If writing a 60+ page detailed account of your business (rather than working on growing your business) sounds like a fun way to spend your week, this post might not be for you. But if you’re thinking, “Root canal or business plan: which would I rather?” …then read on, my friend!
The good news is that these days, except for large bank loans, you often don’t need classic business plans.
Yes, you heard that right.
In fact, some investors and lenders actually prefer NOT to have you do a classic business plan.
To help clarify, let’s break it down a little and explore some alternatives.
Who’s Your Audience?
A great place to begin is to understand your audience – both their expectations and preferences. Here are some helpful questions:
- Who will be reading this business plan, and what are they accustomed to receiving?
- Will it just be investors and lenders, or is this something you’ll be showing to potential co-founders or high-value employees?
- What kind of document will give those people the information they need, and in the easiest-to-digest form?
Planning Is What Matters
The true value of a traditional business plan is the planning part, it requires that you have taken the time to create a plan for the business’s growth. There are many worthwhile approaches to business planning — from the classic approach to the business model canvas method — but they all share the same basic objectives: they allow you to describe how your business will achieve its goals, and they force you to test your assumptions and define your value proposition.
Fundamental business planning means answering questions like:
- What’s the ultimate purpose of your business?
- What are your products or services?
- Who are your customers and why do they need you?
- How big is the market and how will you reach it?
- Who are your competitors and why are you better?
- Who’s on your team and why are you the team to bet on?
- What evidence (i.e. traction) do you have to support your chances of succeeding?
- How will you make money?
While answering those questions isn’t always easy or fast, it’s absolutely necessary for thoughtfully launching any business. In fact, you should never start a business without successfully answers these core questions first.
Classic Business Plan Alternatives
There are two great alternatives to a classic business plan: the executive summary – or teaser – and the pitch deck.
The executive summary is often included as the opening section of a longform business plan. However, even as standalone documents they’re rarely longer than a couple of pages. A better way to think of it is as a “teaser document”, giving the reader just enough information to make them interested. This kind of executive summary can be extremely helpful from the investor’s point of view.
The pitch deck is a great way to narrow down your business narrative into talking points. By compressing your talking points down into a series of slides, it forces you to create a business narrative that is as concise, clear and crisp as possible. If you’re going to pitch to any kind of investor — from friends-and-family to later-stage investors like venture capital firms — a pitch deck is the way to go.
Both the executive summary and the pitch deck serve the same purpose as a longform business plan; however, they can also be used in a variety of situations.
When a Business Plan is Needed
There are times when it’s necessary to create a longform business plan. If you’re seeking out debt financing, you might need it as part of a package to show to a commercial lender. Likewise, old-school angel investors also want to see traditional business plans, as will partners and advisers who come from a traditional business background. If that’s the case, you will just have to suck it up and put one together.
The Bottom Line
When you’re starting or growing a business, your time is already spread thin. Classic business plans take a large investment of time and might only be seen by a single investor, while an executive summary or pitch deck can be easily shared with a wide variety of potential investors, partners, lenders, or potential employees.
Spend up to an hour answering the questions above (under Planning Is What Matters) – take note of your answers – and you’ll suddenly be ready to create your pitch deck, executive summary or business plan. Now carve out some time on your calendar to get it done!