth if it works. Different question, different numbers.

Runway, in months: Cash divided by net monthly burn. Investors read this before almost anything else, because it tells them how long their money lasts and when you will be back.
Gross margin: What is left after the direct cost of delivering. It determines whether growth funds itself eventually or needs feeding forever, and it is the number most often flattered by leaving costs out.
Cost to acquire a customer, against what they are worth: Where relevant, this is the engine of the whole model. A plan that shows acquisition cost without lifetime value, or either without a source, is not yet answerable.
The size of the market you can actually reach: Built from customers, price and frequency rather than taking a headline industry figure and claiming a percentage. Top-down market sizing is the fastest way to lose a reader's confidence.

Rules worth knowing before you raise

Raising money from investors is regulated activity in the UK, and the rules exist whether or not anyone mentions them. Take proper advice before approaching anyone.

Financial promotions: Communicating an invitation to invest is restricted by law. There are exemptions, commonly used for high net worth and sophisticated investors, but they have conditions. This is not a formality and it is worth an adviser's time.
SEIS and EIS: The schemes that make early UK investment attractive, offering investors income tax relief and capital gains treatment. Both have conditions on the company, the shares and the use of funds, and the limits change — check the current position with HMRC.
Advance assurance: HMRC's non-binding indication that a proposed share issue is likely to qualify. Many angels expect it before committing, and the application needs the business plan and the share structure in place, which is one reason the plan comes first.
Cap table and share classes: Get the structure right early. Cleaning up an informal cap table at the point of a priced round is expensive and occasionally fatal to the round.

Different reader, different argument

The financial model behind a bank plan and an investor plan is largely the same work. The argument built on top of it is not, and using the wrong one is the fastest way to be dismissed.

A lender is asking a bounded question: can this business meet a fixed obligation, every month, including the bad ones. Conservatism is a virtue. A modest, dependable business is exactly what they want to see.

An investor is asking an unbounded one: how large could this become. Modest and dependable is a polite no, because equity only returns when something gets substantially bigger. That does not mean inflating the forecast — it means being clear about the size of the opportunity and precise about what has to be true to reach it.

Say what the money buys

The weakest sentence in any raise is that the funds will be used for growth and working capital.

An investor is buying a specific period of progress. Which two hires, doing what. Which part of the product, shipped by when. Which market entered, and what evidence you will have at the end that it was the right one. That specificity is not bureaucracy — it is how an investor judges whether you have decided what to do, and it is the thing that separates a plan from an aspiration.

Runway and the milestone

Every raise buys time, and the question is what you will have proved by the time it runs out.

State the runway in months and name the milestone at the end of it. Then check the arithmetic honestly: if the runway is twelve months and the milestone needs eighteen, you are raising to arrive at the same conversation with less leverage and a shorter clock. Better to know now, and either raise more or pick a nearer milestone.

Build the market from the bottom up

Claiming a small percentage of a large industry figure is the most recognisable tell in early-stage plans, and experienced investors stop reading at it.

Build it the other way. How many customers of your kind exist in the market you can actually reach, what would each pay, how often. The number will be smaller and far more defensible, and the exercise usually teaches you something about the business that the top-down version conceals.

Which kind of investor fits

Equity is not one market, and the plan should be written for the part of it you are approaching.

Angel investors: Individuals investing their own money, often with sector experience and usually motivated in part by SEIS or EIS relief. The most common first institutional-ish money in the UK.
Angel syndicates and networks: Groups investing together behind a lead. More process than a single angel, and the plan gets read by people who did not meet you.
Equity crowdfunding: Public platforms with their own diligence and a promotional requirement. Attracts a wide shareholder base, which has consequences later that are worth understanding first.
Venture capital: Institutional money for businesses with a genuinely large potential outcome, and the wrong fit for most companies. Being honest with yourself about this saves months.

Frequently asked questions

How is an investor business plan different from one for a bank?: A lender underwrites the downside — repayment, security, what happens if it goes wrong. An investor underwrites the upside — how large this could get and what a stake is worth. The financial model overlaps considerably; the argument around it does not.
Do investors read the whole business plan?: Usually not at first. Most read a short deck or summary, and ask for the plan and the model when they are interested. That is exactly why the plan has to exist before you start: the request arrives with a deadline attached.
What financial projections do investors expect?: Monthly for the first two years and annually thereafter, with the assumptions visible and changeable. Investors will want to test your numbers by changing them, so a model that only produces a fixed answer is a disadvantage.
Do I need advance assurance before approaching angels?: Not legally, but many UK angels expect it, and it needs the plan and the share structure settled. Getting it in place first removes a common reason for a soft no.
Can SquarePlan write an investor plan?: Yes, from £499. We build the financial model and write the plan; we do not give investment advice or handle the regulated side of a raise, which needs an appropriately qualified adviser.

Have your for investors business plan written for you

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Clive Unitt FCA

Founder & Chartered Accountant (FCA)

Clive is a Fellow of the Institute of Chartered Accountants in England and Wales and the founder of SquarePlan. He has spent over thirty years working with businesses from sole traders to multinational public companies.

He writes here about business planning, financial projections and the UK tax and funding questions that come with starting out.

More about Clive → ICAEW member record Companies House LinkedIn

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