Investment Company Business Plan Template
Written by Dave Lavinsky
Investment Company Business Plan
Over the past 20+ years, we have helped over 1,000 entrepreneurs and business owners create business plans to start and grow their investment companies. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through an investment company business plan template step-by-step so you can create your plan today.
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What is an Investment Company Business Plan?
A business plan provides a snapshot of your investment company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan for an Investment Company
If you’re looking to start an investment company, or grow your existing investment company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your investment company in order to improve your chances of success. Your business plan is a living document that should be updated annually as your company grows and changes.
Sources of Funding for Investment Companies
With regards to funding, the main sources of funding for an investment company are bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable, but they will also want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business. Investors, grants, personal investments, and bank loans are the most common funding paths for investment companies.
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How to Write a Business Plan for an Investment Company
If you want to start an investment company or expand your current one, you need a business plan. Below we detail what you should include in each section of your own business plan:
Executive Summary
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of investment company you are operating and the status. For example, are you a startup, do you have an investment company that you would like to grow, or are you operating investment companies in multiple markets?
Next, provide an overview of each of the subsequent sections of your business plan. For example, give a brief overview of the investment company industry. Discuss the type of investment company you are operating. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
Company Analysis
In your company analysis, you will detail the type of investment company you are operating.
For example, you might operate one of the following types of investment companies:
- Closed-End Funds Investment Company : this type of investment company issues a fixed number of shares through a single IPO to raise capital for its initial investments.
- Mutual Funds (Open-End Funds) Investment Company: this type of investment company is a diversified portfolio of pooled investor money that can issue an unlimited number of shares.
- Unit Investment Trusts (UITs) Investment Company: this type of investment company offers a fixed portfolio, generally of stocks and bonds, as redeemable units to investors for a specific period of time.
In addition to explaining the type of investment company you will operate, the Company Analysis section of your business plan needs to provide background on the business.
Include answers to question such as:
- When and why did you start the business?
- What milestones have you achieved to date? Milestones could include the number of investments made, number of client positive reviews, reaching X amount of clients invested for, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
Industry Analysis
In your industry analysis, you need to provide an overview of the investment industry.
While this may seem unnecessary, it serves multiple purposes.
First, researching the investment industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy, particularly if your research identifies market trends.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your business plan:
- How big is the investment industry (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your investment company? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.
Customer Analysis
The customer analysis section of your business plan must detail the customers you serve and/or expect to serve.
The following are examples of customer segments: companies or employees in specific industries, couples with double income, families with kids, small business owners, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of investment company you operate. Clearly, couples with families and double income would respond to different marketing promotions than corporations, for example.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.
Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.
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Competitive Analysis
Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.
Direct competitors are other investment companies.
Indirect competitors are other options that customers have to purchase from that aren’t direct competitors. This includes robo investors and advisors, company 401Ks, etc. You need to mention such competition as well.
With regards to direct competition, you want to describe the other investment companies with which you compete. Most likely, your direct competitors will be investment companies located very close to your location.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of clients do they serve?
- What type of investment company are they and what certifications do they have?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide better investment strategies?
- Will you provide services that your competitors don’t offer?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Marketing Plan
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For an investment company, your marketing plan should include the following:
Product : In the product section, you should reiterate the type of company that you documented in your Company Analysis. Then, detail the specific products you will be offering. For example, in addition to an investment company, will you provide insurance products, website and app accessibility, quarterly or annual investment reviews, and any other services?
Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the services you offer and their prices.
Place : Place refers to the location of your company. Document your location and mention how the location will impact your success. For example, is your investment company located in a busy retail district, a business district, a standalone office, etc. Discuss how your location might be the ideal location for your customers.
Promotions : The final part of your investment company marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Advertising in local papers and magazines
- Commercials and billboards
- Reaching out to websites
- Social media marketing
- Local radio advertising
Operations Plan
While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the tasks involved in running your investment company, including researching the stock market, keeping abreast of all investment industry knowledge, updating clients on any new activity, answering client phone calls and emails, networking to attract potential new clients.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to land your Xth client, or when you hope to reach $X in revenue. It could also be when you expect to expand your investment business to a new city.
Management Team
To demonstrate your investment company’s ability to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally you and/or your team members have direct experience in managing investment companies. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing an investment company or successfully advised clients who have achieved a successful net worth.
Financial Plan
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement : an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you take on one new client at a time or multiple new clients? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets : Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your investment company, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing an investment company:
- Cost of investor licensing..
- Cost of equipment and supplies
- Payroll or salaries paid to staff
- Business insurance
- Taxes and permits
- Legal expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or list of clients that you have acquired.
Putting together a business plan for your investment company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the investment industry, your competition, and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful investment company.
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Investment Company Business Plan
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Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.
This sample plan was created for a hypothetical investment company that buys other companies as investments. In this sample, the hypothetical Venture Capital firm starts with $20 million as an initial investment fund. In its early months of existence, it invests $5 million each in four companies. It receives a management fee of two percent (2%) of the fund value, paid quarterly. It pays salaries to its partners and other employees, and office expenses, from the management fee.
The investments show up in the Cash Flow table as the purchase of long-term assets, which also puts them into the balance sheet as long-term assets. You can see them in this sample plan, in the first few months.
In the third year, one of the target companies fails, so $5 million is written off as failure. You’ll see how that looks as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year. The result is a tax loss, and the balance of investments goes to $15 million.
In the fifth year, one of the target companies is transacted at $50 million. You’ll see in the sample how that shows up as a $45 million equity appreciation in the sales forecast, plus a $5 million sale of long-term assets in the cash flow. At that point there’s been a $45 million profit, and the balance of long-term assets goes down to $10 million.
This is a simplified example. The business model holds long-term assets and waits for them to appreciate. It doesn’t show appreciation of assets until they are finally sold, and it doesn’t show write-down of assets until they fail. Sales and cost of sales are the appreciation and write-down of assets, plus the management fees.
The explanation above has been broken down and copied into key topics in the outline that are linked to corresponding tables. These topics are:
- 2.2 Start-up Summary
- 5.5.1 Sales Forecast
- 6.4 Personnel
- 7.4 Projected Profit and Loss
- 7.5 Projected Cash Flow
- 7.6 Projected Balance Sheet
Company Summary company overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">
Content has been omitted from this sample plan topic, and following sub-topics. This sample plan has an abbreviated plan outline. With the exception of the Executive Summary, only those topics linked to key tables have been used.
The focus of this sample plan is to show the financials for this type of company. Brief descriptions can be found in the topics associated with key tables.
2.1 Start-up Summary
This hypothetical Venture Capital firm starts with $20 million as an initial investment fund. The venture capital partners invest $100,000 as working capital needed to balance the cash flow from quarter to quarter.
Market Analysis Summary how to do a market analysis for your business plan.">
Strategy and implementation summary, sales forecast forecast sales .">.
Management Summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">
7.1 personnel plan.
This hypothetical company pays salaries to its partners and other employees, and office expenses, from the management fee of two percent (2%).
Financial Plan investor-ready personnel plan .">
8.1 projected profit and loss.
Please note that in the third year one investment is written off as a failure, producing a $5 million cost which ends up showing a loss for the year of nearly $5 million. The sale of equity at the end of the period enters the sales forecast and the profit and loss statement as a $45 million gain.
8.2 Projected Cash Flow
The Cash Flow shows four $5 million investments made in the first few months of the plan.
In the third year, one of the target companies fails, so $5 million is written off as failure. You’ll see that shows as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year. The result is a tax loss, and the balance of investments goes to $15 Million.
In the fifth year, another investment is transacted at $50 million. This shows up as a $5 million equity appreciation in the Sales Forecast, plus a $5 million sale of long-term assets in the Cash Flow. At that point there’s been a $45 million profit and the balance of long-term assets goes down to $10 million.
The partners invest an additional $100,000 in the fourth year as additional working capital to balance the cash flow of the company.
8.3 Projected Balance Sheet
You can see in the balance sheet how the ending balances for long-term assets were not re-valued. They remain at the original purchase price until they are sold, or written off as a complete loss. There is a $5 million write-off in the third year, and a sale of $5 million worth of assets in the last year. That sale of $5 million in assets produces the $5 million sale at book value plus the $45 million gain in the sales forecast and profit and loss table.
8.4 Business Ratios
The Standard Industry Code (SIC) for this type of business is 7389, Business Services. The Industry Data is provided in the final column of the Ratios table.
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