When to Use Your Business Plan

August 30 2010 one Commented

As you may have read in my last post, I believe entrepreneurs should write business plans – for themselves and for investors.  You’ve probably also noticed that business plans come in several flavors.  Let me describe them and explain how, as an investor, I suggest that entrepreneurs use business plans.

Unless specifically asked, DO NOT hand an investor your business plan when you first meet.  You need to first “set the hook”!  Instead, deliver your Elevator Pitch and ask the investor if they would like to read your Executive Summary.  If and when investors are interested in reading your full business plan, they will ask for it.

Here are the versions of business plans that entrepreneurs need to have available:

Elevator Pitch:  An elevator pitch is a 2-3 minute verbal presentation of your entire business plan.  Difficult to do?  Sure!  But, your elevator pitch is the most likely vehicle for creating interest by new potential investors in funding your business.  Don’t just talk about your product.  Discuss how you will build a business and create value for shareholders by delighting customers.  Design your elevator pitch at a level that your third grade teacher would understand it.  And practice it until you can deliver it smoothly and effectively.

Executive Summary:  An executive summary is a two-page written synopsis of your business plan.  Be sure to write it AFTER you complete your full business plan.  Use your elevator pitch and executive summary to set the hook with investors.  As you give your executive summary to investors, ask them if you may call them in a few days to follow-up.  And, be sure to include your contact information in your executive summary (and business plan).  It is surprising how many entrepreneurs forget to do so.

PowerPoint Presentation:  If investors are interested in your business (after hearing your elevator pitch and/or reading your executive summary), they will likely invite you to make a verbal PowerPoint presentation to a small group of investors.  This presentation must include all aspects of your plan, in a rather abbreviated format.  I like the Guy Kawasaki 10:20:30 rules for PowerPoint presentations (from his book The Art of the Start).  Develop ten slides to cover all aspects of your business, with no more than one slide per topic (product, technology, competition, etc.).  Practice and practice a twenty minute presentation, covering all ten slides.  And, limit the number of words per slide by using #30 font, so that all those watching your presentation can read every word.  Great advice from Guy!

Full Business Plan:  A complete business plan is usually about 20 to 50 pages long and covers every aspect of your new venture, including your product, technology, management team, competition, marketing plan, sales channels, capital requirements and a full set of proforma financials for the first five years of operations.  It needs to be written before approaching investors and before creating any of the abbreviated forms of business plans described above.  That said; never give your business plan to investors until they ask for it.  Investors simply will not read your business plan until they express an interest in funding your company.

Stay tuned!  More on business plans in upcoming posts.

It’s a GREAT time to be an angel.  Find a group and jump in!

One Response to “When to Use Your Business Plan”

  1. Well that’s another way of considering things. It’s good to have ones ideas shaken up now and again to help you to re-examine your individual bias and habits in thinking. I might not go along with almost everything, but I appreciate your individual insight.